How many of the bands you like have disappeared? I was at breakfast this morning and a U2 song started playing over the speakers. The song reminded me that I was once a big U2 fan, but I have not heard much from the band lately. The official U2 website confirmed what I had been thinking. They did a single for the new Nelson Mandela movie “Long Walk to Freedom” but other than this song, their official timeline (http://www.u2.com/timeline) stops in 2011. It can’t be that they are too old. Bono was born in 1960, making him in his early 50s, which is years away from when most people retire. Thinking about the disappearance made me realize that not just U2, but lots of bands hit the charts and then disappear long before their fans tire of their music.
Why do so many great bands disappear before their fans tire of them? I believe the economic idea called “backward bending labor supply curves” explains the situation perfectly.
Normally, most people believe that the more someone is paid the more they want to work. For example, if I offer you $10 per hour to mop floors, flip burgers or greet guests you will tell me how many hours you want to work. However, if I double the pay to $20 per hour, under normal circumstances, most people will want to work more hours and some people will work the same amount, but no one will say they want to work less.
The idea of a backward bending supply curve (see the picture below) says that people want to work more as pay rises up to a point. Once that point is reached, people have enough money and don’t need or want any more. From this point on increases in pay reduce the amount of work because it takes less time to earn the target amount.
Let’s assume you are a struggling rock star. Your fantasy goal is to earn $2 million dollars this year. Let’s assume you are currently doing 100 shows a year and earning $1,000 a show. You are well below your $2 million goal so if someone offers you $2,000 a show to do an extra 10 shows, you will jump at the chance.
Now, let’s assume you become popular and the promoter starts paying you $100,000 per show. If you do 100 shows you will be earning $10 million a year, which is far above your target amount. Instead, of doing 100 shows, you will likely cut back and do far fewer than 100.
In the first case, the increase in pay from $1,000 to $2,000 a show causes the musician to work harder, but, in the second case the increase in pay from $1,000 to $100,000 results in the musician working less because they can earn their target amount with fewer shows. Superstars can earn a lot of money from a single tour. This makes them prime candidates for cutting back their work so much they simply drop out of sight well before fans want them to retire.
Since professors get relatively low pay and few raises, I have not personally had the opportunity to see if I have a backward bending labor supply curve. What about you? If your pay was boosted a huge amount would you cut back working or work more?