Why are hedge fund managers worth more than doctors?

I found this article while surfing the web. When I think about putting in 12-16-hour days and then I think about these four-day-a-week guys…

From Blogginstocks:

A few months ago a doctor asked me why hedge fund managers make more money than he and his colleagues. After all, Doctor, when used before a name, is capitalized, while hedge fund manager isn’t. While I’m joking about the capitalization — it does reflect the much greater level of societal acclamation doctors receive from the moment they set their minds on an MD to their obituaries. So why doesn’t societal acclamation translate into money?

Before trying to answer this question, it’s worth noting that I just spent some time trying to find a list of the highest paid doctors — but I failed. I found one list which said surgeons make an average of $247,536– and a 1999 survey suggesting that neuro-surgeons make $500,000. But hedge fund managers do get ranked by income, as this New York Times article (registration required) points out.

My post on top-ranked James Simons (2006 income: $1.7 billion), suggested hedge fund managers out-earn doctors because top performing hedgies can leverage their time more efficiently. That is — while a hedge fund manager can take on an additional $1 billion under management without adding a huge number of additional analysts, if a doctor takes on many more patients, he or she will need to hire a proportionately larger number of doctors to treat them. Most hedge fund managers let computers do much of the work — something doctors can’t do.

But there’s really more to it than that — society perceived that the pricing mechanism for doctors’ services was broken. That is, if the free market set the price, many citizens would not be able to afford to pay. And society believes implicitly that health care should be widely available to citizens. (That doesn’t mean everybody. 40 million Americans are not covered by health insurance but many of them can get care at hospital emergency rooms.) (more…)

0 Responses

  1. Why do actors in a movie make more than doctors?

    Why do football players make more than doctors?

    Because their boss decides how much he is willing to pay them. That's why.

    Would I pay an actor $1 million or $10 million to do a movie? Maybe I would if I thought I had a decent shot at making $100 million with the movie.

    Not that I'm all that fond of the acting business. But I prefer giving movie companies the freedom to compensate their employees as opposed to giving the government the chance to decide how much folks should be paid.

    Government shouldn't set any type of salary or compensation rules for someone who isn't a government employee.

    It's none of their business.

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Errington C. Thompson, MD

Dr. Thompson is a surgeon, scholar, full-time sports fan and part-time political activist. He is active in a number of community projects and initiatives. Through medicine, he strives to improve the physical health of all he treats.


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