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October 13, 2007
The Economics of Hannah Montana
Any parent of a young girl between roughly 7 and 14 (and, in my case, any friends of such parents) is well aware of the Disney Channel phenomenon known as Hannah Montana, played by Miley Cyrus, daughter of His Royal Achy Breaky-ness Billy Ray Cyrus (if I ever review the show, the post will be entitled "Ole Billy Ray ain't as stupid as I thought"). She is now about to embark on a nationwide concert tour that has sold out nearly instantly. Apparently, ticket brokers quickly snapped up the tickets using sophisticated computer programs to purchase as many as possible as soon as they went on sale. They are now re-selling them, at huge mark-ups.
This morning on CNN they really covered the story, offering all kinds of outraged views (once again preserving their reputation as a logic-free salon), from that of an attorney general looking into possible ticket-scalping charges ("When you allow the hijacking of the market, it's literally the worst of both worlds. You get charged too much, and there's no access for the locals," said Jay Nixon, Missouri's borderline-retarded attorney general.), to one of the instant intellectual ambulance chasers the 24-hour networks keep on retainer by the battalion (who says we award too many PhDs??) who explained that the real crime here is that "the bulk of the revenues won't be going to the real artist here" (I guess she's concerned that Miley and Billy Ray will only be able to afford a personal Boeing 787 without the burled walnut interior trim) to the parent of a little girl in the target demographic but priced out of the Hannah Montana concert market who explained how all of this sends the wrong message to kids (that you can get "whatever you want").
Zeroing on the last point, I'd say the sentiments of that mother betray everything wrong with today's parents. The lesson of this experience is the exact opposite of what she suggests: it is that the daughter can't get everything she wants. And that isn't wrong. It's healthy. You are not entitled to everything you want at an accessible price. This is a world of scarcity and, in the face of that, everyone has to make choices. Her words serve as a commentary on how badly this woman, like millions of parents in her cohort, has indulged every whim of her daughter to the point where even she as a parent can no longer correctly tell the difference between a circumstance that teaches her daughter she can have anything she wants and one which teaches her that she can't have everything she wants.
Another parent explained "I feel like they are ripping off children. I'm sure there are parents out there would pay that much. But the rest of us shouldn't be penalized for that." Penalized for what? Reality? Maybe Ferrari should be penalized for not making their cars more accessible. Who do I write to about the soaring price of Bordeauxs and Burgundies?
But I digress. What is really interesting about the Hannah Montana story is the degree to which it reveals an old and (sometimes tragically) misguided American view of fairness and equity in a nation otherwise completely resigned to the market system. This situation (ticket scalping in this case, price gouging in the aftermath of a disaster) is one that always sparks outrage. But here is the problem: scalpers and gougers aren't causing a bad situation. The prices they set merely reflect reality: that the scalped/gouged item is SCARCE. When you act as a society to control their price setting behavior, you are basically legally declaring your outrage with reality. For instance, these scalpers are able to do what they are doing because Hannah Montana tickets are highly sought after and the initial sellers probably set the price of them far below equilibrium. The high prices reflect the fact that millions of parents want their daughters to attend a concert on a tour with perhaps tens of thousands of seats.
In this instance, the idiocy of the vox populi (Cato would be disappointed to find that the bleating plebs have not been consigned to the dustbin of history) and efforts of politicians/lawyers/power whores to translate that outrage into legal action is comical. In the case of, for instance, efforts to stop price gouging after a storm, they are more often than not tragic. High prices signal scarcity. In the wake of a hurricane, $500 hammers tell arbitragers to get hammers to the scene as quickly as possible: they are fetching a dear price. But that is just the market's way of saying they are scarce at the scene of the disaster. Muting that signal simply means that our market will not direct sufficient resources to the scene quickly enough.
In the meantime, there is hope for all of the devastated 12 year olds out there: maybe the brokers set the prices too high. Arbitragers do make mistakes. But then again maybe not. In any case, they will adjust them correctly: they understand the laws of supply and demand. They understand reality.
You can't simply pretend reality away and you shouldn't expect your government to do so either. It's a terrible message to send your kids or a city reeling in the aftermath of tragedy.
Posted by dag at October 13, 2007 9:04 AM