Why Economists Make More Money than Physicists

The level of academic difficulty in my posts are intentionally varying. From mundane observations of how to allocate time properly, to sweeping but personal observations of the Economics discipline and rather jargon-filled academic debates, here's room for a lot.

On the side of less-complicated posts, I found this paper, admittedly rather old and probably out of date in its data (1999), in the Journal of Economic Perspectives by Richard Freeman.
It however provided me with some very amusing afternoon reading. As repeating readers will very well know, I'm contemplating pursuing an academic career in this beloved field of mine, and at this point I'm probably as dead-set on doing a PhD as one can possibly get.

Anyway, in his very short paper Freeman examines why professional economists in general make more money than physicists or mathematicians do. Physicists know a whole lot more about their field than economists do about ours (and their ability to predict outcomes far surpasses ours). With their particle accelerators and expensive labs and MRI Scanners, they obviously work with much more sophisticated capital equipment than we economists do, normally confined to playing around with agency-provided data series on rather simple statistical software on our computers. So according to our own wage determination theories, physicists' productivity should be much higher than ours, and their salaries equally so.

Or, in the layman (or any of my non-econ friends') version: physicists solve actual problems, inventing things, save the world - you guys argue over GDP figures and inflation numbers and write equations with very little value for outsiders, let alone equations anybody else understands. How can you make more money than they do?

Besides, physicists are probably smarter than we are to begin with. In Freeman's words (p. 142):

The graduate admission policies of economics departments show that we believe that almost any bright mathematician or physicist could sail through our graduate courses with flying colors. More grudgingly, we recognize that even the most technically adept economist would struggle in Ph.D.-level courses in mathematics of physics, and perhaps even in advanced undergraduate courses in those fields.

Freeman's Answer: Second-best options and elasticity of supply curves.

Most physicists have dreamt on becoming a physicist since their childhood. Natural curiosity of how things work have constantly pointed them in the direction to where they are - and they probably spent their teenage years and student years exploring the unexplored areas of incredibly-difficult-physics. Unlike economists who sort of stumbles into it, one way or another. Don't get me wrong, those of us who are set on advancing our field now have the same sort of curiosity. The point is that physicists desire generally go deeper. And they have less options for doing their thing outside of the physicist profession - whereas economists have a lot more options in the world of business, financial analysis or law/statistic agencies.

Or in nerdy econ-language. Our supply curves are a lot more elastic:

Fields with a core of young persons dedicated to a career such as mathematics or physics have relatively inelastic labor supply, at least in some range and over some time period. When demand drops or supply increases for some exogenous reason, such as changes in defense spending or drops in NASA funding or immigration of foreign experts, wages and employment conditions will fall greatly. Eventually, the supply of young American entrants may drop, as has occurred in physics and math, but in the global market, this supply may be replenished by foreign students facing a different set of incentives. By contrast, economics has, I hypothesize, a relatively elastic supply curve. If the job market collapses, our potential graduate students are more likely to move en masse to other fields than math and physics whizzes. Indeed, our subject matter is more likely than the physical sciences to attract persons with lucrative alternative opportunities - law and business, in particular. (p. 143-44)

The argument is probably more of a fun idea than carrying actual explanatory power, but it doesn't seem unreasonable.