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Sunday, December 29, 2013

Business 101 vs. Econ 101


From iSteve.
By the way, Wicked has taken in $793,000,000 on Broadway alone from 2003-2013, higher than the domestic totals of even either of James Cameron's last two movies. That's a lot of money. And that's not the most, either. The Lion King has now surpassed one billion dollars just playing at one theater on Broadway.

As you would expect, various parties have staked their claims to a slice of the pie. After all, you can't outsource Broadway, and it's resistant to insourcing.

Here's a good article on Local 1, the stage hands union in New York that works Broadway and other top tier live events in Manhattan. Their work rules guarantee that they'll put in huge amounts of overtime, for which they are lavishly compensated. A few at the Met opera get over half a million per year in wages and benefits. (The NYT doesn't have access to compensation stats for profit Broadway theaters, but presumably they pay in the same ballpark.)

Not surprisingly, the demographics of stage hands are similar to those of film crews in Hollywood, only more so:

Jobs are often passed from father to son, and some members are now the fifth generation of their families to hold Local 1 cards. [Union boss] Mr. Claffey, whose total compensation in 2011 as Local 1’s chief was $277,000, is one of six Claffey brothers in the union.

(It is most definitely a band of brothers. The union is still overwhelmingly white and male. Two years ago, it convened a meeting of its Sisters Committee for the first time, drawing 28 women, which the union’s newsletter said was nearly 20 percent of all the women in the local, suggesting that there are around 140 [out of 2,600].)
That's Econ 101, as rendered in Business Strategy 101: find yourself a defensible piece of monopoly power, and defend it.

The NYT article is a very interesting (and astounding) read. The Locak 1 stagehands have parlayed their occupations into substantial six-figure salaries, a cost happily borne by Broadway's many customers.

From one of Local 1's newsletters: “We are a proud, unified, hard-working, family-oriented bunch of people with only the welfare of our families, the future of our children and the pride of being the best stagehands in the world deeply embedded in our hearts.”

This is the sort of area where economists get tripped up over their own premises. If nice, cozy guilds and trade monopolies are advantageous, then they're an economic good and people are going to pursue them. So maybe the policy path of least resistance is toward policies that let people find their own, cozy little levels* instead of brutal, all-against-all cage matches where the referees are constantly adding more contestants. After all, George Mason University doesn't just throw up a few classrooms and charge rent to whoever shows up and can draw the most paying students. Instead, they set up a cozy little Bubble from which George Mason's Econ department can lecture the rest of us about churn, creative destruction, barriers to entry, price elasticity, etc.

Which reminds me, a lot of the most dogmatic anarcho-capitalists are academics at public universities. Recognizing that we all have to earn a living and compromise to some extent, wouldn't they have more influence in the federal bureaucracy? Or raising a private army to take over Honduras? (On second thought, maybe that's not a good idea.)

Anyway, back to the quote from Local 1. That is powerful, primal stuff: "the welfare of our families," "the future of our children," pride of place and work. Isn't that also the terminology we use when we talk about nationhood?

I'm coming around to Vox Popoli's view on free trade, namely that 'free trade'--the economists' dream of perfect competition--is not really 'free.' It depends on a lot of externalities in the form of powerful militaries, government immigration policy, currency manipulation. Go back to hard currency, and trade imbalances (and a lot of other things) take care of themselves. In the meantime, any nation whose people want to preserve themselves as a sovereign folk with their unique culture and geographic redoubt had better follow the Local 1 Path and protect their comparative advantage. This means you pay more for Broadway shows, and Broadway producers don't take as big a cut to pay for their second, third and fourth homes, but you've provided a nice living for a larger number of people.

We have already arrived at the appalling outcome where the only outlets for our lower-g citizens are name tag-jobs in fast food, and what can't be off-shored is going to be automated in the near future. That's why there's all this temporarily fashionable uproar about living wages in the fast food industry--that's all these people have left before they bottom out on welfare. These jobs were never meant for people trying to raise families; they were for teenagers, housewives earning grocery money and semi-retired seniors.

In other words, we either spread more wealth around at the cash register, or we pay people welfare for not even trying to work, and the consequences of the latter strike me as far more problematic than the former.
_______________________

* - What I've previously called small pond strategy.

