Posts tagged ‘economic sociology’

Obfuscated Transactionalism at Cato Unbound

| Gabriel |

From my lead essay at Cato Unbound:

And so we modern people take for granted that we both produce and consume through markets. The idea that we might acquire groceries because the butcher, the baker, and the brewer owe us favors rather than because we hand them cash or a Visa card seems primitive. Nonetheless, there are circumstances where we modern westerners consider prestations more appropriate than purchases. This preference extends well beyond obvious matters of intimacy like sex and Christmas presents and even reaches into business interactions.

Responses from Mike Munger, Alan Fiske, and Alex Tabarrok to follow.


June 6, 2016 at 9:05 am

Who Said It? Gift Exchange Lit vs Article on LASD

| Gabriel |

For each quote, guess the source: a classic of gift exchange or a Los Angeles Times article about deposed Sheriff and soon to be plea bargainee, Lee Baca. Highlight the text to see the answers and score your quiz!

“Until he has given back, the receiver is ‘obliged,’ expected to show his gratitude towards his benefactor or at least to show regard for him, go easy on him, pull his punches…” (Bourdieu Logic of Practice)

“The etiquette of the feast, of the gift that one receives with dignity, but is not solicited, is extremely marked among these tribes.” (Mauss The Gift)

“I don’t solicit any gifts. I’ve never asked for a gift.… People just do it for me.” (Los Angeles Times)

“When you’re taking gifts from strangers, there’s only one reason. They only give gifts because they want something.” (Los Angeles Times)

“These, however, are but the outward signs of kindness, not the kindnesses themselves.” (Seneca Benefits)

“What they’re expressing is appreciation for the respectful way we do business.” (Los Angeles Times)

“No one is really unaware of the logic of exchange … but no one fails to comply with the rules of the game, which is to act as if one did not know the rule.” (Bourdieu Pascalian Meditations)

“Nobody is free to refuse the present that is offered.” (Mauss The Gift)

“My life would be much easier if people did not give me gifts.” (Los Angeles Times)


February 10, 2016 at 11:57 am

Obfuscation Form 700

| Gabriel |

[cross-posted from TAS]

The Supreme Court recently ruled in favor of Hobby Lobby but among the many things that are not widely understood is that the decision did not actually result in the firm’s employees losing insurance coverage for IUDs. The actual result is that the employees will still have coverage for IUDs, but the insurance processor rather than Hobby Lobby will have to pay for it (at least in theory). That is, Hobby Lobby was seeking to take advantage of the Obama administration’s own proposal for faith-based nonprofits. As Julian Sanchez at Cato observed, the entire case turns on an entirely symbolic issue of whether the Greens explicitly have to pay for IUDs or are allowed to wink at an obfuscation in which their insurance company bears the cost (at least theoretically).

I found this interesting not only because it’s a much discussed case but also because it’s a close fit with my article published a few months ago in Sociological Theory. (Here’s an ungated version that lacks the benefit of some really good copy-editing). In the article I talk about situations where a moral objection gets in the way of a transaction but the transaction nonetheless occurs through the expedient of obfuscating that a transaction is occurring at all. I describe three mechanisms for accomplishing this and the nonprofit exemption which now also applies to Hobby Lobby is characterized by two of them, brokerage and bundling. That is, the employer does not buy theIUD for the employee but rather pays a broker (the insurance processor) who in turn provides the IUD. Moreover, the IUD is bundled together with other health coverage. The third model which is not at issue in Hobby Lobby but which I describe in the paper is gift exchange, where explicit quid pro quo is replaced with tacit reciprocity.

Of course for an exchange to be morally objectionable or for it to be koshered is entirely subjective. Most obviously in Hobby Lobby there is a range of opinions about the moral acceptability of birth control and abortifacients and where to draw the line between the two. More interesting to me is that opinions vary on what counts as “buying” the contested commodity and whether to seize on obfuscation and denounce it. On this issue the irony is that while the Obama administration itself came up with this obfuscation for nonprofits it opposed extending it to for-profit firms. At a general level, obfuscation doesn’t objectively exist but rather it creates a permission structure that actors can choose to consent to.

