It may seem obvious that Taylor Swift “juiced the economy” during her two-year Eras world tour (Hannah Miao, “Billions in Cocktails and Friendship Bracelets: How Taylor Swift Juiced the Economy,” Wall Street Journal, December 8, 2024). But it is not. For example, the claim cannot be evaluated by simply counting how much money her fans paid in tickets, travel, outfits, etc., to attend her concerts.
Start with the question that Ms. Miao raises close to the end of her report but does not follow through:
There is debate among economists and analysts about how to measure Swift’s economic impact. Do her concerts just divert money that her fans would have spent elsewhere, or does she generate new activity?
Indeed, what her fans paid, they would have spent on something else—other shows or kinds of entertainment, vacations, household appliances or furniture, etc. (In the US, a ticket for an Eras concert reached more than $2,000 and sometimes much more.) The money could also have been saved, with means it would have served to finance investment somewhere in the economy. The objection that expenses related to Swift’s concerts produce “ripple effects” is voodoo economics: spending elsewhere would also produce “ripple effects,” if this expression has any meaning.
A more methodologically defendable estimate of Taylor Swift’s contribution to the economy would be their contribution to GDP. GDP is, by definition, the total production of the final goods at market prices, which is equal to total value added or, alternatively, the sum of all incomes. Only final goods to consumers are included in order to avoid double-counting—say, of the value of the wheat and the flour in the bread they serve to make. What’s important to understand is that the resources used to produce Swift’s concerts (the use of concert venues, the equipment, performers, sound engineers, other personnel, and so on, plus of course the singer’s time) would have otherwise been used to produce something else in the economy.
But to evaluate Taylor Swift’s (and her coproducers’) contribution to “the economy,” even a measure in terms of GDP is very imperfect. Her real contribution is the net benefits gained by the consumers. “Consumer surplus” is the technical term for this concept. It measures in dollars what the consumers gained from something they purchased over and above what they paid for it. The consumers who attended an Eras concert must have considered that it produced the highest consumer surplus that they could obtain with their money.
Besides the forbidding statistical problems of such measurements, there is a more basic problem: any dollar value of either GDP or consumer surplus is not sufficient to measure the “utility” of consumers. By utility, modern economic theory refers to a measure of how a consumer ranks different configurations of goods and situations in terms of his (or her, of course) own preferences. More money to purchase more goods and services will, ceteris paribus, increase one’s utility (and mutatis mutandis for less money), but money is not the only factor in satisfaction or happiness. Moreover, one dollar can give more utility to some individuals than to some other individuals.
One way to directly introduce utility in economic analysis is a model showing how individuals reach their “contract curves” by exchanging with each other. (Students of economics will see a general-equilibrium Edgeworth-Bowley box diagram pop up in their minds.) Most gains in utility come through exchange and trade: you work to, say, produce cars or write articles in order to buy a seat at a Taylor Swift concert; it’s like if you exchanged your piece of car or your articles with Ms. Swift and her organizers for their services.
Preferences and utility are subjective. They reside in the mind of each individual. As much as we can deduce that each party to an exchange gains utility from it (otherwise he would have declined the exchange), it is impossible, even conceptually, to aggregate utility across individuals to measure its net total increase or decrease. Economists speak of the impossibility of interpersonal utility comparisons. “The economy” is a set of individuals who interact to maximize their respective utility, not a bundle of physical objects. We cannot hope to calculate whether the resources employed for the Eras concerts would have produced more or less utility in some other allocation. We cannot hope to calculate a “net utility” figure that would tell us to which extent Taylor Swift brought a net contribution to the economy compared to the alternatives.
The impossibility of producing a precise number doesn’t matter because the same analytical tradition that leads to that conclusion also demonstrates a more general and useful proposition: an economic regime of free markets provides each individual (an individual randomly chosen, says Hayek) with the most opportunities to maximize each his utility through his acts of free exchange. Since some consumers do choose to attend Taylor Swift’s concerts instead of doing or buying something else, and bid up the price of tickets to make sure they get them (as opposed to those who chose to scalp their tickets), we can be sure that, to the extent the economy is free, the result is economically efficient.
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