June 7, 2019 / 2:43 PM / 2 months ago

Breakingviews - Review: Rockonomics nicely reflects the real world

PARIS (Reuters Breakingviews) - One way to understand the economics of rock and roll would be to comb through the Breakingviews archive, reading stories on the buyouts of record companies, the rise and fall of file-sharing service Napster, industrial experiments by artists like Radiohead and Taylor Swift, the boom in festivals and the emergence of streaming services. Or you could just read “Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us about Economics and Life” by the late economist, Alan Krueger.

British Pop Star David Bowie screams into the microphone as he performs on stage during his concert in Vienna February 4, 1996. REUTERS PHOTOGRAPHER

Without encouraging readers to bypass our columnists’ work, Krueger’s book does a fine job describing the financial underpinnings of the music trade and pulling together the many still-shifting strands which will determine its future. The 325-page tome, published after Krueger took his own life in March, functions in equal parts as a basic primer to the industry, a textbook on broader economic concepts and a guidebook for aspiring musicians wanting to start a band. It’s also a window, if an imperfect one, into the author’s soul.

This is not a tell-all autobiography like the ones nearly every aging rocker has produced in the decade or so since Rolling Stone Keith Richards published his bestselling memoir “Life.” But the Princeton University professor was clearly a fan, particularly of fellow New Jersey native Bruce Springsteen. And he spent time with enough actual arena gods to pepper the book with colorful anecdotes, as well as photos he and his wife took of performers ranging from The Chainsmokers to Metallica.

Krueger was, however, a rock star of the dismal science, both in academia and practice, where he served President Barack Obama, first as assistant secretary for economic policy and chief economist in the Department of the Treasury, and later as chairman of the Council of Economic Advisers. While Krueger may not match his idols in the hotel-trashing department, his insights, buttressed with facts, analysis and research – much of it proprietary – prove valuable.

The author writes about the “Seven Keys to Rockonomics,” which “like notes in a scale,” comprise the backbone of the book. In addition to giving structure to Krueger’s dissection of the finances of the rock biz, they provide launching pads for illustrating broader concepts like monetary spillovers (the ripple effect a festival has on its surroundings), sunk costs (the terms of most rookie artists’ first record contract) and agglomeration economies (why Sweden, home of Abba, punches above its weight in music).

In the hands of a less gifted economist, this ambitious attempt to both explain the music business and use it for more didactic purposes could have been clumsy. While Krueger was not a born entertainer like Keith Richards, he harnesses the inherently fascinating nature of music to explain topics that might otherwise lull a reader into drowsiness.

Bigger challenges facing developed economies are also nicely filtered through Krueger’s analysis of the music business. Who knew that the inflation rate for live music has galloped faster than that for U.S. healthcare costs, and nearly as rapidly as for college tuition – both burning issues for the Democratic Party that Krueger served. The price of the average concert ticket rose 190% between 1996 and 2018. That’s well above the 59% increase in consumer prices and 113% jump in healthcare costs – and nearly as fast as the 204% hike for college fees.

Similarly, Krueger looks at socioeconomic patterns among musicians to conclude that the industry provided a better-than-average route for upward mobility. Only 2% of individuals in the top 1% of American income earners came from the poorest families. For musicians who cracked the Billboard Top 100 in 2016 the figure was 26.5%, or 14% if hip-hop and rap artists are excluded.

Of course, only a select few of those who grab a mic or pick up a Stratocaster will ever enter the charts. The power of luck is one of Krueger’s seven Rockonomics keys, but so too is hard work. He cites David Bowie’s prescient remark that eventually music will be as plentiful as water or electricity, requiring artists to tour “because that’s really the only unique situation that’s going to be left.”

In that sense, “Rockonomics” is useful for aspiring Thin White Dukes or Madonnas who will need to master performance, the dark arts of merchandising, audience building and the rapidly shifting economics of live streaming, a subject on which Krueger devotes an extensive chapter. Should your children pursue a musical career, “Rockonomics” may be required reading.

Perhaps the most revealing chapter is the final one: “Music and Well-Being”. Here Krueger catalogues how integral listening to music is to contemporary human life, and marshals research that suggests people are more content when undertaking quotidian tasks, like commuting or cleaning, while rocking out. “Simply put, music makes us happier,” Krueger concludes. If only it had proven truer for the author.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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