It may seem obvious that Taylor Swift “juiced the economy” during her two-year Eras world tour (Hannah Miao, “Billions in Cocktails and Friendship Bracelets: How Taylor Swift Juiced the Economy,” Wall Street Journal, December 8, 2024). But it is not. For example, the claim cannot be evaluated by simply counting how much money her fans paid in tickets, travel, outfits, etc., to attend her concerts.
Start with the question that Ms. Miao raises close to the end of her report but does not follow through:
There is debate among economists and analysts about how to measure Swift’s economic impact. Do her concerts just divert money that her fans would have spent elsewhere, or does she generate new activity?
Indeed, what her fans paid, they would have spent on something else—other shows or kinds of entertainment, vacations, household appliances or furniture, etc. (In the US, a ticket for an Eras concert reached more than $2,000 and sometimes much more.) The money could also have been saved, with means it would have served to finance investment somewhere in the economy. The objection that expenses related to Swift’s concerts produce “ripple effects” is voodoo economics: spending elsewhere would also produce “ripple effects,” if this expression has any meaning.
A more methodologically defendable estimate of Taylor Swift’s contribution to the economy would be their contribution to GDP. GDP is, by definition, the total production of the final goods at market prices, which is equal to total value added or, alternatively, the sum of all incomes. Only final goods to consumers are included in order to avoid double-counting—say, of the value of the wheat and the flour in the bread they serve to make. What’s important to understand is that the resources used to produce Swift’s concerts (the use of concert venues, the equipment, performers, sound engineers, other personnel, and so on, plus of course the singer’s time) would have otherwise been used to produce something else in the economy.
But to evaluate Taylor Swift’s (and her coproducers’) contribution to “the economy,” even a measure in terms of GDP is very imperfect. Her real contribution is the net benefits gained by the consumers. “Consumer surplus” is the technical term for this concept. It measures in dollars what the consumers gained from something they purchased over and above what they paid for it. The consumers who attended an Eras concert must have considered that it produced the highest consumer surplus that they could obtain with their money.
Besides the forbidding statistical problems of such measurements, there is a more basic problem: any dollar value of either GDP or consumer surplus is not sufficient to measure the “utility” of consumers. By utility, modern economic theory refers to a measure of how a consumer ranks different configurations of goods and situations in terms of his (or her, of course) own preferences. More money to purchase more goods and services will, ceteris paribus, increase one’s utility (and mutatis mutandis for less money), but money is not the only factor in satisfaction or happiness. Moreover, one dollar can give more utility to some individuals than to some other individuals.
One way to directly introduce utility in economic analysis is a model showing how individuals reach their “contract curves” by exchanging with each other. (Students of economics will see a general-equilibrium Edgeworth-Bowley box diagram pop up in their minds.) Most gains in utility come through exchange and trade: you work to, say, produce cars or write articles in order to buy a seat at a Taylor Swift concert; it’s like if you exchanged your piece of car or your articles with Ms. Swift and her organizers for their services.
Preferences and utility are subjective. They reside in the mind of each individual. As much as we can deduce that each party to an exchange gains utility from it (otherwise he would have declined the exchange), it is impossible, even conceptually, to aggregate utility across individuals to measure its net total increase or decrease. Economists speak of the impossibility of interpersonal utility comparisons. “The economy” is a set of individuals who interact to maximize their respective utility, not a bundle of physical objects. We cannot hope to calculate whether the resources employed for the Eras concerts would have produced more or less utility in some other allocation. We cannot hope to calculate a “net utility” figure that would tell us to which extent Taylor Swift brought a net contribution to the economy compared to the alternatives.
The impossibility of producing a precise number doesn’t matter because the same analytical tradition that leads to that conclusion also demonstrates a more general and useful proposition: an economic regime of free markets provides each individual (an individual randomly chosen, says Hayek) with the most opportunities to maximize each his utility through his acts of free exchange. Since some consumers do choose to attend Taylor Swift’s concerts instead of doing or buying something else, and bid up the price of tickets to make sure they get them (as opposed to those who chose to scalp their tickets), we can be sure that, to the extent the economy is free, the result is economically efficient.
