4 ms·

Baumol's Cost Disease: Why Artists are Always Poor

39 points by mnemonicsloth 17y ago

Alex3917 17y ago
The other problem is that the market can't properly value artists by definition, because if you know what you're paying for then it isn't art. edit: This is one of the arguments in Seth Godin's next book, which you can get a review copy of here: http://sethgodin.typepad.com/seths_blog/2009/12/preview-copy-of-my-new-book.html http://sethgodin.typepad.com/seths_blog/2009/12/preview-copy...
- deleted 17y ago
  [deleted]
cousin_it 17y ago
I don't see how the linked article supports your editorializing in the headline.
- MarkPNeyer 17y ago
  If anything, this article contradicts the editorializing - the cost effect increases the salaries of musicians and artists.
  - pwnstigator 17y ago
    Artists face inverse-BCD. They aren't qualified for other jobs (primarily because of their lack of a resume) so they lose out on the options that someone with 5 years' experience as a corporate grunt would have. This makes them poor relative to the corporate grunt. We, as entrepreneurs, are also facing inverse-BCD with the bad economy, as everyone familiar with the phrase "multiple liquidation preferences" is aware. VCs aren't issuing shitty term sheets because they're in trouble-- the money they're investing was raised before Sept. 2008-- but because entrepreneurs have fewer options in traditional employment than they did 3 years ago.
- mnemonicsloth 17y ago
  It would have been more precise to say BCD explains why most artists have trouble finding paying gigs. Wages for artists rise, their output stays more or less the same [1], so the proportion of artists whose output is good enough to justify the rising price shrinks. The artists who aren't "good enough" (whatever that means), or have trouble convincing buyers that they are "good enough", have to take other jobs, e.g. as waitstaff, to make ends meet until their careers take off. [1] Mass production has made some kinds of artists more productive, like novelists and screenwriters, but the net effect is a similar winner-take-all situation. Many unknowns compete to be the next Umberto Ecco or Dan Brown.
  - tlb 17y ago
    I don't think the BCD effect goes as far as you say. In a nutshell, the effect is that because artists can make $X working day jobs, you have to pay O($X) for them to perform. But this effect stops working before artists price themselves out of the market, because artists actually like performing and adjust their price to clear the market. This is why you can hire a really good band to play at your party for only several hundred bucks.
cageface 17y ago
I'm not sure you can argue, as the article does, that musicians' productivity hasn't increased either. In the age of digital distribution that same string quartet can (potentially) generate far, far more revenue than their 18th century counterparts.
- mnemonicsloth 17y ago
  I touched on this in my reply to cousin_it below. People consume cultural stuff in large part because other people are consuming it, or as an implied comment on stuff other people are consuming. So the mass production of cultural stuff is limited by the amount of attention people have to dedicate to that sort of thing. Long tail-style fragmentation may change this for all I know. IANA Cultural economist. But in the world we've been living in, the result is a tournament model, where the Stephen Kings and Britney Spearses provide books and music to more people than they would if everybody chose what to read and listen to in isolation. Baumol's Cost Disease is what forces artist-hood to be boolean. If you don't become a bestselling novelist on the national stage, you make no money at all as a novelist, and have to make ends meet as a technical writer or something.
  - wcarss 17y ago
    It sounds like you have some misconceptions about Baumol's Cost Disease. I'm absolutely not intimately familiar with it, but the principle is clearly: 1) Effectiveness increases in one industry. 2) Wages increase accordingly in that industry. 3) To remain competitive, other industries increase wages. The article clearly states that this means artists also receive higher wages. I do not have a specific quarrel with your conclusion that an artist must be very successful to make lots of money, but your arguments so far have not shown any reasonable negative causal relationship between wage increases across industries and the lifestyle/wealth level of the average artist. It's entirely plausible that the situation artists face in being successful or failing is due to other factors, some of which are technological and some of which are cultural. It's also plausible that this situation is merely imagined. There are likely many failed artists across the world, and there are certainly many successes, but the number of musicians who play medium/small gigs, the number of artists who sell commissioned works on a small scale, the number of architects and sculptors and 3D artists who do work for regular wages -- and so on -- is probably not miniscule. The number of writers employed by the television, film, commercial, music, and theatre industry must be enormous. There are regular dayjobs for artists too, you just have to look for them.
pwnstigator 17y ago
The connection is actually the inverse of "Baumol's Cost Disease". BCD describes the increase in labor costs when the laborers have other options. The problem for artists and writers is that they're concentrating on their artistic work, rather than building a resume and career, just because the artistic careers require so much energy, and most of what they end up doing is not transferrable to mainstream work. So they have fewer career options, and those who patronize them (e.g. publishers, agents) are able to exploit their weak bargaining position. For the same reason, academics in the humanities are often paid less than those in the sciences; science professors have other options. You can say that BCD is making the science professors rich, or making the humanities professors poor-- two sides of the same coin.
mnemonicsloth 17y ago
Apparently I've got this wrong. Baumol's Cost Disease is a theory in dispute. I just googled "Baumol's Cost Disease Arts" and found: The first link is to the wp article. The second is an Amazon listing for a book called Baumol's Cost Disease: the Arts And Other Victims. (http://www.amazon.com/Baumols-Cost-Disease-Other-Victims/dp/1858985080 http://www.amazon.com/Baumols-Cost-Disease-Other-Victims/dp/...). The author is apparently an economics professor at a University in England. There's also an abstract from the Journal of Cultural Economics. Baumol apparently developed his claim in the 1960s by looking at the economics of the performing arts, and then generalized it to education and health care. http://www.springerlink.com/content/k16p700536510057/ http://www.springerlink.com/content/k16p700536510057/ At the top of the second page is a New Yorker article that certainly would have made a better HN submission: http://www.newyorker.com/archive/2003/07/07/030707ta_talk_surowiecki http://www.newyorker.com/archive/2003/07/07/030707ta_talk_su... But apparently, the jury is still out. Google also turns up links to skeptical papers: "Has Baumol's Cost Disease disappeared in the performing arts?" http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6WWV-45N44TX-B&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1119612647&_rerunOrigin=google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=24e19cf9babcb2a23cd7004955670d27 http://www.sciencedirect.com/science?_ob=ArticleURL&_udi... and "Why I do not Believe in the Cost Disease" http://www.springerlink.com/content/xuegr8k39y17t3nq/ http://www.springerlink.com/content/xuegr8k39y17t3nq/
chrismealy 17y ago
For extra credit square Baumol's Cost Disease with the Cambridge capital controversy.

