19 January 2015
As I was driving to work today I was treated to the dulcet tones of Peter Garrett’s radio voice as a guest on Triple J – the ABC’s “youth-oriented” radio station. Aside from musing about how much better I like the former contortionist and Midnight Oil front man now that he is no longer a political contortionist (also known as a federal minister – apologies to Mr Garrett, being an Australian I have an instinctive, possibly pathological, definitely worrying prejudice against politicians), I also got thinking about what economics has to say about the quirky little offshoot of Australia’s much loved “Auntie”.
For those who don’t know, the station is a little as if the pirate radio stations in the North Sea during the 1960s had been run by the BBC, funded and sanctioned by the British government. It is deliberately designed with the teenage-to-late-30s demographic in mind and seeks out artists who wouldn’t be in the mainstream of the music industry. The music is almost always that which would be classed as “alternative” – at least until it’s picked up by a major station. The artists are often Australians, Kiwis, and Brits, and less often American than one would expect. It is not uncommon for the guest artists of the station to be doing interviews on their day off work – jobs they hold to survive whilst playing the underground music scene in Australia’s capital and major cities.
The station does not host advertisements, and would be unlikely to attract them anyway if it did, given the size and demographic makeup of its listener base compared to other major radio stations. It does host ABC-quality news and current affairs programs (such as Hack) of a quality rarely available to the bulk of Australians, let alone the listeners of Triple J (who, often being the disaffected youth of our age, are probably the most likely to need its information). With this profile, in the modern commercialised age, the station would not survive on a commercial basis. So why have it? Why should the government continue to take the taxes of everyone to provide a service for the few?
It can be difficult to rationalise the ongoing support of the Australian government for Triple J using standard economic analysis, in which markets are made up of perfectly informed individuals with computational skills that would make your typical Australian blush (and then reach for their tall poppy clipper). As my teacher’s teacher Frank Hahn used to say “we’ll pretend that people know exactly what they want and exactly how to get it”. If everyone knows exactly what they want and exactly how to get it, the justification for Triple J’s basis must rest on market failures – deviations from the perfect competition model.
One failure Triple J might remedy is a lack of information – people don’t know exactly what they want, or exactly how to get it, so Triple J needs to make this information available. This argument is a little weak, given that Triple J has a niche position in the market, such that we would be able to make the case that the vast bulk of the market finds this information not particularly valuable. At least, not to the extent it is economically worthwhile to make the whole population pay for the improvement of information with their taxes.
A second argument is a much stronger, if rather vague one, about “externalities”. Triple J could be argued to have a “positive externality” – a benefit which does not accrue directly to the listeners of Triple J, but rather “spills over” to the rest of the economy – for instance, by supporting a “creative” environment for entrepreneurs in the music and other industries. This argument for Triple J’s existence is a stronger one than remedying information problems, but it is notoriously difficult to identify and measure these benefits using standard economic analysis.
I would offer another rationalisation for the ongoing support of Triple J from evolutionary economics, one which supports the standard economic analysis of Triple J as a source of positive externalities. The existence of Triple J in the Australian music industry generates variety without which the market would not have as high a quality provided to consumers as it does.
Evolutionary economics sees the market economy as an evolutionary system similar, but not identical, to an evolutionary biological system [1]. A market system, of which the music industry is one, consists of ordinary (neither rational nor irrational) human beings within production organisations (bands) trying to compete for the custom of consumers (listeners, via radio stations and album sales).
All evolutionary systems are characterised by the same three step process. In the first stage, a variety of “selection units” (genetic characteristics in biological systems, different products in a market system) is generated, before that variety is subjected to “selection” (by natural selection in biological systems, by consumer choice in market systems), and from this process emerges a set of “retained” selection units (genes which survive in biological systems, products which continue to be sold in market systems). The improvement of “fitness” in the market system comes from the selection by the system amongst the variety of different goods and services (songs in the music industry), some of which are deemed of better quality than others by consumers.
Without variety, the market cannot act to improve quality, and the more variety generated within the market, the better (with some caveats) the overall average quality within the market will be. This is actually a mathematical fact [2], which holds true of all evolutionary systems, including economic systems [3]. In general, the greater the variety within an evolutionary system, the greater will be the rate of increase in its average “fitness”, or quality. The greater the variety generated within a market system therefore, the greater will be the quality of the alternatives on offer to the customers. Many products for consumption, including artistic products, will fail to be selected, and their producers will not succeed, but without the competitive pressure generated by their existence in the first place, we would not have a basis for selection of the highest quality anyway. In evolutionary systems, it is a mathematical fact that strength comes through diversity.
