Chairman of the Council of Economic Advisers Alan Krueger delivered remarks last week at the Rock And Roll Hall Of Fame in Cleveland, Ohio. The speech, entitled “Land Of Hope And Dreams: Rock And Roll, Economics, And Rebuilding The Middle Class” began by introducing the rock and roll industry as a microcosm for the US economy over the past three decades.
Krueger’s example begins by saying that the music industry has dealt with a significant lean toward a “winner-take-all” economy that significantly favors the top percentage of performers, and goes on to examine concert price inflation as a measure of that inequality. Concert prices have risen nearly 400% in the last 30 years, compared to 150% consumer price inflation—a rise attributed to technology evening the playing field in recorded music, and the difficulty in policing unauthorized reproductions. The top artists take back the lost revenue with inflated concert prices, which then squeezes out other artists who make a smaller percentage of revenue due to smaller audiences.
The most refreshing bit of analysis Krueger provides is a lengthy sidebar incorporating luck into the equation, and how much that unknowable aspect plays into popularity and profitability. He cites a fascinating sociological study that concluded a significant part of a song’s popularity is being told it is popular.
About halfway through the presentation, Krueger abandons the music industry comparison in favor of more bluntly political arguments, and ties the economic data to Obama policy proposals aimed at growing the middle class and restoring more stable levels of income equality. But before he lurches into full-on pro-Obama economic rhetoric, it’s a good read for how the economics of the music industry have mirrored the United States economy at large. Read the entirety of Krueger’s remarks at The White House Blog.