Rockonomics

by Alan B Krueger

  In each of the four activities shown in Figure 11.1, listening to music while doing the activity is associated with greater reported happiness. Listening to music appears especially beneficial while working and having conversations.

  Across all activities of daily life in which music is not the main focus, the average happiness rating is 4.0, and across all activities in which listening to music is a secondary activity, the average happiness rating is 4.3. The difference amounts to almost one-fifth of a standard deviation of reported happiness ratings across all daily episodes.

  Not only is reported happiness higher, but negative emotions, such as feeling stressed or impatient, are less intense when music is playing in the background. Music can make you feel happier and chase the blues away.

  Figure 11.1: Average Happiness Rating (0–6 scale) During Activities with and Without Music

  Source: Author’s calculations from French-American survey conducted with the day reconstruction method. Whiskers indicate width of a 95 percent confidence interval.

  Two important statistical concerns must be addressed before reaching the conclusion that listening to music itself causes people to have better emotional experiences. First, it is possible that music is combined with activities that are generally highly enjoyable, such as parties or recreation. Although this is not an issue when looking at occurrences of, say, commuting, it could be a confounding factor when looking across all episodes. If one statistically controls for the main activity that took place during the episode, however, the results are hardly changed.7

  Second, and more important, it is possible that the subset of people who listen to music while engaging in other activities are just happier souls. For example, those who choose to listen to music while commuting may be happier, regardless of whether or not they are listening to music, than those who do not listen to music while commuting. Fortunately, with the data we collected, it is possible to compare the same person over separate episodes of the same activity that occurred during a day, some when she combined music with commuting and some when she did not, for example. Such a comparison indicates that personal differences account for less than half of the benefit that seems to accrue when music is listened to while other activities are taking place.8 Thus, listening to music during an activity seems to improve a person’s perception of her experience compared with her perception of other episodes of the same activity that occurred during the day without music.

  Similar results were found in a DRM study of 207 men and women conducted in Sweden by Daniel Västfjäll and co-authors.9 Positive emotions, such as feeling happy or joyful, were more common and more intense during musical episodes than during non-musical episodes. Subjects were also more likely to express higher degrees of arousal (e.g., feeling inspired or energized) during musical episodes. The Swedish researchers added a new wrinkle to the DRM: they asked participants to indicate their motives for listening to music. “The most common motives for listening to music among the participants were to get energized, to relax, to affect one’s emotions, to get some company and to pass the time,” they found. These findings suggest that people use music to help regulate their emotional states.

  Economists have long been skeptical that researchers can take at face value what people say about what makes them happy or sad. My profession prefers to infer people’s preferences from the choices they make, rather than rely on what they tell us about what they like or dislike. Although this predilection for “revealed preference” is slowly fading with the emergence of behavioral economics, there are good reasons to focus on objective data over subjective reports, when possible. In this regard, the fact that many people choose to devote a large amount of leisure and work time to listening to music is a strong indication that they find the experience satisfying, consistent with what psychological studies tell us.

  There is another reason to trust what people report about their emotions when listening to music: physiological studies establish that listening to music produces positive biological and neurological reactions, similar to those generated during other positive experiences. And, as I explain next, those physiological functions are also related to positive health outcomes.

  Good Vibrations

  An entire academic journal is dedicated to the psychology of music, and stacks of books have been written on music and health and well-being. Even a cursory survey of this literature reveals the many benefits of music for markers of health and well-being, such as on the level of stress hormones, and for health itself, including for patients suffering from neurological disorders.

  Marie Helsing, a researcher at the Karolinska Institute in Stockholm, and co-authors, for example, designed a field experiment to test the effect of listening to music on subjects’ levels of cortisol, a stress hormone.10 Participants were randomly assigned to either a treatment group (twenty-one women) or a control group (twenty women). The treatment group selected music that they liked to listen to, which was loaded on an MP3 player. In the first week of the experiment, both groups were instructed to relax for thirty minutes at home after work without listening to music. After a week, the treatment group was instructed to listen to music during their relaxation time each workday over the next two weeks, while the control group continued their protocol of relaxing for thirty minutes without music. The results indicated that salivary cortisol levels significantly declined after subjects listened to thirty minutes of music, compared with the control group. Self-reported stress also declined, further suggesting that responses to survey questions regarding emotional experiences related to music provide meaningful results. The authors concluded, “Together these results suggest that listening to preferred music may be a more effective way of reducing feelings of stress and cortisol levels and increasing positive emotions than relaxing without music.”