18 comments:

alexis said...

We have already arrived at the appalling outcome where the only outlets for our lower-g citizens are name tag-jobs in fast food, and what can't be off-shored is going to be automated in the near future. That's why there's all this temporarily fashionable uproar about living wages in the fast food industry--that's all these people have left before they bottom out on welfare. These jobs were never meant for people trying to raise families; they were for teenagers, housewives earning grocery money and semi-retired seniors.

In other words, we either spread more wealth around at the cash register, or we pay people welfare for not even trying to work, and the consequences of the latter strike me as far more problematic than the former.


Thank you.

Anonymous said...

The Locak 1 stagehands have parlayed their occupations into substantial six-figure salaries, a cost happily borne by Broadway's many customers.

The cost isn't borne by the customers for a monopolistic product like Broadway shows. The stagehands are getting a piece of the rent that would accrue to the owners of the shows if they had cheaper stagehands.

Anonymous said...

These jobs were never meant for people trying to raise families; they were for teenagers, housewives earning grocery money and semi-retired seniors.

This could theoretically apply to anything. Many American computer programmers today can't earn enough to afford a wife and family. We could say that computer programming is not meant for people trying to raise families. We could shut down the medical guild and import doctors or have robot doctors and then say that being a doctor is not meant for people trying to raise families. The point being that jobs aren't meant for anything in particular. Whether a specific job like a fast food service is sufficient to raise a family depends on the cost of raising a family and the wages of the job. Obviously employers would pay their employees nothing if they could get away with it.

The Anti-Gnostic said...

From a societal perspective, the idea that anybody was going to raise children on the wages of a McDonald's cashier never occurred to anybody until now. The reason it's on the radar now is because adult mestizo immigrants and black Americans are the exclusive holders of these jobs in most places, and we have no idea what to do with these folks. They are in no way comparable to a doctor that some technological deus ex machina makes obsolete. He's high-g, and will retool for something else.

The stagehands are getting a piece of the rent that would accrue to the owners of the shows if they had cheaper stagehands.

Yes, like I said. And that rent is paid by Broadway ticket purchasers who want to see THE show, not a show.

Let me summarize: free trade ain't free and cheap labor ain't cheap. There are a lot of political and monetary reasons why this is so but that's not the sort of thing economists can or will consider in their neoclassical models.

Bob Wallace said...

I've always been mystified by those Aspie nerd/geeks, who have no practical experience in life, who babble about the horrors of an increase in the minimum-wage, and miss everything else. Such what I call Cosmodemonic Transnational Megacorporations, who underpay people because they can shove their costs onto the taxpayer. They privatize the benefits and socialize the costs. It's one reason out of many why I cannot take "professional" economists seriously.

Anonymous said...

Yes, like I said. And that rent is paid by Broadway ticket purchasers who want to see THE show, not a show.

Right, but the cost isn't borne by the Broadway ticket purchases in the sense that replacing the union with cheaper scabs would result in the producers of the show pocketing the extra money.

alexis said...

The libertarians I've encountered are oblivious to the intersection of culture and economy. The dignity that labor can bring to a man and his family is the most underdiscussed part of the wage debate. The churn, the creative destruction, the "change", it doesn't matter if libs or libertarians are spinning it- they just don't see the destructive forces of unemployment, migrant/illegal labor,or a welfare mentality. It's all around them, but they can't see it. They haven't noticed that you go for three generations outside of meaningful employment, you get ghetto. You can't quantify the costs of "culture", but you can quantify its handiwork. Does anybody really think that a black man working in an auto plant in 1960 was worse off than he is now putting chicken in a bucket, or hustling?

Anonymous said...

From a societal perspective, the idea that anybody was going to raise children on the wages of a McDonald's cashier never occurred to anybody until now. The reason it's on the radar now is because adult mestizo immigrants and black Americans are the exclusive holders of these jobs in most places, and we have no idea what to do with these folks. They are in no way comparable to a doctor that some technological deus ex machina makes obsolete. He's high-g, and will retool for something else.

