Wednesday, February 25, 2015

Superstar Theory: J.K. Rowling vs Elizabeth Warren

A couple days ago, in this thread... Epiphytes and Economics... I posted a reply that was all about Sherwin Rosen's Superstar Theory (ST).  Yesterday, Paul Krugman wrote a blog entry that was also all about ST... Jenny Lind, Taylor Swift, and Me.  Coincidence?

Surely it's a coincidence.  It's extremely unlikely that Krugman reads my blog.  If it was at all likely then I might be tempted to guess that he learned about my thread from this recent entry... Who Are You?  

It's a fun coincidence though because it gives you the wonderful and exciting opportunity to compare our economic perspectives on the same theory!  

I'll share my comment with you here.  But first it might help to share the comment that I was replying to...

I googled Elizabeth Warren. Prospect for U.S. president in 2016?  I live in Canada and had no idea who she was. - Beer w/Straw

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If people could choose where their taxes go... we'd create a lot more value by allowing Canadians to spend their taxes in America's public sector and vice versa.

In other words, we create more value by expanding, rather than shrinking, people's pool of potential trading partners. If you liked what Elizabeth Warren was doing for the public more than you liked what any Canadian was doing for the public... then you should be able to give her your taxes.

It should be pretty straightforward that we'd destroy, rather than create, a lot more value by preventing non British people from trading with J.K. Rowling.

If Elizabeth Warren is truly the J.K. Rowling of the common good... then we'd create a lot of value by allowing people all over the world to give her their taxes.

In the absence of global public market... then how in the world would we be able to tell whether Elizabeth Warren truly was the J.K. Rowling of the common good?

Not sure if irony is the right word, but creating a global public market would increase income inequality nearly as much as creating a global private market does. If only Brits could give their money to J.K. Rowling then there wouldn't be as much disparity in income. As J.K Rowling's pool of potential trading partners is expanded... there's a corresponding increase in income inequality.

If we created a global public market... then if Warren was truly as big a rockstar as Rowling... then Warren, a liberal, would receive far money than any other congressperson. Perhaps then she might appreciate that income inequality wasn't the problem. A significant disparity in income simply reflects the fact that a few people are exceptionally good at creating value for others.

We want these exceptionally good value creators to be massively rewarded. Huge rewards create bright value signals which attracts the best and brightest people in the world.

So if we want cancer and poverty to be cured sooner rather than later... then we need to create a global public market.

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What do you think?  Whose perspective do you prefer?

Honestly I'm a little confused regarding what it is that Krugman is trying to say about ST's relevance to music.  It kinda seems like he's saying that it's not very relevant.  That can't be right though.

How big a superstar would the Korean pop singer Psy be if his music/videos were only accessible to people in Korea?  Would he be 1/2 the superstar he is now?  Or 1/10th the superstar?  Or 1/100th the superstar?  Would Snoop Dog have jumped at the opportunity to collaborate with him?  Prolly not.

It's easy to see how much Psy benefits by having his pool of potential trading partners as large as it currently is.  Now he's making music videos with Snoop Dog!  Not to mention the fact that he's earned millions of dollars.

Unfortunately, it's not easy to see all the benefit that Psy has provided for the people that he's traded with.  This is because Psy's benefit is concentrated and tangible while his trading partners' benefit is dispersed and intangible.

If it was easy to see consumer benefit then I wouldn't be here having to explain that giving people the freedom to shop in the public sector would greatly expand our pool of potential trading partners which would greatly increase total benefit.  Pragmatarianism would have been implemented long before I was even born.

How in the world can we make it easier for people to "see" total consumer benefit?  Here's one attempt...




Is total consumer benefit greater than, or less than, or equal to Psy's benefit?

The basic theory is that you only trade when you have the expectation that what you gain will be greater than what you have to give up.  If what you expect to gain has less value than what you have to give up... then you wouldn't want to trade because if you did then you would suffer a loss.  If what you expect to gain has the same exact value to you as what you have to give up... then there's no point in making the trade.

For example... if the amount of benefit you expect to gain from seeing Psy live in concert has the same exact value to you as the opportunity cost of the ticket... then why bother buying the ticket?
We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care. - Ludwig von Mises, Human Action
When people buy a ticket to see Psy in concert... they aren't eager to substitute their current state of affairs for an equally acceptable state of affairs.  So when somebody does buy a ticket to see Psy it's because they are hoping to improve their circumstances as much as possible.

Of course we all know that reality doesn't always live up to expectations.  When this happens we tend not to keep it a secret.  Same thing when reality exceeds our expectations.  This means that persistent exchange generally indicates the persistence of mutual benefit.
  
It should be clear that we would decrease total benefit by preventing Koreans from trading with the rest of the world.  Just like we would decrease total benefit by preventing Americans and Canadians from trading.  Just like we would decrease total benefit by preventing Americans and Brits from trading.

These things aren't clear though.  Because if they were... then people would understand that we destroy a lot of benefit by preventing consumers from trading with producers in the public sector.

Right now it's a fact that Krugman isn't helping to clarify the value of allowing consumers to trade with Elizabeth Warren as easily as they can trade with J.K. Rowling or Psy.  This fact seems to indicate that he doesn't "see" consumer benefit.  Why doesn't he see it?

If we can imagine pragmatarianism gaining momentum, then when would be the optimal time for Krugman to address it?  If he addresses it now then he would be risking too much.  But if he addresses it too late... then he would risk losing all his credibility/relevance.

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