  A bevy of other research supports similar conclusions. Researchers Saoirse Finn and Daisy Fancourt conducted a thorough review of forty-four studies of the biological impact of listening to music, twenty-seven of which were based in clinical settings.11 Biomarkers included cortisol, immune function, and blood glucose as outcome measures. “Thirteen of 33 biomarkers tested were reported to change in response to listening to music,” they noted, and concluded that “the primary way by which music listening affects us biologically is via modulations of stress response. Effects were shown irrespective of genre, self-selection of the music, or duration of listening, although a majority did use classical music.”

  Music is increasingly being used in therapy for patients suffering from a range of disorders, as highlighted in the film Alive Inside. Although the underlying mechanisms by which music helps memory are still uncertain, accumulating evidence from case studies, clinical work, and a handful of experiments suggests that familiar music is salient and memorable for Alzheimer’s patients in ways that many other stimuli are not.12 A survey of the research literature by music therapy professors Blythe LaGasse and Michael Thaut concludes, “The vast amount of evidence from rehabilitation science has demonstrated that rhythmic stimuli can help to recover function in persons who have decreased functioning due to stroke, traumatic brain injury, spinal cord injury, Parkinson’s disease, and multiple sclerosis.”13

  Neuroimaging studies find that the medial prefrontal cortex, a region of the brain that supports retrieval of autobiographical information, is particularly active while people listen to music that was popular during their adolescent years. And there is further evidence that music heard during childhood and adolescence creates more salient or durable memories than music heard at other ages.14

  Interestingly, research on the listening choices of Spotify users by Seth Stephens-Davidowitz finds that people of all ages most frequently listen to music that was popular in their adolescent years.15 Consider the Radiohead song “Creep,” for example, which was released in 1993. In 2018, “Creep” was the 164th-most-streamed song among thirty-eight-
year-old men, who were fourteen years old when the song was released; it was not even in the top three hundred songs for men born ten years earlier or ten years later. Looking across all songs that topped the Billboard charts from 1960 to 2000, Stephens-Davidowitz finds that the “most important period for men in forming their adult tastes were the ages 13 to 16” and “for women…the ages 11 to 14.” Adolescence appears to be a particularly important time for forging our musical tastes and memories.

  The writer Harlan Coben reflected on the role of music in forging his identity while growing up in suburban New Jersey. “Inside, I was panicked about being directionless. My rebellion, mild as it seems, consisted of listening to bands like Steely Dan.”* He was particularly struck by “Deacon Blues.” “I heard it as a song about someone trapped in the suburbs trying to break free.” Later he became interested in writing, “and found my own way to break free.”

  I once asked Q Prime founders Cliff Burnstein and Peter Mensch why they regularly attend spring training for Major League Baseball. Peter answered, “We are trying to extend our adolescence.” Cliff added with a smile, “We are sort of in the business of extending adolescence.”16

  A Great Bargain

  Music is arguably one of the best bargains ever created. For listeners, music is a kind of elixir with seemingly magical properties: it improves unpleasant experiences and makes pleasant activities more enjoyable. Music can also help individuals regulate their moods. For society, music has the capability to unite people of disparate backgrounds, tear down walls, and rally people to support causes. Music is present at almost every major milestone in our lives: high school proms, weddings, funerals, birthdays, parades, sporting events, college reunions, and presidential inaugurations.

  For all of these benefits, Americans spend less money on recorded music in a typical year than they do on potato chips. The average consumer spends less than a dime a day on recorded music. Yet the average person spends three to four hours a day listening to music. Few activities absorb as much time as music yet provide as much pleasure. What’s more, the time we spend listening to music is up, while spending on music is down by 80 percent in real terms since 1999. A great deal has gotten even better!

  Live entertainment also offers fans a great bargain. Although the cost of attending live events by top performers has increased much faster than overall price inflation in recent decades, more people are attending concerts than ever, indicating that consumers still consider live entertainment a good bargain. And more stars than ever are touring.

  Seven Keys to Economics of Music

  The music industry is certain to change as new apps and business models are developed, fans’ tastes change, and entirely new genres and performers rise and fall. But the seven key economic lessons for understanding the music business are likely to endure and continue to be helpful for understanding developments in the industry.

  Supply, demand, and all that jazz of human desire for fair treatment and government policy relating to copyright and scalping, for example, will always play a central role in determining the direction of the music business. Although technology will enable further disintermediation, and provide new avenues for artists to create, market, and distribute their music, the music industry will likely continue to be dominated by a relatively small number of superstars given the scale of the market, the uniqueness of performers, and the role of networks in determining popularity. And luck, along with talent, will likely continue to play an outsized role in determining which superstars seize the momentum and break through in an ever more crowded market with many performers vying for an audience.