39 points by mnemonicsloth 17y ago

The other problem is that the market can't properly value artists by definition, because if you know what you're paying for then it isn't art. edit: This is one of the arguments in Seth Godin's next book, which you can get a review copy of here: http://sethgodin.typepad.com/seths_blog/2009/12/preview-copy-of-my-new-book.html http://sethgodin.typepad.com/seths_blog/2009/12/preview-copy...

deleted 17y ago
[deleted]

cousin_it 17y ago

I don't see how the linked article supports your editorializing in the headline.

MarkPNeyer 17y ago
If anything, this article contradicts the editorializing - the cost effect increases the salaries of musicians and artists.
- pwnstigator 17y ago
  Artists face inverse-BCD. They aren't qualified for other jobs (primarily because of their lack of a resume) so they lose out on the options that someone with 5 years' experience as a corporate grunt would have. This makes them poor relative to the corporate grunt. We, as entrepreneurs, are also facing inverse-BCD with the bad economy, as everyone familiar with the phrase "multiple liquidation preferences" is aware. VCs aren't issuing shitty term sheets because they're in trouble-- the money they're investing was raised before Sept. 2008-- but because entrepreneurs have fewer options in traditional employment than they did 3 years ago.
mnemonicsloth 17y ago
It would have been more precise to say BCD explains why most artists have trouble finding paying gigs. Wages for artists rise, their output stays more or less the same [1], so the proportion of artists whose output is good enough to justify the rising price shrinks. The artists who aren't "good enough" (whatever that means), or have trouble convincing buyers that they are "good enough", have to take other jobs, e.g. as waitstaff, to make ends meet until their careers take off. [1] Mass production has made some kinds of artists more productive, like novelists and screenwriters, but the net effect is a similar winner-take-all situation. Many unknowns compete to be the next Umberto Ecco or Dan Brown.
- tlb 17y ago
  I don't think the BCD effect goes as far as you say. In a nutshell, the effect is that because artists can make $X working day jobs, you have to pay O($X) for them to perform. But this effect stops working before artists price themselves out of the market, because artists actually like performing and adjust their price to clear the market. This is why you can hire a really good band to play at your party for only several hundred bucks.

