Giffen Good (2014)


I certainly wasn’t expecting David Whitwell to ask for a piece that was “economics-themed.” But when he approached me with the idea I thought back on my years of study and realized how much has changed since the financial crisis of 2008. Our speculative financial world, dominated by the big hedge funds, has been turned on its heels. I set out to compose a piece that would metaphorically acknowledge the trends rapidly shaping our new socioeconomic era.

A Giffen good is one that is consumed more as its price rises. This situation occurs rarely, perhaps only theoretically, when (in economics terms) the income effect trumps the substitution effect with respect to a change in purchasing power. Violating the traditional law of demand,  few of these goods have ever been found. The potatoes of the Great Irish Famine remain a classic example.

Giffen goods retain an inelastic demand (i.e. gasoline, where demand is relatively insensitive to changes in price) even while its price rises along with other, substitute goods, because it is still a cheaper and necessary alternative to goods whose prices (or opportunity costs) are rising more rapidly.

Trends in the price of Gold, 2001-2014, collected in a data buffer and used to generate rhythmic material in 'Giffen Good.'

Trends in the price of Gold, 2001-2014, collected in a data buffer and used to generate rhythmic material in ‘Giffen Good.’

Since the Great Recession of 2008, some have suggested that this footnote in our economics textbooks has become a reality, the liquidity trap causing investors to sell off shares of increasingly higher risk stocks in favor of buying low-risk, safer financial assets instead. Some scholars are looking at more liquid assets, including oil and money itself, to search for the presence of Giffen goods in recent years. Some have even suggested that gold, the ultimately liquid form of wealth, may be showing signs of Giffenness. Pictured is a model of the price of gold from 2001 to 2014, where one can observe mostly steady increases, an effect of the woldwide recession. If more investors are moving their assets into low risk, highly liquid assets, what will the consequences be years from now at various levels of society?

In the music, I’ve used this curve to generate durations corresponding to this trend in the world gold market, deriving rhythms in the notated trombone part as a kind of talea against a color that generates pitch material – in the form of a second order Markov chain that indexes an analysis of samples I prepared with trombonist Brennan Johns at Indiana University. A similar Markov chain is implemented in the live performance; it indexes the performer note-by-note as the piece progresses and generates score material from it. This kind of Markov process, once used to predict the movements between bear, bull, and stagnant markets, echoes the presence of live gold stock data pinged from Yahoo Finance during the course of the piece, whose fluxuations are magnified and heard throughout. How important are these micro-movements in price? What will be their long term impact?

Similar statistical methods have been adopted to match audio descriptors such as mel frequency cepstrum coefficients. Audio analysis / resynthesis methods pervade the structure of the piece and its texture.

3 thoughts on “Giffen Good (2014)

  1. Pingback: ‘Giffen Good’ goes to ICMC | Louis Goldford // composer

  2. Pingback: ‘Giffen Good’ plays at ICMC | Louis Goldford // composer

  3. Pingback: VIDEO: ‘Giffen Good’ at ICMC | Louis Goldford // composer

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