Society values pro basketball players who provide entertainment far more than trash collectors who perform a vital service. We may need garbage collectors more than professional athletes, but it’s easy to find people who can pick up trash, while elite athletes are scarce by definition. In this case market supply and demand is a distortion of actual value. We are ok with athletes being paid millions of dollars to play a game because we suppose demand is sacrosanct, almost a godly force we dare not question. After all, we get paid what we’re worth, right?
Yet it’s illegal to buy cocaine or hire a hitman when there is undoubtedly demand for drugs and contract killing. Alcohol and liquor sales are heavily taxed to try to curb demand. Or what about medical treatments? When a patient is in danger of death, the value of the next treatment is theoretically infinite. So shouldn’t that next round of chemotherapy always cost everything the patient has left according to pure demand? The state already can and does regulate demand—it’s not off limits.
So why then do we let a football player or a movie star walk away with millions of dollars when its obvious there’s no way their contribution however important can be that large? When someone becomes a millionaire by throwing a ball around or playing make-believe on camera, the character and morale of the entire society is undermined.
What is the garbage man to think when society values a single movie star more than him dozens of times over? His task is so important, society can’t do without him for even a week. If movie studios were all shut down, it might be unpleasant news but people would get on with life.
So why not put a strict cap on the income of entertainers and their promoters? They provide services that people want and seem to generally do more good than harm by helping to create a thriving culture, so it would make sense to allow them to earn a good living, but becoming multi-millionaires would be out of the question. Entertainment is wonderful to have but it is a luxury, not a mainstay.
Obviously, a big budget movie gets made and its star actors paid millions because hundreds of millions of people are willing to pay for movie tickets. So I could see someone arguing that because demand exists, it should be allowed. But this is not enough. Otherwise we should also be willing to argue for the legalization of contract killing and robbery. The pattern I see is that demand is allowed to express itself so long as it does more good than harm to society. So now we have to decide if it is good for a society to pour billions of dollars of its wealth into a handful of entertainers. Surely there’s a limit on the worth of entertainment when there’s other things that need to be done.
As individuals, we value recreational time playing video games, watching movies, or blogging. Yet we have a time and money budget for our own entertainment. Similarly, a society ought to have a wealth budget for its luxuries. It may sound restrictive to limit what a pro athlete or day trader makes, yet we already accept sin taxes that curb and punish demand for cigarettes and booze. Sin taxes already carry the implicit recognition that we are not rational economic agents. We routinely make bad decisions. So we’re given a push in the “right” direction by the state. We can buy that bottle of vodka or pack of cigarettes, but we have to be willing to pay an extra fee that serves as both a disincentive and an indemnity to society. By the same principle we could cap the price for event and movie tickets or the acceptable budget cities can spend on stadiums to prevent or at least limit the misappropriation of society’s very finite wealth.
It would also be interesting to examine financial “products” and examine which of them return equivalent or greater value to society and which are a net drain or even cause damage.
Limiting the size of luxury industries brings up a big issue though—what about all the people that would lose their jobs in movie studios, stadiums, and concert halls? We ask this because we lose perspective of the big picture. We go to work to provide value to others and then get compensated in proportion to our contributions. Is it a net good to work at a stadium that cost the city’s tax payers billions of dollars to spend billions more on a luxury activity? If there’s nothing more productive to do with someone, why shouldn’t society just give them a guaranteed minimum income until there’s something more useful to do? Society comes out way ahead by just skipping the multi-billion dollar excuse to write a paycheck. No activity at all is far more valuable than useless activity. Just staying at home with some basic income, there is a small chance they may have the initiative to use their leisure time wisely and genuinely contribute to the good of the group.
We’ve been taught to think in a way that’s a distortion of Keynesian views. Keynes suggested hiring people to do useless tasks as one way to stimulate a depressed economy. Naturally, his prescription for emergency situations became the new normal, where making money is a good thing even if we’re building “useless pyramids” or paying people to dig a hole just to fill it in again. The trouble is this becomes a philosophy of economic nihilism in which human activity is divorced from purpose and meaning. People just want money and as long as no one is murdered outright, the means don’t matter much. Strangely, it sounds almost heretical now to suggest that markets and the accumulation of wealth ought to serve a purpose—to benefit the group in which we participate—that money awarded for unproductive or under-productive activity damages the integrity of society.