This becomes clear when we contrast Hobby Lobby to Little Sisters of the Poor. Whereas the owners of Hobby Lobby sued to avail themselves of the obfuscatory accomodation, the Little Sisters of the Poor who (as a nonprofit) already have this obfuscation available to them but are suing to denounce it as mere obfuscation and completely remove themselves from even obfuscated provision of all birth control. Specifically, the Little Sisters are refusing to fill out EBSA Form 700 stating their objection to providing contraceptive coverage since to do so would trigger provision through their insurer and they see this as involving themselves in something morally objectionable. That is, while Hobby Lobby would be delighted to wink and nod (and the Obama administration was reluctant to allow them to do so) the Little Sisters are adamantly opposed to a fig leaf (and the Obama administration would be delighted were they to play along with the face-saving obfuscation).

July 7, 2014 at 9:59 am

Gifts Make Slaves, Whips Make Dogs, and Covenant With Yahweh Makes Charity

| Gabriel |

A couple months ago, I read Were the Jews a Mediterranean Society? Reciprocity and Solidarity in Ancient Judaism by Schwartz. As suggested by the subtitle, in this sense “Mediterranean” is not a geographic designation but a synonym for clientelism. This combines two of my favorite interests, Western civ history and comparative exchange, and so naturally I had to read it when I saw it in the PUP catalog.

As background, it helps to understand that clientelism (aka hierarchy, patronage, or authority ranking) is one of the basic modes of human organization. One of the many ways that our culture is WEIRD is that to us clientelism is relatively unimportant in fact and even less so in salience. The logic of clientelism is premised on reciprocity under conditions of inequality. So you have higher status people giving gifts to lower status people, who in turn incur social obligations to the higher status people. In the process the former become patrons and the latter clients. In the extreme case this can turn into debt slavery, but even short of that you see the clients reciprocating with deference (thereby conferring status to their patrons), votes, and fighting in the patron’s military unit. My  favorite example of reciprocity through deference comes from JLM’s Social Structures (p. 206), when he notes that non-military feudal reciprocity “was usually minor or degrading or both: in return for the manor of Hemingstone, the tenant was required to `leap, whistle and fart for the king’s amusement’ every Christmas day.” (For more background on clientelism, read Graeber’s Debt, JLM’s Social Structures, and Fiske’s RMT).

Anyway, back to the Hellenistic/principate era Judaism that is Schwartz’s empirical focus, you probably won’t be surprised to hear that his conclusion is that Jews exhibited both clientelism and solidarity during this period. Nonetheless, he sees Jews as exhibiting relatively less clientelism and relatively more solidarity than your typical Hellenistic culture. That is, Jewish culture was unusual in providing charity to the poor without turning them into clients, and in particular with constraints on debt slavery and weak institutions of euergetism (civic philanthropy as clientelism). In this respect it makes sense to take a sort of glass half full approach and ask where did the solidarity come from?

The source of solidarity is God, or to be more precise about it the Bible, and to be even more precise about it, P, D, and the prophets. (For background on Hebrew source criticism concepts like “P,” listen to the Yale OT course by Hayes or read Who Wrote the Bible by Friedman). The prophets and priests who wrote these parts of the Bible, and to a certain extent the rabbis who developed the subsequent interpretive tradition, were developing an ideology of mutual support and a polemic against reciprocity since to hold a client in debt implies that they are not members of the same community with obligations to one another on the same level as between members of the same household. This is seen most clearly in passages like Deuteronomy 23:19, which prohibits charging interest to another member of the community and likewise in other parts of the Bible that demand debt jubilees in which debts are forgiven (and in anticipation of which one is supposed to nonetheless continue making “loans” to those who need them despite the imminent foreseeable mass debt amnesty). That is, in Fiske’s terms, these strands of the Bible are engaging in polemic against authority ranking and in favor of communal sharing. It is telling that debt jubilees come from the P source, which suggests an underlying class dynamic of priests contesting with landowners for the support of the masses, very similar to the oratores/bellatores split of the mediaeval elite or the models of a semi-autonomous intellectual class found in Gramsci, Bourdieu, and new class theory.

However the glass half empty is that, as Schwartz emphasizes, this was to a large extent an aspirational ideology and in practice Hellenistic/principate (and presumably Biblical) era Jews didn’t always live up to it, but still had a fair amount of clientelism. In some cases this was genteel clientelism, as with the rabbinic traditions in which one reciprocated the mentorship of a master rabbi with praise (much as a 21st century academic will write journal articles citing her doctoral advisor), and yeah, this is a form of clientelism but it’s a pretty far cry from debt slavery. At the other extreme you’ve got The Wisdom of Sirach, which Schwartz reads as a sort of a Hellenized Jew’s “How to Win Friends and Influence People” type deal, complete with full-blown Bourdieu among the Kabyle-ism in which the instrumentality of gift giving is just barely sublimated.

