The Joy of Economics:  Making Sense out of Life
 Robert J. Stonebraker, Winthrop University
 

Starving Artists

            It is through art, and art only....that we can shield ourselves from the sordid perils of actual existence.

                                                                        .....Oscar Wilde

            Artists rarely starve, but they do get hungry.  More accurately, many are waiting tables to keep food in their bellies.  Although Russell Crowe and Mariah Carey provide powerful exceptions, performing artists are not among our economic elite.  Average income levels are well-below average and lengthy spells of unemployment between gigs are commonplace.  For every Russell Crowe there are hundreds of aspiring actors fighting for bit parts in regional stage productions; for every Mariah Carey there are hundreds of musicians vying to provide background music in local restaurants and bars.

            It's all supply and demand.  Members of performing arts earn relatively less because their supply relative to demand is large.  The dancer/designer/actor/composer who holds out for a higher price is quickly replaced by a talented aspirant waiting in the wings.  And, the talented aspirants are there.  Listen to the principal flutist in a small-city orchestra, the lead in a regional production of Fiddler on the Roof, even the paid soloist in the local church choir.  The talent is there, just lusting for a shot at the big-time.

Too much supply

            Why do they try?  Young performers know their chances for fame and fortune are slim.  Dancers put their bodies through incredible stress.  Why endure the physical pain of ballet training when plumbing is more lucrative?

            Non-monetary rewards are an obvious factor.  Gliding across the stage in Tchaikovsky's Swan Lake and playing Hamlet to a packed house offer an allure that emptying septic tanks cannot match.  Just as workers must be paid more to attract them into dangerous and/or unpleasant occupations,¹ workers willingly accept lower wages to enter occupations which provide enjoyment, self-expression, and potential adulation.  As long as performing arts markets are flooded with starry-eyed youth, wage rates and employment opportunities will remain low.

            Self-delusion swells the oversupply.  In most occupations our abilities are easy to evaluate.  For example, plumbing performance is transparent; either the leaking pipe is fixed, or it is not.  Assessments in the arts are less objective.  Is my sonata soothing?  Is my soliloquy stirring?  Few people misjudge their chance of success as electrical engineers but, for some of us, five minutes alone in the shower can conjure visions of Broadway fame.  If the glut of talented performers is bad, the glut of untalented performers is worse.

            An increased consumer appetite for performing arts might ease the problem, but don't hold your breath.  Prime seats for Broadway musicals already can fetch $250 and up, and even the nosebleed seats in the Metropolitan Opera House will cost you more than several nights of bowling. High prices have driven low and middle-income buyers out of the market and chased many live performance groups into oblivion.

In search of technology

            Do not expect any changes.  Ticket prices for the live performing arts have risen faster than most other prices in the past, and are likely to do so in the future.  The relative price of these performances is on a relentless tear.²  Why?  In a word, it is technology.

            Quickly.  Name a product that is less expensive than it was in the past -- a price that has fallen over time.  What did you identify?  Computers?  Calculators?  Long-distance telephone service?  Those are all good answers.  Now ask what those products have in common.  The answer is rapid technological change.  Whether the relative price of a good rises or falls over time depends critically on the pace of technology.  When technology advances rapidly, productivity improvements cut costs and relative prices will fall.  But, when there is little or no technological change to keep costs down, relative prices will rise. 

            Imagine you were a visitor from the year 1850.  The changes you'd find would blow you away!  Current manufacturing techniques and robotics would look like science fiction; modern communication and transportation systems would be incomprehensible; and even agricultural methods, replete with pesticides, mechanization, and genetic engineering would astound you.  In each of these areas, technological advancements have lowered costs, increased supplies and encouraged growth and expansion.

            Yet, should you venture into a theatrical or concert performance, you would recognize it immediately.  You would see some minor changes ‑‑ electric lights and new sound systems ‑‑ but the basic technology is unchanged.  You would see the same performers playing to the same audiences in the same rows of seats.  More importantly, you would find little or no increase in productivity.  Computers have enhanced the speed with which sets and costumes can be designed and built, but it still takes the same number of musicians the same amount of time to play Beethoven's Fifth Symphony; it still takes the same number of actors the same amount of time to perform Othello.

            In short, there has been no significant technological progress and no significant increase in productivity.  With no increases in productivity to hold costs down, the relative price of live performing arts has risen. 

