Chapter 56: Superstars
Günther G. Schulze What makes a star a star? Why are Madonna, Luciano Pavarotti or Tom Cruise so immensely rich? The competitive model in its simple version tells us that people are remunerated according to their (marginal) productivity. This would imply that, given the enormous differences in income between the average writer or actor and, say, Stephen King or Sean Connery, there would have to be a huge gap between the talent of the stars and of those that come next but do not enjoy a star status. If you agree with me that Britney Spears’s talent is not hugely different from that of your local music club’s singer, there must be more to the superstar phenomenon than the simple competitive model would be able to portray. This is what we investigate in three steps. The next section presents theoretical arguments for the existence of superstars, the third section discusses the empirical evidence for the arts, and the last section points to selected further issues. Although the superstar phenomenon is not limited to the cultural sector – there are superstar law firms, doctors, managers, professors and of course athletes – the focus here is on superstars in the arts. Theoretical concepts In his seminal paper on ‘The Economics of Superstars’, Sherwin Rosen explains how small differences in talent translate into large differences in earnings. The underlying reason for that is the concurrence of imperfect substitutability of different qualities (of the otherwise ‘same’ service) on the demand side and a production technology...
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