Monday, October 29, 2012

A quick thought on the positive externalities of STEM

It's a big mistake to expect to see it in GDP data.

First, there could be very long lags. Again think of what all the applications of relativity are. Needless to say they did not crop up in GDP statistics immediately after 1905.

Second, they are much more likely to impact welfare than GDP. Think of what we like about science and what it does for society. We like that it gives us cooler stuff than we could imagine before with comparable resources applied. It makes our lives better. It does not necessarily make the total amount of money spent on final products higher. Indeed, it may make that lower (think about electronics prices).

So be careful about sloppy talk around STEM externalities.


  1. In an alternate world, we might magically increase the number of STEM sudents by raising the pay rates of STEM workers. But in this world, those pay rates are set by people who absolutely KNOW what STEM workers ought to earn. And it's generally a lot less than successful lawyers or bankers or businessmen or movie stars. May 60 thousand per year, maybe 90 thousand, but not -- God forbit -- a quarter million unless that STEM guy is say a principal at a rising start up. Upper middle class, in other words.

    So ambitious people who might otherwise become programmers or engineers or biologists get a strong message to bail out and find a career in something more lucratives.

    1. I work in engineering myself, this is how I see it....

      Most of the other professions that have high wages either require very different skills or come with other disadvantages. In many engineering areas jobs aren't that difficult to find, and they're fairly steady over time. (There are exception to that like anything connected with oil, as Daniel have pointed out before). The hours are quite predictable, there isn't the complexity of working for yourself and often the work is interesting. Sometimes there's a big rush to finish a project and lots of unpaid overtime is expected, I'm currently in that period. But, it doesn't happen very often, this is the first time in more than a year for me. The qualifications don't take long to obtain, unlike medicine or law, for example (of course that isn't true for the sciences which generally require PhDs). There isn't ridiculous winner-takes-all competition like there is in acting or music (and often management). Although this is playing to stereotypes I think many people in STEM wouldn't have the people skills to work in lots of the other areas mentioned.

      I certainly think that competition between fields for people is important though, especially in the long run.

  2. I agree with this point, except this bit:

    "It does not necessarily make the total amount of money spent on final products higher. Indeed, it may make that lower (think about electronics prices)."

    Isn't that supposed to be taken into account by the price indexing. That is, the price of a gadget is indexed to CPI at some point. Then the price of that gadget falls over time, leading to a declining CPI and a rising RGDP. Then eventually the statistical agency replace that gadget with a better one in the index. I know this may not work in practice very well, but indices are intended to take into account this sort of thing.


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