Superstars & redistribution

Alex Tabarrok explains how increasing inequality can be due to “winner take all” superstar effects. This raises an issue. Insofar as this is a reason for higher top incomes (and it is only part of the story), mightn’t it strengthen egalitarians’ arguments for redistribution?
I mean this in three senses.
1. It increases the force of Rawls’ claim that the distribution of talents is “arbitrary from a moral perspective” because “no-one deserves his place in the distribution of native endowments.” The essence of winner-take-all economics is that  small differences in skills can mean large differences in returns. Even if you think Rawls was wrong on this, and that there is a moral element in the distribution of skills - say, insofar as these arise from differences in effort - one must, surely, be inclined to think that small differences in skill are largely arbitary.
This is especially true because not all superstar earnings arise from even slightly superior skills. As Alex says, people like to read the books that others read. But this can generate Adler superstars - people who become rich simply because they arbitrarily become the focus of attention. Is Dan Brown’s superstar income really the result of him leveraging his superior intellect? Or is he just a mediocre writer who got luckier than comparable writers?
2. It reduces the relevance of the self-ownership thesis. Even if we concede the Nozickian point, that people own their own talents, this does not suffice to justify leaving superstar salaries untaxed, because such salaries are a joint product. They arise from an interplay of talent (or luck) with socio-technical forces: globalization; a negligible marginal cost of production; copyright laws; and so on. No superstar can claim a right to these factors, which are an accident of history. And insofar as these are social factors, it might be reasonable for the incomes arising therefrom to be socialized.
3.  It undermines Laffer curve arguments. Imagine you’re the impoverished J.K.Rowling writing her first Harry Potter novel, and that taxes on high incomes are very high. Do you think: “I’ll not bother writing, but become a waitress instead?” It’s about as likely as Wayne Rooney preferring to work in McDonalds than play football.
Because only a tiny minority become superstars - and they do so at least in part through luck - hardly anyone with rational expectations would anticipate becoming a superstar. Superstar salaries, then, are not needed to induce people to become writers, musicians or sportsmen. Instead, they consist very heavily of rents. And rent is a reasonable subject for tax.
Against all this stands Nozick’s famous Wilt Chamberlain story. But is this really a compelling counter-argument?

Comments

[Luis Enrique]

3. is a good point.

One of the simplest arguments for inequality is the link between earnings and productivity. Here's one expression of it:

http://econlog.econlib.org/archives/2010/09/against_high-iq.html

What does the idea of superstar economics add to this? JK Rowling and Dan Brown have "produced more". But does a superstar CEO produce more?

[L]

@Luis Enrique, what do you mean Dan Brown and JK Rowling have produced more? Produced more what? More words than they would have produced if they had to keep churning out a novel a month to make a living wage? More pleasure in more readers than other lower earning writers (how do you quantify that?)?
On CEOs, I doubt they produce "more" either. There are plenty of exmaples of CEOs drawing superstar pay, bonuses and redundancy packages whilst the company they lead declines in profitability under their leadership.

[Luis Enrique]

L

I am not sure what the right way to measure the output of authors is, but I'd have thought quantity of books sold is a good place to start. Whereas, as you say, it's much less obvious that superstar CEOs are more productive in any sense.

[cuffleyburgers]

Utter tosh.

Super star CEOs leading their companies are the exception - the rule is that highly paid senior management creates enormous value in terms of improving productivity which automatically filters through into the wider economy.

Dan Brown is an abysmal author - but lots of people are prepared to pay him to read his books, and who am I or you so say, "ok that's enough, all the rest you must give to me?"

The "superstar effect" is a consequence of globalisation and free markets and as such is a small price to pay for the rapidly rising incomes all across the globe.

It is not as though the money they earn is lost to the economy - they spend it, and as often as not they give it away, extremely intelligently pace the Gates Foundation.

The alternative is to strangle global growth in a mesh of high taxes and regulated trade, which WILL lead to hundreds of thousands of deaths amongst the poorest in the world, simply because you are jealous that somebody vastly more talented and harder working than you earns more money?

Now THAT's selfishness!

[L]

@Luis Enrique, surely that comes back to Chris's argument about luck - like their salaries (which probably directly relate to the number of books sold) the quantity of books sold by these authors only partially relates to the talent of the authors.

"such salaries are a joint product. They arise from an interplay of talent (or luck) with socio-technical forces: globalization; a negligible marginal cost of production; copyright laws; and so on. No superstar can claim a right to these factors, which are an accident of history."

You might also choose to reward the CEO of these authors' publishing companies with a superstar salary for the same book sales. Or perhaps it should be the marketing people, or the first person who made a decision to publish the author's first book.

[Luis Enrique]

L

I am merely trying to argue that some superstars have a better claim to be super productive than others. Of course productivity is explained by more than individual ability, but that leaves room to say some individuals are more productive than others. Creators of very popular entertainment or sports stars in my opinion have a better claim to being productive than some other beneficiaries of superstar economics.

(On a side note, I wouldn't put too much weight on this Adler effect. One needs information about a book when deciding whether to read it, and popularity contains information. If everybody who read Harry Potter or Steig Larsson thought it was rubbish and told their friends so, they wouldn't have done so well. How do you rule out the possibility that these books are popular because lots of people like them? I don't think "wanting to read what others read" for the sake of it is that compelling a story.)

[Paolo Siciliani]

The problem is when someone becomes the residual claimant of the collective efforts of, say, a business, primarily thanks to the fact that the negotiation positions of the rest of the company have deteriorated to the point that they are no longer able to claim their fair share (linked ideally to productivity). What may look like superstar effects is actually donw to skewed bargaining positions. Agree that this should be addressed at the source of income rather than in terms of redistribution.

[Luis Enrique]

What I was trying to get at is that if you believe that "keeping what you produce" is the definition of fair distribution, then do 'superstar' economics change anything? Even without 'superstar' economics, people got rich by being in the right place with the right product at the right time. Even without superstar mechanisms (i.e. global markets and sharply increasing returns to scale) income is explained by a lot more than personal attributes (extent of competition, wealth of customers, presence of complementary inputs, whatever). So what do 'superstar' mechanisms change? I guess this is just Nozick's argument again.

But I muddled my argument bringing up the possibility of superstars who are not even super productive. The OP's argument applies to superstars who are super productive (even if by virtue of luck, whatever). I wonder if, in addition to what's in the OP, there some are beneficiaries 'superstar' mechanisms (perhaps getting to be the CEO of Globalmegacorp without contributing a jot to its output) that have even less of a claim to their income than JK Rowling and Cesc Febregas.

[Dain (Mupetblast)]

Anthony de Jasay's essay, "The Dog Owns Your House" might elucidate some of this. We all exist with background conditions - environment, pure chance - that contribute to our success. But how they translates into redistribution is pretty murky.

If nobody deserves what they have, why does anyone else?

[Michael Nunn]

Superstardom comes down to greed. An agent will identify a "talented" person and see only dollars for themselves by exploiting that talent.
In history however, superstars have been genuine - let's think about well known soldiers, authors, lovers etc. Was Shakespeare a superstar? Alexander the Great? Cassanova? These three were all superstars in their own right - were they not?

[john malpas]

All the arguments above seem to add up to socialist greed.
"You got more than me or my mate - give it us" ( or else).

[Frank in midtown]

How about with the failure of communism an offering has been removed from the marketplace of ideas. With this removal the remaining market participants are free to modify their offering. Simply put, the market has taken back that which our parents were given so they wouldn't go commie. With TINA comes a weaker and weaker market offering (a monopoly don't cha know.)