Newspaper article

Economics Behind Orchestra Dispute: Slouching toward the Lake Wobegon Symphony

Newspaper article

Economics Behind Orchestra Dispute: Slouching toward the Lake Wobegon Symphony

Article excerpt

The Minnesota Orchestra and Orchestra Hall play an important part in my life.

I first heard George Gershwin's "Cuban Overture" at one of Leonard Slatkin's "rug concerts" in the 1970s. My wife and I had season tickets while we were college students, putting us in the first row at Orchestra Hall, where we could see the member of the double-bass section who wore soft cloth shoes instead of dress shoes like his section-mates.

At Orchestra Hall I saw Van Cliburn in the 1970s, Maynard Ferguson in the 1980s, Tony Bennett in the 1990s and the Count Basie Orchestra in 2000s.

Over the last year I've observed the lockout and cancellation of the 2012-2013 season at Orchestra Hall and tried to make sense of it. Economic theory suggests two explanations: one that applies to the 2012-2013 lockout and season cancellation and one that illuminates the current contract negotiations, including the potential loss of music director Osmo Vanska.

Comparing the lockout and restaurants

Have you ever gone to a restaurant and observed: "No one is here. How can this place stay in business?" If you think about it, it's pretty clear what's up: If a restaurateur signs a six-month lease, they might lose less money continuing to hire cooking and wait staff and open every day than by closing the doors and paying off the lease.

Economists call this the shutdown decision. A company must decide whether it will lose less money by operating and earning some revenue rather than by closing and earning no revenue.

My hunch is that the Minnesota Orchestra board made a similar decision. Faced with the choice of playing concerts away from Orchestra Hall while it was being refurbished, they figured they would incur smaller losses by locking out the musicians and canceling all concerts than by paying the musicians, renting alternative venues and holding performances.

Comparing orchestras and used cars

Suppose you're at a used car lot and find two cars that look exactly the same on the inside and outside, have the same number of miles and are priced the same. …

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