Why Rooney makes £200,000 a week and a nurse is on £27,000 a year

Wayne Rooney makes up to £200,000 a week on his new contract which is staggering considering a nurse makes on average £27,000 a year. Wayne is on around 380 times more than a nurse yet nurses help save lives and Wayne probably can't spell patient (not that i can talk), what is going on?
Some would question "what is going on! Its an outrage" maybe even doubt how economist works, but economics and example this quite easily: DEMAND AND SUPPLY.

The theory
Footballs have always been in short supply, there are very few players with the skill to play at the top in Football. To show this we draw an inelastic supply curve, as shown bellow in the graph
This first graph shows the demand for football players forty years ago, when plotted across this translates to £2300 a week. The second demand lines shows demand in 2010, demand has increased dramatically and because the supply of football players is inelastic this is multiplied and the salary sores.

At the bottom we can see that Q was the supply of skill football players and this now have increased to Q1, this is because the high wages incentivise more people to try and be football players, but if you don't have the skill you can't become one so Q is not effects much at all. This is what inelastic supply is all about.

Where is the high demand?
Why has demand increased? Whats the evidence? Well increasing viewing figures is the main reason, increasing merchandise e is another reason and the size of the top football as increased.
Football clubs are now seem all over the world and sell shirts and other merchandise in millions, for this reason an iconic football player is in very high demand: by the owners wanting to sell shirts and make money and by the fans that want to win.
The table bellow shows the value of rights to the premier league overseas, this is doubling every three years, which means the demand for players is being forced up as well.





Why do nurses get so little?

What about the nurses? well its simple, there is larger supply of nurses than skilled football players which drives down the 'price per nurse'.

Want to lower pay for football players?
If you still think its outrageous what football players get  paid then you can start by stop buying any merchandise from any team, so the value of a team or a players name falls and its not profitable for the owners of a club to pay so much for them.
Then you can stop watching all football games on TV so viewing figures falls and Sky, BBC and others don't bother paying for the rights to football and the value of it falls (low demand). Also advertisers will be put off football as a method of selling their products.
The question is would you really want to do that? and get everyone else to do that..? Or would you rather do the British thing and just moan and enjoy some fantastic goals? I'd rather do the latter.

The COCA COLA championship...

So next time your staggered by the amount Wayne Rooney gets pays consider how much people talk about football, all the matches you've watched and how much you care (or know someone who cares) about your team. Thats translates globally into HUGE demand which is why he gets a huge salary.

Primary sources:
Fags to Wags- The Times
Premier League world's favouriate league -Telegraph

Inflation Killed My Pocket Money

Here Sonny boy take this 10p and go buy yourself a handful of sweets" ... yes Grandma i think you will find you can no long buy a humble Fredo with that!

Inflation is often a concept none economists easily over look. People will look at the public sector (for example) and ask why are they complaining about a 1% pay increase? Its an increase isn't it? No it is not, if inflation is higher than 2%. If inflation is 2% that means everything will cost 2% more than last year so their wages from last year will be able to buy less. While this is not a fall in nominal income it is a fall in real income. This means that a 1% wage rise is actually a pay cut in real terms.
(This means that the pay freezes, which means no more pay increase, in the public sector as stated in the budget is actually a cut in real terms.)
Value can also confuse some people, consumers can easily be thrown off track by inflation as the hypothetical granny was. To assume that something will cost the same as it did ten years ago is folly because firms will have raised their prices due to inflation. If your pocket money as a child (if your lucky enough to get any) never saw an increase then it means it will have fallen in value significantly over time. "Your lucky back in my day we got 50p a week" is a failure of a statement.. back in your day 50p could buy a lot more!
On a final note, if you can grasp this concept you will be able to understand that over time the value of your savings fall. If interest rates are less than inflation then in real turns saves are devaluing... using this theory we can move into Micro Economics because this is one of the main principals of Monetary policy......

Money Isn't Everything: An Introduction to Economics

We take money for granted today and often if you ask someone what economics is about they will tell its about money. Money is an interesting thing if we analyse it further, in fact from economic point of view money its self possesses no value what so ever! In this article I will try to explain what the principal behind money is and how we have come to use it.
The world we live in is full of useful resources that we can use to better our selves (increase our standard of living) but the problem has always been how to divide these through out the population evenly. You see even in the time of the first humans when resources were in abundant supply we had to get at them. This required time and skill and people had to worry about the daily struggles of life. This meant people failed to advance into great empires. At some point in history the human race made a great jump they decided to barter, to trade, and economics began. People first would trade one resource for another, this was known as barter and it meant people could begin to specialise. Specialisation is when individuals can focus on one thing they are good at so that we can all produce more. In the early societies those that were good at farming could farm enough for many people and then others could work on making other goods like weapons, then these could be swapped with each other. There are how ever a number of huge problems with barter. The first problem with barter is that how can people know what one thing is worth, there is no use a farmer spending all his time raising a cow and then getting just a spear for it. The second problem is related to the first problem, there is no division of units, if a cow is worth four and half a spears what use is half a spear! The final main problem is that resources can perish, if a farmer works hard and farms lots of potato’s then wants to save up so if there is a bad season, he can’t or all his potato’s will rot. The solution if a medium of exchange… money.
The first evidence of money is in Mesopotamia around 3000bc, by making everything worth an amount of money people can save money and freer to specialise. Money was clearly a success and by the time of the Roman Empire the roman currency called denarii was being used through out Europe. Why then did I say that money is useless? Money is just a method of exchanging resources with each other; the value is only in what you can buy with the money. All the money in the world is worth all the resources in the world.
By increasing the amount of money the only thing that happens is you decrease the value of everything. If the only thing you could buy with Pounds was Apples and there were only 40 Apples you could buy, then if the amount of pounds in the world was £1000 then 40 Apples would be worth £1000 (1 Apple = £25). If you mint another £1000 then the total number of pounds becomes £2000 this then means if you have all the money in the world the max you can buy is still 40 apples and each apple is now worth half the amount. This is why government CANT print money to make them richer all it will do is devalue the value of their currency or in other words increase prices. A rise in prices is know as inflation and printing lots of money leads to hyperinflation. This method of gaining wealth has been tried again and again in history, Germany in the 1920s, Greece in 1944 and there are many more examples, it always fails.
Money is only ever worth what you can buy with it. There is no use in being a Zimbabwean billionaire.
Written By Jonathan Martin 24/4/10