What differentiates the economic system that is the music industry from a biological one is also that the generation of variety in an economic system is purposeful [4], where in biology it is taken to be random [5] or at least well beyond human control. We can ourselves choose to generate variety which helps to drive the evolutionary process. This is why there is a solid economic case for the government’s ongoing support of Triple J.
Triple J acts as a generator of variety for the music market in a manner in which commercial stations simply cannot. Commercial stations, for perfectly legitimate reasons, must be driven by the profit motive. They need advertisers to pay for airtime, which requires that they have a significant listener base, which requires that they play music they understand to be popular to a broad audience. This naturally limits what they can air, and indeed, means they will in all likelihood offers very similar listening to each other (this is very similar to the median voter theorem in economics). They literally cannot afford to air a wide variety of “alternative” music. Triple J, being funded by the government has no such concerns, and is in fact mandated, in effect if not in law, to seek out alternative, and particularly Australian content, and has a forty year history of doing so.
If it were not for Triple J expanding the variety of material in the market, we would find that the overall average quality in the market for music would be lowered, as dictated by evolutionary mathematics. Being unencumbered by commercial concerns, Triple J serves an economic purpose by bringing to the market music which people would otherwise not have known they enjoyed, and which would have been too alternative, and, Catch-22 like, unestablished for a commercial station to take a risk on bringing to the market first.
This means not only that it by itself will provide greater variety, and hence enhance the quality of the overall market, it means that the commercial stations also have a source for new artistic material which they would not otherwise have. It will often be the case that one will hear an artist on Triple J, and a few months later the same artist will be given some airtime on commercial stations, at which point they can become quite successful commercially as well as artistically. I seem to remember that the New Zealand born artist Lorde was noticed by Triple J after filling in at a festival in Australia the station had been covering. Her music, spare and trancelike with more or less only percussion, a bass and vocals is quite unlike anything else in the music industry, certainly the mainstream thereof, and one could make the case it would not have become so well-known had not Triple J been able to establish her music in the market relatively unencumbered by concerns about appealing to a broad segment of the population.
Of course, much of the material aired on Triple J will not become commercially viable, but this is simply a manifestation of the selection processes of the market. What does survive in the market place due to Triple J will enhance the overall quality of the offerings of the music industry.
This is one source of the externalities of the radio station, upon which standard economics builds its strongest case for government intervention in the music industry. Triple J and its listeners do not acquire all the benefit of their activities, some of it spills over into the commercial sphere when the commercial stations pick up an artist who is actually appealing to a broad cross-section of society, but would have been a risky proposition to give airtime to. But also, by providing a variety of music free to air which is alternative, cutting edge, pushing the boundaries and all of these too much so for airing on a commercial station, Triple J provides a platform whereby artists (not always individuals with the greatest access to material resources) can access and influence each other. The station in this manner provides a platform where the variety of miners at the coalface of music can be made available to the public, and learn new ways of advancing along and exploring their own vein.
Triple J is a (comparatively) very cheap [6], somewhat unusual and quite successful example what evolutionary economists call a “national innovation system”. National innovation systems typically involve large scale schemes for providing financial backing to many small projects which would be unable to obtain finance from responsible banks in spite of their promise and potential importance. Often these projects will go on to constitute significant advances in the quality and function of items produced by an economic system, as the mathematics of evolutionary markets dictates. Mariana Mazzucato (2011) has provided a wealth of examples where national innovation systems provided financial means for innovators to obtain the critical mass necessary for many innovations which simply would not have got funding otherwise - such as almost all technology within the iPhone. In the Australian music industry, all Triple J needs to do the same is to give airtime to some songs, at the cost of the wages of the people who run the station, the cost of broadcasting equipment, and the other incidental costs of operating a radio station. It is an excellent example of just how little the government need to intervene in the market sometimes to create a significantly improved market outcome, while leaving the positive aspects of the market process more or less unaltered.