READER COMMENTS
Thomas Leonard Knapp
Dec 16 2024 at 12:29pm
“what her fans paid, they would have spent on something else—other shows or kinds of entertainment, vacations, household appliances or furniture, etc. ”
There’s at least one plausible exception to that substitution factor:
Say I’m a Taylor Swift fan, and really want to see her in concert, and calculate that it will cost me, say, $2,500 to purchase tickets, travel, lodging, etc., to do that.
What if instead of taking that money out of my savings account, or foregoing other expenditures I would normally otherwise make, I take on a second temporary job, or start volunteering for overtime shifts at my job, to finance the concert attendance? In that case, I am increasing my productivity and “growing the economy” by working hours I would not otherwise have worked.
Knut P. Heen
Dec 18 2024 at 7:45am
Good point, but are you sure that your extra job would not have been taken by someone else if you had not taken the job?
Craig
Dec 16 2024 at 12:41pm
“Indeed, what her fans paid, they would have spent on something else”
Indeed even what her non-fans were forced to pay to subsidize the construction of some of the stadiums she played in would have been spent on something else, like, I dunno, stupid things like my kids’ 529 plan. 😉
Pierre Lemieux
Dec 16 2024 at 2:23pm
Craig: You are right. Any measurement, or attempt at measurement, of Taylor Smith “juicing the economy” would have to deduct the opportunity cost of the public funds spent on indirectly subsidizing her. That’s included in my qualification “to the extent the economy is free.” Nothing is perfect, but it could certainly be less imperfect than it is now.
steve
Dec 16 2024 at 1:49pm
You seem to be saying that spending on Taylor Swift cant result in real economic growth. Obviously, we do get real growth. Why couldn’t her concerts cause that?
Steve
Pierre Lemieux
Dec 16 2024 at 2:05pm
Steve: Spending does not cause any real economic growth in the sense of increased prosperity and utility. (If it did, “modern monetary theory” would bring all to nirvana.) What causes economic growth is investment and entrepreneurship for the purpose of producing goods and services demanded by consumers to increase their utility.
Craig
Dec 16 2024 at 4:50pm
I am inclined to agree with you, but I hesitate a bit because my thought, perhaps erroneous is that the reasonable inference is that GDP, as a stat, is just generally bunk? No?
Matthias
Dec 16 2024 at 6:42pm
Why would GDP be bunk?
Craig
Dec 16 2024 at 7:21pm
My brief thought, a tangent on a comment, is “Spending does not cause any real economic growth” <– GDP essentially measures expenditures….so perhaps not such a good metric?
Pierre Lemieux
Dec 16 2024 at 9:48pm
Craig (et Matthias): GDP is defined as production. Since everything that is produced is purchased, if only as inventory held, it can be measured as expenditures; and since everything produced translates into payments to factors of production, it can also be measured at total (national) income. You can check my Regulation article “What You Always Wanted to Know about GDP But Were Afraid to Ask,” where both you and Matthias will find some problems with GDP (including the treatment of government production). Chapter 2 of the BEA’s NIPA Handbook on the national accounts will give you more material to read at night.
GDP is a useful indicator of the value of market production at market prices if we keep in mind what it is and its limitations. It also helps governments find excuses for meddling.
Knut P. Heen
Dec 18 2024 at 8:31am
GDP is bunk because it does not measure what it is supposed to measure. GDP suffers from the broken window fallacy. It counts the production of the new window, but does not reduce GDP to account for the broken window. Using police to investigate crime counts as production. Employing stiff penalties to prevent crime does not count in GDP (unless it does not work and people actually get locked up for a long time requiring spending on prisons). A woman at home with 10 kids does not count towards GDP. A kindergarten teacher looking after 4 children in a kindergarten counts towards GDP. It is like measuring temperature by the clothes people are wearing. It says something, but it difficult to separate summer from winter.