The survival of human societies in this world is a serious business; against other societies, against the pitiless forces of nature, and never-ending internal pressures. The elevation of frivolous things to the heights of accomplishment makes a mockery of the social order. A society where people worship “celebrities” over inventors, leaders, and entrepreneurs has lost its way. Such is a disaster of mob rule where the masses are allowed to determine who is great and who is low. When the undeserving get the best rewards, cynicism spreads and loyalty erodes until one day a nimble challenger full of confidence arises and proves more than a match for a mighty opponent crippled by rot.
The market is a form of economic democracy—every purchase is a vote. We have an electoral college and representatives in political democracy rather than a pure popular vote. So popular demand on the market must also be subject to controls, to curb and prevent tragedies of the commons. There already are rules such as monopoly prevention that implicitly acknowledge the market has a mission to fulfill. It is not there for its own sake. These principles just have to be extended until the market is re-animated with purpose as a healthy circulatory system.
8 replies on “Market Demand Must Be Regulated”
But the Blues are the best! No the Whites! Surely you know it’s the Reds. NO! It’s the Greens! This has been going on quite a while. I’m not sure how you could divvy up the take. If the athletes don’t get the money…who. The owners. Hah! The government, even worse.
I would definitely swash the profits in finance which are made with our money they create from scratch. Lots of the same regulations that we had during the Depression and few more.
Another good one is why are capital gains taxes less than personal taxes or wage taxes? Reagan made them equal. Index their profits to inflation and let them pay the same as the garbageman.
Dump the FED.
A lot of big utilities used to be public owned. TVA type stuff. California Power Company. They were well run on average and if you figured in the worse service and profits sent to the Capitalist probably cheaper. They at least planned ahead and invested in the future. In third world countries they talked (or bribed) them into selling their utilities then they socked it to the customers.
As for a sports model I just thought of the Green Bay Packers. Anyways I’m rambling.
Yes, Sam, obsession with entertainers has been a symptom of bloated, declining societies for thousands of years. A people who have lost hope and purpose submerge themselves in frivolities, frittering away in a few years what it took their ancestors generations to accumulate.
I agree, we need to restructure the system to make different sources of gain commmensurate with contribution. Why do we punish productive workers paid a wage compared to clever investors. Are wage earners just easier to fleece? If that’s the state’s philosophy the incentives and examples are set and everyone clamors to be a clever money manipulator rather than a working sucker. Just look at France before its revolution—only suckers had to pay taxes.
Back in college, around 2004, I lived a semester with a family in Argentina. The apartment’s water heater had to be lit with a match and extinguished when not in use to save money. It was explained to me that prices had skyrocketed ever since the utilities had been sold out to European companies .
This is the first post of yours that I recall disagreeing with quite so much…
Governments cannot regulate demand. Literally, cannot. They don’t regulate demand even for contract killings. They may regulate supply. But the question should not be framed in this abstract way: Total Real Value of Entertainments vs. Total Real Value of Trash Hauling. These are abstractions that no one (besides government statistics keepers) ever actually experiences. Is the entertainment immoral? Ban it. Give people 40 lashes for producing or distributing it. 20 for appearing in it. Not immoral? Then let the market set the price.
The money for sports and entertainment is going to be made. Shouldn’t a significant fraction of it go to the performers? Comparing the market contract killings to that of major league baseball pitchers is disingenuous in the extreme. One is per se immoral. The other is not. Eschaton is not within the grasp of public policy.
Nick, I’ve appreciated your support on your blog and am happy to see you comment here. Let’s see about addressing your concerns…
Governments interfere with the forces of demand all the time. Banning hitmen and cocaine are more extreme examples, but I also bring up middle ground situations like liquor tax. The demand for liquor is regulated by increasing the price. If it were cheaper people would want more of it. I would get XO brandy and single malt scotch all the time if it were at every gas station for $5 a bottle. Price and availability greatly affects what I can demand.
I agree that entertainers provide real value. I do assert that apex entertainers are examples of people who earn far more than they are worth to society. Great entertainers provide value, but society must remember they are a luxury, not a necessity and keep things in perspective.
