Dear Economist: What About Bob?

Julian Sanchez | June 16, 2005

Over drinks last night with Tim Harford (who writes the excellent Financial Times column Dear Economist), I mentioned the post below about Bob Geldof's displeasure at the reselling of Live 8 tickets on eBay.

Tim observed, first, that the nontransferrability requirement was part of the rules of the contest to win tickets, so he is certainly entitled to insist that people not sell them. But Tim also pointed out how counterproductive the requirement is: Part of the value of the ticket (and hence the incentive to pay the three bucks a chance to win a ticket costs) is the ability to resell it. Forbidding resale therefore depresses entry, lowering the available funds to underwrite the costs of the concerts and fund aid programs. Similarly, a rule allowing only one pair of tickets to be won by any individual decreases the marginal value of each additional entry chance bought, discouraging repeat entry.

Comments

|6.16.05 @ 12:52PM|#

Geldof. One f.

David Woycechowsky|6.16.05 @ 12:56PM|#

Yes, but he may have other valid objectives in mind. Maybe he wants a cool audience at the concert and not just a buncha parrotheads. Maybe the other performing artists want that, too.

Maybe he wants relatively poorer people to give to charity, understanding that rich people can, will and should give without a big show. It is not immediately clear to me whether a non-tranferrability requirement would actually further this possible objective, but maybe Bob thinks it does.

|6.16.05 @ 1:21PM|#

David,
You are over-rationalizing BG's thought processes. The economists are right

David Woycechowsky|6.16.05 @ 1:27PM|#

I never said the economists were wrong. Even if Geldof thinks as I am guessing, that does nothing to tarnish or challenge the work of the economists.

Personally, I like my concert audiences young, pierced and desperate. A non-transferability requirement may enhance these important indexes that the economist seems to be ignoring.

fyodor|6.16.05 @ 1:40PM|#

David W,

Your point is internally valid but is belied by what Geldof has actually said about the matter. He has called the resale "sick profiteering" as if there were something inherently immoral about reselling tickets one has won for a benefit concert. It is for this attitude he gets ridiculed there. I suppose the possibility exists that he really wants to eliminate transferrability for the reasons you suggest but is just putting up a front that he thinks can be better sold to the public (a la Bush on the war?), but Occam's Razor is satisfied by taking him at his word.

fyodor|6.16.05 @ 1:41PM|#

Um, make that:

"It is for this attitude that he gets ridiculed here."

fyodor|6.16.05 @ 1:43PM|#

BTW, Julian, are you bragging about drinking with economists again?? :-)

David Woycechowsky|6.16.05 @ 1:49PM|#

Thanks, F. that makes sense. He and Bono do put kind of an unappealing face on rockstar charity work, anyway, IMO, but I don't have any better suggestions.

|6.16.05 @ 1:51PM|#

One has to ask if raising money is really the reason for the concert. Mounting all-star charity events can have significant costs. Have you seen some of those concert riders bands demand? Poor management could result in expenses eating up the profits. What the event could turn out to be is a giant lobbying effort to get First World governments to pump up aid from non-ticket-buying taxpayers. In this scenario, spreading the tickets widely, without regard to the potential customers'/donors' buying power, could be a tactic to mobilize support.

I haven't seen any audits of past Live Aid bashes, so they very well may have raked in the cash. I seem to recall that the grandaddy of these, The Concert For Bangladesh, didn't go into the black until the live album started selling. Live Aid's studio recordings raised a lot from the start, so if the concert is just a break-even thing, they still have ways of making money.

Of course, nowadays sales of any concert CD will be depressed by those who record the event from the digital TV signal, whether delivered by cable, dish or grabbed entire from the net. And I wonder how the "I hate copyright" crowd will rationalize downloading files of performances meant to raise funds to help the starving.

Kevin

|6.16.05 @ 2:34PM|#

kevrob,
I'm pretty sure I've heard Geldof say the point of this concert is not to raise money, but awareness.

David Woycechowsky|6.16.05 @ 2:45PM|#

not to raise money, but awareness

the a non-alienability restriction makes sense after all.

|6.16.05 @ 2:46PM|#

I think Bob Geldof is an idiot. When I was a kid I remember his crap on tv and watching all the sickly starving Africans. And I remember hearing about how Geldof's work took money from poor Americans and Europeans and gave it to rich Africans who bought better weapons and Armies to secure their power.

