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Home Publications Blogs Beat the Press The Superstar Effect: It Ain't Just Technology

The Superstar Effect: It Ain't Just Technology

Sunday, 26 December 2010 05:06

The NYT has a lengthy piece that notes the sharp rise in inequality in the last three decades due to the "superstar effect." This is attributed in part to the fact that technology allows a top athlete or entertainer to be seen by far more people in 2010 than in 1960.

It is important to recognize that it was not technology alone that allowed superstars to profit from this change. The U.S. government has gone to great lengths to strengthen the reach and enforcement of copyright law, in many cases leading to serious restrictions on individual behavior. For example, it was briefly illegal to sell digital recorders because they were not encoded to protect copyrighted material.

This fact it is important because it means that policy decisions, not just technology, was central to the rise in inequality. This is also the case with the soaring pay of top corporate executives. This is attributed to their growing responsibilities as the size of the largest corporations increases. However, companies in Europe and Japan expanded as well without a corresponding increase in CEO pay. This suggests that the difference in compensation is more likely attributable to differences in laws and norms surrounding corporate governance than any increase in the value of effective leadership to corporate profitability.

Comments (15)Add Comment
Superstars Earn What They're Worth Over Second Best Socialists, Low-rated comment [Show]
Moving Forward -- Together or Not At All
written by Ron Alley, December 26, 2010 8:14
The role of regulation is better understood in looking at the role of regulation in labor. Beginning in the 1950's with the Department of Labor's emphasis on Taft-Hartley and protecting (rather than eroding) the "right-to-work" laws of southern states, the tide of inequality began a sixty-year flood. At first the power of unions in auto and steel industries resulted in the unionization of auto plants and steel mills in the souther states from Atlanta to Dallas. Those union jobs helped to bring up wages in non-union shops. That ended when the federal government decided to pursue a policy of trade agreements that facilitated labor arbitrage and extended the reach of intellectual property rights. The emphasis of the trade negotiations was to grant China a virtual monopoly on manufacturing.

The logical result was the surge in the role of financial services.
written by fuller schmidt, December 26, 2010 8:21
Our CEOs also have American exceptiomalism conferred by the God of Pat Robertson and Gary Bauer going for them. He clearly is better and stronger than Those of Europe, Israel and Japan, where CEOs make 1/10th of here.
Why do superstars make so much money?
written by Brett, December 26, 2010 9:56
The New Yorker had a great piece not too long ago about Marvin Miller -- the main guy responsible for unionizing Major League baseball players and getting them to work together to demand higher pay and better benefits. His simple understanding was that a sports star is not an easily replaceable labor figure. You can replace a guy working an assembly line job pretty easily, but you can't replace Catfish Hunter or Bob Gibson very easily -- that is if you want to continue drawing large crowds and winning baseball games. So he worked tirelessly to unionize the players and fight the owners and completely turned the power structure in the business on it's head to wear the players call the shots now.

In general, unions have been beaten and bashed constantly by conservative forces over the last 30 years, but the unions that are set up for superstar talent have thrived such as the NFL Players League Association, Major League Baseball Players Association, and the Screen Actors Guild for a few examples. I'm guessing because both conservatives and liberals find what sports stars and actors do is valuable that they never pursued economic policies that would have trampled on those particular unions.

..., Low-rated comment [Show]
A very stupid NYT Article
written by Regular Reader, December 26, 2010 10:17
That was a terrible article. I noticed also that the author doesn't mention the increase in real wages after WWII for the next several decades. The NYT piece was an apology for the super rich, and attempt to obfuscate the origins of inequality while also making inequality natural and inevitable. Check out the line, "Ultimately, the question is this: How much inequality is necessary?"

Ultimately the question is this: Exactly how dimwitted is Eduardo Porter, and how did he become such a pathetic sycophant to rich people?
written by izzatzo, December 26, 2010 11:07
Professional sports is a big commie lie. Rush Limbaugh already proved for example that the so called competitive sport of baseball is socialism because teams share revenue.

If they didn't and the same ones kept winning, there would be only one team left to pay it's superstars their true marginal productivity as they play against themselves before the largest possible crowds and revenue stream under true free market, winner take all capitalism.

If two or more teams were allowed to play against each other, this would interfere to suppress the vibrant competition necessary to attract superstars in the first place by diluting their marginal revenue product below it's true stand-alone value.
written by vorpal, December 26, 2010 11:09
I think the Wikileaks cables reveal that the purpose of the federal government is to further enrich the rich.

Evidently, the federal government is an effective bureaucracy.
by a curious inversion of logic.
written by diesel, December 26, 2010 12:25
If "Pelé was not held back by the quality of his game" and " He might be the greatest of all time", and "By contrast...Ronaldo is not better then Pelé" but "He makes more money because his talent is broadcast to more people", then this would seem to disprove the notion that disproportionate salaries acts as either a stimulant to or reward for superior performance.
written by urban legend, December 26, 2010 5:43
The blinkered naivete of people like K Williams is astounding. Nothing can shake their religious faith in the free market. Scratch the surface, examine the operation of management-friendly corporate law, with no organized interest group to object, and you will find that the most extravagant CEO pay is a sophisticated form of theft.
written by Randy, December 27, 2010 8:36
"The Winner Take All Society" by Phil Cook and Bob Frank offered a terrific exploration of this topic in 1996. The tendency has only increased since then.
written by Calgacus, December 27, 2010 3:01
Worse than K Williams naiveté is his logic: No reason? - You look at some data, see dozens of points bunched up in one area (Euro/Jap exec pay), but there is one way off in left field (US exec pay). Then you call the big bunch outliers and say the lonely point is just as likely to be the "true value". Yeah, right.
But Calgacus...
written by diesel, December 27, 2010 3:49
you miss the point of his argument. We are exceptional. Who wants to be average? And the fact that our executives are so handsomely rewarded proves that they are exceptional. Because the markets don't tolerate inefficiencies.

If it appears as though European and Japanese companies are successful, then it is in spite of their fumbling management. Meanwhile, our guys, the creative outliers (as you say) are out there pushing the envelope, churning up new possibilities, turning over the fertile soil of capitalism by composting the archaic, the anachronistic, the losers in the battle for sunlight and lebensraum. We (that is our execs) are the Master Race. Now, get on board, buckle up and get ready for a great ride. Remember, it's not the uphills that provide the thrills, but the downhills, and the steeper the plummet, the greater the rush.
gucci outlet
written by gucci outlet, December 30, 2010 3:58
vibram five fingersbut the downhills, and the steeper the plummet, the greater the rush
Explaining Economic Phenomena
written by Hugh Sansom, December 31, 2010 8:38
Dean Baker's comments here (and many of his comments on this site) point to an extremely important issue in economics and political science (or 'science').

A key test of scientific explanations is predictive power. If phenomena arise which should be explained by a given theory are, in fact, not explained then at the very least questions should arise about the theory.

But this is manifestly not the case in economics or political economy. Conservatives and moderates offer an explanation for monstrously high corporate pay scales in the US. If true, then comparably pay should be seen in foreign companies of comparable size. This predicted outcome fails to obtain. The theory fails. But economists in the US and other anglophone nations adhere to the theory -- or, more accurately, dogma. What is being practiced in economics is not science, but religion, the religion of wealth and the divine right of wealth.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.