Thursday, April 26, 2007

Explaining Income Inequality Through Harry Potter

Economist Alex Tabarrok argues that the way to explain why incomes are becoming less equal in the world and in the United States is to look at why some writers, like JK Rowling are making tons of money. Basically, it comes down to the fact that everyone is staying about the same, while a few top-earners are making a lot more than they used to because they have larger global markets than they used to. So Tabarrok's explanation is not that the poor are getting poorer, but rather, the richest few are pulling away from the pack.
I do not disparage Rowling when I say talent is not the explanation for her monetary success. Homer, Shakespeare and Tolkien all earned much less. Why? Consider Homer, he told great stories but could earn no more in a night than say 50 people might pay for an evening's entertainment. Shakespeare did a little better. The Globe theater could hold 3000 and unlike Homer, Shakespeare didn't have to be at the theater to earn. Shakespeare's words were leveraged.
(Source: Marginal Revolution)


Abby said...

It is clear that J.K. Rowling has enough talent in order to explain her billion dollar success. But I'm sure there are a handful of equally talented people out there who just haven't had the luck of being published. In some sense, her success is a gamble. As Tabarrok commented it could be easily explained that "time is limited and people want to read the same books that there friends are reading." Just like Veblen pointed out, people do not act as individuals instead they look to one another to see what the other has. There are few trendsetters in our world and to Rowling's luck they have brought about waiting lists to the next book not even set to come out until July, box-office movies and crazed kids, teens and adults. Her success has has brought an inequality in that her income could be taking away from those more talented than her writing.
Although personally, I love Harry Potter even if Rowling is making billions...I guess I am contributing to her success.

Anonymous said...

I think it is a great thing that the rich are getting richer. It shows that they still have the desire to work hard, and they are not satisfied with their success. No one should ever be criticized for their success. Many people today complain that the rich are too rich and that the poor should be helped more. The rich people didn't get where they are by sitting on the couch and looking for the government to help them out. They went out and made something of themselves. J.K. Rowling is a great example of how someone can earn money if they put forth the effort. I get very mad when I hear the excuse that certain people are poor because they didn't have the same opportunity as others. I don't see how that is true. They go to a public school where their education is paid for. It is their choice if they want to study to get a scholarship to go to college. If they put forth the effort, it can be done. There are plenty of people who have overcome poverty by striving for excellence. Let the people keep the money they make. They shouldn't be penalized for being rich.
Bryan W.

Anonymous said...

I think this is a very interesting idea. how is it that the rich are getting richer and the poor are remaning the same? First of all, the allure and pull for technological innovations and creativity is causing a huge surge in our econonmy. One technological or innovative invention can cause instant wealth and popularity for the creator or inventor. One idea can spiral around to boost sucess and fortune. With JK Rowlings novels, technological innovation isnt exactly the case. In her field, the money lies in unpredictatbility of story lines and uniquness of characters, events,and themes. JK Rowling was able to create an unpredictable story line that allured readers across age groups, bringing together the masses. Reading Harry Potter became the "it" thing to do very quickly. Along with her instant success from her first Harry Potter books, the highly technological world we like in has created a demand for Harry Potter video games,movies, computer games, and other pleasures. JK Rowling probably gets paid for every single one of these sold. Since our world is so advanced, getting "richer" through the creation or invention of just ONE thing can make you increasingly more wealthy than in the past, say, in Shakespeare's time, not necesarily due to the certain innovation but to the "things" that accompany them.

Anonymous said...

To me the "Rowlings" and "Gates" of society have been around forever. There will always be a select group of individuals who are set apart financially from others. This barrier, in my opinion, is merely more obvious today because billionaires are broadcasted to us through the media. I also agree with Brian that there is nothing wrong with being hugely successful and wealthy. What I find disturbing is that, in America, a new form of serfdom seems to be arising due to the huge numbers of unskilled labor coming to us from mexico. I do not think that talented people who have a firm hold on a particular market are causing the inequality in income to increase, but rather the those who continue to exploit cheap labor.