Dwarfonomics

The excellent Blithering Bunny draws attention to an article by Thomas Sowell. Journalists, he says, are economically illiterate, because they write of surpluses and shortages without mentioning their causes:

People with a basic knowledge of economics would understand that words like "surplus" and "shortage" imply another word that may not be mentioned explicitly: Price. And chronic surpluses or chronic shortages imply price controls…The time is long overdue for schools of journalism to start teaching economics.

Now, in 99 times out of 100 when Thomas Sowell criticizes journalists, I’ll be on his side.

This is the 100^th time. There’s a shortage (the mot juste) of dwarfs. And it’s a chronic shortage; for years, productions of Snow White and the Seven Dwarfs have been stymied by it.

By Dr Sowell’s logic, this should mean there’s a limit on dwarfs’ wages. But there isn’t. Not even Gordon Brown would impose a ceiling on dwarfs.

Instead, what’s happening here is all to do with price inelasticities. A rising wage for dwarf actors doesn’t call forth an increase in supply. Actors can’t become dwarfs in response to a price signal - not even Tom Cruise. And, as Liz Hurley regularly demonstrates, acting is a rare ability, so few dwarfs can substitute into acting away from other jobs*.

Equally, demand for dwarfs is price-inelastic. If you want to put on Snow White and the Seven Dwarfs you need – well – seven dwarfs. You have a Leontief production function. Sure, you could try using monkeys or children, but that brings other problems. More likely, you could switch from doing Snow White to doing Jack and the Beanstalk – you only need one giant. But the fact is that one margin of substitutability is missing. That contributes to inelastic demand.

So, sorry Dr Sowell, for once you’re wrong and the journalists are right. Chronic shortages don’t always imply price controls.

* Certainly, a dwarf can’t give up working as a human cannonball. Where would they find a replacement of his calibre?

Comments

[Scott Campbell at Blithering Bunny]

In defence of Sowell - as a non-economist but full-time wise-guy - I'll say this. Sowell is perhaps overstating it when he says shortages are *always* caused by price controls. But he's right to criticize journalists for constantly writing stories about shortages where they never even mention price controls, especially in cases where price controls are relevant.

Nor are the journalists right here, because none of them - at least none of the ones Sowell was criticizing - asserted anything like "Chronic shortages don’t always imply price controls".

Also, with dwarves, while I take the point about price inelasticity, I find it difficult to accept that the market for dwarf actors is *that* inelastic. I would be surprised to find that an increase in demand for dwarf actors never had the effect of bringing more dwarves into the acting business. Not all dwarves are employed as human cannonballs. Surely some of them were tempted away from a desk job when they saw the ads that said "Dwarves wanted for filming"?

Similarly, surely a shortage of work in the film and panto business for dwarves must have had some effect in making some dwarves give up the biz and do something else?

[Brian Ferguson]

I wonder, though, if when producers refer to a shortage of dwarfs, they really mean that they don't want to pay the current equilibrium price for the services of this particular group of actors? Or pay whatever would be required to bid them away from other potential employers? If that's the case, Prof. Sowell's basic point about the economic illiteracy of journalists holds up. There's also the question of how much of the Seven Dwarfs' income was actually economic rent. Is this group really that different from, say, seven highly skilled professional atheletes?

[Tim Worstall]

Oh dear. A tyro journalist sets up an argument that allows him to use every short pun he’s stumbled over in a lengthy career and people concentrate on the economics.
I couldn’t see what was wrong with Sowell’s argument until I looked up the meaning of implies. I thought the word came with an attatched but unsaid "usually " but it doesn’t. Soooo, leaving aside the fact that there are controls on the supply of dwarves (work visas, equity cards etc) Mr S&M would appear to be correct.
Now, if Thomas Sowell had inserted the usually which I thought was already there in front of his implies, he would be correct and the above example would just be an interesting example of an exception.

[dearieme]

money can solve it: do it with mirrors.

[Scott Campbell at Blithering Bunny]

>Mr S&M would appear to be correct.

About Sowell, yes (if we're being strict), but not about journalists, who never said anything like "Chronic shortages don’t always imply price controls". But full marks to Mr S&M for his amusing example.

In regards to acting ability, I doubt this would matter much, given the roles that dwarves usually get. Better to have some bad dwarf actors playing some of the seven dwarves than have to shut down the production. No-one expects Dopey to have a way with words.

Tim W. reminds us of Actors Equity. I'd forgotten about this. Getting an Equity card is no easy matter and even today it can be an effective barrier to getting work. Take that absurd restriction away, and getting dwarf actors would be, I suspect, a lot easier.

So despite it being a good stimulus to discussion, I'm even less convinced than before that dwarf actors are a good illustration of price inelasticity.