The Economics Of Music

2019-01-13T06:04:09.000Z Honest Cash

Neil Turkewitz posted a good story on Medium about the economics of music… When Economic Theory Fails: A Critical Examination of Waldfogel’s Digital RenaissanceI responded, then he responded, and here's my response


Way back in the day, if you wanted to hear a fancy song, maybe by Beethoven, you had no choice but to shell out big bucks for a ticket to a concert. I’m guessing that the ticket was very expensive… so only wealthy people could afford it. For everybody else there was music at the local tavern.

Maybe occasionally there were concerts for the public. In any case, for the most part there was a continuum of prices that roughly reflected a continuum of quality.

Then technological progress brought records. This made even the fanciest music far more accessible. But at least initially the record players and records were pretty expensive. And it wasn’t like anybody could easily copy a record.

Records decreased in price and then came radio, followed by tapes and CDs.

There were still expensive concerts, but if talented musicians wanted to make the most money, they had to cater to the masses.

Part of the issue was that it was so easy to copy tapes and CDs. This meant that it wasn’t feasible to charge $100 or $1000 for a tape or CD. Therefore, prices couldn’t reflect, even roughly, the continuum of music quality. All tapes/CDs were the same price even though all music was not the same quality.

Now it’s possible to buy songs for a dollar each on iTunes but I think that most people probably just listen to music for free on Youtube.

Thanks to technology, everybody has equal influence, via views/votes, on the supply of music. Music has been democratized.

Most people think that democracy is a good thing… but is it really? Is it truly beneficial for everybody to have equal influence on anything?

We’re about to find out!

On Cent and Honest Cash people can use their money to rank music. The more money somebody has, the more influence they can have on the rankings.

So will the cream rise to the top? Will the pseudo-prices reflect, even roughly, the continuum of music quality? Will the marketization of music be better or worse than the democratization of music?

A while back I gave a “thumbs up” to each of these 10 songs…

Hello Seahorse! — La Flotadera
Rone — Down for the Cause
DATA — Don’t Sing
Jan Blomqvist — More
Kid Simius — The Flute Song
Blonde Redhead — Tons Confession
Moderat — Running
Bomb the Bass & Lali Puna — Recut
Jamie xx — Gosh
Weekend Wolves — You

Here’s how I’d divide $10 dollars between them…

$4: Blonde Redhead — Tons Confession
$2: Jamie xx — Gosh
$1: Weekend Wolves — You
$1: Hello Seahorse! — La Flotadera
$1: Kid Simius — The Flute Song
$1: Rone — Down for the Cause
$0: Bomb the Bass & Lali Puna — Recut
$0: Jan Blomqvist — More
$0: DATA — Don’t Sing
$0: Moderat — Running

It would be somewhat more accurate if I used pennies instead of even dollars. And I’m ranking the song itself… not the video. That video of Gosh is my favorite music video.

Hopefully it’s intuitive that we really don’t equally value everything that we vote for (“thumbs up” or “Like”). This is why the democratization of music really sucks. It completely fails to reflect our valuations.

What’s kinda funny is how Medium tries to address this by allowing us to vote up to 50 times for one story. Heh. I wish that I could have been there when they tried to determine the maximum amount of votes per story. Was there any disagreement? Did anybody want the maximum to be 100 or 500? For me it would have been far more interesting if there wasn’t a limit. Somebody could applaud a story for a second or a minute or a day.

The anarcho-capitalist Murray Rothbard fantasized about a button that he could push to instantly destroy the state. He would have pushed the button until his thumb blistered.

Personally I don’t hate the state. Sure, the supply of public goods doesn’t reflect our valuations, but this is simply because people don’t understand the importance of their valuations.

Of course it’s entirely possible that I’m overestimating the importance of people’s valuations… but the proof is in the pudding (Cent and Honest Cash).

