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Case studies of social value of work

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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]. It's unclear whether this is because a large number of applicants are unqualified, or because the number of medical school spots is artificially limited by regulations.

The American Association of Colleges of Nursing reports that about 60% of qualified baccalaureate nursing school applicants are accepted to nursing school. The acceptance rate may be higher for associate degree programs. 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.

Engineering

Benefit to customers

Engineering underpins technology, which has substantially improved quality of life. It's difficult to say how much the typical engineer

Finance

Finance is a diverse sector, and the social value or disvalue of finance depends on the subsector. The degree to which a given consideration applies to a subsector of finance depents on the subsector.

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.

Positive externalities

Investment can lead to economic growth, increasing everyone's wealth in the long run. Finance workers who make financial markets more efficient may increase economic growth.

Negative externalities

  • People in finance can be thought of as people who look for resources that other people haven't noticed, and taking them. If these resources are resources that others wouldn't have noticed, then this increases the total pool of resources available to people. But if these resources are resources that others would have noticed soon afterward, the person who takes the resources makes money for his or her customers while depriving the customers of other people in finance of those resources. So working in finance can cause harm to investors other than one's customers.
  • Some people in finance make very risky bets in situations where they don't have enough money to cover their potential losses. If the bet doesn't pan out, it can fall on the government to cover the loss, wasting tax-payer dollars.
  • People in finance can be responsible for speculative bubbles that lead to stock market crashes, which can result in people unexpectedly losing their savings, and increase unemployment.

Replaceability

It's unclear how replaceable finance workers are. In sectors of finance where workers have very high wages, the high wages suggests that there's high demand, which suggests that workers are not replaceable.

Management

Consulting

Advertising

Law