How the Music Industry Explains Inequality, Globalization, Middle-Class Decline ... Basically Everything

Alan Krueger's thoroughly entertaining economic speech (that phrase is not an oxymoron.) at the Rock and Roll Hall of Fame (that address is not a typo.) is a potpourri of cool factoids, but the bottom line is that if you want to understand economic inequality in the U.S., start with the music industry.

Here's the evolution of the "winner-take-all" music biz, where the top 1 percent of artists have more than doubled their share of ticket revenue since 1982 ...

... and here's the evolution of the "winner-take-all" American economy, where the top 1 percent of earners have doubled their share of national income, too.

The simplest way to explain both trends in the same breath is to say that globalization and technology have conspired to give the world unprecedented access to the best stuff (songs, socks, smartphones). This gives the best producers (of songs, socks, and smartphones) access to more wallets than ever. And that helps the folks behind the world's best songs, socks, and smartphones use their best-in-class status to gobble up more money than ever before.

But the most interesting way that the music industry teaches us about the overall economy isn't income inequality, exactly. It's duplicability.

Once you can copy something, its price goes to zero. You can copy a song file. You can copy a video of a song file. These things aren't unique. But a live concert is. So look what's happened to prices. In the last 30 years, listening to music has become cheaper than ever, while watching live performances has grown more expensive. "The price of the average concert ticket increased by nearly 400% from 1981 to 2012," Krueger said, more than twice the rate of inflation.

In many ways, the middle class jobs crisis in the last half-century has been a crisis of replicability. Last century, the pool of manufacturing workers for U.S. companies was limited by the bounds of the contiguous United States. They made decent wages. In the last 30 years, those same companies have learned that Chinese people, Vietnamese people, and varieties of robots perform the same tasks for less money. As the labor pool doubled and doubled, manufacturing work in the U.S. disintegrated.

The same way that concerts (i.e.: unique, local music events that can't be duplicated) have come to dominate the music business, local "non-tradable" industries have come to dominate job creation in the last generation. As I've written, about half of the net jobs created between 1990 and 2008 were in education, health care, and government -- local industries shielded from the duplicative forces of globalization and technology, since we don't visit doctors in China or take Econometrics from robots (yet).

In a world of plenty, the real value is in scarcity. YouTube links are about as scarce than the labor capacity to stitch a sock. Meanwhile, in the same global economy, rare talent can reap "pop star"-level rewards. Abundance giveth and taketh away.

Derek Thompson is a staff writer at The Atlantic, where he writes about economics, technology, and the media. He is the author of Hit Makers and the host of the podcast Crazy/Genius.

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