It’s interesting that Joshua ben Sira was a thoroughly Hellenized chap, living in Alexandria (the same diaspora community that included his book in its great cultural achievement, the LXX Bible). This cosmopolitanism and cynicism to a large extent go together. Part of the logic of communal sharing is that it only works within tightly bound communities and indeed in lab experiments you prime communal sharing by emphasizing the alter’s common membership in a highly salient community. We also see this logic in the parts of the Bible that demand egalitarianism. For instance, the very next verse after Deuteronomy 23:19’s famous prohibition against interest allows the exception that one can charge interest to foreigners (including resident aliens).

Parts of the Bible are downright genocidal, but what’s interesting is that these parts are uniformly directed towards what we might call an especially energetic form of boundary work. That is, the Bible reserves its most bloodthirsty passages for other peoples who threaten to undermine the particularity of Israel through intermarriage and encouraging apostasy (issues which the Bible sees as nearly synonymous). (e.g., Numbers 31:15-17Deuteronomy 20:16-18). Nor can you really separate the “nice” Bible that discourages exploitation from the “mean” Bible that demands men divorce their foreign wives and that the nation wage genocidal campaigns against the nations within Canaan. Intense social closure (at least in aspiration) and intense altruism (at least in aspiration) were mutually supportive. What undergirds both of these issues is that the nation is defined by relationship to Yahweh. The Bible defines Israel not primarily by common descent from Abraham’s twelve legitimate great-grandsons but rather by common affirmation of the covenant Abraham cut with Yahweh. Notably, most of the covenant language follows the genre conventions of Near Eastern vassalage treaties. Although the Bible vacillates on such issues as whether Yahweh’s protection is contingent, all versions of the covenant establish Yahweh as patron of Israel which means that relations of Jews to one another are as mutual clients to a single patron. Now in general co-clients often lack horizontal ties, but this structural equivalence means that there’s the ideological raw material there to build an aspirational case that horizontal ties among these co-clients are as members of a common household. We see this view make the jump to Christianity, yet again primarily as an aspiration, in Paul’s view of the church (including the laity) as the new Israel and internal to which there were to be altruistic relations (e.g., his letters to the Corinthians, which both encapsulate supersessionist covenant theology by rejecting circumcision and demand egalitarian relations within the community through internal arbitration of disputes, sharing the agape feast, etc).

Conversely, the decline of particularism and closure is associated with the decline in altruism. Nelson’s thesis is that the taboo against usury relaxed with the decline of a notion of tribalism. Similarly, we see a close reflection of this in the common observation that welfare states are most likely to arise in highly homogenous high trust societies like Scandinavia and less so in heterogenous societies like the United States. However much there might be an aspiration towards universal altruism it looks much like the product of universal and altruism are more or less a constant, such that if you increase one, you tend to decrease the other. An extremely open society is one in which we can hope people will refrain from swindling one another, but it’s probably too much to expect that they will consider highly inegalitarian relationships to be inappropriate or engage in unreciprocated altruism.

July 1, 2013 at 9:57 am 1 comment

Blogs, Payola, and Gift Exchange

| Gabriel |

In a review of the MRU media economics MOOC course (to which I contributed a guest lecture, part 1 and part 2), Ashok Rao asks why is there not more focus on new media. It’s a fair question and one that could be extended to my own course on media sociology, which for the most part could be fairly described as “sociology of the media as it existed through the 1990s” (I do deal with a few recent issues like how piracy unraveled bundling). In particular, Rao wants to know about blogging payola. This is actually an interest of mine as I’ve done work on radio payola and I’ve been thinking a lot lately about gift exchange.

First of all, Rao’s model is about exchange among bloggers, whereas traditionally payola involves exchange between two different types of actors, such as record labels and radio stations. As I’ve previously discussed, we have seen examples of this with bloggers who seem to be a little too close to political campaigns. Likewise a few years ago the FTC announced that bloggers should disclose when they’d received incentives from companies whose products they were discussing. The business model of Klout is basically to institutionalize this, by quantifying how influential social media users are and then serving as a broker for companies who want to give freebies to relatively influential folks in the hope that they’ll blog or tweet about their experiences.