Adam Smith, my favorite economist, shared some of his thoughts about music…

In the most approved instrumental Music, accordingly, in the overtures of Handel and the concertos of Correlli, there is little or no imitation, and where there is any, it is the source of but a very small part of the merit of those compositions. Without any imitation, instrumental Music can produce very considerable effects; though its powers over the heart and affections are, no doubt, much inferior to those of vocal Music, it has, however, considerable powers: by the sweetness of its sounds it awakens agreeably, and calls upon the attention; by their connection and affinity it naturally detains that attention, which follows easily a series of agreeable sounds, which have all a certain relation both to a common, fundamental, or leading note, called the key note; and to a certain succession or combination of notes, called the song or composition. By means of this relation each foregoing sound seems to introduce, and as it were prepare the mind for the following: by its rythmus, by its time and measure, it disposes that succession of sounds into a certain arrangement, which renders the whole more easy to be comprehended and remembered. Time and measure are to instrumental Music what order and method are to discourse; they break it into proper parts and divisions, by which we are enabled both to remember better what is gone before, and frequently to foresee somewhat of what is to come after: we frequently foresee the return of a period which we know must correspond to another which we remember to have gone before; and, according to the saying of an ancient philosopher and musician, the enjoyment of Music arises partly from memory and partly from foresight. When the measure, after having been continued so long as to satisfy us, changes to another, that variety, which thus disappoints, becomes more, agreeable to us than the uniformity which would have gratified our expectation: but without this order and method we could remember very little of what had gone before, and we could foresee still less of what was to come after; and the whole enjoyment of Music would be equal to little more than the effect of the particular sounds which rung in our ears at every particular instant. By means of this order and method it is, during the progress of the entertainment, equal to the effect of all that we remember, and of all that we foresee; and at the conclusion, to the combined and accumulated effect of all the different parts of which the whole was composed.

A well-composed concerto of instrumental Music, by the number and variety of the instruments, by the variety of the parts which are performed by them, and the perfect concord or correspondence of all these different parts; by the exact harmony or coincidence of all the different sounds which are heard at the same time, and by that happy variety of measure which regulates the succession of those which are heard at different times, presents an object so agreeable, so great, so various, and so interesting, that alone, and without suggesting any other object, either by imitation or otherwise, it can occupy, and as it were fill up, completely the whole capacity of the mind, so as to leave no part of its attention vacant for thinking of any thing else. In the contemplation of that immense variety of agreeable and melodious sounds, arranged and digested, both in their coincidence and in their succession, into so complete and regular a system, the mind in reality enjoys not only a very great sensual, but a very high intellectual, pleasure, not unlike that which it derives from the contemplation of a great system in any other science. A full concerto of such instrumental Music, not only does not require, but it does not admit of any accompaniment. A song or a dance, by demanding an attention which we have not to spare, would disturb instead of heightening, the effect of the Music; they may often very properly succeed, but they cannot accompany it. That music seldom means to tell any particular story, or to imitate any particular event, or in general to suggest any particular object, distinct from that combination of sounds of which itself is composed. Its meaning, therefore, may be said to be complete in itself, and to require no interpreters to explain it. What is called the subject of such Music is merely, as has already been said, a certain leading combination of notes, to which it frequently returns, and to which all its digressions and variations bear a certain affinity. It is altogether different from what is called the subject of a poem or a picture, which is always something which is not either in the poem or in the picture, or something quite distinct from that combination, either of words on the one hand, or of colours on the other, of which they are respectively composed. The subject of a composition of instrumental Music is a part of that composition: the subject of a poem or picture is no part of either. — Adam Smith, Of the Imitative Arts

People aren’t equally good at arranging sounds, or words, or ingredients, or people, or anything.

People aren’t equally effective at allocating resources. People aren’t equal. If we were, we’d all be clones.

Smith’s most important passage…

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations

The most valuable balance depends on all of our valuations.

Anyways, maybe I got some stuff wrong about the history of music… I’ve spent far more time studying economics. But hopefully my economic explanation makes sense. Please let me know if it doesn’t!

For some of my thoughts about the question of quality, check out my latest story… Determining The Importance Of Things.

This story on Cent… The Economics Of Music.