Pierre Lemieux
Dec 19 2024 at 9:10pm
Knut: I am replying to your comment beginning with
Perhaps it does not measure what you would want some measurement to measure or what should be measured–although I succinctly explain in my post that welfare cannot be measured). But it does measure gross domestic product at market prices. Gross because it does not measure net capital–neither the net nor the capital used in production. Replacing a broken window for a business does not count as production because only the business’s net income is value added; I think that replacing a broken window in a consumer’s house will count as production, just as a renovation, because it is a final good. (On this last point, I would have to review the email conversation I had some years ago with a BEA bureaucrat.) In both cases, the repair will use resources that can’t be used for production elsewhere in the economy. The “broken-window fallacy” is meant to show that destroying something does not increase GDP. Non-market goods are not included for statistical reasons and also because they have no observable prices. Everything that consumers demand and is produced as on markets as a response to their demand counts as utility; it also counts in GDP as a “gross” entry (in the sense of not including consumption of capital).
I have linked to two references in my text and in a comment above: a Regulation of mine and the BEA’s explanation of what GDP measures
Jim Glass
Dec 18 2024 at 4:39pm
GDP is a fine measure … of production. It doesn’t measure welfare or inequality or anything else, and doesn’t pretend to. The textbooks all state this plainly, at least my old ones do. Journalists and everyone else who cite GDP as if it reveals the quality of an entire economy mislead. It’s like when your doctor takes your body temperature and blood pressure — nobody says they are “bunk metrics” because they don’t show if you have cancer or diabetes.
GDP also doesn’t measure the *quality* of what’s produced. Generally, in a free market, GDP correlates with large-scale welfare because goods produced are counted at market value and production = income (what’s produced gets sold). Higher income and more material wealth in real terms are good. Less be bad,
But China has long boosted its GDP by massively overbuilding empty housing, bridges to nowhere and bullet trains that can’t even pay their own electric bill much less construction cost. All that building does count in GDP. But the busting bubbles and massive debt pile-ups resulting are making it pay the price for them now (and will for years to come.)
Russia has had a surge in GDP since Putin pushed the economy into war production. As it pours massive resources into producing stuff that immediately gets *destroyed*, pulling workers away from industries that produce goods of economic value to make them produce goods that get *destroyed*, increasing wages to do so, more wages pursuing fewer surviving goods are steadily driving up inflation. Which has led the central bank to increase the interest rate to 21% and signal “a mammoth rate hike coming“, while top industry leaders screech about coming bankruptcies. Yet you see pundits everywhere saying “Russia’s economy is doing great, look at its GDP!” Go figure.
GDP is an A-OK fine measure … of what it measures. Nothing else.
Knut P. Heen
Dec 19 2024 at 8:12am
GDP is not a fine measure of production. There is not a monotone relationship between production and GDP. Just consider the case of a monopoly economy vs. a competitive economy. The profit and GDP in the monopoly economy is larger than in the competitive economy, but production is larger in the competitive economy.
A minimum requirement for an ordinal measure of production is that an increase of production also increases the measured production. GDP does not fall into that category.
Pierre Lemieux
Dec 19 2024 at 9:15pm
Jim: I agree.
Pierre Lemieux
Dec 19 2024 at 9:30pm
Knut: In your first paragraph, consider two points. In a monopolistic market, prices are higher and quantity produced (and consumed) is lower. Depending on elasticities, the value of production can be higher or lower. Of course, there is no necessary equality in a single market between value added (profits) and the value of the production of the good or service. There is necessarily equality, however, at the level of the economy.
On your second paragraph, consider this. GDP is not an ordinal measure: it is a cardinal measure: there is a non-arbitrary zero and differences are comparable. Prices, of course, must be used as weights to add apples and oranges. As the Soviet planners saw, there can be no measure of any aggregate production without such weights.
Of course, GDP is even less meaningful (or more meaningless) the less free is the economy because the link is arbitrarily broken between prices and consumer demand. If that is what you wanted to say, you are right.
robc
Dec 16 2024 at 2:21pm
I think he is saying the exact opposite. She is increasing the economy by the difference in consumer surplus for her concerts vs the consumer surplus of the second best opportunity for that money.
