Over the past few years, I’ve found it increasingly challenging to enjoy superhero films. This isn’t merely due to a decline in their artistic merit (though that may be a contributing factor), but rather because they are fundamentally flawed in their economic reasoning. To illustrate this point, I will address the intriguing question: why wouldn’t superheroes exist?
The Gotham Dilemma
Picture yourself in Gotham City, a place plagued by rampant crime. Such persistent villainy not only creates a moral quandary but also depresses real estate values. Enter Batman, a caped crusader who swoops in to mitigate this crime wave. Do the citizens of Gotham rejoice? Likely! After all, Batman’s presence means a safer environment, and consequently, an uptick in their property values. However, we might deduce that the Gotham police force, despite their efforts, simply cannot elevate property values to the extent necessary to justify hiring additional officers.
Batman’s intervention effectively shifts the acceptable level of crime from “a mafia boss controlling every block” to “let’s avoid premeditated crimes after dark.” If Batman can achieve higher property values at a lower cost than the benefits he bestows upon the city, it stands to reason that he is the most coveted recruit for the Gotham City Police Department. Yet, he refuses any salary. While Batman’s actions generate value, citizens do not reciprocate by fully appreciating his contributions. Property values remain subdued due to the uncertainty surrounding Batman’s anonymity and ambiguous motivations.
In a way, we encounter a market failure: the residents of Gotham would willingly compensate Batman for his services, yet because he declines payment, he inadvertently diminishes the perceived value of his contributions, even though he would likely continue to provide those services if he were compensated.
A fascinating paper by Benjamin Klein and Keith Leffler titled “The Role of Market Forces in Assuring Contractual Performance” suggests that any introduction of transaction costs necessitates an investment in “hostage capital” by the producer and a price premium from the consumer (assuming supply and demand are not perfectly elastic or inelastic). For example, consider Gucci selling a “high-quality” shirt. As a potential buyer, you naturally want assurance that the shirt is genuinely of high quality. This mistrust can act as a transaction cost that complicates the sale. To mitigate this, Gucci invests in brand capital; their reputation holds value only if their products meet expectations. We call this “hostage capital” because Gucci is essentially offering you a form of collateral: their brand name.
Both producers and consumers endure costs in this scenario (think of taxes as a cost). Consumers often “absorb” the cost of transaction mistrust by increasing the price they are willing to pay, incentivizing the producer to deliver the expected quality. If consumers cannot rely on the goodwill of providers (hostage capital), they must pay higher prices to maximize their gains from trade.
With Great Power Comes Great… Economic Responsibility?
Returning to superheroes: Spider-Man’s lack of payment leads to a suboptimal situation where property values in New York remain stagnant. This is largely because no one can be certain that Spider-Man will consistently combat crime. We often envision heroes as altruistic figures who wouldn’t “do it for the money,” yet compensation is crucial for maximizing the value of Spider-Man’s efforts. The only way consumers could fully reap the benefits of Spider-Man’s services is if he were so passionate about crime-fighting that he absorbed all transaction costs through investment in hostage capital (essentially, he has a perfectly inelastic supply curve).
This leads us to question the very assumption that superheroes would exist, even if individuals with superhuman abilities did. Bystanders and heroes alike are not optimizing their potential by donning masks and engaging in crime-fighting without compensation.
Uncle Ben’s timeless advice to Spider-Man—that “with great power comes great responsibility”—holds normative truth. However, innocent bystanders (like you and me) should advocate for Spider-Man to have a fiduciary responsibility alongside his moral one. When Spider-Man neglects his duties, he incurs no direct cost, yet his failure has significant repercussions for the citizens he serves! Unless bystanders can be completely assured of Spider-Man’s unwavering commitment (which, as history shows, he occasionally falters on), we should fervently desire that he be compensated.
My previous assertion may seem somewhat tongue-in-cheek. I argue that superheroes don’t exist because the value of their labor is diminished when they fight for free. While many superpowers may be fictitious (thus making characters like Spider-Man impossible by default), there are indeed individuals with remarkable talents and skills. However, in a world that fails to reward superheroes, why would we expect them to emerge? Frankly, I would only allow a radioactive spider to bite me if there were clear financial incentives involved.
Setting aside the notion of superpowers, why doesn’t someone like Elon Musk become Batman? Simply put, crime-fighting is not his “superpower.” The value he brings to the world is maximized through other industrial endeavors, even if he could theoretically afford a Batcave. This suggests that the marginal benefit of reducing crime may not be as high as we’d like to believe. If Bruce Wayne were a real person, he might find himself more inclined to run a tech giant rather than patrol the streets at night. While Elon Musk may not be driven solely by profit, we nonetheless pay him to uphold a fiduciary responsibility that ensures he maximizes his contributions.
In conclusion, perhaps my initial question was somewhat of a ruse. “Superheroes” do exist, but they are (1) compensated and (2) generally not focused on crime reduction, as market signals indicate that the marginal benefit of such actions is rather low.
Not only do powerless superheroes exist, but the portrayal of powered superheroes in comics creates a scenario where no one has an incentive to possess or utilize superpowers for altruistic purposes. Therefore, every superhero film implicitly assumes a failure of market dynamics. If superheroes were to receive no compensation, it would imply they aren’t delivering services that warrant payment!
