Economist Paul Krugman on How to Fix the Music Industry (and Why Not Much Has Changed in the Last 150 Years)

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Paul Krugman photographed April 16, 2012.

When New York Times op-ed columnist, Nobel Prize-winning economist and indie-music fan Paul Krugman, 62, goes to see a band at Bowery Ballroom, he can't help but run the numbers. "Even for bands that have wildly enthusiastic followings, it's still $15 a ticket," he says. "At that level, it's very hard to see how they get very far." Billboard asked Krugman, who's a fan of Lucius and San Fermin, to take a macro look at the music industry. His read was not exactly rosy.

Let's say you are made the czar of the music business. How do you ensure that artists are paid fairly?

Wow. I wish I had a lot of positive suggestions. When I did some homework for a South by Southwest panel, I was surprised at how little has changed for artists. Extreme superstars always have earned about the same relative to the mere mortals. If you look at Jenny Lind, the Swedish Nightingale, who toured America in the 1850s, and Elizabeth Billington, the star of London opera in the 1800s, and if you scale what they made by our best estimates of per capita income at the time, basically, they were Taylor Swift. It was always about the live performances. Artists have never made much money from royalties. Even in the height of the CD era, artist earnings from live performances were something like seven times that from their recording.

Has the Internet made it any easier for an artist to break through?

My colleague Alan Krueger at Princeton has done work on this stuff and claims that for top artists -- the 1 percent -- their share of live-performance revenue is still rising despite the Internet, despite the democratization. I would have expected the Internet to be a leveling force, because you don't have to be promoted by a major company to find your audience. But, so far, that's not reflected in the numbers. That may be because the algorithms at companies like Spotify are not democratizing the field as much as I would like. Or it might be that people are all pretty much the same -- and they all want to hear Taylor Swift.

In an interview, The-Dream suggested unionizing artists and songwriters. Is that a ­viable option?

If, say, we had to pay $25 for a ticket to see a band at Bowery Ballroom instead of $15, and the artist got paid a bit more, it's probably true that the great bulk of the audience would still come. So, I shouldn't knock it. Organizing could make the difference between not surviving and barely surviving.

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The other thing that the arts benefit from is a strong social safety net. If you ask people in Ireland why so much music has come from there, one thing they'll say is that they don't have to worry about health care. The fact that Canadian musicians have publicly funded health care is not trivial. Policies that help low-earning workers, like health insurance and minimum wages, lead to somewhat better income for [them]. You don't usually think of musicians being like Walmart inventory people, but they have some notable common interests.

The majority of artists do not make a living, or they barely scrape by. They're not just working as waiters, there's also a pretty heavy dependence on the bank of mom and dad. How many wonderful talents do we never get to hear because they didn't pick the right parents?

This story first appeared in the June 27 issue of Billboard.