JULY
2004

 

By
Larry DeBoer
 
Professor of
Agricultural Economics
Purdue University

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07-22-04

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Superstars and the Rest of Us


"Gracie, how's your brother?" George Burns would ask.
"Not so good," Gracie Allen would reply. "He broke his leg."
"He broke his leg?"
"Yes, he was ironing his pants and he fell off the ironing board."

Burns and Allen were a hit in the vaudeville theaters. In 1928, they signed a five-year contract with the Keith-Orpheum circuit for $600 a week. That's about $6,600 in today's dollars. They played the Palace on Broadway. Then ame radio.

Radio was great for Burns and Allen. Theirs was a talking act. Radio didn't work so well for the dancers, mimes or trained seals. In his memoir, "Gracie," Burns wrote that before radio, the only way to see a performer was to "see" a performer. With radio, people could stay home and be entertained. Radio killed vaudeville, Burns said.

But vaudeville died not just because a lot of acts didn't work on radio, and not just because it was easier and cheaper to stay home than go to the theater. Radio allowed Burns and Allen to compete with every comedian in America all at once. Burns and Allen were the best. The other comedians, even the good ones, couldn't match the superstars. Their audiences shrank, and so did their paychecks. But Burns and Allen got rich playing to audiences of millions. By 1932, they were earning up to $10,000 a week. That's almost $140,000 today.

It's a phenomenon that two economists named Frank and Cook wrote about in a book called "The Winner-Take All Society." Advances in communication technology allow the superstars to compete with everyone else all at once. The superstars get rich, and everyone else earns less. It may be one reason that the distribution of income has become less equal over the years.

Consumers do just fine, of course. They get to buy the products of the best in the business, for less money than they were paying for the merely good products they bought before. 

"Larry, how's your brother?"
"For a while there, not so good. For 20 years, he made a living as a commercial photographer. Then, the business went digital. Suddenly, a lot of the skills he'd learned in college were obsolete -- the chemistry of film developing, how to take pictures of ice cream under hot lights."

More than that, now people who needed photographs could search the digital Web sites of firms like Corbis, and buy really nice pictures cheaper than if they hired a photographer. "Those were the jobs I used to get," my brother told me.

Companies like Corbis compete with every commercial photographer in the world, all at once. The digital companies make a lot of money, the consumer gets a deal, and the small commercial photographers find other work. The winners take all.

"My brother's excited about his new job."
"He's got a new job?"
"Yes, he's a marketing manager for a Web site development company. If you can't beat 'em.."

My neighbor down the street is taking college courses at the University of Phoenix, over the Internet. She's never set foot in Arizona. She can live in her house, work at her job and earn a graduate degree. That makes taking courses online a lot cheaper than taking them on campus. The Internet lets the online university serve thousands of students who might otherwise take courses on campus. The online university gets the tuition dollars and the campuses don't.

I teach at Purdue, to students who (sometimes) show up in my classroom. If on-campus education goes the way of vaudeville and commercial photography, my job is in jeopardy. I can imagine a half-dozen superstar economics professors, each teaching 100,000 students every semester, getting rich off all that tuition money, while the rest of us see our class sizes shrink to nothing.

The state government is trying to figure out how to hold down the costs of college education. Maybe the market has already figured that out.

"That's it for the column. I've got things to do."
"You've got things to do?"
"Yes, I've got to put my economics course up on the Web, before some Harvard superstar puts me out of work."

 

 

 

Writer: Larry DeBoer
Editor: Olivia Maddox