BLOG: The Disease

There is a terrible disease out there, You're probably thinking, "This is about Ebola, right?" If I said yes, would you keep reading? It seems to work in the rest of the media. Even though more Americans have been killed by lightning so far this year, we've all decided to collectively panic over Ebola (unless you've just now decided to panic about lightning). So, given that, sure, I'll say this is about Ebola… Except that I would have to be a horrible, immoral, almost inhuman person to purposely gin up imaginary fears of a vanishingly rare disease for some sort of personal gain. So, no, not Ebola. I am speaking of an even worse illness: Baumol's Cost Disease. You're probably thinking, "Oh, my God! That sounds horrible! Do I have it?!" Let me be the first to assure you that, since you probably work in the arts, you almost certainly do. And I'm sorry. I'm so, so sorry, because this is an economic disease, and now that I have said that, I can sense your collective eyes glazing over. I have to do something to get your attention back, so… OH MY GOD, EVERYTHING YOU TOUCHED IN THE LAST 12 HOURS IS ENTIRELY COVERED WITH EBOLA!!! That oughtta get your attention. Seriously, about the economics: Last week over at the Clyde Fitch Report, performing arts management consultant Duncan Webb laid down some stone cold economic theory to knock you on your sorry butts and stirred up some debate in the process. If you didn't click on the link above describing Baumol's Cost Disease, let me break it down for you as succinctly as possible: one of the basic tenants of classic economics is that in a free market, the rise in wages in most industries is tied to increases in labor productivity. As a byproduct, this may also force a rise in wages for industries where there is little to no increase in labor productivity. If you run a company where you have to keep raising salaries, but cannot also get increased income from productivity, you eventually hit a wall where your prices have to rise much faster than inflation or you go out of business. The "disease" has been put forth as an explanation for the rapid rise in the cost of many industries, especially higher education and health care. You're bored, aren't you? OH MY GOD, EBOLA JUST LOOKED AT YOU FUNNY AND MAYBE MADE A LEWD GESTURE AT YOUR GIRLFRIEND! However, the book in which this theory was first put forth was titled Performing Arts - The Economic Dilemma. Yes, my artist friends, this disease was first diagnosed in you. Baumol's basic explanation was that it takes exactly as long today as it did in the 19th century to rehearse and perform a Beethoven string quartet, but today's professional musicians will certainly demand higher wages than they received 200 years ago. (If this last part is not true, I would like to hire a quartet to perform in my living room for a farthing). Hence, an ever-spiraling problem in which expenses (i.e. artist's wages) will increase faster than earned income (i.e. ticket sales). It may seem that the Cost Disease is inevitable fatal, but as Michael Rushton, a blogger for Arts Journal, points out in his rebuttal to Webb, plenty of industries that have had no significant increases in labor productivity (like hair stylists and restaurants) have not fallen into the Cost Disease spiral, because demand for their services has remained steady. And now you're getting bored again. THE CALL IS COMING FROM INSIDE THE HOUSE AND IT'S EBOLA AND IT'S STANDING RIGHT BEHIND YOU! Theater attendance has been declining in the US. According to the 2012 NEA Survey of Public Participation in the Arts, from 2009-2012, attendance at musicals dropped 9% and attendance at plays dropped 12%. So much for demand. TCG recently released their 2013 Theater Facts, which showed a whopping 40% increase in earned income among their "trend theaters", but this was only accompanied by a tiny 0.4% increase in attendance, which suggests that rather than increasing demand, theaters have settled on increasing prices. (It's certainly happened in the for-profit theater world.) And even when trying to paint a rosy picture of the regional theater system (which is, let's face it, TCG's main job), even they had to admit, "But there is still reason for anxiety." See, now you're just getting sad, which is slightly better than bored, but pales in comparison to being unreasonably terrified, so if I may… OH MY GOD, EBOLA IS RAMMING A CAR FILLED WITH GASOLINE AND FIREWORKS INTO THE BUILDING YOU ARE SITTING IN RIGHT NOW! But not everyone is doing badly. Disney is still milking Broadway for every penny it's worth, and at the complete other end of the spectrum community theaters are surviving rather well. (The Twin Cities's own Lakeshore Players are getting a spiffy new home in the near future.) Of course, the Disney model, with its never-ending supply of demand and its actual ability to wring productivity gains out of performance, and the community theater model, with no need to worry much about wage increases, can safely avoid Baumol's Cost Disease. For very different reasons, they are effectively immune. In between them, we've seen a few LORT houses close this year. The Prince Music Theater in Philadelphia just went under. Even nobly-intentioned projects like the August Wilson Center are barely being coaxed back to life. OK, now you're experiencing existential angst, the most insidious disease that you, the college-educated American who is most likely reading this column, will probably contract at some point in your life, so let me scare that out of you… OH MY GOD, EBOLA'S GOT A KNIFE. WHERE DID IT GET THAT KNIFE?! HOW IS IT HOLDING IT? IT'S A VIRUS! IT DOESN'T EVEN HAVE HANDS! THIS IS COMPLETELY PREPOSTEROUS, BUT IT'S TOTALLY GONNA CUT YOU, I SWEAR! My, we've experienced a range of emotions and illnesses today. Perhaps you need a little escapism in your life. Whatever you do, though, I don't recommend the Hunger Games "theatrical experience". As bad as your imaginary Ebola is, the world of Panem is an objectively terrible place to want to escape to. Of course, so is Medieval Europe, but that doesn't stop Renaissance Festivals. OK, I admit that I don't have a good way to wrap up News and Notes this week. You're probably starting to realize that I'm only using rhetorical parlor tricks and empty doomsaying to gain attention without actually doing any of the heavy intellectual lifting of offering solutions to real problems, to which I say EBOLA! AAAAAAAAAHH!