That said, let’s get back to Rao’s model of blogging, which is that we link to higher status bloggers in the hopes that they’ll reciprocate with a link back. (Did I mention that I saw Rao’s post, via MR?). I’m not sure if I’d exactly call this “payola” but it is an interesting phenomena and is related insofar as it involves an exchange of fame. In fact it closely follows Roger Gould’s model of status. Gould’s model of status is that it’s a combination of preferential attachment and reciprocity. The preferential attachment dynamic means that we prefer to direct our attention towards high-status actors. However the reciprocity heuristic means that we also expect our attention and resources to be reciprocated. To the extent that the high status actors have finite attention with which to reciprocate, the two heuristics are in tension with each other and so in effect low status actors jointly optimize the two heuristics by accepting asymmetric relationships with high status actors, even as they would refuse similarly asymmetric relationships with low status actors. So I am willing to link to Tyler or Megan more than they link to me because they are higher status than I am and so this asymmetry in power makes me grateful for what attention they give me rather than resenting that I give them more attention than they do me.* And in a sense, I should be grateful since their attention is worth so much more than mine, as indicated by a look at the “referrers” section of my WordPress stats.

Nonetheless, as Podolny‘s model of status argues, the Gould model tends to result in cumulative advantage since the preferential attachment heuristic means we are willing to forgo a certain amount of reciprocity when dealing with high status actors. (Note that JLM treats exploitation in patronage as contingent, see figure 6.6 in Social Structures). As such, only occasionally reciprocated links will tend to lead to cumulative advantage in blogging fame.


* It’s hard to describe patronage without sounding like you’re complaining. All I can say is that I have no complaints at all about my relationships with various famous bloggers and I consider some of them to be among my closest friends.

May 17, 2013 at 10:47 am 4 comments

How the poor debtors still sell their daughters, How in the drought men still grow fat

| Gabriel |

[Update 12/18/2012: Struck through the bit about Apple because I think people make way too big of a deal about this. It’s an isolated mistake in a very long book, big deal. I used strike-through rather than out-right deleting it to preserve the record. On the other hand I stand by my criticism of the “tribute” thesis of chapter 12 as this is not nitpicking but a substantive disagreement with a sustained argument. In retrospect I might have changed a word here or there in my take on “tribute,” but overall I think my argument holds up.] 

I recently read Graeber’s Debt: The First Five Thousand Years and found it to be very impressive and thought-provoking. As an indication of how impressed I was, I’ll just say that: I’ve recommended it to several people, I’m citing it in one of my next papers, I’m very seriously considering assigning it as a text when I prep econ soc sometime in the next couple years, and it inspired me to go back and read The Gift by Mauss and several journal articles. I’d long been vaguely aware of the anthropology of exchange through my exposure to Zelizer and Fiske, but had never read very deeply in it and so I learned a lot. Debt is written as “big history” (not unlike JLM’s Social Structures and Fukuyama’s OoPO) and this gives it a different character than the more cross-sectional approaches taken by Mauss, Zelizer, or Fiske.

Large parts of the book could better be called Commerce: The First 5,000 Years or Exchange: The First 5,000 Years. However there are a few places where Graeber explicitly tackles debt. The most widely known of these (in part because Graeber opened a can of whup-ass on some guy at Mises who tenaciously stuck to the discredited view) is the origins of money. The received view from Adam Smith which still persists in econ textbooks is that primordial exchange takes the form of barter but that barter suffers from the “double coincidence of wants” problem wherein A can only trade with B if A has something B desires and vice versa. In this model, money lubricates exchange by creating a universal medium of exchange. As Graeber shows, this model of pre-monetized exchange assumes arms-length transactions whereas almost all documented exchange in primitive cultures is thoroughly embedded and takes one form or another of communal sharing or gift exchange. That is, delayed reciprocity is typical and this avoids the problem of coincidence of wants. From the economist’s perspective delayed reciprocity introduces further issues of trust, time preference, etc and thus is a more complex form of exchange than barter, but this is because (at least on this issue) economists are acting as arm chair philosophers of the social contract and it is the anthropologists who are (at least on this issue) being good empiricists.

