What Taylor Swift and Oasis can teach us about the economy

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The writer, an FT contributing editor, is chief executive of the Royal Society of Arts and former chief economist at the Bank of England

This summer was bookended by two grand music tours. Taylor Swift’s Eras tour, which stretched across five continents, and the announcement of next year’s Oasis reunion tour of the UK. For most fans, the experience of the first was beyond their wildest dreams. The second has left many looking back in anger. Both provide a fascinating window into modern-day economies and economics.

Music’s contribution to the global economy, at the headline level, looks rather dull. Even in the US and UK, the world’s two largest music exporters, its share of national income is less than 1 per cent. This has nudged up, little by little, since the 1970s. But the aggregate numbers mask sharp shifts in the composition of music’s contribution.

A generation ago, album sales accounted for the lion’s share of music’s contribution, with touring simply a vehicle for marketing an artist’s work. Today touring is the headliner, making up around three-quarters of music’s contribution to GDP and most of artists’ income. Touring now makes more money than album sales and downloads, with the Oasis tour boosting the relaunch of the 1994 album Definitely Maybe and a surge in streaming and downloads.

This shift, from product to performance, was predicted over 20 years ago by the little-known economic theorist David Bowie. The late Princeton economist Alan Krueger called it “Bowie Theory” in his book Rockonomics. Its power has grown to the point where there was an identifiable “Eras Tour” effect on GDP in a number of the smaller countries Taylor Swift toured this year, including Singapore and Sweden.

The move towards intangible assets has also contributed to a supersonic imbalance in income that favours an ever-more concentrated set of “superstars” like Swift and the Gallaghers. The emergence of an increasingly intangible and unequal music industry foreshadows identical trends in the wider economy. The Bowie effect is now one of the most potent economic and societal, as well as musical, forces on the planet.

Ticketing for the two tours has also been a source of contention, with thousands of Oasis fans rejected, ejected or, for the lucky ones, scalped at the online box office. It is strange to have got this system so wrong. We have thousands of years of experience of ticket auctions. Their optimal design has been extensively studied by a glittering array of Nobel Prize winners in economics, such as William Vickrey and Paul Milgrom.

The best design of an auction typically depends on how efficiency and fairness considerations are traded-off. In general, dynamic pricing of tickets tends to fare well on the first, but poorly on the second, criteria. What distinguished the Oasis auction is that it seems to have been neither efficient nor fair. It appears that the band’s management team failed to familiarise Liam and Noel with the work of Vickrey and Milgrom.

Nor did they study the game plan of that less celebrated American auction theorist, Taylor Swift. Her ticketing master plan made use of innovative principles such as fan verification, loyalty ticketing and phased sales — all of which reduce the risk of scalping. This “slow ticketing” meant that Swift’s use of dynamic pricing cast a smaller shadow over her fan base.

One final way in which music shapes the economy is through its impact on our mood. Economists are not very good at dealing with emotions, often hiding behind the convenient fiction of rational behaviour. But words, music and stories have always shaped human life. Latterly, the work of Nobel laureates George Akerlof and Robert Shiller on “narrative economics” has woken up to this fact.

Their research shows that, especially at times of uncertainty and economic turning points, much of the variation in economic activity can be explained by sentiment rather than fundamentals. Stories shape spending. The degree of optimism or pessimism expressed in the words used in songs and books can be a good predictor of economic activity. Music is a mirror on our spending as well as our souls.

For more evidence, look no further than the contrasting experiences of the two most recent Labour governments. Tony Blair swept to power in 1997 to the anthemic tune “Things Can Only Get Better” by D:Ream. One of the prime minister’s early signature moments was welcoming the elder Gallagher brother to Downing Street. This helped to shape a national narrative. Britannia was cool and growth blossomed.

This summer, however, D:Ream refused permission for any political party to use its song during the UK election — an ominous sign of things to come. After an upbeat intro, Prime Minister Sir Keir Starmer gave a funereal speech in Downing Street a few weeks ago. It may as well have been titled “Things Can Only Get a Bit Worse”. The chancellor provided gloomy backing vocals. The national mood is now chilly rather than cool. Any hope of an upbeat narrative is sliding away.

In next month’s Budget, there is an opportunity for the chancellor to change the tune. If investors in the UK are to return to the dance floor, in the manner of deputy prime minister Angela Rayner letting loose in Ibiza or presidential contender Kamala Harris’s now iconic dance moves, optimistic lyrics and catchier melodies are needed. This would lift spirits and spending. Some might say politicians, like economists, still have a lot to learn about the rhythm of modern economies.