[Opinion] Superstar Economics

It is only natural that good auto mechanics make more money than ordinary ones, but the gap between their salaries does not reach the hundreds or thousands times. When it comes to entertainers and athletes, however, top stars make enormous amount of money while most of the others manage to make ends meet. Why does all this happen?

This is because of the peculiarity of a market in which a star exists. The preconditions for a superstar to emerge are as follows: First, several ordinary people cannot beat an extraordinary one. Second, a large number of people can mass consume the services of a star at a very low cost. For instance, watching three or four games of a basketball player half as good as Michael Jordan is not equivalent to watching a single game of Jordan’s. Also, everyone can watch Jordan’s games at a low price via cable television and other means. Meanwhile, a mechanic can never be a superstar no matter how good his skills are, as the number of people who can consume his services is limited.

Professor Sherwin Rosen of the University of Chicago analyzed the winner-takes-all phenomenon, in which the winner gets enormous compensation while the runner-up wins with much less compensation, and named it the “economics of a superstar.” Sport and entertainment industries are not the only places where the superstar phenomenon takes place. The same principle is applied to Nike shoes, Windows 2000, and the Hangul word processor. “In the era of diversification, it is harder to make a choice as the number of items to choose from increases, and this is why mega-hit products emerge,” argued Kenichi Omae, a Japanese economic critic. “With the development of information technology, now there are superstars in the worlds of professional business managers, medical doctors, lawyers, and consultants.”

The New York Times recently reported that the superstar phenomenon is fading away in Hollywood, with U.S. moviemaker Paramount saying goodbye to actor Tom Cruise. Those who have been envious and jealous of luxurious private lives of top stars might feel somewhat happy. Progress is bound to be slow, however, in an atmosphere where one’s success is regarded with jealousy. The reason why this happened is not because the economics of superstars is wrong, but because of a thorough economic logic that now he gets “unreasonably more than what he contributes.”

Heo Seung-ho, Editorial writer, tigera@donga.com