How Music Helps To Understand Economics - And Vice Versa

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On March 2, online publication MusicRadar covered a report released by the University of East Anglia detailing independent musicians’ dwindling incomes. The report stated two major factors are at play.

First, artists who belong to major labels have a distinct advantage over independent musicians when it comes to earning potential from streaming. Platforms like Spotify and Apple favor major labels for several reasons. The main reason is that major labels have a ton of money invested in streaming platforms. Naturally, companies are going to give perks to those who offer them the most capital. Hence, it’s no secret that major labels like Sony and Universal (two of the four major labels left) “own” streaming.

But there’s another reason for shrinking incomes that’s mentioned in the report. Artists receive measly earnings from streaming. Even major artists admit streaming doesn’t pay the bills.

So where does this leave independent artists sandwiched between an industry still held captive by gatekeepers, and products with earnings that don’t even begin to cover investments?

Despite the mystery and secrets of the industry, much of the confusion can be solved by understanding the sound laws of Austrian Economic Theory. For those artists who’ve never had any interest in picking up an economics book, now’s the time to get interested because free market economics is the single most important driver of your business. And whether you like it or not, whether you’re a musician, writer, or painter, you’re a business if you take in income.

Subjective Theory of Value

The Subjective Theory of Value comes from the father of Austrian Economics, Carl Menger, who stated that individuals value things at different prices at different times for all different kinds of reasons. This went directly against the Labor Theory of Value, a popular economic theory which states products should be priced according to labor put into them.

While subjective values are often talked about purely from the consumers’ point of view, it is important to understand this economic law plays just as important a role for an entrepreneur.

As business owners, musicians are constantly investing in their work. Studio time for recording, new instruments and equipment, and travel expenses are just a few goods and services musicians buy on a regular basis.

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