Top Menu

Yes Virgina, There Is A Cost Disease

Over on the Marginal Revolution blog, Tyler Cowen opines that the arts are not impacted by Baumol’s cost disease.

2. I do not see the arts as subject to the cost disease very much at all. As for the “live performing arts,” the disease seems to afflict the older and less innovative sectors, such as opera and the symphony. There is plenty of live music these days, it is offered in innovative ways, and much of it is free.

I was a little confused by this point since all it really proves is that people aren’t charging for live music and doesn’t really address that there are costs involved with the performance.

Admittedly, he does seem to imply that innovation in the way the artistic product is offered makes all the difference. Back in June, I noted that Jon Silpayamanant made the point that there are alternative ways to make money when offering an experience.

Cowen goes on to say, (my emphasis)

“4. In many sectors of the arts, especially music, consumers demand constant turnover of product. Old music becomes “obsolete” — for whatever sociological reasons — and in this sense the sector is creating lots of new value every year. From an “objectivist” point of view they are still strumming guitars with the same speed, but from a subjectivist point of view — the relevant one for the economist – they are remarkably innovative all the time in the battle against obsolescence. A lot of the cost disease argument is actually an aesthetic objection that the art forms which have already peaked — such as Mozart — sometimes have a hard time holding their ground in terms of cost and innovation.”

I will grant him that some of the cost disease problems can be attributed to an adherence to aesthetic ideals rooted in the past and a resistance to innovation.

But I am not sure if consumers are truly demanding a constant turnover in product. There is reluctance to sample anything new and unfamiliar among consumers. This isn’t necessarily confined to symphony and opera where you might argue the new material is being presented to the wrong audiences (i.e. older existing audiences whose tastes are already set).

There is as much a sense of risk aversion among audience as among content creators. Broadway shows are often revivals or derivative of works that have already proven their success. Playwrights bemoan the fact that regardless of their proximity to Broadway, few theatres are producing new works.

The same is true with movies. The most well attended movies this summer were based on comic books. Even the plots of those stories had been revamped numerous times in the comics format. The plan for the adaptation of J.R.R. Tolkien’s The Hobbit went from two movies to three leaving fans to wonder, if the three books of the Lord of the Rings took three movies to tell, (albeit with much left out), how is the one book of The Hobbit going to be stretched to three?

A fair bit of emotion and nostalgia is responsible for perpetuating the conditions which contribute to Baumol’s cost disease. One of the points Cowen makes reinforces this:

“Live music” may seem like it doesn’t change much, but lifting the embargo on Cuba would boost the quantity and quality of my consumption of spectacular concert experiences, as would a non-stop flight to Haiti.

Opportunity rather than innovation is the only thing having any bearing on the quantity and quality of his consumption. It isn’t necessary for Cuban musicians to made any changes whatsoever since 1962 when the embargo began, they just need to be available.

There is an element of his aforementioned “aesthetic objection that the art forms…have already peaked” in this point as well. It is difficult to take an entirely objective view of a product or service possessing an artistic element.

If quality of product could be maintained by paring down performers and replacing them with technology, The White Stripes would have been a model everyone emulated. As interesting as the band’s work might have been, there wasn’t a rush to form duo performance groups.

It may be a difficult to define Platonic ideal, but there is a minimum one can offer before the perception of the experience suffers. Ultimately, because it is his area of expertise, I might find myself having to concede Cowen’s point in the face of a more detailed argument. But I think given that the resources necessary to provide the central experience remain generally constant, Baumol’s cost disease does indeed impact the arts significantly.

As for the solution, at this point I keep coming back to Jon Silpayamanant’s idea that ancillary elements surrounding the experience need to be developed in order to support it.

, , ,

5 Responses to Yes Virgina, There Is A Cost Disease

  1. lindaessig October 3, 2012 at 8:20 am #

    Thank you for calling out Cowen!

    • Joe Patti October 3, 2012 at 8:54 am #

      Well, I don’t necessarily think I am calling him out. I just think there is more to it than he is acknowledging.

  2. Jon Silpayamanant December 3, 2012 at 9:26 am #

    Cowen is a little bit unclear, I think–one second he seems to be defending the Cost Disease effect and the next stating it doesn’t matter. I quoted some of the exact segments you did, Joe, in a piece about Pop Music and the Cost Disease.

    I think one thing that might be useful to consider (as I outline in my post linked) is that, as far as pop music is concerned, there has been a consistent downgrading of performing forces since the early part of the 20th Century. The earlier part of the century was full of Big Bands and Crooners/Singers back by full orchestral forces. By the 60s, as Larry DeBoer points out (reference in my post above):

    It was one factor accounting for the shift in the dominant form of US popular music from big band swing in the 1930s and 1940s to rock ‘n’ roll in the 1950s. Baumol’s disease made the smaller band a necessity, although cultural forces determined the music’s content. The recording industry responded to these cost pressures by concentrating on rock ‘n’ roll music.

    And by the 80s we started to have a proliferation of solo superstar acts (e.g. Madonna, Michael Jackson, Billy Joel). This trend has been noticed by others as well as I note in another post (Death of the Pop Music Industry and the Decline of Popular culture) and I think your comment about the rehashing of content for cinema also is pertinent. The most successful movies, or the movies with the biggest budgets, were already successful franchises in other media (literature, comic books, video games) or simply sequels to already popular film franchises (which may have started out as a non-cinematic franchise).

    And I’ve been saying this for years–the pop bands, outside of the superstars that usually get the attention, that make a livable wage at their art are more often than not cover bands–not bands that create original content. For every Superstar name act in the pop world, there are thousands of cover bands making a living covering pre-existing material!

    • Jon Silpayamanant December 3, 2012 at 9:29 am #

      Apologies–I didn’t realize you had linked to a recent blog post by Cowen–my post referenced a piece he published in 1996 which made pretty much the same points!

      “Why I Do Not Believe in the Cost Disease: Comment on Baumol,” originally published the Journal of Cultural Economics (20: 207-214, 1996)

Trackbacks/Pingbacks

  1. Around the horn: Frankenstorm edition | Createquity. - October 31, 2012

    [...] William Baumol has a new book out summarizing his decades of thinking on cost disease. Joe Patti has more. [...]

Leave a Reply

%d bloggers like this: