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Taylor Swift is Not Adding Billions to the U.S. Economy
I'm sorry Swifties, but Taylor's economic impact is overstated
Taylor Swift is not just a musical sensation; she’s a force of nature. Her chart-topping hits, record-breaking album sales, and sold-out concerts have made her a household name. And her fan base? Well, it’s massive. But what about those articles claiming that Taylor Swift’s concerts made a significant economic impact on the U.S. economy and the cities she performed? Unfortunately for many Swift fans, these types of reports are frequently flawed and prone to oversimplification.
It’s undeniable that Taylor Swift has made a significant cultural impact. Her fans are spending billions of dollars and businesses are taking advantage of Taylor Swift whenever they can to earn a little extra dough. But here’s the twist: the businesses and employees who bask in her limelight may be benefiting at the expense of other companies who aren’t getting the customers they normally would. In order to have an economic impact, the spending must be considered new spending,” and not just be a transfer from one business to another. So, what’s her actual economic impact?
This Why We Can’t Have Nice Things
To get the full picture, we need to understand the basics of economic impact studies. These studies are a popular tool to assess the financial impact of major events, including things state fairs and sporting events. These reports often highlight the positive outcomes of spending around the event but overlook some complexities in measuring new spending.
The challenge in calculating the economic impact of something is in measuring the "unseen" dollars that would have been spent somewhere else had Taylor’s concert not stopped in the city. In economic terms, we need to consider counterfactual spending. To help us grasp this concept a bit more, we want to start thinking about a concept known as "the seen and the unseen."
There’s no doubt that fans are collectively spending millions of dollars to attend a concert, but spending money isn’t the same as generating economic activity or adding money to an economy. The “seen and unseen” is an often misunderstood concept popularized by the French economist Frédéric Bastiat in the 1800s. It’s all about considering both the immediate, visible consequences of an action ("the seen") and the less obvious, indirect, and unintended effects ("the unseen"). This means that what’s right in front of us isn’t always the whole story. And that’s a key concept to keep in mind.
The Left Behind Businesses Are Forced to Shake it Off
A typical Taylor Swift concert ticket doesn’t come cheap. Original ticket prices can range from $49 to several hundred dollars, with secondary market tickets averaging over $1,500. And while die-hard Swifties might willingly part with their cash for a night with their idol, it’s important to frame that spending in the context of the substitution effect.
The money spent to attend one of Taylor Swift’s shows likely would have been spent on other things, possibly other entertainment options, whenever people were attending the show. The concerts are simply the results of a reallocation of spending in a local economy, rather than in real increases in economic activity. So, while Swift’s concerts have generated a lot of revenue (“the seen”), it’s essential to consider that these earnings could have been allocated elsewhere in the local economy (“the unseen”).
Some Residents Are Leaving Behind a Blank Space
These events can quickly fill up hotel rooms and provide a little jolt to the tourism industry on concert weekends. In fact, the Philadelphia Federal Reserve got pulled into the mix when reporters misattributed a comment in the Beige Book about Taylor Swift’s concerts increasing hotel bookings. While that weekend may have sold out, the same report also noted that tourism was slowing overall. Here’s the full comment provided by the Philadelphia Federal Reserve:
Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.
This type of activity is easy to report ("the seen"), but it usually ignores the crowd-out effect ("the unseen"). Unfortunately, that lost spending isn’t easy to track because locals are taking their business to other cities. While these concerts may result in an influx of Swifties; some locals might decide to skip town to escape the concert chaos:
This crowd-out effect isn’t just limited to the locals, however. These concerts are held in cities that are already popular destinations for tourists after all! Other tourists who had their hearts set on visiting the city during that particular weekend might have a change of heart and decide to head elsewhere, all to avoid the hustle and bustle.
Alternatively, some Swifties who were planning a trip to the city in the future may push up their vacation to align with the concert dates. The spending may coincide with the concert weekend, but it would have happened eventually in the future had the concert not happened. That behavior could explain why people are spending thousands of dollars to see Beyonce and Taylor in their overseas concerts. So, while it’s tempting to focus on the packed hotels and buzzing streets when Taylor Swift’s in town, we’ve got to remember that it’s not the whole story.
All The Spending Had to Do Was Stay
Economic impact studies often neglect to consider leakage, where a substantial portion of the money spent in the city does not stay within the local economy. But where does the money actually go? It can end up in the pockets of non-local entities like artists, ticketing platforms, and hotel chains. But the most significant recipient? Taylor Swift herself, who is estimated to earn $4.1 billion from the Eras Tour. And where does she take her earnings? Back to her home in New York.
But what about the $250 that Swifties pay for their stay at the local Holiday Inn? Hotels may be charging 50% more when Swift is in town, but it’s unlikely that employees are earning 50% more than before. A fraction of that elevated rental rate goes back to Holiday Inn’s Headquarters in Atlanta. This type of leakage can significantly diminish the actual financial benefit accruing to the community where the concerts take place.
Long Live True Economic Impacts
Lastly, let’s talk about timing effects. Economic impact studies often focus on short-term economic benefits without considering the long-term implications. In some cases, the effects may be temporary and not contribute to sustained economic growth. Take the Cincinnati Regional Chamber’s Center for Research and Data estimate that claimed the area would see $48 million in additional economic impact because of Swift’s stop in the city.
At first glance, this may seem like a big investment in the area. Thankfully, we can compare this to the current economic activity using data from the Bureau of Economic Analysis. In 2021, the Cincinnati metro area generated the equivalent of $171 billion during the year. Had the Eras Tour stopped by the city back in 2021, it would have raised output by 0.028% at most.
Hearing that millions of dollars are being spent in a city sounds impressive, but the cities hosting the Eras Tour are much more active than many people may realize. Hotels and restaurants won’t increase employment permanently in response to a single weekend. The cities may well indeed see an infusion of immediate cash into a city, but these effects are temporary and do not contribute to sustained economic growth.
Real Economic Impact vs. Perceived Benefit
So, what’s the bottom line? While Taylor Swift’s influence in the music industry is undeniable, we must differentiate between cultural and economic impacts. Her concerts provide unique experiences for fans and create a sense of excitement in host cities, but reports of increased activity ignore the fact that the dollars spent at concerts are not necessarily "new money" entering the economy. In many cases, it’s a reshuffling of existing spending.
The myth of Taylor Swift's extraordinary economic impact unravels when we examine the assumptions underlying economic impact studies. This deeper understanding encourages us to view the phenomenon from a more critical perspective while acknowledging the real cultural and emotional value Swift brings to her fans. As economists often remind us, the devil is in the details, and in this case, the economic devil lurks within the assumptions of impact studies.
The Eras Tour features a set list of 44 songs divided into 10 acts that runs for more than 3 hours [Newsweek]
A survey of Swift concertgoers found that the attendees spent an average of $1,300 per show on expenses like tickets, outfits, travel and food [GlobalNewswire]
Midnights was the top-selling vinyl record in 2022, with 945,000 copies sold [Billboard]
After dropping Midnights, Swift promptly took over the entire top 10 of the Billboard Hot 100 [The Hustle]
Beyonce’s Renaissance Tour is estimated to gross $2 billion, while Swift’s Eras Tour could gross $1.6 billion [CBS News]