econlife - The Mystery of the Artless Heist by Elaine Schwartz

Our story starts in the Netherlands with a museum director who wanted a painting by John Constable. In London, an art dealer had precisely what he was looking for. The two got together and agreed that the painting would be sent to the museum.

There was one glitch.

Paying For the Painting

The museum could not pay for the painting. However, by showing the painting to several donors, the director secured the purchase price. He just had to wire the money to the seller.

But then the unexpected happened.

The museum received an email that changed where the money was to be sent. Instead of its original destination, the $3.1 million was wired to Hong Kong. And then it disappeared.

The museum says the Constable painting belongs to it because they sent the money. The seller says it is the legal owner of the Constable since it never got paid. Each side says the other was hacked.

A court recently declared the museum could not sue the art gallery for negligence. But they need to decide much more. Someone has to own the Constable painting.

The court will decide.

 Our Bottom Line: Private Property Rights

In a market economy, clearly articulated private property rights are crucial. Only then can goods and services be bought and sold with minimal transactions costs. Only then will owners be willing and able to improve and innovate. And, only then, would a buyer be willing to transfer the purchase price.

At first, the art gallery and the Dutch museum could negotiate the sale of the Constable because everyone knew who owned it. Now, until the courts clarify ownership, that painting is going nowhere.

It will remain at the Rijksmuseum Twenthe in Enschede, Netherlands:

My sources and more: Thanks to Bloomberg Radio for alerting me to the Bloomberg Businessweek “Heist” Issue. From there, artnet came in handy. (The Constable painting is today’s featured image. Called “A View of Hampstead Heath,” it dated back to 1824.)

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why Aretha Franklin Should Have Earned More From “Respect” by Elaine Schwartz

Otis Redding’s “Respect” was No. 4 on the R&B charts in 1965. He wrote the song. He first performed it.

Two years later, Aretha Franklin made it unforgettable:

So yes, Mr. Redding created “Respect” but Ms. Franklin’s version gave it a new life. Still though, when they play the song, commercial radio stations pay Mr. Redding (and his heirs), not Ms. Franklin. Why? Intellectual property law.

Before we move onward to music and the law, for a tear or two, do look at this magnificent 2016 video from the Kennedy Center. As Ms. Franklin sings, we also see the reaction from Natural Woman co-songwriter Carole King, and Michelle and Barack Obama:

Copyright Law

Aretha Franklin (March 25, 1942-August 16, 2018) made money from “Respect” through her concerts and record sales. In fact, at her concerts, she insisted on being paid in cash before she sang. According to New Yorker writer David Remnick, she received stacks of hundred-dollar bills. Then her body guards kept an eye on the money during her performance.

By contrast, Ms. Franklin did not receive money from commercial radio for the millions of times it played “Respect” during the past 51 years. The reason? Copyright law says that radio stations should pay the songwriter and the publisher but not the performer.

Now though the House just passed the Music Modernization Act and the Senate is considering it. Simplifying complicated territory, we can just say that the Congress has begun to move music law into the digital age. Listening to the musicians, tech companies, radio broadcasters, song writers, and music publishers, they are clarifying ownership issues. One goal is to increase performers’, songwriters’, and creatives’ royalty payments.

Out Bottom Line: Who Owns the Song?

As economists, our concern is private property. Like a tangible good, the songs we create belong to someone. They are someone’s intellectual property.

Tangible and intangible private property are crucial for a market system. Only through ownership can we create the incentive to invest, innovate, and profit. The music industry has used “Respect” as the primary reason for changing the copyright law that applies to performers.

My sources and more: This NY Times article is a good starting point for understanding why Aretha Franklin earned less from “Respect.”  Then, if you want to learn more about music industry copyright law, this NY Times explanation is clear. However, if you would just enjoy a firsthand look at Ms. Franklin, do go to the New Yorker.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.