DR. JOHN SASE, ECONOMICS CONSULTING AND RESEARCH

Where in the developed world do people live the longest?

Where do people born at the bottom of the economic ladder have the best shot at climbing up?

In which nations do children do best in school?

Which countries send the most people to prison; have the teenage pregnancies and suffer the most homicides?

British epidemiologists Richard Wilkinson and Kate Pickett suggest that the answers indicate a society's overall health and the quality of life (The Spirit Level: Why Greater Equality Makes Societies Stronger, Bloomsbury Press, 2009, ISBN-10: 1608190366).

The authors assert that nations that do the best all turn out to share one basic trait. They all have less income and wealth inequality than their peer nations. Unfortunately, the United States ranks at or near the bottom of every indicator studied. On a state by state basis using the same methodology, the authors found that social well-being is higher in states with less income and wealth inequality.

Whether or not one agrees with their initial findings, the data deserves to be studied as we move forward in 2010 and address national legislation and finances in the areas of health, education, taxation, and crime prevention.

--Dr. John Sase

B Like many of the attorneys whom I serve, I have also been a musician/producer/engineer/indie label owner releasing esoterica since the 1960s. Though I have made a living with my music, I also developed my talents as an economist, earning a doctorate in that field. Therefore, I am commenting from this dual prospective.

The post-future is not really that different from the past. How and why folks obtain their music continues to reflect three related decision drivers. We can summarize these as 1. Content, 2. Durability, and 3. Time-Cost. Let me explain further.

1. Content When I started to record music in the early 1960s, the market was filled with "one-hit wonders." It was the age of AM (amplitude modulation) DJ radio. It was also the age of the 45 RPM record with the hit on the A Side and often some filler cut on the B Side. It was not uncommon for anyone with a 2-track reel-to-reel to "download" the one desired hit from their favorite radio station. There were few groups that offered entire 12" inch LPs with mostly great songs. The first LP that I purchased was "Meet the Beatles" by those four lads from Liverpool.

During the late 1960s, the industry turned more to "Greatest Hit" collections by groups that had a string of AM radio hits and to "concept" albums. During this golden age of LP sales, the Beatles, the Stones, the Grateful Dead, Yes, King Crimson, and numerous other groups released albums filled with solid content. Bottom line: consumers don't mind paying for product if they feel that they are receiving value.

2. Durability Why would someone buy a 12" LP when they could borrow a copy and tape record the songs to a reel-to-reel or, later on, a compact cassette? First, it was "cool" to have a good album collection, especially one that a member of the opposite gender could thumb through in one's dorm room. Let's just say that one's album collection could inform another party about one's tastes and possibly cultural personality. A good collection provided a certain degree of social currency.

The second part of the equation was the actual product durability. Like current downloads, self-recorded reel-to-reel and cassette tapes generally suffered from some loss of fidelity in the transition. More importantly, the integrity and permanence of the media also left something to be desired. Thirty to forty years ago, tape would flake, break, and tangle around the capston. Unless one backed up their collection to another tape, many of one's favorite tunes would be lost.

Today, hard drives crash. Without the expense of an additional hard drive and the time involved to make the transfer, the same issues ensue. What about CDs? As most of who use CD-Rs for multiple purposes, the technology that instantly burns an image leaves a product that is much more delicate and subject to damage in comparison to a commercially fabricated CD that was stamped from a metal master.

3. Time-Cost This third element is basically the old "time-is-money" economic argument and may explain why younger music-listeners are more likely to prefer to download songs either legally or illegally. It is the same economics that led listeners in the 1960s to record their favorite hits off of the radio. It has to do with how an individual values their time. If a music-lover is working for a low hourly wage or has no income at all, they will value the time spent downloading, backing up, and transferring cuts in terms of what they could be earning during the same time. Let's consider the following example.

Assuming that 12 downloads or a comparable CD costs $12, a baby-sitter earning $6 per hour could afford to spend as much as two hours of time ripping to achieve the same value. However, someone with a skilled trade or a college degree may be earning $24 per hour. Spending more than one half hour would exceed the value derived. The counter-argument of time cost of travelling to a brick-and-mortar store is offset by a person's ability to log-on to Amazon or elsewhere in less than a minute and possibly get free shipping. The market will always change as the primary market demographic ages. It happened with the Baby-Boomers of the 1960s and 1970s and it will happen with Generation X, Y and Z in the current century.

The bottom line of all of this is that a consumer will choose the mode of the deliverable that optimizes his/her bundle of values. This bundle includes quality and quantity of content, durability, and time-cost effectiveness. These are the lessons that musicmakers and music deliverers must understand to survive. The more things change, the more they stay the same.

--Dr. John Sase

Today, I reviewed a "snapshot" published by the Economic Policy Institute in September of 2009 (http://www.epi.org/economic_snapshots/entry/snapshot_20090909/).

There are currently about 8,000 small and medium sized banks in the United States. However, since sweeping changes in regulations took effect during the late 1990s, the concentration among the larger banks has increased.

In December 2002, the four largest U.S. banks--Bank of America Corp., JPMorgan Chase & Co, Citigroup Inc., and Wells Fargo & Co.--held 27% of all bank assets in the U.S. However, six-and-a-half years later in June of 2009, that percentage had risen to just under 50%.

Between June 2008 and June 2009--the year of TARP--Citigroup and Bank of America held steady at 9% and 13%, respectively. However, Wells Fargo more than doubled its assets from 4% to 9% of the industry total while Chase increased its share from 9% to 13%. Is this what Adam Smith had in mind when he wrote his book, "The Wealth of Nations" in 1776?

--John Sase

In this blog, I hope to discuss a number of issues in the wide field of Economics. Besides being a practicing Forensic Economist, I teach Urban Economics, Investment Market Economics, Economics for Managers, and various other courses on a regular basis.

Having done Economics on a professional basis for three decades, I am accustomed to answering a wide range of questions that visitors may have.

I respect and embrace a wide range of ideas from the far-right to the extreme left. However, I generally look at economics and politics with a centrist eye.

In addition, I have posted a number of Economic videos on YouTube that readers may enjoy and spur a dialogue.

--John Sase