  Successful artists and businesses will continue to take advantage of complementary activities, such as live performances and selling merchandise, find ways to price-discriminate without offending fans in order to maximize revenue, and avoid incurring unnecessary costs. Music will always affect listeners’ moods, and scientists may find new and better ways of treating patients with musical therapy.

  A journalist in China recently asked me, “What does your book have to say about the latest hit app, TikTok?” To be honest, I had never heard of TikTok, a fast-growing social media platform for creating and sharing short videos, with five hundred million users. But I explained that a lesson of this book is that consumers demand quick and convenient service, which is why streaming platforms such as Apple, Amazon, and Spotify have been able to attract users from sites offering free pirated music, and that music is a social activity that spreads through networks. As the music industry evolves and new apps emerge, the lessons of rockonomics will help us to understand these exciting yet disruptive developments and place them in a broader context.

  Closing Time

  In his 1930 essay “Economic Possibilities for Our Grandchildren,” John Maynard Keynes posited that a hundred years hence, the main economic problem confronting people will be what to do with our leisure time:

  Thus for the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.17

  Most people are not nearly as free of pressing economic concerns as Keynes had envisioned, partly because of the rise in inequality in our increasingly winner-take-all economy, and that situation is unlikely to change in the next decade when we reach Keynes’s one-hundred-year marker. Still, Keynes’s forecast has merit. As Daniel Hamermesh has observed, “Our ability to purchase and enjoy goods and services has risen much more rapidly than the amount of time available for us to enjoy them.”18 Keynes anticipated that “it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.”

  Indeed, economic activity and consumer spending are increasingly dependent on experiences, entertainment, and culture. Research by the Nobel Prize winners Angus Deaton and Danny Kahneman finds that Ella Fitzgerald’s famous quote about being “rich is better” is only partly correct: higher income is associated with greater life satisfaction, but beyond a certain level—$75,000 of income a year in their estimation—additional income is unrelated to day-to-day emotional well-being. In their words, “High income buys life satisfaction but not happiness.” A wealth of psychological research finds that experiences, family and friendships, health, and personal values are what matter most for our well-being, not the amount of material goods that we purchase.19 For this reason, advice books commonly recommend that to improve our lives, we should spend money on memorable, enjoyable experiences, not on tangible goods.

  Music is a quintessential component of the experience economy. And while we can hope that we will someday soon face Keynes’s dilemma of figuring out what to do with excessive leisure time, listening to music will continue to be a significant element of how we improve our experiences both during leisure time and during work time. That is an essential element of rockonomics: music is almost uniquely situated to enhance experiences, reinforce memories, help people find purpose and meaning in their lives, and build sustainable communities. And enabling people to reach these goals is the ultimate purpose of the economy.

  Keynes closed his essay on the future by observing:

  The pace at which we can reach our destination of economic bliss will be governed by four things—our power to control population, our determination to avoid wars and civil dissensions, our willingness to entrust to science the direction of those matters which are properly the concern of science, and the rate of accumulation as fixed by the margin between our production and our consumption; of which the last will easily look after itself, given the first three.

  Meanwhile there will be no harm in making mild preparations for our destiny, in encouraging, and experimenting, in the arts of life as well as
the activities of purpose.

  But, chiefly, do not let us overestimate the importance of the economic problem, or sacrifice to its supposed necessities other matters of greater and more permanent significance. It should be a matter for specialists—like dentistry. If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!

  My dentist actually helps manage her son’s electronic music band, Space Jesus, in her spare time. There is even more to learn from dentists than Keynes anticipated! Rockonomics provides a splendid model for learning about the economy and life on the journey to economic bliss.

  * Harlen Coben, “Novelist Harlan Coben on Steely Dan,” Wall Street Journal, November 15, 2016.

  APPENDIX

  Evaluation of the Pollstar Boxoffice Database

  The Pollstar Boxoffice Database is used in Chapters 4 and 6 to describe trends in concert prices and revenue. The Pollstar data have a variety of commercial applications: they are used by the media (e.g., the Wall Street Journal and Forbes) to determine the size of the concert industry and celebrity earnings; by Pollstar to select bands for touring honors; by promoters to determine the likely number of tickets that could be sold for tours; and by merch sellers to determine a band’s potential for merchandise sales. Pollstar is considered the gold standard for data on concert attendance, revenue, and prices, but a number of music business insiders mentioned to me that Pollstar data are incomplete. Data quality should always be a concern, especially in the music industry, where there is a lack of transparency and where managers, promoters, and venues may have incentives to misreport data or fail to report altogether. (As a public company, however, Live Nation has a legal duty to report accurately.) This appendix assesses the coverage, accuracy, and reliability of the Pollstar data.*