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Union Unrest Strikes a Chord

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Tags Legal SystemU.S. EconomyPrices

03/13/2003D.W. MacKenzie

The specter of union unrest recently haunted Manhattan, where local 802 of the American Federation of Musicians squared off against management, resulting in a four-day shutdown of Broadway musicals. The confrontation concerned this industry that union leaders described as an "important economic engine for the city of New York."1.

Though the dispute was resolved for now, economic fundamentals dictate that this was just the beginning of what will surely be a series of strikes and strike threats in response to management pressure for reform.

The controversy revolves around the authenticity of Broadway music. Broadway producers on tight budgets want to start replacing orchestra members with synthesized or digitally recorded music—an approach which is far cheaper than hiring live musicians even if it is not as desirable from an artistic point of view. According to the union, producers want to use the "sterile, carbon copy sounds generated by electronic machines to replace the vibrant music of real violins, winds, and brass that audiences expect to hear on Broadway." 2

A union contract has traditionally required theaters to hire a minimum number of musicians—between 24 and 26 in the 12 largest houses. Since this contract between Local 802 and the League of American Theaters ran out, theater owners planned to adopt a more capital intensive method of production. These employers wanted "the right to further reduce and/or eliminate the number of musicians on Broadway." After a strike that cost the city millions, a settlement was negotiated that dropped the required minimum numbers of musicians to 18 to 19.

Why do theaters want reduce the number of musicians? According to the union, it is so that the theaters can increase their profits. What consequences will derive from this profit seeking? The union believes that economic and cultural devastation will follow.

As union representatives put it, "we can’t allow a few misguided employers to turn midtown Manhattan into Las Vegas or an entertainment theme park…Broadway Theatre is an important economic engine for the city of New York. Cheapening our product could not only threaten all of our jobs and futures, it could also do serious damage to the NYC economy."

These musicians are clearly serious about this issue, but their motivations couldn't be more obvious. These musicians are concerned for their own jobs, not the future of New York City. New York has over seven million inhabitants. It is an important center for finance, media and advertising, and a number of other industries.  New York hotels alone contribute 13 billion dollars in revenue to the New York City economy3

The musicians of local 802 claimed that by replacing some of them with electronic music, the city's tourist industry would suffer. This point may be correct but it can hardly be significant. How much of the 13 billion dollar hotel industry will be lost if Broadway has less live music? Surely most of this business derives from New York's other business and tourist attractions.

There is little reason to believe that even this small part of New York's commerce will be adversely affected.  As the union representatives point out, the theater owners are motivated by profit. These owners earn profits precisely by attracting paying customers. Perhaps some of these customers come because they want to experience authentic live music. If theater aficionados do care about this, theater owners will see this in their profit and loss statements. Since they are interested in profits, this would prompt them to rehire musicians and abandon the use of recorded music. 

Union representatives claim to have outguessed their employers in predicting future consumer wants, but what basis is there for this? These musicians clearly have private interests at stake. Were they truly interested in the welfare of their future audiences; they would welcome some electronic competition. 

As economist F.A. Hayek argued, competition enables us to discover the best ways of using scarce resources in satisfying human wants. Competitive pressures lead to experimentation with different methods of production. Such experimentation leads us to accept or reject business strategies according to what consumers want to pay for alternative goods. 

Entrepreneurs initially face uncertainty in these matters, but experience eventually informs them (Alchian 1950). Profit and loss accounting enables owners to calculate the actual value of resources in terms of consumer wants (Mises 1920). These musicians want to resist competitive pressures and confound accurate accounting of value so that they can maintain their enjoyable and well paying careers, not so that they can benefit their audiences and the New York economy.

It is not uncommon for artists to voice contempt for capitalistic processes. As Mises demonstrated in his Anti-Capitalistic Mentality, when consumers do not want to pay for the art that artists produce, these artists blame the system, or people within the system, instead of blaming themselves. Consumers do not appreciate real art, or entrepreneurs are too shortsighted, or the market does not reflect real values.

Such excuses enable them to avoid the obvious truth that sometimes consumers simply do not want to pay for the art that many artists want to sell, or at least not to an extent that pleases artists.

Artists often see themselves as underappreciated members of an elite that knows which cultural achievements are economically valuable and which are not. In actuality, profit drives businessmen to attempt a vastly more complex task: the estimation of actual consumer wants in a vastly complex and changing world. As Mises put it: 

"The vain arrogance of the literati and Bohemian artists dismisses the activities of the businessman as unintellectual moneymaking. The truth is that entrepreneurs and promoters display more intellectual faculties and intuition than the average writer and painter."

Entrepreneurs unintentionally serve the interests of consumers as they compete with each other as well as for resources. The artists of Local 802 want to restrict part of this competition for their own benefit. In truth, it is the very processes of profit seeking competition that makes a complex society, where some can specialize in being artists, possible.

If consumers demonstrate a preference for live music, the musicians of Local 802 have nothing to worry about. If they do not demonstrate this preference, the musicians are wrong to attempt to force their employers to provide them with employment. The absurdity of the claims that these musicians make regarding the importance of live music on Broadway stand in stark contrast to the economic and moral principle at issue—free competition as the means of securing personal liberty and general prosperity.

Image source: commons.wikimedia.org


Alchian, Armen. (1950) Uncertainty and Economic Evolution The Journal of Political Economy.

F.A. Hayek. (1977) Competition as a Discovery Procedure in New Ideas in Philosophy, Politics, Economics and the History of Ideas.

Mises, Ludwig von. (1994) The Anti-Capitalist Mentality Libertarian Press. 

________________. (1920) Economic Calculation in the Socialist Commonwealth. 

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