The parable of the talents

20th August, 2005

Dear Economist,
I am 17 and want to be a professional musician (I play the bass). My parents insist that I go to university to study music. Shouldn’t I just get out there and play?

— Joanna Kay, Chicago

Dear Joanna,

Your decision chiefly depends on the returns to human capital versus the returns to alternative investments. The opportunity cost of going to college is that you could otherwise work, gain musical experience, and put the money you earn and the college fees you save into a diversified investment portfolio. If the expected income from the portfolio is lower than the expected increase in your earnings after the age of 21, your parents are correct.

As previously reported in this column, the returns to such straightforward financial investments are much lower than the human capital investment of going to college. So your parents would seem to have a strong argument, especially since partying and late-rising at college is often more fun than real work.

But let’s not be hasty; a professional musician gets to go to a lot of parties, and different professions enjoy different returns to human capital investments. What, specifically, are the returns to education for musicians?

Thomas Smith of the University of Illinois, himself a jazz bassist, has examined the data on the earnings of jazz musicians. He’s uncovered a surprising fact: while the returns to schooling are 10 per cent for classical or other non-jazz performances, they are actually negative for jazz performances.

In other words, if you plan to play jazz, every year spent at school is a costly distraction. Professional playing experience, by contrast, is especially valuable for jazz musicians. Tell your parents to save their college fees and subsidise your first couple of years at the University of Life.

Update: The full text is now here because it’s also available in the New York Times without subscription.

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