Wednesday, June 19, 2013

Has Daft Punk gotten lucky?

Alan Krueger, President Obama's chief economic advisor, generated some controversy last week when he gave a speech about economics at the Rock and Roll Hall of Fame.  Krueger, one of the few economists to have taken a careful look at the economics of rock and roll, shared some data that showed the richest rock stars are getting richer relative to their less fortunate competitors.  This is happening for a number of reasons, including technology, scale and globalization (see the speech transcript for details).

Krueger raised some eyebrows, however, when he brought up the subject of luck.
I said “best artists,” but I also could have added luckiest artists. Luck plays a major role in the rock ‘n roll industry. Success is hard to judge ahead of time, and definitely not guaranteed, even for the best performers. Tastes are fickle, and herd behavior often takes over.
Out of context, this sounds an awful lot like his boss's "You didn't build that" line from last summer, and way off the mark.  Groups like the Stones and U2 can generate huge box office yields whenever they tour; most economists would argue this has more to do with having a solid customer base than luck. 

The role of luck becomes more critical when one asks why some groups or songs are more successful in obtaining a customer following.  Reviews from rock critics are one way of measuring quality, but their perspective is not the same as the general public.  Critics have a lousy history of predicting commercial success and artists who get poor reviews often go on to become quite well known (e.g., Katy Perry, Justin Bieber). 

In our world of big data, research should now be possible to get better insights into how some acts can break into the big time (e.g., Taylor Swift, Kanye West) whereas others stay in the shadows (Deerhunter gets rave reviews, but you will not see them in any stadiums any time soon). 

Disclaimer: I have known Alan for almost 30 years and consider him one of the best labor economists around, although we do not see eye to eye on politics all the time. 

1 comment:

  1. Great post. First time I've ever heard rock & economics blended together.