Interesting article on the economics of music, from Princeton economist Alan Krueger, via Slate.

"In recent years, economists have been drawn to the music industry
like lawyers to a car wreck. Napster, Grokster, digital sampling, and
Chinese piracy have thrown the industry into chaos. Economists have
realized it’s the best place to study what happens when new
technologies disrupt established industries. They have also realized
it’s really fun.

Among the crowd rushing the stage is Alan Krueger, the Princeton labor economist who is an expert on the minimum wage and many other things. In a paper written with Marie Connolly, which managed to cite both singer Paul Simon and Nobel Prize-winning economist Gary Becker,
Krueger set out to answer some fundamental questions of what he and
Connolly call "rockonomics." (This is not to be confused with Freakonomics, the book co-written by University of Chicago economist Steven D. Levitt and journalist Stephen J. Dubner.*)
Why are Cher concerts so expensive? How have falling record sales and
the rise of downloading affected big-name stars? And what’s the deal
with scalping?"

How can you not love a serious economic analysis of music called "Rockonomics?"

Sources:

Rockonomics
http://www.irs.princeton.edu/pubs/pdfs/499.pdf

Rockonomics and Its Uses
Finally, economic proof of Elton John’s genius!
Daniel Gross
Slate, May 13, 2005, at 7:06 AM PT

http://slate.msn.com/id/2118607/

>

Category: Finance, Music

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2 Responses to “Rockonomics Rocks!”

  1. jay says:

    I have to say that the rockonomics analysis scales to the tip of the pyramid in rock. He claims his data is on the 1200 bands in some rolling stone Encyclopedia of Rock, that is over more than a decade. However if you go to the pollstar site there are more than 6000 touring bands. I am interested what the 1200 bands were, what types of venues they were using and what the conclusions would have been had he used a larger source.

  2. erik says:

    I think it’s safe to assume Krueger and Connolly did this to get their word in on the mp3 debate. I also think their choice of ‘popular music’ (which requires the band be ‘financially viable’ to be considered in their story) stacks the deck in favor of the RIAA’s standard argument.

    Krueger did a terrible job at explaining the causes of any of the changes in the music industry. For an example see pages 23-24 where the authors essentially argue that file-sharing has decreased royalty revenue thus causing ticket prices to rise and demand to fall. After assertion he goes on to ‘formalize’ (ie restate with numbers) without ever really going beyond the mere assertion of the original causal relationship.

    What’s more, you might read the Slichter excerpt on pages 8-9 and wonder where the hell Krueger came up with this causal relationship in the first place.

    There’s more to the present controversy than whether or not metallica can hold on to the profits from the albums of a previous band (by the same name) that didn’t suck.

    Here’s a link that might be of interest:

    http://www.firstmonday.dk/issues/issue8_11/may/