Longing for the day ...

The irrational consumer

If music is the same as bread or bacon, why do some versions of a song sell better than others? Why do pieces of plastic with U2's songs sell better than pieces of plastic imprinted with the same songs played by my mates who jam with me on Thursday nights at Pete's place? Why can one recording induce intense romance, nostalgia or empathy while another recording of the same song induces nausea?

Conventional economics is based on the idea that producers, consumers, and market agents act rationally. That is, they take into account the likely costs and benefits of any given action and choose to do what's best for them.

However, this idea hits some walls when coming to terms with the fact that sometimes people's actions DON'T make financial sense. They sell things for less than they're worth, they work for nothing, they a more expensive brand that is of no better quality than a cheaper brand.

Economists try to account for this irrational behaviour by factoring in amounts for "goodwill", "reputation" and other terms to cover this lack of financial precision. But the reality is that some costs and benefits are simply not valued in dollars - not by individuals and not in an aggregated marketplace.

The late 20th-century music industry became dominated by numbers men and this accounted for the perception that much of the music that became popular was not very good. A record label with $1million to spend on one of 5 acts of similar music genre, age, and ability will choose the one that represents the lowest risk, not the one that produces the most interesting music.

But music is very different to most commodities. The more people wear a particular piece of clothing, the less that item of clothing is worth but the more people listen to a particular piece of music, the more it is worth.

Music is not a commodity and its value cannot be directly measured in dollars because its value is personal, social and cultural. These values can only be exchanged for money when they are attached to other things.

Summary:

Traditional economics cannot explain the inconsistencies of the commercial value of music. When music is traded, much more is exchanged than money and music.