Friday, October 22

The case for subsidizing hip-hop

A recent working paper by Swedish economist Per Engström, Bling Bling Taxation and the Fiscal Virtues of Hip Hop, makes the bizarre argument that we should subsidize hip-hop music in the interests of efficiency.

Engström starts with a model of taxing what he calls "diamond goods" —goods that have no value except for their costliness. Taxing these goods ad nauseam is an efficient method of taxation, according to this model, because people value the good more as its after-tax price increases.

Engström focuses his analysis on a specific type of diamond good, "bling bling," which he defines as the following:
…the very extreme kind of ornamentation that hip hop artists often display. It could consist of very heavy gold chains with massive dollar signs (euro signs have lately come in fashion since the late fall in dollar price), diamond encrusted ipods, or surgically removing all your teeth and replacing them with asymmetric chunks of diamond adorned gold.

Engström suggests that hip-hop music and bling bling are perfect complements, and as such, we should subsidize hip-hop music. In economics, perfect complements are goods that need to be consumed together in order to have value to a consumer. The textbook example is shoes and shoelaces, since most people wouldn't have any use for shoelaces without shoes, nor would you want to wear a pair of shoes if it were lacking laces. The logic behind Engström's theory is that if hip-hop and bling bling are perfect complements, by subsidizing hip-hop, we'll have more bling bling consumption, which we can get more tax revenue from.

Assuming that there is such thing as diamond goods (which is a big "if"), the problem with Engström's theory, in my mind, is that hip-hop music and bling bling are not even close to being perfect complements. Obnoxious jewelery can be enjoyed in the absence of rap music. Unlike shoes and shoelaces, I don't have to purchase a new Eminem CD every time I wish to encrust a tooth in diamonds. Likewise, I enjoy (in extreme moderation) hip-hop music even though I do not own any bling bling.

I applaud Engström for his creativity. But his interpretation of what constitutes a perfect complement seems off.