Gluts and Shortages (Prices Change)

Prices change, but many people seem to wish they didn't.

There's a housing glut in the country. Do a Google search for that term in quotes and you get 14,000 hits.

Meanwhile, there's also apparently a nursing shortage. A Google news search for nursing shortage yields about 600 hits.

So why is there a housing glut and why is there a nursing shortage? The answer for why there's a housing glut is because many sellers of houses are hanging on to the hope that they can get what people were selling houses for a year or so ago. Lower the prices and you'll no longer have a housing glut. Waiting for a higher price may be economically sensible for an individual homeowner, especially if they want to move locally or are at least not in a major rush to move out.

There's a nursing shortage because hospitals and doctors don't want to raise nursing salaries as much as they should. If they raised the salaries, they'd no longer have to worry about filling all their available spots. Of course, it takes a while for this to fully take effect: someone can't become a nurse instantly. But if salaries were raised, perhaps some stay-at-home moms with nursing degrees would venture back into the workforce.

In a market economy such as ours, you should rarely have gluts or shortages in anything - goods or services. You may sometimes, like in a hurricane. But the media seems to report that gluts and shortages are a regular aspect of our lives. However, while there may be a lot of houses for sale at present, what there really is is that there are a lot of houses that are on the market at above market rates. And while there are a lot of nursing positions that are open, the employers don't think these positions are that essential, as they havn't boosted the salaries for these positions.

The house sellers may not get as much as they could have in the past, and the hospitals may have to pay more than they did previously, but that's the market. Prices move up and down, and trying to get an old price will be difficult.

Are Baseball Players Paid too Much?

Well, it's Baseball season again, and even though I'm not a big sports fan, you invariably hear how crazy it is that baseball players get paid so much for merely hitting a ball (the same type of argument is made for all major sports). Often times, these salaries are then compared to teachers' salaries, with the implication that baseball players should be paid less and teachers more.

Baseball salaries are of course set by the law of supply and demand, as are teacher salaries, and most other salaries. There's two basic ways that baseball salaries would come down: 1) the entry into the baseball market of many new good players. This would be what economists might call more supply. 2) less interest on the part of the general public in baseball. This would reduce the amount of owners had to pay players (through fewer ticket sales and / or lower TV revenues), and might lead to fewer teams in the marginal cities. This would be what economists call less demand.

So why are baseball players paid so much? First, not that many people can do what they do well. Second, people are willing to pay $20, $30, or whatever to go watch a game, and large corporations are willing to buy luxury boxes to entertain clients and employees. Millions of people are willing to watch baseball on TV or listen to it on the radio, and thus advertisements can be sold. Now, if this is all news to you, then either you aren't an American and lack even the most basic understanding of how our economy works, or you are really sheltered (so how in the world did you find this article?).

In short, baseball players are paid a lot because they get a lot of people to watch what they're doing. And in the process, you can get these people either spend money to watch them, or you can sell advertising. Baseball players accomplish what marketing executives try to do: get more eyeballs on a product, or have people pay to do something (in this case, watch baseball at the stadium or on pay-tv).

However, local governments can have an impact on baseball salaries as well: it's not merely the law of supply an demand in operation. Lots of cities in the country bend over backwards to get sports teams. They build stadiums with taxpayer money, they let the team get revenues for naming the stadium or for parking, or from vendors.

This has the effect of loweing the costs for the sports team owners, which allows them to pay additional money to the players. I don't mind that sports players make a lot of money. But I do not think it is the least bit fair that my taxes have to support sports teams (and thus help contribute to higher salaries for the athletes).

If local governments built no stadiums, we'd still have sports in this country. Maybe not in the exact same cities as we do now, but there would be a broad geographical dispersal of teams, and professional athletes probably would make slightly less than they do now. Some of the more marginal teams (I mean this from an economic standpoint, not how well they do on the field) might fold up without the subsidies, but it wouldn't be the end of the world. Teams would be located where there was the most interest for that sport. We'd have slightly lower taxes, or at least the local governments could waste the money somewhere else.