So, on this the 40th anniversary of the foundation of Auntie’s eclectic offshoot, we can reflect once again that Australia is the “lucky country”. I am no expert on Australian political history, but the Whitlam Labor government likely instituted Triple J (Double J as it was then known) in 1974 for reasons other than promoting the generation of variety for evolutionary market processes to create a higher quality market. Much more likely, it was part of the Whitlam government’s vision for a more progressive Australia, to differentiate it in the eyes of the youth from the staid, conservative Menzies era government by reaching out to them with their music. But in trying to give the youth the music their parents disapproved of, the government also (probably inadvertently) instituted one of the most important institutions for the health and strength of the music industry in Australia.
Three cheers for Triple J.
As I was driving to work today I was treated to the dulcet tones of Peter Garrett’s radio voice as a guest on Triple J – the ABC’s “youth-oriented” radio station. Aside from musing about how much better I like the former contortionist and Midnight Oil front man now that he is no longer a political contortionist (also known as a federal minister – apologies to Mr Garrett, being an Australian I have an instinctive, possibly pathological, definitely worrying prejudice against politicians), I also got thinking about what economics has to say about the quirky little offshoot of Australia’s much loved “Auntie”.
For those who don’t know, the station is a little as if the pirate radio stations in the North Sea during the 1960s had been run by the BBC, funded and sanctioned by the British government. It is deliberately designed with the teenage-to-late-30s demographic in mind and seeks out artists who wouldn’t be in the mainstream of the music industry. The music is almost always that which would be classed as “alternative” – at least until it’s picked up by a major station. The artists are often Australians, Kiwis, and Brits, and less often American than one would expect. It is not uncommon for the guest artists of the station to be doing interviews on their day off work – jobs they hold to survive whilst playing the underground music scene in Australia’s capital and major cities.
The station does not host advertisements, and would be unlikely to attract them anyway if it did, given the size and demographic makeup of its listener base compared to other major radio stations. It does host ABC-quality news and current affairs programs (such as Hack) of a quality rarely available to the bulk of Australians, let alone the listeners of Triple J (who, often being the disaffected youth of our age, are probably the most likely to need its information). With this profile, in the modern commercialised age, the station would not survive on a commercial basis. So why have it? Why should the government continue to take the taxes of everyone to provide a service for the few?
It can be difficult to rationalise the ongoing support of the Australian government for Triple J using standard economic analysis, in which markets are made up of perfectly informed individuals with computational skills that would make your typical Australian blush (and then reach for their tall poppy clipper). As my teacher’s teacher Frank Hahn used to say “we’ll pretend that people know exactly what they want and exactly how to get it”. If everyone knows exactly what they want and exactly how to get it, the justification for Triple J’s basis must rest on market failures – deviations from the perfect competition model.
One failure Triple J might remedy is a lack of information – people don’t know exactly what they want, or exactly how to get it, so Triple J needs to make this information available. This argument is a little weak, given that Triple J has a niche position in the market, such that we would be able to make the case that the vast bulk of the market finds this information not particularly valuable. At least, not to the extent it is economically worthwhile to make the whole population pay for the improvement of information with their taxes.
A second argument is a much stronger, if rather vague one, about “externalities”. Triple J could be argued to have a “positive externality” – a benefit which does not accrue directly to the listeners of Triple J, but rather “spills over” to the rest of the economy – for instance, by supporting a “creative” environment for entrepreneurs in the music and other industries. This argument for Triple J’s existence is a stronger one than remedying information problems, but it is notoriously difficult to identify and measure these benefits using standard economic analysis.
I would offer another rationalisation for the ongoing support of Triple J from evolutionary economics, one which supports the standard economic analysis of Triple J as a source of positive externalities. The existence of Triple J in the Australian music industry generates variety without which the market would not have as high a quality provided to consumers as it does.
Evolutionary economics sees the market economy as an evolutionary system similar, but not identical, to an evolutionary biological system [1]. A market system, of which the music industry is one, consists of ordinary (neither rational nor irrational) human beings within production organisations (bands) trying to compete for the custom of consumers (listeners, via radio stations and album sales).
All evolutionary systems are characterised by the same three step process. In the first stage, a variety of “selection units” (genetic characteristics in biological systems, different products in a market system) is generated, before that variety is subjected to “selection” (by natural selection in biological systems, by consumer choice in market systems), and from this process emerges a set of “retained” selection units (genes which survive in biological systems, products which continue to be sold in market systems). The improvement of “fitness” in the market system comes from the selection by the system amongst the variety of different goods and services (songs in the music industry), some of which are deemed of better quality than others by consumers.