The important exception to the “barter is a myth” point is that Graeber argues that arms-length exchange does occur in primitive cultures, but only between and not within meaningful social units and that such arms-length exchange is somewhat sketchy and dangerous. More broadly, one of the central points of the book is that arms length exchange in general and market economies in particular require the disembedding of people and commodities from their social context. Graeber sees this process as often violent and he makes a powerful argument that this originates with slavery, both in antiquity and in early modern Africa.

Other interesting points he makes on debt are various ways that it becomes a moral obligation such that debtors are seen as sinners and religious salvation is seen as a spiritual analog to redemption. This helps explain something I never completely understood when watching The Sopranos, which is why gangsters first go to the trouble of getting someone to incur an illegal debt before shaking them down? It turns out that the point of loan-sharking instead of mere naked extortion is the victim feels a certain moral obligation to repay the debt and so loan sharks exploiting gambling addicts has the same logic as how many grifts (e.g., 419 advanced-fee fraud, the fiddle game, etc.) first involve the victim as co-conspirator in a crime against a real or imagined third party. Moreover, Graeber makes the bold point towards the end of the book that debt can drive people to do things that they otherwise would be morally averse to, with his example being the conquistadores.

This is all fascinating but it depends a lot on how much you trust Graeber’s empirical claims. For instance, was it really true that everyday economic life in early modern Britain was largely cashless and instead used a combination of token currencies, informal credit, and asynchronous barter? Maybe, I really don’t know. I’d like to trust Graeber on this but I don’t know if I can since he gets some things pretty wrong, or at least dubious. At Unfogged there’s a review (and a very funny comments thread) pointing out that the following sentence contains six factual claims all of which are incorrect:

Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley in the 1980s, forming little democratic circles of twenty to forty people with their laptops in each other’s garages.

This is not exactly stuff written in the cuneiform of Mesopotamian diplomacy, the barbarian law codes of mediaeval Ireland, or the field notes of Victorian anthropologists, but something that occurred in suburban California around the time I was born and concerns the extremely well documented origins of one of the world’s biggest firms. If Graeber gets this wrong, how can we trust him about the stuff that’s harder to check, like all that business about barbarian law codes.

The thing that really bothers me though (because it’s more than an isolated sentence) is the last few chapters, which argue that America’s current account deficit constitutes military tribute. He means this literally. For instance, he suggests that the Iraq War was punishment for Iraq switching to the euro — meanwhile back in reality the euro area itself overlaps pretty closely with NATO and several eurozone countries invaded Iraq together with the United States. I guess we’ve just been too busy punishing Iraq for using euros to get around to dropping a few bombs on the European Central Bank which actually issues those euros. (This is pretty strange since the ECB is just a few minutes of flight time from a massive USAF base, so bombing it would be a very convenient way to ensure the continued flow of tribute).

When I first read this military tribute argument in the early 1990s (in Chomsky’s Deterring Democracy) it made a lot of sense to me, but two things were different then:

  1. I was a lot younger, less informed about economics, and more paranoid in my political thinking.
  2. In the early 1990s the US government’s major foreign debt holders were countries that could plausibly be described as military protectorates (Japan, South Korea, Saudi Arabia, etc.). Now the single largest holder of US government debt is the People’s Republic of China. For those of you following at home, China is most certainly not a US military protectorate but our major geostrategic rival against whom a post-GWOT DOD is orienting its strategic doctrine.

Graeber addresses problem #2 head on and tries to explain this away by some convoluted argument that I can’t even reproduce but I find his argument much less plausible than the more parsimonious explanation that the Chinese are buying t-bills (a) as a store of value (b) as a medium of exchange and (c) as a tacit export subsidy that suits their domestic politics. That is, they buy t-bills for basically the same reasons as everybody else, including those countries where we have Air Force or Navy bases. This deliberate obtuseness about how a reserve currency works and the paranoid understanding that it is provincial tribute is by far the worst part of the book. I’m trying to draw a fact/value distinction between my lack of sympathy for his political positions and his empirical claims as I’d like to think that when reading someone with whom I disagree I can distinguish between their empirical claims that are well-supported, debatable, and downright nuts. That is to say I don’t think these chapters upset me because they are normatively “anti-American” but because as an empirical matter they badly fail to understand how (for better or worse) American power works.

