“All right, let’s set the stage. Picture this: it’s another day in the world owned by Taylor Swift. A new city just popped up on her concert schedule, and everyone goes bananas. Tickets? Snatched up in a blink. The next round? City authorities laying out the red carpet, begging Swift’s fans to come to town. Take Glendale, Arizona – they went so far as to rename themselves ‘Swift City’ for a few days, like some crazed teen fan.
You may be thinking, ‘Okay, that’s insane!’ But hang on. The madness is laced with reason. Swift’s tour could inject a cool $5 billion into the US economy. Just one gig in Vegas brought back pre-COVID tourism levels. So, yeah, cities are eager to attract that Swift-cash splash.
But let’s swerve away from Swift-mania for a moment. Here’s something to ponder: Why on earth are concert tickets so expensive? The Wall Street Journal dubs 2023 as ‘the year of the $1,000 concert ticket.’ Swift’s 2024 tour tickets to Australia make her 2018 tickets look like a steal. And yes, we’re talking about primary ticket prices, not the ridiculous scalper rates.
Simple answer? Good old demand and supply. Just ask Ticketmaster, who experienced such a stampede when Swift’s tickets dropped that they said she’d need to perform for 50,000 fans every night for almost three years to meet the demand. Physically impossible, you say? Yup, which means artists like Swift can hike their prices without batting an eye.
But here’s the thing. Swift isn’t the only one with costly concert tickets. Live performance prices have been outpacing general inflation for years. An economist named Alan Krueger, the author of Rockonomics, showed how an average concert ticket jumped from $12 in 1981 to a hefty $64 in 2017. Now, if it matched general inflation, we’d be looking at about $32. So what’s the deal?
Enter William J. Baumol, an economist from the ’60s, and his theory about productivity known as Baumol’s Effect or Baumol’s Cost Disease. The concept is relatively straightforward.
Picture a Swiss craftsman from yesteryears making 12 watches per year. With the advent of machinery, he now makes 1,200. Higher productivity means the factory can sell more watches and reward both customers (with lower prices) and workers (with higher wages). Sounds great, right?
Now consider live music. As an example, take Beethoven’s String Quartet №14. In 1826 and 2010, it took four people 40 minutes to produce a performance. No productivity increase there. The same applies to Swift, who needs the same time to perform a 10-song set in 2023 as she did in 2009. Marginal productivity gains come from better mics.
But that doesn’t mean musicians won’t see a pay rise. If wages didn’t increase, they’d quit and switch to more lucrative sectors. Hence, even if they aren’t more productive, Swift must pay her band and crew higher wages, which does translate into pricier tickets.
When we talk about inflation, it’s the average price increase (or decrease) of various consumed goods in a country. If manufactured goods weigh more in this calculation, it can keep the overall figure low, making live performances seem to get pricier each year when compared to watches or general inflation. Welcome to the Baumol Effect.
So, Swift fans, start saving for her future concerts. Remember to factor in Swift’s brand allure, the demand-supply equation, and of course, the Baumol Effect. But for now, here’s a snapshot of Glendale’s love letter to Taylor Swift.”