Its just not as much as the raw numbers suggest. And it is basically incalculable, as we would need the utility difference for each individual.
Pierre Lemieux
Dec 16 2024 at 2:13pm
Thomas: That’s a good but, I think, invalid point.
First, it is unlikely that, with his infinite (or near-infinite) desires, the consumer you mention did not already equalize his work time and leisure time at the margin. It is because of individuals’ infinite desires for goods and services that, as the cost of leisure increased, it has been overcome by the income effect at some point: people do not take much more leisure time than, say, 50 years ago. We could think of rare cases, such as a desert hermit who, on his annual trip to the village hardware store, sees Taylor Swift on a TV screen and immediately drops his contemplation lifestyle and goes get a job at McDonald’s to be able to buy a concert ticket. But even this case is taken care of by my second argument.
My second point concerns most individuals. On a free labor market, most individuals are paid the value of their marginal product. (I exclude cases like Beethoven, Bach, or Shakespeare.) If we can say that an individual “grows the economy,” it is his economy that he grows. Except perhaps infinitesimally, he does not increase GDP for anybody else nor anybody else’s consumer surplus.
It is true that an individual’s trade of his labor services for a wage, and of his wage for (say) Taylor Swift’s services, will benefit the people with whom he exchanges. While helping himself, he helps these people get on their contract curve. Yet, his contribution to other’s utility is typically very small, and cannot be measured anyway. What we do know is that it is because all individuals get on their contract curve (trade with each other) that all of them can get (relatively) rich–which was my core argument on “juicing the economy.”
Scott Sumner
Dec 16 2024 at 4:04pm
A while back I did a post that had some related observations:
https://www.econlib.org/the-economic-impact-of-superstars/
Pierre Lemieux
Dec 16 2024 at 4:16pm
Scott: Thanks for reminding me. I had forgotten, but rereading your post reminded me. It may have inspired me!
Todd Ramsey
Dec 16 2024 at 5:09pm
She could have grown the economy if people worked more hours to earn the extra wealth necessary to attend the concert(s).
Pierre Lemieux
Dec 16 2024 at 6:02pm
Todd: I think this is the same as Thomas’s argument above, to which I have responded.
Pierre Lemieux
Dec 16 2024 at 9:57pm
Todd: Another point that has its importance, and it is more than rhetorical: Nobody can literally “grow the economy,” except if by “the economy,” we mean his own economy (his consumption or his production). The economy will grow by itself if some consumers want to consume more (or make babies who will consume more or invite him a nanny from Mexico) or more consumers come to live here and if producers are left free to cater to all these consumers. To repeat René-Louis de Voyer, Marquis d’Argenson‘s injunction, “Laissez faire, morbleu ! laissez faire !”
Todd Ramsey
Dec 18 2024 at 10:04am
“Except perhaps infinitesimally, he does not increase GDP for anybody else.”
I fully concede that the GDP growth of extra labor is small and nowhere near the estimates of growth the popular press propagates, but it IS growth.
It’s difficult to point to the unseen, but here is an extreme example to highlight the possibility. In order to earn the extra wealth to attend a Taylor Swift concert, a person spends a day picking fully ripe strawberries. The extra labor allows the picking of not-quite-perfect marginal strawberries that would not have otherwise reached the market. The extra strawberries add to the total wealth of society, and the total amount of resources consumed.
A less-visible but more plausible example: the concert-goer takes an extra Uber gig to drive an industrial engineer’s daughter to the airport, freeing the engineer from that task. The engineer uses the time to improve a process, freeing others’ time to produce more product.
Pierre Lemieux
Dec 19 2024 at 8:39pm
Tood: I have replied to your objection in my reply to Thomas.
Ron Browning
Dec 17 2024 at 8:00am
In Buchanan’s “Cost and Choice” he describes the incompatibility between “cost inducing choice” , (those imagined costs that induce us to make particular choices) and “choice inducing costs”, (those costs that actually accrue because of our particular choices). I think it is helpful to consider the same incompatibility between benefits imagined and benefits experienced.