In short, Geldof made the situation worse. And I had to put up with watching starving people on tv all the time, and thinking why can someone just give Starvin Marvin a sandwich for chrissake.

ed|6.16.05 @ 2:52PM|#

Gee kwais,

Don't you realize that if we just forgive Africa its debts (again) and send a boatload of Western-style charity their way (again) then all will be well and Africa will finally join the civilized world and be happy and successful?

|6.16.05 @ 2:53PM|#

Actually, Geldoff should be more pissed at himself for "pimping" people to pay big money (even if for charity)to see old fart acts like McCartney, Elton John, the Who-cares, and R.E.M. (BOY, did THEY prove that rock groups need their drummers)

To paraphrase someone way more talented than McCartney, wouldn't it be more effective if these rich rock stars just raffled their jewelry?

Or maybe the Rolling Stones will hold a alternate freebie concert at a British speedway, and some libertarian biker will smack Geldoff with a rolled-up copy of REASON

HYPE --- CHILDREN --- IT'S JUST A SOUNDBITE AWAY
IT'S JUST A BITE AWAY --- YEEE-AAAAYY!!

|6.16.05 @ 2:59PM|#

"Actually, Geldoff should be more pissed at himself for "pimping" people to pay big money (even if for charity)to see old fart acts like McCartney, Elton John, the Who-cares, and R.E.M"

These are free concerts.

|6.16.05 @ 3:02PM|#

Regardless of Bobcat Geldof�s motives for Live 8, money to send to Africa or awareness, he would have been best served by auctioning off tickets to the highest bidders. That way the consumer surplus inherent to a static ticket-pricing methodology would be realized by the promoters (to be used for the forces of good or evil), rather than by the lottery winners and scalpers. The eBay resale motive is completely obviated.

Zeppelin Ruuuuules! (not sure how many u�s actually belong)

|6.16.05 @ 3:08PM|#

Well, damn, I stand shamed and corrected for jumping to conclusions.

My VERY bad ...

(Disciple walks away in disgrace, with buddha palm smack imprinted on back of bald head, having failed to snatch pebbles from Master's hands ... )

But R.E.M. still sucks ...

|6.16.05 @ 3:19PM|#

B.A.I.

They surely do.

fyodor|6.16.05 @ 3:25PM|#

At the risk of revealing my ignorance, can someone please explain to me what relieving debt in this context means? Since there's obviously no armed enforcement of these unpaid debts, what difference does it make if we say they're relieved or not? Future potential lenders are not going to ignore the unpaid debts just because someone in government declared them relieved. Are there some sort of trade sanctions that we hold over nations that don't repay their international debts?

|6.16.05 @ 3:51PM|#

fyodor,

New creditors will charge a hefty risk premium to loan money to these countries (if debt is forgiven). But currently a loan is impossible, because the debt service on the old loans is still in place. So it is of benefit to a certain degree.

Also, even if no new debt was taken on, when the old interest payments disappear, the government can use those funds for services, grants, etc. Or so the thinking goes...

|6.16.05 @ 4:02PM|#

I could actually see an argument for newly-free countries refusing to pay debts racked up by their former dictators. For example, I don't know if Iraq's debts have been forgiven, but if Iraq ever becomes a truly free country, I could easily see them saying, "You want the money you loaned Saddam so he could buy the weapons that oppressed us? Fine. Go ask him for it."

|6.16.05 @ 4:38PM|#

Jennifer is quite right. We shouldn't have to be forgiving third-world debt, because dictators should never have been permitted to indebt their oppressed countrymen in the first place.

|6.16.05 @ 5:15PM|#

Kevin- the money from the Bangladesh concert wasn't dispursed until well afterwards.

So basically, the benefits accrued to the survivors, which according to Darwin, was unnecessary.

fyodor|6.16.05 @ 5:16PM|#

sulla,

But currently a loan is impossible, because the debt service on the old loans is still in place.

Is it illegal to loan money to a government in default, or is it a choice? If the latter, I don't understand why calling the debts relieved would change that decision. If it's the former, I don't understand the reason for such a law. Unless maybe, doing any business with a defaulted government is considered tantamount to buying stolen property...?

|6.16.05 @ 5:19PM|#

make that, dispersed

|6.16.05 @ 5:20PM|#

dictators should never have been permitted to indebt their oppressed countrymen

I thought most third world debt was written off or eventually dropped off the books. Bono and Geldof's work is usually done by default. No need to suffer through Coldplay and Stipe sniveling about how horrible we all are.

