It may seem obvious that Taylor Swift “stimulated the economy” during her two-year Elas World Tour (Hannah Miao, “Billions of Cocktails and Friendship Bracelets: Taylor Swift… How We Revitalized the Economy,” Wall Street Journal, December 8, 2024). But that’s not the case. For example, this claim cannot be evaluated by simply counting the amount of money fans paid for tickets, travel, costumes, etc. to attend her concerts.
Let’s start with a question that Mr. Miao raised near the end of his report but didn’t carry through to the end.
There is debate among economists and analysts about how to measure Swift’s economic impact. Are her concerts just entertaining her fans with money they would have spent elsewhere, or is she generating new activity?
In fact, the money fans paid could have been spent on other things, like other shows and entertainment, vacations, appliances and furniture. (In the United States, tickets to Elas’ concerts reached upwards of $2,000, and in some cases more.) That money could also have been saved as a means to serve as capital for investment elsewhere in the economy. The counterargument that spending related to Swift’s concerts creates a “ripple effect” is voodoo economics. If this expression has any meaning, spending elsewhere will also have a “ripple effect.”
A more methodologically defensible estimate of Taylor Swift’s contribution to the economy would be their contribution to GDP. By definition, GDP is the total output of final goods at market prices and is equal to the total value added, or the sum of all income. To avoid double counting, only final goods to consumers are included. This is to avoid double-counting the value of wheat and the flour contained in bread, for example. What’s important to understand is that the resources used to produce Swift’s concerts (such as the use of concert venues, equipment, performers, sound engineers, other personnel, and of course the singers’ time) Otherwise, it would have been used to create something. There’s also the economy.
But even GDP is a woefully imperfect measure of Taylor Swift’s (and her co-producer’s) contribution to the economy. Her real contribution is the net benefit to the consumer. “Consumer surplus” is the technical term for this concept. Measures the amount of money a consumer receives in dollars over what he or she paid for something. Consumers who attended Eras’s concert must have thought they had produced the best consumer surplus their money could get.
Besides the statistical problems that prohibit such measurements, there are more fundamental ones. That is, the dollar value of either GDP or consumer surplus is not sufficient to measure consumer “utility.” Utility in modern economic theory refers to a measure of how a consumer ranks different configurations of goods and situations based on his (and, of course, her) preferences. More money to buy more goods and services naturally increases a person’s usefulness (applies mutatis mutandis to having less money), money is not the only factor for satisfaction and happiness . Furthermore, a dollar may confer more utility to some individuals than to some others.
One way to directly introduce utility into economic analysis is through models that show how individuals arrive at a “contract curve” by exchanging with each other. (If you are a student of economics, you will see the Edgeworth-Bowley box diagram of general equilibrium come to mind.) Most gains in utility come through exchange and trade. For example, you work in the production of cars, or in writing articles to buy seats. Taylor Swift concert. It would be like exchanging your car or goods with Ms. Swift or her host for services.
Taste and practicality are subjective. They exist in each individual’s mind. Although it can be assumed that each party to an exchange derives utility from it (otherwise they would have declined the exchange), it is conceptually impossible to aggregate utility between individuals and measure increases or decreases in their net total. It’s also not possible. Economists say that comparisons of utility between individuals are impossible. An economy is not a bundle of physical objects, but a collection of individuals interacting to maximize their utility. We cannot expect to calculate whether the resources used for the Eras concerts provided more or less utility for other allocations. We can’t hope to calculate a “net utility” figure that tells us how much net contribution Taylor Swift has made to the economy compared to other artists.
It doesn’t matter that it’s impossible to come up with exact numbers. For the same analytical tradition that leads to that conclusion also demonstrates more general and useful propositions. A free market economic system gives each individual (according to Hayek, a randomly selected individual) the most opportunity to maximize his or her utility through free acts of exchange. Some consumers may choose to go to a Taylor Swift concert instead of doing or buying something else and bid up the price of the ticket to ensure they get it. (In contrast to people who buy tickets at a discount), we can be sure of the following: As long as the economy is free, the outcome will be economically efficient.
