The law of unintended consequences is that intentions alone do not define results; our intended actions have consequences that we neither intend nor foresee. This law applies with special force to the actions of government. Labor unions enjoy special privileges and immunities given them by government, so they too are subject to the law.
The Formation of Actor’s Equity Association
Actor’s Equity Association (Actor’s Equity or just Equity for short) is a labor union formed in 1912 to improve the lot of actors and stage personnel working in the realm of live performance. It establishes wage minima and rules governing working conditions and compensation. One Equity provision of particular importance is its bond requirement. No later than the first rehearsal, the producer of a play employing Equity members is required to put up a bond for the contractually-guaranteed provisions of member contracts – typically two weeks worth of salary, pension and health benefits.
Most Americans are conditioned to regard regulations governing wages and working conditions as good things. Economists take a more jaundiced view of these matters. They know, for example, that merely requiring payment of a wage does not guarantee that the worker’s productivity will vindicate its payment. If the wage exceeds the value of the worker’s production, then the worker will be unemployed at that minimum wage.
In the case of Equity, this is a datum of more than theoretical interest. Equity is widely thought to be the only union in the world with a membership unemployment rate exceeding 90%. It is clear that the gains of union membership flow disproportionately to the small fraction of members who are fortunate enough to be working on the stage. These people are heavily concentrated in the Broadway theater district of New York City.
According to the Oxford Companion to American Theatre, “In recent years, the minimums and bonds demanded by this and other unions have been a factor in stifling production, shrinking the road and forcing musicals to perform in auditoriums that are really too large for live performances… .” The reference to the size of the performing venue suggests that the unintended consequences of Equity have spilled over the boundaries set down by economic textbooks.
The Equity Waiver Movement
In 1972, Los Angeles trailed only New York City in U.S. population. Yet the theater scene in Los Angeles, quite unlike that in New York, was sparse and stagnant. The city held only 45 theaters, ranging from huge (the Ahmanson in downtown LA) to middle-size (the Mark Taper Forum) to small (scattered neighborhood theaters).
In New York City, large theaters and large numbers of people were crammed together in a relatively small area in the theater district. Moreover, the subway system provided relatively cheap transport from outlying boroughs into the city. Los Angeles comprised the largest geographic metropolitan area of any major U.S. city and – at that time – lacked a subway system. Thus, there were fewer large theaters to contain plays and fewer economic ways for theatergoers to reach their destinations. Both the supply of, and the demand for, theater correspondingly suffered in LA compared to that in New York.
This wasn’t for lack of local actors. The motion-picture industry continually refreshed the supply of labor with infusions of new talent – or would-be talent, anyway. During the old days of the studio system, community theater had thrived. Venues like the legendary Pasadena Playhouse acted as minor-leagues for the movie studios. They allowed raw recruits to learn their craft from experienced directors and practice it before audiences that included movie talent scouts and a public hungry for reasonably priced entertainment. Graduates of the theater’s drama school made up a veritable Who’s Who of Hollywood: Raymond Burr, Ernest Borgnine, Charles Bronson, Jamie Farr, Gene Hackman, Dustin Hoffman, Lloyd Nolan, Tyrone Power, Robert Preston, George Reeves, Randolph Scott, Gloria Stuart, Robert Taylor, Gig Young and Robert Young.
By the 1960s, Equity wages and work rules became onerous enough to drive community theater into the ground. The nadir was reached when Pasadena’s drama school closed and the Playhouse went bankrupt. This led a hardy band of actor-producers to approach the union with a daring suggestion – waive Equity rules for small theaters, those with fewer than 100 seats. They hoped this would allow struggling actors to work instead of languishing, unemployed, or – just as bad – spending their lives in tasks unrelated to their chosen life’s work.
The waiver provision did just that – it waived Equity provisions completely for theaters with fewer than 100 seats. As long as the theater met the size limitation, actors and producers were free of Equity’s burdensome restrictions on wages and working capital. Actors could work for free, if they chose. And some of them – mostly chose who were also producers of the plays in which they appeared – did, indeed, so choose.
The waiver provision was capped at 100 seats because it was just those small theaters that had been disproportionately wounded by Equity, whose increased minima and work rules increased theater costs. A theater offers a fixed physical potential for income; anything that increases costs threatens to overwhelm that fixed income potential. As the Oxford Companion to American Theatre observed, bond costs and increased minimum compensation forced producers to seek larger venues in order to enhance their revenue potential. If the particular production – such as a musical – did not lend itself to presentation in that venue, the result can be aesthetically unsatisfactory.
Poles of Opinion
Predictions of disaster for the Equity Waiver movement were loud and frequent. The quality of theater was bound to suffer, according to Waiver opponents, because lower pay for actors would call forth lower-quality actors. Any success the Waiver movement had in stimulating play production and employment of actors would be offset by fewer plays and less employment within big theaters.
No, maintained Waiver proponents, the Waiver would showcase actors who would otherwise find it hard to secure auditions or get work. Actors could practice their craft and avoid going stale and maybe pick up a few bucks in the process. Meanwhile, producers could actually revamp theaters and put on productions for a change.