This business about tribute is at the end so I’d like to say that I recommend the book but that you stop on page 365, right before he gets his Chomsky on, but I honestly worry whether I can trust the parts of the book I’m not as informed about. This is the 13th chime of the clock, the brown M&Ms in the Van Halen dressing room; pick your metaphor, but this business about Apple computer and especially about Chinese t-bill holdings ultimately makes me take a “trust but verify” attitude towards a book that I found both extremely enjoyable and intellectually inspirational as I was reading it. My recommendation is that people interested in exchange read the book, but do so with an appropriate degree of skepticism and look to see reactions from historians and anthropologists who are qualified to assess the empirical claims. Also see other reviews at Understanding Society and OrgTheory. [Update 2/23/12, also see the Crooked Timber symposium. Like all of their book clubs it’s truly excellent]

December 29, 2011 at 8:01 am 21 comments

Misc Links

| Gabriel |

  • The first three seasons of Breaking Bad are now on Netflix streaming so you now have no excuse not to watch it.
  • Speaking of Netflix, Megan McArdle has the most interesting thoughts on the company’s recent series of debacles and in particular explains why it doesn’t scale
  • Q: How many French anti-racism activists does it take to screw in a lightbulb?
    A: That’s not funny.
    (Also, I’m gonna guess Adam Sandler’s “Chanuka Song” wasn’t a big hit with this crowd.)
  • I recently discovered Naxos Music Library, which is basically Spotify for classical music. Here’s the UCLA link, those of you elsewhere should check if your school has a site license
  • Very interesting discussion of the contrast between Smith’s prediction of barter and actual fieldwork demonstrating that primitive societies work on gift exchange. This is fascinating primarily for the economic anthropology itself and secondarily for the science studies type point that some economists are so stubborn about replacing their traditional model (which is based on nothing but armchair theorizing) with a well-established finding from comparative ethnography. It’s especially funny to me because I think it’s about as easy to see how monetary exchange emerged from gift exchange as it would be to see how it emerged from barter. This should be rather obvious given that (as discussed in Social Structures among other places) the monetization of feudal obligations is a familiar example from our own culture that had only recently been completed in Europe when Smith was writing. In any case stuff like this makes me think that at its core econ is less as a positive science than applied utilitarian moral philosophy. (That sounds like I’m knocking econ, but my candid descriptions of soc and anthro are even worse).
  • Hipsters of the world unite, you have nothing to lose but your regulatory barriers to Korean taco trucks! (h/t Tyler @ MR). Also on the libertarian lawsuit front, Cato is taking on business method and software patents. To paraphrase Plutarch on the actual Cato during Sulla’s reign of terror, “Why, then, did you not give me a sword test case, that I might stab him reverse bad precedents, and free my country from this slavery patent thicket?”
  • Anyone ever told you this is the faculty club of the Satan’s Helpers?

September 26, 2011 at 8:40 am 1 comment

Peak screens

| Gabriel |

Apparently Creature , a god-awful exploitation monster film, opened on 1,500 screens with no marketing and made no money whatsoever (h/t Jonathan Last). My initial reaction was (and I apologize if you can’t follow the abstruse technical jargon) what the fuck?

1,500 screens is no Spiderman 2, but it’s still a reasonably wide opening. When Jaws (which as coincidence would have it was also produced by Sid Sheinberg) opened on 409 screens in 1975 that was considered “opening wide” on an unprecedented scale for a highly anticipated major studio film which was based on a novel that had been on the NYT bestseller list for almost a year. And yet here we are with an obscure turd of a film opening on over three times the scale of one of the biggest films in Hollywood history.

This seems like the kind of thing that simply can not happen, but I checked Variety, and yup:

Monster movie “Creature” also bellyflopped. The film, self-distributed by Sid and Jon Sheinberg’s Bubble Releasing, had an unusually aggressive rollout for an indie title but a paltry per-screen average of just $220 from 1,507 locations. Total was an estimated $331,000.

At least I can take some comfort in the collective sanity of Hollywood in knowing that neither the majors nor LionsGate were involved in this fiasco but there’s still the puzzle of what the exhibitors were thinking.

Most likely they were thinking in terms of vacancy chain / opportunity cost issue. September is something of a dumping release date. For instance, Fox notoriously buried the brilliant satire Idiocracy in September of 2006. We can see this more formally in Figure 1 from Sorenson and Waguespack ASQ 2006 (emphasis added).

