Thursday, January 21, 2021

A Reminder from Berlin — Peter Radford

 I would not lay the issues entirely at the feet of economics, but Peter Radford has a point worth considering.

As I have been saying, it is impossible to approach most interesting and important issues in life with without a systems view, which necessitates improving this view with feedback as the natural sciences do. 

Conventional economics pretends to be a natural science but has no comprehensive systems view of a subject matter that is social and political as well as economic. The result is as Peter Radford asserts. Disaster.

BTW, the MMT approach doesn't fix this either since it is analysis of a narrow subject matter. It lays a foundation but a superstructure needs to be built on that foundation of institutional analysis of monetary production societies (note: not "economies").

The Radford Free Press
See also
The dominance of Big Tech and other ‘superstar’ firms’ has put market power back on the agenda of politicians, as well as in research. But although oligopoly markets have been introduced in macroeconomic and trade models, this is mostly in the context of a very large ‘continuum’ of sectors such that a firm has market power in its sector but no influence on the wider economy. This column argues that it is high time that oligopoly is integrated fully into the macroeconomics toolbox.
Xavier Vives must have tenure.
Xavier Vives, Professor of Economics and Finance and Academic Director of the Public-Private Sector Research Center at IESE Business School.
Originally published at VoxEU


Tech Companies Worry About Becoming Targets
Ashley Gold


Ahmed Fares said...

re: the Superstar Effect

In a 1981 paper published in the American Economics Review, the economist Sherwin Rosen worked through the mathematics that explains why superstars, like Pavarotti, reap so many more rewards than peers who are only slightly less talented. He called the phenomenon, “The Superstar Effect.”

Though the details of Rosen’s formulas are complex, the intuition is simple: imagine a million opera fans who each have $10 to spend on an opera album. They’re trying to decide whether to buy an album by Florez or Pavarotti. Rosen’s theory predicts that the bulk of the consumers will purchase the Pavarotti album, thinking, roughly: “although both singers are great, Pavarotti is the best, and if I can only get one album I might as well get the best one available.” The result is that the vast majority of the $10 million goes to Pavarotti, even though his talent advantage over Florez is small.

—Cal Newport (2010) “From CEOs to Opera Singers – How to Harness the Superstar Effect”

Ahmed Fares said...

Further to my comment:

Juan Diego Florez cemented his reputation as a top operatic tenor during a 2008 performance of Gaetano Donizetti's La Fille du Regiment. Among professional singers, Donizetti's masterpiece is known as "the Mount Everest of opera"; a reputation due, almost entirely, to a devilishly tricky aria, "Ah! Mes amis, quel jour de fete," that arrives early in the first act. The aria demands the tenor to hit nine high C's in a row — a supremely difficult feat.

In his 2008 performance of Donizetti, at the Metropolitan Opera House, Florez hit all nine notes. The acclaim was so overwhelming that he was summoned back to the stage for an encore, overturning the Met's long-standing ban on the practice.

As a top opera singer, we can assume that Florez does well for himself financially (likely on the order of 5-digit paydays per performance), but not lavishly well. Put another way: he's well-off but not wealthy.

Then there are the superstars.

In 1972, a young tenor by the name of Luciano Pavarotti also made a name for himself performing Donizetti at the Met. Like Florez, he too hit the high C's. But there was something extra in Pavarotti's voice. The audience at the Met in 1972 did more than demand an encore from Pavarotti, they weren't content until he had returned to the stage seventeen times! In writing about Florez's 2008 performance, the New York Times noted: "If truth be told, it's not as hard as it sounds for a tenor with a light lyric voice like Mr. Florez to toss off those high C's…[I]n the early 1970's, when Luciano Pavarotti…let those high Cs ring out, that was truly astonishing."

In other words, both Florez and Pavarotti are exceptional tenors, but Pavarotti was slightly better — the best among an elite class. The impact of this small difference, however, was huge. Whereas we estimated that Florez was well off but not wealthy, when Pavarotti died in 2007, sources estimated his estate to be worth $275 to 475 million.

Peter Pan said...

My money went to Kenny Rogers, to buy an album for my mother.

Matt Franko said...

The arts have all the “inequality!”...

Orioles paying Chris Davis 168M over to hit 0.145... meanwhile the kids coming up in minor leagues getting cancelled...

$200 for Rolling Stones tickets meanwhile artists busking for coins....

You Art degree morons are the source of all the problems....