Without variety, the market cannot act to improve quality, and the more variety generated within the market, the better (with some caveats) the overall average quality within the market will be. This is actually a mathematical fact [2], which holds true of all evolutionary systems, including economic systems [3]. In general, the greater the variety within an evolutionary system, the greater will be the rate of increase in its average “fitness”, or quality. The greater the variety generated within a market system therefore, the greater will be the quality of the alternatives on offer to the customers. Many products for consumption, including artistic products, will fail to be selected, and their producers will not succeed, but without the competitive pressure generated by their existence in the first place, we would not have a basis for selection of the highest quality anyway. In evolutionary systems, it is a mathematical fact that strength comes through diversity.
What differentiates the economic system that is the music industry from a biological one is also that the generation of variety in an economic system is purposeful [4], where in biology it is taken to be random [5] or at least well beyond human control. We can ourselves choose to generate variety which helps to drive the evolutionary process. This is why there is a solid economic case for the government’s ongoing support of Triple J.
Triple J acts as a generator of variety for the music market in a manner in which commercial stations simply cannot. Commercial stations, for perfectly legitimate reasons, must be driven by the profit motive. They need advertisers to pay for airtime, which requires that they have a significant listener base, which requires that they play music they understand to be popular to a broad audience. This naturally limits what they can air, and indeed, means they will in all likelihood offers very similar listening to each other (this is very similar to the median voter theorem in economics). They literally cannot afford to air a wide variety of “alternative” music. Triple J, being funded by the government has no such concerns, and is in fact mandated, in effect if not in law, to seek out alternative, and particularly Australian content, and has a forty year history of doing so.
If it were not for Triple J expanding the variety of material in the market, we would find that the overall average quality in the market for music would be lowered, as dictated by evolutionary mathematics. Being unencumbered by commercial concerns, Triple J serves an economic purpose by bringing to the market music which people would otherwise not have known they enjoyed, and which would have been too alternative, and, Catch-22 like, unestablished for a commercial station to take a risk on bringing to the market first.
This means not only that it by itself will provide greater variety, and hence enhance the quality of the overall market, it means that the commercial stations also have a source for new artistic material which they would not otherwise have. It will often be the case that one will hear an artist on Triple J, and a few months later the same artist will be given some airtime on commercial stations, at which point they can become quite successful commercially as well as artistically. I seem to remember that the New Zealand born artist Lorde was noticed by Triple J after filling in at a festival in Australia the station had been covering. Her music, spare and trancelike with more or less only percussion, a bass and vocals is quite unlike anything else in the music industry, certainly the mainstream thereof, and one could make the case it would not have become so well-known had not Triple J been able to establish her music in the market relatively unencumbered by concerns about appealing to a broad segment of the population.
Of course, much of the material aired on Triple J will not become commercially viable, but this is simply a manifestation of the selection processes of the market. What does survive in the market place due to Triple J will enhance the overall quality of the offerings of the music industry.
This is one source of the externalities of the radio station, upon which standard economics builds its strongest case for government intervention in the music industry. Triple J and its listeners do not acquire all the benefit of their activities, some of it spills over into the commercial sphere when the commercial stations pick up an artist who is actually appealing to a broad cross-section of society, but would have been a risky proposition to give airtime to. But also, by providing a variety of music free to air which is alternative, cutting edge, pushing the boundaries and all of these too much so for airing on a commercial station, Triple J provides a platform whereby artists (not always individuals with the greatest access to material resources) can access and influence each other. The station in this manner provides a platform where the variety of miners at the coalface of music can be made available to the public, and learn new ways of advancing along and exploring their own vein.
Triple J is a (comparatively) very cheap [6], somewhat unusual and quite successful example what evolutionary economists call a “national innovation system”. National innovation systems typically involve large scale schemes for providing financial backing to many small projects which would be unable to obtain finance from responsible banks in spite of their promise and potential importance. Often these projects will go on to constitute significant advances in the quality and function of items produced by an economic system, as the mathematics of evolutionary markets dictates. Mariana Mazzucato (2011) has provided a wealth of examples where national innovation systems provided financial means for innovators to obtain the critical mass necessary for many innovations which simply would not have got funding otherwise - such as almost all technology within the iPhone. In the Australian music industry, all Triple J needs to do the same is to give airtime to some songs, at the cost of the wages of the people who run the station, the cost of broadcasting equipment, and the other incidental costs of operating a radio station. It is an excellent example of just how little the government need to intervene in the market sometimes to create a significantly improved market outcome, while leaving the positive aspects of the market process more or less unaltered.
