Sunday, 11 December 2016

A Cost-Benefit Analysis Of Cheap Fame

Ask Tom the economist whose favourite three bands are The Beatles, Pink Floyd and Radiohead whether he likes manufactured pop music and with his artistic hat on he’ll probably say no. Ask him whether he likes manufactured pop in terms of what’s good for society and with his economist hat on he may well say yes.

What’s the difference between the two evaluations? The answer is that one is a subjective personal argument and the other is an objective economic argument. As a credible music lover, Tom possibly sees the likes of Westlife and Boyzone (or whoever the modern day equivalents are) as lacking musical credibility, complicit in cultural degradation and producing faux-icons that are unworthy of adulation.

As a credible economist, he understands that lots of people are willing to spend money listening to manufactured pop. The economist is generally less bothered about whether someone is right or wrong, wise or unwise to like something – he or she is primarily concerned about market signals that convey information about people’s wants, needs and preferences.

To put it another way, what is being considered is whether the market for fame (like the market for laptops, beds and cars) is succeeding or failing. Save for price controls and government interference, nobody questions whether the market for laptops, beds and cars is failing, because we don’t wonder if we’re getting the wrong kinds of products. Yet with celebrities we do – we find ourselves wondering whether famous music stars are credible songwriters or artificially manufactured bubble gum pop stars, and whether the latter has any artistic validity.

It’s here that economics explains why by and large we have the right number of all kinds of celebrity too, at least in terms of what people perceive to be socially valuable. It’s easy to be critical of people who look at the benefits of the minimum wage, rent controls and import tariffs and stay blind to all the costs. Therefore we should do the same with celebrities; that is, identify the costs, but also realise the benefits too, even if they are not our own personal benefits. Because, you see, a big part of doing economics well is about perceiving the benefits to others that are not immediate to ourselves.

One obvious criticism of the present day celebrity culture is that fame is cheap and that there are a plethora of celebs competing for attention in an excessive pool. But equally, one benefit of fame being cheap is that society has more celebrities and entertainment for less money. For people that like inexpensive and accessible entertainment, the celebrity world is a bit like discovering a bargain bucket that contains some treats you end up liking but didn’t know you would. On top of that, the associative products that are concomitant with the marketing of celebrity – everything from TVs, CD’s, DVDs, audio-visual equipment, websites, fashion, shows, critics, advertisers, promoters and agents - share in the value of celebrity markets.

Another societal benefit that the celebrity culture engenders, as with all kinds of art and expression, is the way it brings people together for topics of conversation, mutual appreciation, and fashion influences. And given that fame brings valuable diversity to society, there is going to be beneficial cooperation from a wide range of people, where if value isn’t created they could no longer earn a living. In other words, if the world of celebrity gives people something they desire more than the money then it shows that consumer surplus is occurring.

What you have to consider is that when you walk into Waterstones, or log on to Amazon, the products competing for your attention are there at the expense of other products that could be competing for your attention. This means that in commercial terms a lot of people think this stuff is worth your while purchasing, which piques our interest to consider that, say, out of all the new books in the ‘out now’ section, there might well be something we’ll like.

The same is true of celebrities paid handsomely to endorse products – it’s a marketing trick to convey the following message: look, we’re sure you’re not convinced that this celebrity really loves the product, but if we’re willing to pay him or her all the money to say they do we must have confidence many of you will like it. On balance, the benefits of cheap fame probably outweigh the costs.