I say “entertainers and their promoters” because I understand the actors and athletes are still just tools of studios and team owners. The promoters would also have to be subject to controls.
The trouble with “the money will be made no matter what” is we don’t think like that when it comes to crime and contraband.
So I’m not trying to compare baseball pitchers to contract killers. I’m saying that because contract killers are illegal despite proven demand, it is a legitimate concept to place a salary cap on pitchers who are overpaid.
So if we are discerning towards legitimate workers as we are towards criminals, we are no longer complacent saying someone “earned it” so long as they remain within the letter of the law.
Surely nutballs like Tom Cruise earning 100 million dollars a year of society’s scarce wealth is as silly as peasant collectives catapulting a breadbasket nation into famine. It’s about finding the golden mean. Too little water you die of thirst, too much, you drown.
It perplexes me that we suppose we must either beat a horse to death or let it go feral, nothing in between.
You shouldn’t be so hard on Tom Cruise. He’s in a serious reality bubble. All the top people at Scientology I’ll bet are psychopaths as was Hubbard. Cruise is not near the actor that these psychopaths are. Cruise is a great actor though. People like to bash him but I’ve been entertained by most anything he’s in. I liked his Collateral (2004) and Oblivion (2013).
As for regulation. Maybe you could tax NON-local entertainment. For example a movie was taxed but local plays were not. Big sports, TAX, local high school team, NOT taxed.
This would vastly improve social well being of the population. It would penalize people like myself that don’t get out much. It would also push a great deal of local medium caliber talent. People who are really good but not Tom Cruise.
As for financial types they have been controlled before and it can be done again. I hope…
Here’s a really, really, really good take on the Argentinian collapse by a guy who lived through it. It has extremely good information on what to do and not do if…well not actually if…when it happens in the USA.
He has a book I bought and felt it was good covering the same in more detail. I can not recommend enough reading him. He’s not one of these get guns and hole up in the country types. It’s realistic practical stuff.
What was done to Argentina was planned. Goldman Sachs came in and promised the Argentinians that their banks accounts would be tied to the US dollar. They sucked up all the money from the middle class and everyone else and then burnt them. Converted their accounts to Pesos, or whatever, and inflated the whole damn lot away while not allowing them to pull their money out. They took a middle class country and MADE it poor. They were directly responsible. Don’t believe all the lies they’re saying about the Argentinians doing this to themselves. Lies, lies, lies. They bribed and/or blackmailed the top leaders and then stole the money outright. Same as They’re doing the same to the US right now and EXACTLY the same as they did to Germany fostering the rise of Hitler..
Another good book to read “Confessions of an Economic Hit Man” by John Perkins. Same strategy. Very good book.
Look at this CSPAN video where a Rep. actually lets out what happened during the economic crash in the US. Rep. Paul Kanjorski said,”…$550 billion dollars drawn out in an hour or two…”. All a set up. Planned. Their doing the same to us.
Yes, Tom Cruise is a consistently entertaining actor. I really enjoyed Edge of Tomorrow. However, is Tom Cruise so irreplaceable and valuable to be awarded millions for a single film? Surely acting talent is not that rare and precious. What Cruise really brings to the table is his widespread public recognition. He commands high prices by being the memetic equivalent of walmart or McDonalds. So wouldn’t imposing a cap or sin taxes be a way of correcting a market distortion?
You perceive that limiting Tom Cruise’s influence would be like limiting Walmart or microsoft. Suddenly an ecosystem of niches for smaller scale entertainers would open up and the entertainment industry might not be dominated by memetic oligarchs. Entertainment might become a healthier social influence if it was oriented around people engaged in their community rather than distant “stars.”
Recession is also a potent weapon. When things sink below their real value, those who still have wealth can buy it all up for cheap. Carlos Slim, for example, made good use of recessions in Mexico.
[…] Dannato continues his series on political economy over at Forward Base B: Market Demand Must Be Regulated. I think that’s wrong. Supply may be regulated. But demand, I think, cannot be. At least not […]
While I have said that public works can be good for the citizens sometimes it doesn’t work out. I wonder is this just gross mismanagement or were they pushed? Fat chance on getting an unbiased opinion in the media.