Richard W Fulmer
Dec 17 2024 at 2:38pm
Interesting point. A college education may, depending on the degree, provide benefits that match or even exceed expectations – investments in self-improvement may well yield unforeseen gains. Tatoos, by contrast, are an often-expensive method of self-modification that could render one less employable, resulting in “benefits” that are far below what was imagined.
Pierre Lemieux
Dec 17 2024 at 10:21pm
Ron: Intriguing point. Obviously, as Richard mentioned, one–consumer or producer–can make errors in his choices, even if he is the person who has the fewer incentives to do so (outside perhaps of his family). But how would it add or subtract from my arguments?
Ron Browning
Dec 18 2024 at 8:24am
Pierre: It may be that my comment does not add or subtract from your argument (It may be better directed at some commenters) But since you are just the person to think thru this nuanced point, the following sentence:
“The consumers who attended an Eras concert must have considered that it produced the highest consumer surplus that they could obtain with their money.”
is within a paragraph concerning the actual net value produced by the Swift Concerts, but is relying on what the concert attendees “considered” prior to choosing.
Jim Glass
Dec 18 2024 at 3:23pm
If she did, Jagger age 81, and Richards, 80, are juicing too…
Rolling Stones count the money as new tour reaches 10 million pounds per night, beating Taylor Swift
What will Taylor and her fans be juicing in their 80s?
Jim Glass
Dec 18 2024 at 6:17pm
Ehh … I don’t know. I’ve certainly made that argument many times myself as to proposals that sports stadiums and the like would boost an economy, justifying taxpayer spending on them (and subsidizing billionaire team owners). There’s much to it.
But pushed to the extreme this suggests no economic growth is ever possible at all. Increased consumer demand resulting in greater real spending on anything is offset by reduced real spending on something else. No total growth. Yet the economy grows year after year. And we all think steadily increased consumer spending, aggregate demand, is required for that. (1930, 2008.) As to “ripple effects”, might growing demand for the product of an industry generate a “ripple” such as increased competition spurring innovation that increases productivity? If that’s voodoo, it makes voodoo like good to me. Maybe I’ll stick a pin in a doll of my ex.
But then why were they used on Swift’s concerts (and the Stones’, etc.)? Was it because the market determined they produce the highest returns there? That pretty much looks like maximizing productivity to me. Say all such concerts were banned by law (Trump gets vengeful) the free market blockaded. Is it really true that there’d be no economic loss because the same resources “would be used to produce something else in the economy”.
None of those resources would have gone under-employed? (None of the sound engineers would become retail workers? None of the venues would host a flower show?) And the something else produced would be of equal or greater value? (I don’t like girl music either, so maybe the state would be right on this one, but I’m sticking to principles.)
What other industries does this concept apply to? If consumer demand had been blocked from creating the growth of the auto industry since the 1920s, computer industry since the 1970s, the movie industry since Hollywood, all the resources they used in real life would’ve instead been used somewhere else to equal effect, and our economy would be unchanged today?
IMHO the difference between the concert industry and subsidized sports stadiums is that the former is free market — and vibrant free-market industries *do* juice the economy. Even girl concerts.
Pierre Lemieux
Dec 19 2024 at 9:42pm
Jim: It might be that you were right before and you are wrong now! Growth, in the sense of GDP increase, comes from an upward move in the whole PPF (production possibility curve). This can caused by an increase in labor, or new innovations, or more competition (as you suggest), or freer institutions–not to mention the impact of international trade and comparative advantage.
As for the rest of your comment, most of it is consistent with what I wrote:
Alice Temnick
Dec 27 2024 at 11:09am
For two years I calculated my varying cost-benefit analysis for a ticket. In the end I chose to increase my own GDP as my retirement goal guilted me into forgoing extravagances. I regret that missed consumer surplus and the opportunity cost of my decision. I wonder how it might inform a future decision or two.
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