The summer of 2013 saw strong reviews for the Bristol Old Vic’s theatre company’s production of Shakespeare’s “A Midsummer Night’s Dream”, in which an actor called David Ricardo Pearce played Oberon.

1. Ruth Tarrant Head of Economics and Politics, Bedales School
October 2013
What would David Ricardo say?
The summer of 2013 saw strong reviews
for the Bristol Old Vic’s theatre company’s
production of Shakespeare’s “A Midsummer
Night’s Dream”, in which an actor called
David Ricardo Pearce played Oberon.
David Ricardo Pearce, according to his agent, has
had a strong career in on-stage Shakespeare, whereas
his TV appearances have been rather limited to roles
such as an extra in “Extras” and a TV reporter in
Eastenders. He also has particular skill as a musician
(with emphasis on cabaret singing and playing the
cello), stage combat, and portraying particular
accents including Cockney, Received Pronunciation
and American New-York. His set of skills are unique
to him, and other actors from the same agency have
different sets of skills and talents. Although most of
the actors on the agency’s books will have a go at
anything, they prefer to take on jobs in areas in
which they are relatively more skilled, or, to use the
terminology of the more famous David Ricardo, they
specialise according to their comparative advantage.
Most economics students connect David Ricardo
to the concept of comparative advantage, and then
stop there. In fact, Ricardo wrote extensively on other
economic topics, in particular the theory of wages,
explanations of rent, capital-labour substitution, fiscal
policy and protectionism. Examining the wages of
those in the acting profession throws up some
interesting examples against which to assess
Ricardo’s thinking on wage theory.
In the UK, many actors are members of Equity, a
trade union for professional performers and creative
workers. The minimum weekly wage rate for an Equity
member is £372 per week or £470 per week in
London. This equates to an annual salary of between
£19344 and £24440, assuming actors will be in
work for 52 weeks a year (which is unlikely).
Compare this with the “rich list” for actor earnings.
Keanu Reeves has earned $156, 000, 000 over his
lifetime from the Matrix films, Tom Cruise has earned
over $170,000,000 for his parts in Mission Impossible
films and even Harrison Ford has so far earned over
$65,000,000 for his portrayal of Indy in 2008’s
slightly rubbish sequel Indiana Jones: Kingdom of
the Crystal Skull.
Ricardo recognised in his 1821 work ‘Principles of
Political Economy and Taxation’ that
“labour, like all other things which are purchased
and sold, and which may be increased or
diminished in quantity, has its natural and market
price. The natural price of labour is that price
which is necessary to enable the labourers, one
with another, to subsist and to perpetuate their
race”.
In other words, the price of labour i.e. the wage, is
determined by the market forces of demand and
supply, and that the wage will vary when living costs
vary. This is a neat, early explanation of why wages in
London are higher than wages in the rest of the UK.
Boris Johnson, Mayor of London, said recently that
the “living wage” in London is £8.55 per hour
compared with £7.45 per hour in the rest of the UK.

2. Ruth Tarrant Head of Economics and Politics, Bedales School
Whilst Ricardo’s explanation can help us to understand
the difference in wages for actors in and out of
London, does his work give us any insight into why
some Hollywood A-Listers can command enormous
wages? Ricardo seems to suggest throughout his
work that the ‘market wage’ will, over time conform
to what he calls the ‘natural wage’ (a good parallel to
use in terms of understanding this is to think about
the actual rate of unemployment compared with the
natural rate of unemployment – the actual rate does
not have to be equal to the natural rate, but over time
it averages out). Ricardo wrote:
Notwithstanding the tendency of wages to
conform to their natural rate, their market rate,
in an improving society, for an indefinite period,
be constantly above it; for no sooner may the
impulse, which an increase in capital give to a
new demand for labour be obeyed, then another
increase in capital may produce the same effect.
Ricardo’s writing is not always particularly easy to
understand, but what he seems to suggest here is
that wages can be higher than expected if the industry
and its capital is changing and evolving. The film and
movie industry has certainly changed significantly
since its inception over a century ago, most recently
with digital media, and if you can believe it, new
technology that can change the ending of a film
depending on the mood of the viewers! However, the
traditional place for actors, on stage, has changed
very little over the last few hundred years. So, Ricardo
suggests, markets wages are at their ‘natural rate’.
This may be of some comfort to David Ricardo
Pearce as he searches for his next job now that
“A Midsummer Night’s Dream” has ended its run.