But whether or not a certain job provides enough to raise a family depends entirely on the cost of raising families and the supply of labor for the job. It has nothing to do with what society thinks. That goes for medicine or any other job that a high-g man might retool for. If the cost of obtaining a wife and raising a family and the supply of labor for a certain job is increased, then it will be harder to have a family with that job, whether it's a high-g job or not. If there were a seriously sexist religion imposed on society and the social status of women were significantly lowered, then the cost of obtaining a wife and raising a family would plummet compared to what it is now. If the supply of labor were severely restricted, then the returns to labor would be higher for all jobs, high-g or not, and families would be more affordable accross the board.

Many food service industry workers have higher fertility than many people in other fields as a result of their lower costs for raising a family. They can raise a family with food service wages. The reason this issue is on the radar may be due to the fact that the employees are majority black and immigrant, but it's not due to them not being able to afford a family. They can afford families, moreso than many men with more prestigious, more highly compensated jobs.

Anonymous said...

These jobs were never meant for people trying to raise families; they were for teenagers, housewives earning grocery money and semi-retired seniors.

If teenagers, women, and seniors were banned from working, the supply of labor for these jobs would shrink, putting upward pressure on wages (assuming immigration restriction as well of course). Remember child labor used to be prevalent in the West. Child labor restrictions and compulsory education had the effect of shrinking the labor supply for industrial jobs and raising wages. With women banned from working, not only would there be higher wages from the smaller labor pool, but the real wage for obtaining a wife and family would be higher, since women would be cheaper to obtain. As a result of the higher labor costs, the franchise owners would shut down or put up with lower profits or sell the franchises, or work the franchises themselves or with their families, etc. If they wanted to make more money they would have to come up with better products and increase sales or use automation and tech to lower labor and operating costs. Then the people working in the fast food franchise would be working with more capital and have even higher wages. If the entire franchise were automated, then the only human "working" the fast food job at the franchise would be the franchise owner himself, and he would have a very high wage, with the entire automated franchise comprising the capital good he works with.

Gyan said...

Your conclusions are wise.
The entire matter is confused and made overly-complex by an insistence at not looking at nation/community as an entity in itself that can not be reduced to collections of individuals.

The other point is Is the modern economics based upon the rational pursuit of self-interest (following Adam Smith) or satisfaction of uneases (following Mises).

Pursuit of self-interest is a rational thing since a man must think where his self-interest lies. But satisfaction of uneases is non-rational.

The Anti-Gnostic said...

I think there's more of a covenant about these things in Germany: the employees promise not to break the bank, and the employers promise not to send everybody on a race to the bottom. Obviously, a country of diverse, atomized strangers will never have such a covenant.

IA said...

If race and culture are closely aligned, and I think they are when dealing with large populations, I suspect that in a few decades of mass importation of 3rd world people all of these problems concerning minimum wages, fairness, guilt and status marking will be solved for us, and that our descendents will look at this era as we today view courtly chivalry and christian relics of the saints.

Anonymous said...

New here. What is the meaning on high / low "g". Google didn't offer any definitions that seemed to fit the context.

Thanks,

The Anti-Gnostic said...

General intelligence.

SFG said...

Perish the thought, but seems like you've got a case for common cause with the left here...

Come on, the Chamber of Commerce and the ADL/ACT-UP/etc. have been screwing the people for years now...

The Anti-Gnostic said...

The Left despises economic populism, and lower class whites in particular.

It's all about identity politics now, and minorities are useful only insofar as a tool to bludgeon lower caste whites.

Remember "The Help?" That's all it was about: an upper caste white woman using black women to exact revenge on other white women.

The Left is engaged in deflection and patronage of the most despicable kinds.

SFG said...

"The Left despises economic populism, and lower class whites in particular."

I agree with everything you have stated, both here and in your link. I wonder if the Old/Alternative Right could take it up then? What's so wonderful about the free market anyway?

I see the ruling class as having pulled a very clever divide-and-conquer...

The Anti-Gnostic said...

The market is just the way things are, like physics and gravity. That does not preclude people forming collective entities to round off some of those sharp corners in life. One would posit that that's the whole point of a nation: you and your peeps in your geographic redoubt.

The US, a propositional nation, operates with less comity than even your typical shopping mall. Imagine a shopping mall where the landlord never stops signing up new tenants.