            The arts must compete with other industries for skilled personnel.  As technology drives productivity and wages up in other sectors, arts producers must match those higher wages to attract needed performers and other workers.  But having to pay higher wages, without the benefit of higher productivity to offset them, is a sure‑fire recipe for escalating costs. As long as the arts remain in the technological backwaters of the American economy, their relative costs will inexorably rise.  Unless violinists or ballerinas find a way to churn out more performances per hour, the relative prices of such live cultural pursuits will inevitably rise.³

            One segment of the arts has been transformed by technology: broadcast and recorded performances.  Through the magic of movies, a single Russell Crowe performance can play to an audience of millions.  Recordings expand the potential market for the New York Philharmonic and MTV videos do the same for Mariah Carey.  The relative expense of live performances may be rising, but technology has lowered costs enough to make broadcast and recorded performances more accessible than ever.

            Electronic technology has created immense riches for top movie stars and recording artists, but has done little or nothing for most performers.  Indeed, the new technology might even have lowered the median economic status in the occupation.  Technology-induced riches are highly concentrated in the pockets of a few superstars.   After all, if we are to own a recording of Puccini's La Boheme, we want the best.  Given a choice between a recording by the supremely gifted Luciano Pavarotti as the lead tenor, or by moderately-gifted Bill Kennedy from the local Lutheran church choir, we will choose Pavarotti every time.  And so will everyone else.  Pavarotti's recording will sell to the masses; Kennedy's will sell to his friends.⁴

            The big money is in the electronic media, not live performances.  Top actors earn more from single movie than from years of nightly Broadway performances. As a result they often relegate live theater to downtimes in their movie careers.  Not only do superstars crowd less-talented performers from the electronic media, they are likely to crowd them from the live-performance market as well.  Why attend a live recital by less-talented local tenor when Pavarotti is available on compact disk 24 hours a day, seven days a week?  Why pay to see the local repertory's version of Hamlet when you can see Laurence Olivier's Hamlet on video instead? 

Other examples

            The cost disease that besets live performance is not unique.  Handmade items have suffered the same fate.  If we continue to craft such items as we did in 1850, their relative expense can only rise.  Suppose that artisans in 1850 could produce either one earthenware jar or ten metal cans in a day.  The opportunity cost or "price" of the jar would have been ten cans (or the monetary value of ten cans).  Suppose the same worker, due to technological change, could turn out 100 metal cans per day in 2001.  The opportunity cost of producing the hand‑crafted earthenware jar just increased by 1000 percent!  The price of the jar ‑‑ just ten cans in 1850 ‑‑ would be 100 cans in 2001.  Given such changes, it is not surprising that so few hand‑crafted items are still available at reasonable prices.

            Similar trends are evident in many service industries.  The opportunity cost of time for a doctor's house call and a milkman's home delivery have risen so rapidly that they are too expensive for most of us to afford.  Restaurants that have not shifted to "fast food" techniques have lost ground.  The opportunity cost of the time spent in preparing fresh meals for each customer is greater than most of us are willing to pay.

            Education offers a final example.  As with live theater, the basic technology has changed little over time.  We still rely on the same teachers lecturing to the same students taking notes with the same pencils in the same desks.  Teachers cannot talk any louder or any faster; they cannot turn out any more students per hour than they did one hundred years ago.  Productivity increases have been minimal and its relative cost has risen.  Do you think a college education is expensive now?  Barring some unforeseen technological breakthrough, just wait and see how pricey it becomes fifty years down the road.

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Notes:

1.         Economists term these higher payments compensating wage differentials.

2.         As measured by the Consumer Price Index, average prices rose by a factor of about 12 from 1938 to 1998.  What would have cost $1 in 1938 typically cost about $12 in 1998.  Over the same period, top tickets for Broadway dramas rose from $2.50 to $50 (a twenty-fold increase).  A top ticket for Verdi's Aida at New York's Hippodrome or Metropolitan cost $1.50 in 1938.  An equivalent ticket in 1998 cost $150 (a hundred-fold increase).

3.         This phenomenon is often termed "Baumol's cost disease."  See Baumol, William J. and Bowen, William G., Performing Arts - The Economic Dilemma, The Twentieth Century Fund, New York, 1966. 

4.         Movie stars and recording artists often operate in the winner-take-all markets discussed in What's Fair is Fair.  See Frank, Robert H. and Cook, Philip J., The Winner-Take-All Society, The Free Press, New York, 1995.

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Testing Yourself

To test your understanding of the concepts in this reading, try answering the following:

1.         Explain how and why the relative prices of tickets for the live performing arts have changed over time; make sure you discuss the role of technology.

2.         Explain how technology has created performing arts superstars who earn disproportionately large incomes.

3.         Explain how and why the relative price of education is likely to change in the future.

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