Differences in People: The Rents of Unique Individuals

For the lucky few, fame has lifted incomes to astronomical levels. Software guru Bill Gates, investment wizard Warren Buffet, basketball star Dishabille O’Neal, singer Michael Jackson, and eve economists who consult for business can earn fabulous sums for their services.

These extremely talented people have a particular skill that is highly valued in today’s economy. Outside their special field, they might earn but a small fraction of their high incomes. Moreover, their labor supply is unlikely to respond perceptibly to wages that are 20 or even 50 percent higher or lower, Economists refer to the excess of these wag~ above those of the next-best available occupation asa pure economic rent; these earnings are logically equivalent to the rents earned by fixed land.

Some economists have suggested that technological changes are making it easier for a small number of top individuals to serve a larger share of the market (recall our discussion of winner-take-all markets in Chapter 11). Top entertainers or athletes can now give a single performance that reaches a billion people via television and recordings-something that was not possible just a few years ago. this trend continues, and labor rents rise further, the income gap between the winners and the runners-up may widen even further’ in the years ahead.

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