Costs and creativity
“Cost disease” is an economic concept that is vital to understanding the relationship between labor costs and the arts. First described by William J. Baumol in the 1960s, cost disease describes the way that technology seems to drive up the cost of “services.” (In econo-jargon, performing music and writing books are both “services.”)
Technology generally reduces the amount of labor needed to make physical things. Every year, automation drives down the number of human hours needed to assemble a car; and thus, every year, for the average buyer, cars tend to get more affordable, as their labor costs decrease.
Services are much harder to automate. Teaching a kid how to read, examining a patient, performing a sonata, or cooking a hamburger all take approximately the same amount of time now as they did a century ago. And since the people who do these jobs all expect to be able to buy cars and other manufactured goods, their wages can’t be (fairly) discounted just because their “product” isn’t getting cheaper as quickly as manufactured goods are. More often, in fact, their wages go up.
This is, incidentally, one of the key reasons that education and health care command ever-larger slices of developed countries’ GDP—the machines and buildings get cheaper, but the people who operate them are a fixed cost.
This same dynamic impacts the arts. Whether you’re writing a novel, performing a song, or painting a painting, there are some costs—both in time and money—that can’t be reduced.
However, there are many parts of a creative living that have gotten vastly cheaper thanks to technology. Twenty years ago, I was the CIO of a successful documentary-film-production house. Our edit suite cost $250,000, and didn’t even produce production-quality output—after films were edited on it, they had to be re-cut on a multimillion dollar system that we rented access to. Our cameras—digital betas—cost several times more than modern SLR and Red digital cameras, and produced footage that was nowhere near the same quality.
Today, you could replicate our whole setup for much less than ten thousand dollars. And that’s not all: these days, when your crew goes on location, it can book its own plane tickets—no travel-agent fees—shop around for customs processing, save big money with Airbnb and hotel discounters, and so on.
The time filmmakers spend writing their scripts and recording their interviews and editing down their footage costs just as much as it ever did. But every other cost has gone down. These are the capital costs—the costs that you’d typically borrow or raise funds to cover. The stuff that you need time for has stayed fixed, but time is something you can provide on your own, without begging patrons or investors for help. Meanwhile, the cost of the stuff that you have to sell your soul and vision for—the cameras, the plane tickets, the hotel rooms and edit suites—has plummeted, and there is no bottom in sight.
Yes, it takes an orchestra the same number of hours today to perform a Mozart symphony as it did in the eighteenth century, but all the other costs of delivering that symphony to the greatest number of listeners are vastly cheaper today than they’ve ever been. Rehearsing and performing are the things that the orchestra can do for itself, while everything else is the stuff they have to sell their soul for. Cost disease hasn’t reduced the cost of performing, but it has given musicians much more control over their destiny than they’ve ever had before.
So if analog dollars have turned into digital dimes (as the critics of ad-supported media have it), there is the fact that it’s possible to run a business that gets the same amount of advertising as its forebears at a fraction of the price. You can still profit from a much smaller income, as long as you have much smaller expenses, too.
3. YOU CAN SELL SWAG
There’s no question that the market for certain embodiments of art has declined. For example, I’ve got no interest in ever acquiring a CD again—a CD isn’t an asset, it’s a liability. When I get a CD, I have to rip the disc, make sure the song titles and other metadata were correctly transferred, and then figure out how to get rid of the CD itself in a way that is both legal and environmentally responsible. (If you give it away after ripping it, it’s probably not legal; if you throw it away after ripping it, it’s definitely not environmentally responsible.) This is one reason that “piracy” statistics from the music industry are so misleading: they imply that every downloaded song is a lost sale, and that every lost sale is a lost sale of the whole album, not just the single. But if piracy vanished tomorrow, people like me wouldn’t start buying CDs again. We don’t want those liabilities in our lives. The best you could hope for is that a small fraction of today’s downloaders would become iTunes or Amazon MP3 customers, which is a lot less commercially exciting than turning them into buyers of $17.99 CDs. There’re those analog dollars/digital dimes again.
Randall Munroe is a funny guy and a moderately talented illustrator. Trained as a physicist, he started posting his humorous stick-figure doodles to his website, xkcd.com. (He says the name doesn’t mean anything—it was just a four-letter.com domain he managed to snag before they were all snapped up by speculators.) Eventually, he