But...if the US doesn't give loans, money and "aid" to third world dictators, then how do we maintain our influence around the world and justify our expensive presidential elections where we pick electors to pick a president who picks which dictators get taxpayer money?

fyodor|6.16.05 @ 5:21PM|#

sulla,

Are loans "impossible" to any citizen of the nation, or just to the nation's government?

|6.16.05 @ 5:24PM|#

Umm, near as I can tell debt relief means that the guarantors of the loans will pay back the creditors. Three guesses as to who the guarantors are.

fyodor, in the old days failure to pay debts was dealt with by military intervention. Most of our early 20th century gunboat policy was in that pursuit. The interesting thing was that it was done for mostly European countries; something to do with the Monroe Doctrine (we couldn't have them invading so we did it).

It went like this. The Marines went in, took over the ports and the Customs Service, collected tarriffs until the bills were paid off. Then they went home.

|6.16.05 @ 5:32PM|#

The biggest problem with debt-forgiveness has been that in the past debtor-nations who were forgiven simply went out and borrowed more, thus digging a hole even deeper than the one they were in before.

We've been promised that that's not going to happen this time. Rrriiight!!!!

fyodor|6.16.05 @ 5:50PM|#

Isaac Bartram,

Ho-kay, that's beginning to make a little more sense to me. Well, in a sense. So our government GUARANTEES loans of private banks to foreign governments, including dictatorships? And then we're called stingy if our government doesn't pay off the loan? I sure don't see why our government should be involved in such. I'd probably be fine with forgiving all the damn debt as long as our government didn't go guaranteeing more debt from private loans! Or did I get you wrong somewhere in there...?

|6.16.05 @ 5:56PM|#

fyodor, this time there are supposed to be safeguards in place to guarantee reforms to prevent reoccurances. Everybody in the G8 has agreed to oversee and enforce these safeguards.

Next up, African Nations apply for restoration of Colonial status.

|6.16.05 @ 6:01PM|#

Oh, and Jennifer, I understand the bulk of Iraq's debt has been forgiven. Supposedly this was a coup for W, since the biggest creditors were France and Russia, and they were, as you know, seriously pissed about our Grand Adventure.

|6.16.05 @ 6:47PM|#

Glad to hear it about Iraq, Isaac.

Something else occurred to me as I was driving home: why the hell can't banks who lend money to murderous dictators be SUED for collusion, or whatever the legal term is? Loaning money to Idi Amin to fund his alligator farm is no different from me loaning a gun to a man when I know perfectly well he intends to kill somebody with it.

|6.16.05 @ 7:47PM|#

Jennifer, the only reasons banks lend to tinpot dictatorships in the first place is that Uncle Sugar (or John Bull or whatever nickname you want to give France or Germany) guarantees the loans. There are Grand Strategic reasons given for this practice, but in the end you'll find cheap cronyism.

|6.16.05 @ 7:49PM|#

The cheap cronyism is, needless to say, generally very expensive for those of us who are not pals with the right people:)

|6.16.05 @ 8:52PM|#

...why the hell can't banks who lend money to murderous dictators be SUED for collusion...

Shit, if we did that we'd have to sue every one of our presidents since WWII, since they've been the one's making the guarantees.

Hey, we could dig up a few and prop 'em up in chairs and put the buggars on trial. Sorta like what that Pope dude did back in 1066 or whenever.

That'd be more fun than messing with the living ones :)

|6.16.05 @ 9:38PM|#

Julian,

People are buying the tickets for more than face value
=> they can't buy tickets for face value
=> the event is sold out
=> depressing entry isn't a problem.

Granted, this performer is an idiot. But his idiocy lies in charging far too little for tickets, not in requiring them to be nontransferable.

|6.17.05 @ 9:19AM|#

fyodor,

It's not illegal. It's just that no lender is going to make that loan because he'll have absolutely zero chance of recourse when the tinpot government defaults. The lender would likely be at the very end of the line of creditors if any kind of settlement is attempted. The additional complication (as noted by someone) is that these loans have to be "co-signed" by a rich nation.

In theory, even Robert Mugabe could sell bonds to bring money into his treasury. But, of course, this being Robert Mugabe, he would probably have to pay 100% interest on his bonds to attract any takers...

On your other question, even if the government is in default, or has a horrible credit rating, it wouldn't necessarily preclude a loan to a private citizen. But again, he would probably have to have really great collateral (assets in a first world bank account). In which case, how much does he really need the loan?