Tuesday, April 03, 2007

Austrian-School Idol

Every year, American Idol has a couple of predictable "controversies", which people somehow manage to be surprised by, even though the same ones happen, as I said, every year. One of them is the mid-season or so ouster of one of the expected favorites (e.g., Jennifer Hudson), which we haven't quite reached yet in the current season. Another is the relatively untalented contestant who ends up lasting much longer than he/she deserves. This season, that is the infamous Sanjaya Malakar.

It occurs to me that this predictable pattern illustrates an argument, first proposed by Austrian economist Ludwig von Mises, that socialism cannot work even in principle. The argument is known as the "calculation problem", and what it says is that in a socialist system, capital goods have no prices (since all transfers of such are simply internal transfers within the government-owned system of producers), and that in the absence of the information conveyed by price signals, it is impossible to rationally calculate the most efficient use of those capital goods. To oversimplify a bit: Without prices, one cannot know what goods really are the most in demand.

This is the problem with American Idol: Voting for contestants is virtually costless (there is only the negligible cost of time spent dialing the phone). It therefore conveys no real information about the preferences of consumers. If you really wanted to know which singer people preferred, what you should do is sell singles/mp3s of each contestant's performance every week, and kick off whoever sells the fewest copies of their song. Free votes are not (necessarily) going to translate into actual sales, once money enters the equation. Without a price, those votes tell us nothing about the actual demand for recordings of one singer versus another.

Extrapolating the implications of this line of reasoning as it applies to votes in a political democracy is left as an exercise for the reader. :-)

1 comment:

A. Nony Mouse said...

I always liked the idea that only the people willing to die for the country should get a say in how it's run (military service=voting rights)... wasn't that in a book somewheres...??? Guess it's too late to do that in this country... time for revolution!