In the event, it was the Waiver supporters who were proved right. Community theater flourished. The number of theaters and theatrical companies tripled. It became possible to go to the theater in Los Angeles for about the price of attendance at a sporting event. This was a far cry from the hundreds of dollars that theater tickets cost on Broadway – although, to be sure, the quality of 99-seat theater in LA was not uniformly equal to that of the Great White Way.
The Equity Wars
In the mid-1980s, Equity withdrew its waiver and tried to reimpose control over the small-theater market in Los Angeles. This led to the Waiver Wars from 1986-1988, fought mostly in courtrooms. Equity refused to negotiate with the insurgents – the very tactic it had always publicly deplored when employed against it by theater owners or producers.
The eventual compromise left LA community-theater intact but set up an Equity contract for small theaters, one which was subsequently modified several times. The odd thing about this outcome is the fatalistic reaction it has triggered from all participants. Waiver proponents seem to believe that the return to Equity hegemony was inevitable, that there was something inherently wrong, or at least suspect, about a completely free market for labor in live theatrical performance.
In effect, both sides seem to believe that actors should be protected from themselves. If left alone, they will be driven by their free will to act for a zero wage – and that this is clearly intolerable. While they lasted, though, the Equity Waiver free market in stage labor and the subsequent Equity Wars proved the imperishable value of freedom. They also proved the applicability of the Law of Unintended Consequences.
What Happened to Movie Theaters?
Older readers may recall the single-screen movie theaters that covered the United States in the first half of the 20th century. The best of these were marvels of construction and design that ranked among the most beautiful works of architecture in America. Today, only a tiny handful remains standing, let alone operating. Most owe their survival to historic-preservation efforts.
What happened? How did the principal hangout and communal gathering place in big cities and small towns alike lose its status? The full story cannot be told without recounting the rise and fall of motion pictures in America – in itself an economic object lesson – but it will suffice to reveal the history behind the successor to the movie palace.
From Cineplex to Multiplex
The modern cineplex was born in the Ward Parkway Shopping Center in Kansas City, MO, in 1963. Stanley Durwood, head of American Multi Cinema, opened the first two-screen movie theater there. He was capitalizing the new technology of automatic movie projection, which allowed one projectionist to simultaneously operate two projectors showing two different films in adjacent theaters. Formerly, one skilled union member was needed to show a film. Now one non-union projectionist could do the job for a fraction of the cost.
The demise of the old studio system of movie making brought an end to vertical integration of the movie business. This meant that costs of producing, distributing, marketing and exhibiting movies spiraled higher – so much so that eventually few movies were profitable when all costs were accounted for. The profit in the movie business came from ancillary activities. In production, these were sales and licensing of products spun off from movies, mostly to children and young adults. In exhibition, the profitable activity was not the showing of the movie but instead sales of food and drink at the concession stand.
In order to squeeze the most profit from concessions, exhibitors had to book heavily-advertised films into multiple theaters in order to draw large crowds and schedule those films at staggered half-hour to one-hour intervals, so as to create a constant parade of customers past the refreshments.
Why is 299 the Magic Number for Movie-Theater Seating?
Just as 99 became a magic number for live-theater seating capacity in Los Angeles in the 1970s, movie multiplexes acquired their own magic seating number in 1990. The Americans with Disabilities Act (ADA) required theaters with 300 or more seats to provide ramps for wheelchairs to all rows. The ramps took up roughly one-third of the space that would otherwise be allocated to seats.
Movie theaters were already a declining breed – by 1990 there were about one-third as many theater sites as in 1929. To cut potential revenue in existing sites by one-third by simply refitting all theaters would have been business suicide for theater owners. Instead, they cut up their existing space into smaller theaters – each with 299 seats. New theaters were multiplexes with screens each serving 299 or fewer seats. Between 1990 and 2005, the number of movie screens increased from 23,000 to 38,000 – despite the relatively small number of theater sites previously noted.
The Implications of Multiplex Movie Exhibition
The unintended consequences of the ADA on the movie business do not stop there. Smaller screens and cramped seating areas make for poorer viewing; there is less room for the viewer and more chance of a view being obscured. Ambient noise is more intrusive and annoying. The aspect ratio of the picture is less favorable, which is less pleasingto the eye. Older movies were shot for wider screens and cannot be shown comfortably on today’s screens.
In order to serve an exhibition market with more screens, distribution companies must make more prints of the movies. This is so costly that movies are now subsidizing the cost of converting theaters to digital projection. But replacing film with digital technology is revolutionary – it changes the texture of film and presents new and vexing problems in film preservation.
The Law of Unintended Consequences
Over the centuries, economists have come to appreciate the law of unintended consequences. Every time we pass a law or regulation – or otherwise impede the workings of a free market – we invite consequences whose nature and magnitude we cannot begin to understand. The wild disproportion between 99 and 100 seats in live theater and between 299 and 300 seats in movie theaters are good examples of this.
Somehow, it seems that these consequences are seldom favorable. This is because we have a solid understanding of the consequences of free markets, which are predominantly favorable. When we deliberately set out to thwart those outcomes, we cannot always confidently predict the result, but we shouldn’t be surprised if it turns out to be bad.