Thursday, February 16, 2006
Superstars
The previous post on social influences in the music industry hints at something which seems to be occurring (or at least it is being noticed) more frequently. That is, many phenomena seem to follow a distribution with a very long upper tail. In the case of the music post, there were a few songs which grew more and more popular and then a bunch of songs which "never quite make it."
Given the lack of (or only small) differences in quality between those become superstars and those who languish in obscurity, is the distribution of outcomes "fair?" There is a certain tendency to think that people get what they deserve. We think that if someone becomes a superstar it must be because they somehow have greater talent or put in more effort. But what if this is not the case? Are we ok with a system in which many outcomes are determined by what are essentially big lotteries which pay randomly selected individuals huge sums and most others very little? A system where even though I am just as hot as Brad Pitt (and let's be honest I obviously am), he gets to be a treated as "royalty" while I am just, well, me? If yes, why? If not, why not and what should/can we do to fix it?
I don't know the answers to these questions, but I hope to explore them somewhat in this space. (Regardless, it is kind of interesting that the US has essentially created a system where we quasi-randomly select "royalty" -- which is essentially what celebrities are in the US in some bizarre sense. Perhaps even more bizarrely, instead of providing us "protection" or whatever, our "nobles" provide distraction -- largely in the form of gossip. This says something deeper about modern life, but I am not sure what.)
Anyhow, to start our examination of the upper tail, I recommend checking out this interesting paper by Ian Dew-Becker and Robert Gordon which looks at the growth of the long upper tail in the distribution of income between 1966 and 2001. It is all very interesting, but most relevant for us are the sections toward the end on micro evidence.
A few teaser findings:
Between 1966-2001, "of the total increase in real labor income of over 2.8 trillion dollars, less than 12 percent went to the bottom half of the income distribution. More of the income change accrued to the top one percent than the entire lower 50 percent, and more accrued to the top1/100 percent than to the entire lower 20 percent. The small share going to the bottom half reflects not just growing inequality of real hourly wages, but a smaller number of hours worked at the bottom."
Over 35 years, inflation-adjusted annual wages for those at the middle of the income distribution increased by a total of only 11 percent (from $23,667 to $26,251 for an average of 0.3 percent a year), but the annual wages for the top .01 percent increased by 617 percent (from $442,626 to $3,172,691 for an average of 5.63 percent a year).
Given the lack of (or only small) differences in quality between those become superstars and those who languish in obscurity, is the distribution of outcomes "fair?" There is a certain tendency to think that people get what they deserve. We think that if someone becomes a superstar it must be because they somehow have greater talent or put in more effort. But what if this is not the case? Are we ok with a system in which many outcomes are determined by what are essentially big lotteries which pay randomly selected individuals huge sums and most others very little? A system where even though I am just as hot as Brad Pitt (and let's be honest I obviously am), he gets to be a treated as "royalty" while I am just, well, me? If yes, why? If not, why not and what should/can we do to fix it?
I don't know the answers to these questions, but I hope to explore them somewhat in this space. (Regardless, it is kind of interesting that the US has essentially created a system where we quasi-randomly select "royalty" -- which is essentially what celebrities are in the US in some bizarre sense. Perhaps even more bizarrely, instead of providing us "protection" or whatever, our "nobles" provide distraction -- largely in the form of gossip. This says something deeper about modern life, but I am not sure what.)
Anyhow, to start our examination of the upper tail, I recommend checking out this interesting paper by Ian Dew-Becker and Robert Gordon which looks at the growth of the long upper tail in the distribution of income between 1966 and 2001. It is all very interesting, but most relevant for us are the sections toward the end on micro evidence.
A few teaser findings:
Between 1966-2001, "of the total increase in real labor income of over 2.8 trillion dollars, less than 12 percent went to the bottom half of the income distribution. More of the income change accrued to the top one percent than the entire lower 50 percent, and more accrued to the top1/100 percent than to the entire lower 20 percent. The small share going to the bottom half reflects not just growing inequality of real hourly wages, but a smaller number of hours worked at the bottom."
Over 35 years, inflation-adjusted annual wages for those at the middle of the income distribution increased by a total of only 11 percent (from $23,667 to $26,251 for an average of 0.3 percent a year), but the annual wages for the top .01 percent increased by 617 percent (from $442,626 to $3,172,691 for an average of 5.63 percent a year).
// posted by BW @ 9:17 PM 
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