cageface 17y ago

I'm not sure you can argue, as the article does, that musicians' productivity hasn't increased either. In the age of digital distribution that same string quartet can (potentially) generate far, far more revenue than their 18th century counterparts.

mnemonicsloth 17y ago
I touched on this in my reply to cousin_it below. People consume cultural stuff in large part because other people are consuming it, or as an implied comment on stuff other people are consuming. So the mass production of cultural stuff is limited by the amount of attention people have to dedicate to that sort of thing. Long tail-style fragmentation may change this for all I know. IANA Cultural economist. But in the world we've been living in, the result is a tournament model, where the Stephen Kings and Britney Spearses provide books and music to more people than they would if everybody chose what to read and listen to in isolation. Baumol's Cost Disease is what forces artist-hood to be boolean. If you don't become a bestselling novelist on the national stage, you make no money at all as a novelist, and have to make ends meet as a technical writer or something.
- wcarss 17y ago
  It sounds like you have some misconceptions about Baumol's Cost Disease. I'm absolutely not intimately familiar with it, but the principle is clearly: 1) Effectiveness increases in one industry. 2) Wages increase accordingly in that industry. 3) To remain competitive, other industries increase wages. The article clearly states that this means artists also receive higher wages. I do not have a specific quarrel with your conclusion that an artist must be very successful to make lots of money, but your arguments so far have not shown any reasonable negative causal relationship between wage increases across industries and the lifestyle/wealth level of the average artist. It's entirely plausible that the situation artists face in being successful or failing is due to other factors, some of which are technological and some of which are cultural. It's also plausible that this situation is merely imagined. There are likely many failed artists across the world, and there are certainly many successes, but the number of musicians who play medium/small gigs, the number of artists who sell commissioned works on a small scale, the number of architects and sculptors and 3D artists who do work for regular wages -- and so on -- is probably not miniscule. The number of writers employed by the television, film, commercial, music, and theatre industry must be enormous. There are regular dayjobs for artists too, you just have to look for them.

pwnstigator 17y ago

The connection is actually the inverse of "Baumol's Cost Disease". BCD describes the increase in labor costs when the laborers have other options. The problem for artists and writers is that they're concentrating on their artistic work, rather than building a resume and career, just because the artistic careers require so much energy, and most of what they end up doing is not transferrable to mainstream work. So they have fewer career options, and those who patronize them (e.g. publishers, agents) are able to exploit their weak bargaining position. For the same reason, academics in the humanities are often paid less than those in the sciences; science professors have other options. You can say that BCD is making the science professors rich, or making the humanities professors poor-- two sides of the same coin.

mnemonicsloth 17y ago

Apparently I've got this wrong. Baumol's Cost Disease is a theory in dispute. I just googled "Baumol's Cost Disease Arts" and found: The first link is to the wp article. The second is an Amazon listing for a book called Baumol's Cost Disease: the Arts And Other Victims. (http://www.amazon.com/Baumols-Cost-Disease-Other-Victims/dp/1858985080 http://www.amazon.com/Baumols-Cost-Disease-Other-Victims/dp/...). The author is apparently an economics professor at a University in England. There's also an abstract from the Journal of Cultural Economics. Baumol apparently developed his claim in the 1960s by looking at the economics of the performing arts, and then generalized it to education and health care. http://www.springerlink.com/content/k16p700536510057/ http://www.springerlink.com/content/k16p700536510057/ At the top of the second page is a New Yorker article that certainly would have made a better HN submission: http://www.newyorker.com/archive/2003/07/07/030707ta_talk_surowiecki http://www.newyorker.com/archive/2003/07/07/030707ta_talk_su... But apparently, the jury is still out. Google also turns up links to skeptical papers: "Has Baumol's Cost Disease disappeared in the performing arts?" http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6WWV-45N44TX-B&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1119612647&_rerunOrigin=google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=24e19cf9babcb2a23cd7004955670d27 http://www.sciencedirect.com/science?_ob=ArticleURL&_udi... and "Why I do not Believe in the Cost Disease" http://www.springerlink.com/content/xuegr8k39y17t3nq/ http://www.springerlink.com/content/xuegr8k39y17t3nq/

chrismealy 17y ago

For extra credit square Baumol's Cost Disease with the Cambridge capital controversy.