So I often have wondered if people in Hollywood need to create television shows, movies, and other media and all these things take capital why is Hollywood on average so liberal? I had some theories as to why this was true. One reason I thought people in Hollywood weren’t so capitalistic is because they have to playing a signaling game. If you are in Hollywood and you show (signal) that you only are concerned about money other artists will not take you seriously. When people in Hollywood donate money, participate in fundraisers, give their time, they are signaling that they care about something perhaps because they actually care about that cause or because they want people to perceive they care.
Little did I know Larry Ribstein of the University of Illinois had already written a paper on this very subject. In his paper “Wall Street and Vine: Hollywood’s View of Business”. Professor Ribstein makes some good arguments for why people in Hollywood are probably not as capitalist as they should be. The goal of an artist is different than the goal for a capitalist. A capitalist is trying to maximize wealth while an artist is trying to show the quality of their work which has little if no relation to creating value. The interesting though is that artists need capitalists but capitalists don’t need artists. The capitalist usually has other alternative investments but the artists can usually only get financed by the capitalist. Usually investing in the production of a movie is not wise since very few movies actually make money. Only about 5% of movies make a net profit. This means when we take revenue- costs 95% of the movies we see are in the red. Economics would tell us that clearly this could not be sustained for a very long period of time.
In recent time The Hollywood Stock Exchange has got attention. This is an exchange where people can bet on whether or not movies will make or break their office receipts. The exchange can also predict who will win the Oscar (although I think Intrade is better). The exchange makes Hollywood more honest because it communicates information about the reality of the situation. Imagine if actors and actresses had Hollywood Exchange options along with getting paid for movies. They would have incentives to make sure people saw their movie. Similar to how employees are given stock options for people in Hollywood would allow actors, actresses, and directors to see how markets actually work instead of demonizing them. Are there any movies that portray businessmen in positive ways? Usually if there are any that show businessmen in the positive light they show that it is nobler to be charitable then to create more wealth (A Christmas Carol). The banker Mr. Potter in “It’s a Wonderful Life” is portrayed as a similar Scrooge. In theory Mr. Potter should have never gone to jail. Since Uncle Billy threw a newspaper and $8,000 into Mr. Potter’s lap this is considered mislaid property. Mislaid property is intentionally deposited property but the owner doesn’t remember where they placed it. Technically mislaid property is owned by wherever the property was placed if the owner doesn’t come back within a reasonable time to claim it. Since the property was placed in Mr. Potter’s lap at the bank (and Mr. Potter owns the bank) then it is in theory Mr. Pottery’s property. Also how do we know Uncle Billy wasn’t trying to gift Mr. Potter $8,000?
At any rate, the point is that Hollywood almost always portrays capitalists, businessmen, and corporations in a negative sense. One of my favorite quotes in the paper is from former director Sydney Pollack who said “economics is the most inhibiting factor for a mainstream director making a film”. Maybe one day Hollywood and capitalism will be meant for each other.
Link to paper:
Little did I know Larry Ribstein of the University of Illinois had already written a paper on this very subject. In his paper “Wall Street and Vine: Hollywood’s View of Business”. Professor Ribstein makes some good arguments for why people in Hollywood are probably not as capitalist as they should be. The goal of an artist is different than the goal for a capitalist. A capitalist is trying to maximize wealth while an artist is trying to show the quality of their work which has little if no relation to creating value. The interesting though is that artists need capitalists but capitalists don’t need artists. The capitalist usually has other alternative investments but the artists can usually only get financed by the capitalist. Usually investing in the production of a movie is not wise since very few movies actually make money. Only about 5% of movies make a net profit. This means when we take revenue- costs 95% of the movies we see are in the red. Economics would tell us that clearly this could not be sustained for a very long period of time.
In recent time The Hollywood Stock Exchange has got attention. This is an exchange where people can bet on whether or not movies will make or break their office receipts. The exchange can also predict who will win the Oscar (although I think Intrade is better). The exchange makes Hollywood more honest because it communicates information about the reality of the situation. Imagine if actors and actresses had Hollywood Exchange options along with getting paid for movies. They would have incentives to make sure people saw their movie. Similar to how employees are given stock options for people in Hollywood would allow actors, actresses, and directors to see how markets actually work instead of demonizing them. Are there any movies that portray businessmen in positive ways? Usually if there are any that show businessmen in the positive light they show that it is nobler to be charitable then to create more wealth (A Christmas Carol). The banker Mr. Potter in “It’s a Wonderful Life” is portrayed as a similar Scrooge. In theory Mr. Potter should have never gone to jail. Since Uncle Billy threw a newspaper and $8,000 into Mr. Potter’s lap this is considered mislaid property. Mislaid property is intentionally deposited property but the owner doesn’t remember where they placed it. Technically mislaid property is owned by wherever the property was placed if the owner doesn’t come back within a reasonable time to claim it. Since the property was placed in Mr. Potter’s lap at the bank (and Mr. Potter owns the bank) then it is in theory Mr. Pottery’s property. Also how do we know Uncle Billy wasn’t trying to gift Mr. Potter $8,000?
At any rate, the point is that Hollywood almost always portrays capitalists, businessmen, and corporations in a negative sense. One of my favorite quotes in the paper is from former director Sydney Pollack who said “economics is the most inhibiting factor for a mainstream director making a film”. Maybe one day Hollywood and capitalism will be meant for each other.
Link to paper:
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