Big movies tend to open on big weekends. This wasn’t a big weekend and so it’s not surprising that weren’t a lot of big movies opening this weekend. To a first approximation, we can say that exhibitors probably played Creature because it was that or keep dark. (Though at $220 per screen they probably would have been better off staying dark).

Another interesting thing is that opening wide isn’t cheap (which is why until the blockbuster era studios preferred to make just a few prints). It costs about $2,000 to make a print of a film, which (if we assume prints rather than digital) implies about $3 million for prints for Creature , which is about the same amount as the production budget. The rule of thumb is that prints and promotion cost about half again the production budget, but Creature seems to have economized on this through the simple expedient of not having any marketing. This doesn’t really make sense though since marketing and prints are complements, which is why they are usually budgeted together. If I had a crappy movie and only $3 million to self-distribute it, I’d probably spend less than a million on prints and the rest on promotion. So we’ve got to figure out what was going on with the (self) distributor. Here are a few non-mutually exclusive speculations as to what was going on with the distributors:

  1. They’re idiots (more specifically, they drank the “social media” Kool-Aid)
  2. They planned on marketing the film but ran out of money
  3. They relied on digital projection
  4. They offered exhibitors better points on box office than the industry standard

Note that any of these stories are bad news for exhibitors. #1 implies that exhibitors didn’t think to check if the distributor understood the film industry. #2 implies that the distributor booked the exhibitors with an explicit or implicit expectation of a certain level of marketing then didn’t follow through and the exhibitors didn’t notice this. #3 is one of many issues in the film industry where distributors have a conflict of interests against exhibitors. Digital projection implies large fixed costs for theaters but allows distributors to radically lower their marginal costs, which (Coase theorem notwithstanding) is not a good recipe for a happy outcome. The conflict is especially acute when you realize that digital projection makes it easier to open wide which means most of the box is in opening weekend when the theaters get very little of the ticket sales and basically only make money on popcorn. (On the other hand, digital does open up some pretty cool possibilities for using theaters for things other than movies.) That leads us to possibility #4, which is that the distributors might have gotten creative and offered the exhibitors an unusually good deal, like an 80/20 split on opening weekend box or something like that, so as to treat the theatrical release as a publicity-generating loss leader for ancillary revenue streams (DVD, tv, streaming, etc.). If we also assume digital distribution this largesse wouldn’t have even cost the distributor much up-front. This would have been a good precedent for the exhibitors if it worked, but it didn’t and so they’re stuck with back-loaded revenue sharing models that were worked out back when there were fewer screens and movies stayed in theaters for more than two weekends.

Long story short, I’m putting this in my “theatrical exhibitors are fucked” file, along with 3D fatigue and the Comcast/Universal merger.

September 13, 2011 at 6:52 am 5 comments

Misc Links

| Gabriel |

  • Anything But Justin Bieber: Symbolic Exclusion and NPR Story Selection Dislikes
  • Glee breaks Elvis Presley’s record. Note that this is more than a little misleading since Glee singles have brief but intense bursts of popularity whereas Elvis (or the Beatles for that matter) had much more sustained popularity.
  • WalMart is pushing CSR on its supply chain. WalMart says that their customers are demanding these practices but I call bullshit on that as CSR is a superior good and WalMart’s niche is down market (though it’s possible that they think CSR is a way to draw in wealthier customers). Rather I think it likely that WalMart knows it has saturated the exurbs and small cities and can only expand by going into big cities, but this ambition is thwarted by a left-wing political coalition. WalMart is never going to get the unions to drop their opposition (here in LA the grocers’ unions have led the fight against WalMart) but several of their recent actions suggest a strategy of peeling off enough of the “food desert” and “sustainability” greens to squeeze through the zoning process. In other words, it’s coercive isomorphism all the way down.

March 7, 2011 at 1:23 pm

Breaking Bad Edges

| Gabriel |

First let me say that I love Breaking Bad for exactly the same reasons as Ross Douthat. If you haven’t watched it, go to Amazon and buy the first and second seasons — it will be the best $29.98 plus shipping you ever spend.

It struck me that the season 3 finale is entirely about exchange theory. [really serious spoilers follow].


June 18, 2010 at 1:16 pm 1 comment

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