Taking Note: A Superstar Economy is Born
"What in the world do you think you are?
A superstar? Well, right you are.
But we all shine on..."
---John Lennon, "Instant Karma"
When it comes to economics, Alan Krueger is nothing less than a rock star. As a Princeton professor of economics and public affairs, he has written about the economics of such diverse phenomena as education, terrorism, the labor market, and individual well-being. He also founded Princeton's survey research center. In addition to having held two chief economist posts for the U.S. government (one at the Department of Treasury, the other at Labor), Krueger now chairs the White House Council of Economic Advisers, in which capacity he has helped the President cope with post-Recession blues, including persistent unemployment rates.
Less known are Krueger's contributions to research on the arts. In 2006, he contributed a chapter to a key text, the Handbook of the Economics of Art and Culture (eds. Victor Gisburgh and David Throsby), and, subsequently, his pioneering work with time-use diaries identified listening to music as one of the most enjoyable activities for people. Last month, Krueger showed he has not lost his fascination with cultural economics for what it can reveal about broad societal trends. Drawing from his published research on rock concert ticket prices, Krueger gave a speech titled "Land of Hope and Dreams: Rock and Roll, Economics, and Rebuilding the Middle Class."
Krueger's thesis is that as technological advances made recorded music cheaper to replicate and distribute, musicians began charging higher fees for live performances as a way to recover the lost income. The problem is that only a few household names command the lion's share of total ticket revenue. Krueger claims that this imbalance, coupled with the dumb luck that often accounts for success in the first place, presents "a risk to the entire industry." I wonder how the news was received by his audience at the Rock and Roll Hall of Fame and Museum in Cleveland, an institution which, if anything, has helped to maintain the earning potential of a rock elite.
Krueger likens concerts to "a giant block party instead of a traditional market. While it is socially appropriate to charge neighbors some fee for coming to a block party to pay for the provisions, it is inappropriate to charge them enough to make a hefty profit." This emphasis on fairness and social equity leads him to construe the music industry as emblematic of the nation's economic troubles. According to Krueger, "the same forces of technology, scale, luck, and the erosion of social pressures for fairness that are making rock 'n roll more of a superstar industry also are causing the U.S. economy to become more of a winner-take-all affair."
Let's leave Krueger in Cleveland for a moment and consider his argument in terms of other research on the arts. The term "winner-take-all," as applied to labor economics, was popularized by Robert Frank and Philip Cook's 1995 book, The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us. Ten years later, University of Pennsylvania sociologist Mark Stern produced a paper titled "Artists in the Winner-Take-All Economy." In it, Stern examines patterns of income inequality among artists over a two-decade period (1980 to 2000) in six major metropolitan areas. Artists' income inequality grew over that period, though not as quickly as inequality of income for the rest of the workforce. Nevertheless, even in 1980, income inequality was "unusually high" compared with that for other occupations. These findings and others made Stern conclude that "the role of increasing inequality within the arts and cultural professions is an issue that can be ignored only at the peril of artists, cultural organizations, and ultimately the society that they seek to understand."
Around the same time, in a textbook chapter titled "Artists' Careers and Their Labor Markets," Neil Alper and Gregory Wassall of Northeastern University reviewed Census data over a 60-year period and found that the income inequality of artists remained higher than for other "professional and technical workers"---a difference that vanishes only when one limits the comparison to full-time, year-round workers from both categories.
Sixty years may seem a long time, but from Sherwin Rosen's 1981 paper "The Economics of Superstars" (cited by Alper/Wassall and, yes, by Krueger himself), we learn that even after adjusting for inflation, Elizabeth Billington, a highly paid opera singer at the turn of the 19th century, earned far less than Luciano Pavarotti in the 20th, thanks in part to the even higher earnings now possible for celebrity-artists through royalties and recording contracts. "Imagine [Billington's] income had radio and phonograph records existed in 1801!" Rosen pants. "What changes in the future will be wrought by cable, video cassettes, and home computers?"
The example of Elizabeth Billington originated with Alfred Marshall, considered by Krueger and many others to be "the father of modern microeconomics." Marshall developed the concept of a superstar economy (he didn't call it that) as far back as the late 1800s, and it's telling that he referred to painters and musicians when describing the phenomenon. (In some ways, his discussion of income inequality anticipates research by Baumol and Bowen on the inflexible wage structure for orchestras.)
As for the NEA, we haven't closely examined the question of a superstar economy, though we regularly publish demographic, geographic, and earnings information about U.S. artists---thus enabling other researchers to make income comparisons across artist occupations and with the general workforce. We also have made such comparisons ourselves, notably in a 2008 research publication that showed income disparities between female and male artists.
More recently, we've released a research tool allowing the public to interrogate data from the Equal Employment Opportunity tables, including findings about artists' median incomes. And just a few weeks ago, responding to a question on Twitter, Bonnie Nichols in the NEA's Office of Research & Analysis posted an analysis of 11 artist occupations relative to the poverty line.
But back to Krueger and Cleveland. His paper has much more significance for arts and cultural research and policy than his analysis of the music industry alone. Two of his conclusions in particular are worth quoting here: "First, we need to provide ladders of opportunity so we can fully utilize and develop the talents of everyone in our country." Krueger says such opportunities can be launched by a high-quality preschool education. "Second, the only force stronger than globalization is the strength of the community."
Elaborating on the second point, Krueger says: "There is the reason why tech communities agglomerate in Silicon Valley or movie producers in Hollywood. And it is why Motown produced so much great music. There can be positive spillovers within communities."
More evidence of the agglomeration effects of creative talent and the "positive spillovers" he speaks of can be found in a newly published volume, Creative Communities: Art Works in Economic Development, published by Brookings Institution Press and sponsored by the NEA. "Strength of community," in Krueger's terms, is the operating principle behind NEA programs such as Our Town and other creative placemaking strategies.
At the same time, Krueger's first point, about "ladders of opportunity," is underscored by a chart he showed in Cleveland, one that should make arts and cultural policy leaders gasp.
"Since the 1970s, expenditures on [education]-related activities---including music and art lessons, books and tutoring---have been growing for children in families in the top 20 percent of income earners, but stagnant for children in the bottom 20 percent," he comments. Then he shows the slide---based on separate data analyzed by Harvard political scientist Robert Putman (author of Bowling Alone, and scheduled to receive a National Humanities Medal this year). The chart shows "a widening gap in participation in music, dance, and art outside of school" between groups of children from families of either low or high socioeconomic status.
If this latter trend is to be believed---and NEA research on arts participation and arts education seems to corroborate it (see, for example, Nick Rabkin's 2011 report)---then arts and cultural administrators have their work cut out for them---and it doesn't involve sustaining superstardom.