“Taylor Swift and Beyonce are affecting inflation and GDP with their respective tours,” CNN he tweeted with a segment discussing the macroeconomic impact of the two celebrities’ tours.
CNN is not alone. CNBC made a similar claim in a report on “tourflation” in July, which explored the spike in prices that locales experience when Beyonce and Swift come to town.
“It’s not just that tickets are getting more expensive,” Klaus Baader, global chief economist at Societe Generale, he told CNBC. “It’s also that your beer or cider or your Coke or your hot dog on the spot has also gotten a lot more expensive.”
Baader is right that the prices of goods and services at events go up a lot, so it’s no surprise that mass excursions like Eras can lift up billions of dollars in gross domestic product. Fans spend a lot of money at big events, whether it’s a Beyonce concert, a Yankees game, or a NASCAR race, where they buy expensive food, drinks, and souvenirs.
This economic impact goes beyond the stadium. It was recently observed that hotel prices rise when the Swifties descend on the cities to attend concerts, much to the annoyance of some locals and other travelers.
But is this really evidence of inflation? In a sense, the question is difficult to answer because there is more than one definition of inflation (more on that in a minute). But closer examination reveals that the answer is yes no regardless of which definition is chosen.
First, it is important to understand that price changes are not in themselves evidence of inflation. The prices of goods and services are constantly changing due to changes in supply and demand.
For example, Ford recently reduced the price of his Lightning (an electric pickup truck) for $10,000. Ford didn’t do this because of any change in monetary policy, but because the market is experiencing lower-than-expected demand for electric vehicles (and probably because Tesla recently launched a competitor to the Lightning).
Or consider gasoline. Prices are constantly changing, and generally these changes have little or nothing to do with inflation and a lot to do with supply and demand (of both gasoline and oil), such as when Saudi Arabia recently announced it would cut oil production by 500,000 barrels a day.
The point is that higher prices do not necessarily mean inflation. And the idea that “superstar tours” fuel inflation is one of them Economist freshly poured cold water.
“Inflation is calculated by comparing the prices of a basket of goods, rather than measuring sudden price increases in one sector, such as hotels,” the magazine noted. “Concerts, theater and cinema have a weight of less than 0.8% in the basket”.
And that brings me to how we define inflation. It was not until the 20th century that inflation was defined as “a general and sustained rise in prices”, which is the definition of Economist is using
For centuries, there was a simpler definition: an increase in the money supply.
“Inflation is an increase in the amount of money and credit. Its chief consequence is the rise of prices,” explained Henry Hazlitt to Economics in a lesson. “Therefore inflation, if we misuse the term to refer to rising prices themselves, is caused solely by printing more money.”
did you catch it Inflation, by the long-standing definition, was an expansion of the money supply. The result of inflation were higher prices.
Many economists prefer this definition of inflation today because it is a reminder that price inflation is not an accident.
“Inflation is politics,” said the Austrian economist Ludwig von Mises explained“a deliberate policy of people resorting to inflation because they consider it a lesser evil than unemployment.”
Of course, one can see why so many politicians and policymakers dislike how Hazlitt and Mises defined inflation and why they favor the newer definition. It makes it easy to blame “corporate greed” and Taylor Swift for inflation when it is defined as “a general and sustained rise in prices.”
In reality, basic economics makes it clear that the $6.5 trillion the Federal Reserve printed more than 24 months is the real culprit of inflation. But who wants to take care of that?
Jon Miltimore is editor-in-chief of the Foundation for Economic Education. Follow his work on Substack.