An Exploration of the Beckerian Theory of Time Costs: Symphony Concert Demand

American Journal of Economics and Sociology, The, Oct, 1999 by Robert B. Ekelund, Jr., Shawn Ritenour

ABSTRACT. The passage of time has long been known to have economic effects. The most important effect in the arts has heretofore been the so-called "cost disease" whereby productivity in manufacturing and even service activities outstrips those in cultural pursuits, notably the performance arts. Naturally, a positive income effect on demand would tend to mitigate this supply effect. This paper posits yet another side to wage and income increases - the Beckerian notion that such increases also raise the opportunity cost of time, potentially adding to the effect of the "cost disease." The implications of this effect are discussed in this paper and a preliminary statistical test for significance is developed and conducted. The results support the economic significance suggested for the aggregate demand for symphony concerts.

I

Introduction

ANALYSIS OF PROBLEMS RELATED TO "CULTURE" is relatively new to economics and to economists. Founded by Baumol and Bowen in the mid-1960s (1965; 1966), the study of cultural economics now encompasses all aspects of art markets (broadly considered). It is headlined in many major economic journals (e.g., Pesando 1993) and by a journal devoted solely to these issues (the Journal of Cultural Economics). From studies of art auction markets (Galenson 1997; Ekelund, Ressler, and Watson 1998), to those relating to art as investment (Frey and Eichenberger 1995), to an analysis of Picasso's genre price history (Czujack 1997), the field's range grows apace.

From the beginning, a problem relating to the passage and value of time has seized the interest of economists dealing with the progress of "culture." The problem, first noted by Baumol and Bowen and later developed by Baumol alone (1973), is that many cultural goods such as symphonies and other performing arts are very likely caught in a two-way squeeze with respect to time. On the supply side, the particular kind of production function found generally in the performing arts creates a "cost squeeze." Unlike the production of a McDonald's "Happy Meal," a Schubert or a Shastakovich string quartet (or a Brahms symphony) will always require four string players (an 85-piece orchestra), no more, no less. This sort of quasi-fixed proportion production function employed with a relatively fixed tempi for particular pieces means that "productivity" cannot rise by, for example, playing the piece faster or with fewer instruments. [1] For orchestral performances, however, Baumol's disease is, in the limit, inescapable. M usical groups can play more smaller scale pieces from the Baroque and Classical periods and fewer symphonies by Bruckner, Wagner, and Mahler, but the orchestra size necessary for the standard repertoire from the seventeenth century can be only so small. [2] Once the reduction is made, no further cost decreases can be made if the organization wants to continue to perform orchestral music. It is also important to note, as Baumol and Bowen did in their initial discussion (1965: 500), that any productivity increases in arts performances would have to be continuous, an unlikely prospect for most of the industry. The unhappy bottom line of the "cost disease" is a so-called situation of unbalanced growth with general productivity increases in the economy at large exceeding incomes in the performing arts. [3]

Naturally, the fate of the performing arts depends on both demand and supply conditions. A demand effect may be expected as income increases through time and as other factors also affect demand. [4] But if the demand for performances is income-elastic, as many argue, demand increases may match or exceed the size of the supply decreases expected through time, yielding a stable or growing performing arts sector. The impact of income on demand is complex. Other things being equal and assuming the services of the performing arts are a normal good, an increase in income or wages will produce demand increases. But, as Becker has argued (1965; 1981), rising incomes also mean that as the opportunity cost of leisure time increases, time- intensive activities of consumers will become more costly, reducing the demand for those activities. Presumably, consumers will substitute less time-intensive methods of consumption in order to satisfy utility-producing demands. [5] That substitution will involve both leisure commodi ties (music appreciation, sports, health, and the like) and all other types. Thus, in addition to the traditional "income effect" of income growth, a rise in wages or incomes raises the value of time in the consumption patterns of individuals and families.

The purpose of this paper -- unique to the best of our knowledge -- is to examine the possibility of whether there is a negative effect on the demand for symphony concerts from a rising opportunity cost of time. Our analysis --admittedly exploratory -- is Beckerian in character and we regard it as a potentially important application of that theory for symphonic performances and cultural goods generally. Our focus is on a potential theoretical approach to the issue, but we also conduct a preliminary empirical test. Certain simplifications are necessary for the latter. In particular, the opportunity cost of time is commonly measured in terms of a real hourly wage rate and, despite some caveats, it is the one used in this study. [6] We employ a simple demand model, which includes less time-intensive alternatives, and income as well as the opportunity cost variable. Our results broadly support the hypothesis that the performing arts are likely being squeezed from two different directions.