Music and the Economists

Some clarifications, I hope

Ted Gioia has a very fine post (they all are, really) on ancient philosophy, flutes, and economists. This is something of a response to what his post says about economists.

First, in re Adam Smith. Smith is one of the great minds in history, with fresh insights into how markets work that have continued relevance. But as Gioia notes, Smith did not see much value in music. Smith indeed had odd views on what he considered to be “productive” and “unproductive” labour. Here is Smith from The Wealth of Nations, Book 2 chapter 3:

There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expence, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers: he grows poor by maintaining a multitude of menial servants. …

The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject; or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence of the commonwealth, the effect of their labour this year will not purchase its protection, security, and defence for the year to come. In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, &c. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful, produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production.

In the public imagination we sometimes see hints of this view - that manufacturing is a very valuable sort of work because in produces a lasting physical object, as opposed to services, and as such public policy ought to give special consideration to manufacturing - but no contemporary economist holds to this view. It is far out of date. Even the Chicago school’s George Stigler, who is nothing if not a fan of Smith, sees this as simply an error on Smith’s part.

Another economist cited by Gioia is Joakim Book from the AIER, who actually titles his article “Music has no economic value”. His argument is, with all due respect, daft:

The rhythmical vibrations that move into my ear canal as I write this depend on a combination of incredible technical and economic features before they can successfully reach my brain. Set aside the two devices under my control that make the entire thing happen on my end (phone plus headphones), equally crucial is the streaming service (Spotify) and the hardware in their business that supply these sounds to me at the click of a button. (Let’s also ignore the background conditions of electricity supply and internet connectivity, and the general wealth and division of labor of my society that allows me to do this rather than eke out a subsistence farming a hostile Earth.) 

Without the producers and musicians who created this specific song, I wouldn’t have had anything to listen to and all these other adjacent products and services lose some of their appeal. Below all of this sits an economic relationship between all of us that permits this pleasant and concentration-enhancing consumption to take place. Modern global capitalism truly is astonishing.

There is plenty of economic value going on here, ultimately because I as a consumer value the state of affairs that comes from it enough to hand over other valuable resources to those who provide me with all of this. Hence I purchased the devices that let me do it, and pay the monthly fee to Spotify. In the background, they kick back some money to whoever maintains their servers as well as the artists who made the songs I’m consuming.

But the individual song that currently streams directly into my consciousness (“The Hymn of Nivoria,” by NIVORO) has no economic value, perfectly illustrated at the end of its three minutes and seven seconds: Another song (“Your Gravity,” by Somna) takes its place. After that, another and another and another until the playlist with all my favorite songs repeats — but even if it didn’t, I could keep going until I exhausted Spotify’s 100-million-plus songs (which would apparently take me some 300 years). I run out of patience, energy, or even life before I run out of songs. Ergo, the marginal song has no economic value for me. If I didn’t listen to this one, I’d listen to another. If, for whatever reason, “Hymn of Nivoria” had never been created or its creator had legally withheld it from Spotify’s catalog I would merely have consumed another, similar song. No big deal. 

Yes, not all songs are the same, and I do suffer some marginal loss from never having heard Hymn of Nivoria, just as humanity as a whole would be shortchanged had Mozart never been born. But not really: We would have just listened to and admired something else.

If marginal songs don’t have economic value, then their creators (i.e., musicians) are also disposable…

But it is not “no big deal”: each person places a value on the music they really enjoy where there are not “similar songs” that could act as substitutes. That there is a tremendous variety of music available such that no mortal could conceivably listen to it all (or want to, come to that) doesn’t alter this fact. We all have different tastes, and that most people are indifferent to the music I enjoy the most doesn’t mean there is no value at the margin. I can substitute one bagel for another without care; I cannot substitute some random piece of music for Mozart’s horn concertos. An abundance of music is not the same thing as an abundance of air.

So … if we put Smith’s theories of productive labour aside, and likewise with Mr. Book, what does garden variety mainstream economics say about the value of music? I wrote about it here (free download), a more polished version of which is chapter two of my book. To start, we need to distinguish between what economists (and other social scientists) use as working assumptions in their research, and what they believe beyond those confines.

The method of economics when it comes to the arts is that, as with all goods and services, the preferences of consumers are not subject to evaluation or criticism. There is no such thing as bad taste, or bad art. There is no distinguishing between high art and low art. This doesn’t mean that when the economist goes home after work and puts on their cardigan and slippers and puts a record on the turntable that they continue to believe this assumption. It is just that they (rightly) recognize that their personal beliefs about relative values in the arts are not appropriate for their research projects into markets for music, or the compensation of musicians.

It does present a challenge for economists writing about arts policy, since if they strictly adhere to the no-judgment method of economics, it means that policy too must be guided by consumer preferences into what has value as a public good, and what does not - in the final chapter of my book I claim this is not really sustainable, that independent judgement in arts policy is necessary. In other words, this economist, at least, thinks economics hits a dead end when it comes to public funding for the arts - something else is needed. But I ought to be clear that’s just me - reasonable people can differ.

But, arts policy aside, of course music has economic value: people are willing to pay for records, for streaming, and for live performances. That streaming music has become very, very inexpensive for the consumer does not reflect a lack of value placed upon it - our “willingness to pay” greatly exceeds what we actually pay to the Spotify’s of the world. The cheapness is a result of technology that enables listeners to cheat the system with file sharing; music has very high economic value, but technology is such that most of that value ends up coming in the form of consumer surplus.

Music has economic value. Economic value is not its only value (I think David Throsby expresses this best), and I don’t even think most economists think that economic value is the only value - economics is a way of isolating certain aspects of goods and services, and there is a use in that, so long as the limitations are understood.