So, on this the 40th anniversary of the foundation of Auntie’s eclectic offshoot, we can reflect once again that Australia is the “lucky country”. I am no expert on Australian political history, but the Whitlam Labor government likely instituted Triple J (Double J as it was then known) in 1974 for reasons other than promoting the generation of variety for evolutionary market processes to create a higher quality market. Much more likely, it was part of the Whitlam government’s vision for a more progressive Australia, to differentiate it in the eyes of the youth from the staid, conservative Menzies era government by reaching out to them with their music. But in trying to give the youth the music their parents disapproved of, the government also (probably inadvertently) instituted one of the most important institutions for the health and strength of the music industry in Australia.
Three cheers for Triple J.
[1]. Pioneers in this field were Nelson, R., Winter, S., 1982, An Evolutionary Theory of Economic Change. Harvard University Press, Cambridge, Massachussetts., while a more modern and generally accepted statement of the framework can be found in Dopfer, K., Foster, J., Potts, J., 2004. Micro-meso-macro. Journal of Evolutionary Economics, 14(3), 263-279.
[2]. Price, G.R., 1970. Selection and Covariance. Nature, 227, 520-521, Price, G.R., 1972a. Extension of covariance selection mathematics. Annals of Human Genetics, 35, 485-490, Price, G.R., 1972b. Fisher's "fundamental theorem" made clear. Annals of Human Genetics, 36, 129-140.
[3]. For instance, Metcalfe, J.S., 1998, Evolutionary Economics and Creative Destruction. Routledge, London., Metcalfe, J.S., 2008. Accounting for economic evolution: Fitness and the population method. Journal of Bioeconomics, 2008(10), 23-49. and Markey-Towler, B., 2014, Law of the Jungle: Firm Survival and Price Dynamics in Evolutionary Markets.
[4]. On this, one would do worse than consult Foster, J., 1997. The analytical foundations of evolutionary economics: From biological analogy to economic self-organization. Structural Change and Economic Dynamics, 8, 427-451. and Witt, U., 1999. Bioeconomics as economics from a Darwinian perspective. Journal of Bioeconomics, 1, 19-34.
[5]. For an emphatic, almost dogmatic defence of this idea, also known as the “central dogma of biology”, see Dawkins, R., 1976, The Selfish Gene. Oxford University Press, Oxford.
[6]. National innovation systems in the Australian context have been discussed at length by Dodgson, M., Hughes, A., Foster, J., Metcalfe, J., 2011. Systems thinking, market failure, and the development of innovation policy: The case of Australia. Research Policy, 40, 1145-1156.
References
Dawkins, R., 1976, The Selfish Gene. Oxford University Press, Oxford.
Dodgson, M., Hughes, A., Foster, J., Metcalfe, J., 2011. Systems thinking, market failure, and the development of innovation policy: The case of Australia. Research Policy, 40, 1145-1156.
Dopfer, K., Foster, J., Potts, J., 2004. Micro-meso-macro. Journal of Evolutionary Economics, 14(3), 263-279.
Foster, J., 1997. The analytical foundations of evolutionary economics: From biological analogy to economic self-organization. Structural Change and Economic Dynamics, 8, 427-451.
Markey-Towler, B., 2014, Law of the Jungle: Firm Survival and Price Dynamics in Evolutionary Markets.
Mazzucato, M., 2011, The Entrepreneurial State. Demos, London.
Metcalfe, J.S., 1998, Evolutionary Economics and Creative Destruction. Routledge, London.
Metcalfe, J.S., 2008. Accounting for economic evolution: Fitness and the population method. Journal of Bioeconomics, 2008(10), 23-49.
Nelson, R., Winter, S., 1982, An Evolutionary Theory of Economic Change. Harvard University Press, Cambridge, Massachussetts.
Price, G.R., 1970. Selection and Covariance. Nature, 227, 520-521.
Price, G.R., 1972a. Extension of covariance selection mathematics. Annals of Human Genetics, 35, 485-490.
Price, G.R., 1972b. Fisher's "fundamental theorem" made clear. Annals of Human Genetics, 36, 129-140.
Witt, U., 1999. Bioeconomics as economics from a Darwinian perspective. Journal of Bioeconomics, 1, 19-34.
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