Image Source: PexelsBloomberg has an article discussing the economic impact of superstars like Taylor Swift and Shohei Ohtani:
Move over, Taylor Swift. The economic might of baseball star Shohei Ohtani is bringing some big winners, and also some losers to the Japanese corporate world.
How should we think about “economic impact”? It’s not an easy question to answer, as there are a number of issues that must be untangled. Here I’ll consider five approaches, but the list will be far from exhaustive:1. The economic impact is the revenue spent on the performer’s concerts or games, including in person tickets, TV rights, merchandise, etc. That could be viewed as a gross measure.2. The net economic impact is roughly zero, because if people weren’t spending their money on Taylor Swift tickets, they’d be spending it on some other form of entertainment.3. Popular superstars are a sort of Keynesian stimulus, encouraging the public to boost consumption and lower its saving rate. This boosts aggregate demand, having a multiplier effect.4. The central bank offsets any increase in aggregate demand with tighter money, to keep inflation close to 2%.5. If the concert occurs in a foreign country, then the economic impact on the local population is the difference between the ticket price and the maximum willingness to pay. If Taylor Swift fans pay $100 for tickets that they would have been willing to buy for $150, then the concert creates $50 in consumer surplus for that purchase.The fifth approach is my preferred way of thinking about economic impact. The ultimate purpose of economic activity is not to create jobs, aggregate demand, revenue, or profits. The ultimate purpose is to create goods and services that provide value. Jobs, revenue, profits, etc., are a means to an end. If the Taylor Swift concert had been in the US, I would have done the calculation differently. Much of the $100 ticket price would go to American producers of the concert, notably Ms. Swift herself, but also her large support staff. You could then think about how the revenue this group of workers earns would compare to their next best alternative. It seems likely that Swift’s next best option to being a pop star would yield considerably less revenue than what she earns from her concerts.Even though I believe the Keynesian “stimulus” argument regarding pop stars is wrong, I suspect that we actually under-rate the economic value of major pop icons. When my daughter was younger, I read her the seven Harry Potter books. I’d guess the books cost about $25 each (I don’t recall), and J.K. Rowlings received only a fraction of that sum. But the value of that experience was huge, and indeed that series of books loomed large in the imagination of many young people. I can’t even imagine how much you’d have to pay me to redo those years of her life without the Harry Potter books.Older readers may overlook the extent to which stars like Taylor Swift, Beyoncé, Shohei Ohtani, etc. are important role models for many young people, at an especially important period of their lives. If I’m right, then these cultural icons may well produce economic value that far exceeds even their seemingly enormous incomes. So yes, a huge economic impact. But it’s not about the dollars actually spent; it’s about maximum willingness to pay.PS: The same argument applies to inventors of important products such as the new weight loss drug. The Danish company that developed the drug is making lots of money, but probably only a small fraction of its total value to society.More By This Author:Conor Sen On Fed Policy Goolsbee Vs. Summers What Ails The Anglosphere?
