Case studies of social value of work

In this article, we analyze common careers using the considerations from the article social value of work: how much the job helps customers, what the positive externalities of the job are, what the negative externalities of the job are, and how replaceable you'd be if you were to take the job.

Medicine

Benefit to customers — You can get a sense for how much social value doctors and nurses contribute by (i) considering how much you yourself have benefited from them and (ii) using the fact that doctors see ~1000 patients per year.

Positive externalities — By keeping people healthy, doctors and nurses reduce the amount of time people's families have to spend taking care of them, as well as the amount of time they can spend working and taking care of others.

Negative externalities — Doctors sometimes perform expensive, mostly unnecessary procedures, which health insurance companies have to pay for, which boosts the cost of health care for everyone.

Replaceability — There's no shortage of people who are willing to become doctors: over half of people who apply to medical school [| are rejected]. Unless you're significantly better at being a doctor than the strongest medical school rejects would be, you're replaceable, and the value that you contribute is the value of the work of your replacement rather than the immediate, direct value that you add as a doctor. For nurses, the situation is different: it's been claimed that there will be a major need for additional nurses in the near future, suggesting that if you become a nurse, you wouldn't be replaceable, but others have questioned whether this is true.

Finance

Finance is a diverse sector, and the social value or disvalue of finance depends on the sector

Benefit to customers

Basic banking services are a necessity: people need institutions that enable them to save money and take out loans.

There are large parts of finance that don't contribute substantial value to customers. For example, about 66% of mutual funds perform worse than the stock market as a whole does. It's plausible that if you work in this capacity, you won't help customers very much.

There are exceptional examples of financial firms that have consistently generated outsized returns for customers. For example, Berkshire Hathaway averaged ~20% returns over the past 48 years (compared with ~7% for the stock market as a whole). If you have the ability to work at such a firm, you may be able to help customers significantly.

There are instances of fraud in finance, where an investment advisor deceives investors. For example, Bernard Madoff's fraud resulted in investors losing $18 billion. If you work in this capacity, you will harm customers.