Published by the Federal Reserve: Lafayette Students Explain the Invisible Hand Behind a Hit Song

What does a popular song have to do with economics?

In this episode, Katy sits down with four Lafayette Academy students whose economics project was selected for publication by the Federal Reserve's Journal of Future Economists. Inspired by the classic essay I, Pencil, the students set out to answer an intriguing question: What does it actually take to bring a song to life?

What they discovered was far more than a story about music. From songwriters and recording studios to instrument makers, streaming platforms, marketers, and countless others working behind the scenes, every song depends on an extraordinary network of people contributing their unique skills and talents. Together, they reveal a powerful economic principle often called the "invisible hand", the idea that people pursuing their own work and interests can create something valuable that benefits millions.

Along the way, the students discuss their research process, what surprised them most, and why understanding economics is really about understanding human cooperation.

For more information about Lafayette Academy, A Classical School please visit https://lafayetteacademy.org/

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Transcript

SPEAKER_01 0:00

Welcome back to the Lady K podcast. I'm Katie McKinney, the founder and head of school for Lafayette Academy, a classical school. And today we have a very unique opportunity to sit down with four students who are juniors and seniors at Lafayette Academy. And I'm very excited for us to share with you a little glimpse into their world this year. So I'm sitting down with Susanna and Colton and Natalie and Ellie. They have a podcast script that they're going to share with us today. It's called I Song. And the exciting part of this, before you hear it, was that this was actually selected to be publicized to be published in the Federal Reserve's 2026 Journal of Future Economics. It's coming out this summer, so you can be looking for it there. This was a tremendous honor. It was a tremendous accomplishment for them. Out of 207 teams nationally, Lafayette Academy was chosen as only one of 12 to be selected for publication. So that is definitely worth celebrating. You all have worked hard on this and obviously uh delineated the concepts of economics, free market economics in your publication. So this is very exciting. So we're very proud of all of you. Not simply, though, of course, because you won this award, but um because your work shows serious thought, shows creativity, careful research, and the ability to take something very familiar, um, like a popular song, which we'll talk about here in a minute, but to have it then reveal and uncover the economic truths behind it, which to me shows really it brings out it brings forth the best in humanity when everyone has a has a part in bringing something to life, which is very exciting. So I wanted to start with just a few questions, and then we're going to actually hear the podcast script that they created. Um, so this year's theme for the Fed Challenge was the economics of music. I'm curious how you all came to decide on what you wanted to focus um within this theme. You absolutely you chose a song called Ordinary by whom? Alex Warren. Alex Warren. And so how did you all uh come to that uh idea to choose a song? I guess it could have been anything within the musical industry, right? So you guys chose a song. Why why that?

SPEAKER_04 2:14

We looked at a couple different options. We read the journals from previous years to have some inspiration from what previous winners had done. And we had recently read an essay called iPencil, and that kind of led us, we wanted to mimic that and use those ideas, and that led us to choosing a song.

SPEAKER_01 2:34

Okay, so that does bring up a question. There are some people in the world who have not read iPencil by Leonard Reed. Um, and I was curious if if maybe Ellie, could you tell us a little bit more in simple terms, what is iPencil? What does that mean?

SPEAKER_04 2:49

Of course, it's a relatively short essay about the creation of a pencil. A pencil is something we use relatively often. We are aware of it. It's supposedly simple, but he goes through all the different complex processes and materials and organization that has to come together to create even just one single pencil. And the idea is that none of that happens because you have one central planner telling people what to do, but because there are many different organizations and incentives happening in a market. And that allows us to have a multitude of these products.

SPEAKER_01 3:23

Okay, so then when you came up to the idea of choosing a song, it sounds like a song is similar to it's a product, right? It's a thing, just like a pencil is a thing. Um, I guess it sounds like that parallel between those two is what inspired you to create i song. Is that how that okay? Tell me more about Alex Warren's this song Ordinary. Um I'm sorry to say it's not a song I'm familiar with. I need to listen to it. Why why was this a good case study for this assignment? Maybe Susanna, can you tell us a little bit more?

SPEAKER_03 3:51

Yeah, so we wanted a popular song as like a good general basis for looking at how a song is created. And so we looked at the top five and chose one that we all liked.

unknown 4:02

Okay.

SPEAKER_01 4:03

And I assume it's a it's a pretty popular song. It's one of the five top five. Um, a couple more questions here before we let you share your your piece of magical creativity. Colton, could you tell us a little bit about your portion? I think you talk more about the the cost of the recording and the producing of the song. I'm curious what surprised you most about the idea. It was this is an expensive song, obviously. I he took a big risk. Obviously, he had a he had a big reward, but um, you know, were there the idea of how expensive it was before you can even earn a dollar? Did that surprise you?

SPEAKER_00 4:36

It takes almost for like a professional studio, almost ten thousand to fifty thousand dollars to like create the song. And it's before it even hits the market. Before it hits the market. And when it comes to like adding all that up, it's like a couple hundred dollars here for equipment and then another like that a couple thousand for like a producer and like all this stuff, and it just continues to add on. And like I work on a lot of cars and stuff, so I can understand like how the bill can add up for yeah, if you're working on it. So it it was just fun to see that in sort of the business side of things in a like in a song or just in the economic world.

SPEAKER_01 5:14

And obviously a big risk, you don't you don't know it's gonna be in the top five. And so you you do your best, obviously, and you hope the market receives that. And in case, you know, of ordinary, in the case of ordinary, he actually did a great job.

SPEAKER_00 5:25

Definitely.

SPEAKER_01 5:26

Um, Susanna, I'm curious, your section on um master recording rights and publishing rights is very detailed. I was curious, what was the most surprising thing you took away about who actually owns the song? There's a lot of lot of cooks in the kitchen when it comes to making a song.

SPEAKER_03 5:41

Yeah.

SPEAKER_01 5:41

So you know, tell me more about your thoughts on that.

SPEAKER_03 5:44

I was surprised like the different sections are owned differently, like the different types. There's the um master recording rights and the publishing rights, and they're like different aspects of the song. And I didn't know that before. And they're like owned differently, and you need to own both of them whenever you need to use the song.

SPEAKER_01 6:06

Interesting. Does this uh this total side note, but with Taylor Swift and and the whole debacle that happened, did this actually help you understand a little bit more as to the that situation? You think just gives more context? It gives you more context, probably, and and and maybe what the debacle was and maybe why she ended up re-recording things. Right so she had full control, right? Obviously that matters. Interesting. Um, Ellie, your section talks about uh the marketing and how artists get attention in a crowded market. Um, I'm curious what you learned about the relationship between the art, the audience, the incentives. Tell us more about that.

SPEAKER_04 6:40

Yeah, the art, the artistic side of it is very interesting because art is a very heavy, complex idea in we talk about a lot in the classical sphere. What is it, what is it for, what is good art. But I do think there is something magical about the fact that we create art sometimes for other people. And when Alex Warren created this, he wanted to give it to people who would enjoy it, and you have to work to find that audience. And we talk about when you are making a mutually voluntary trade, both people are gaining something from it. It's not a zero-sum game. Both people, by exchanging time, resources, expertise, their lives are getting better.

SPEAKER_01 7:19

So in this case, Alex, what was what was he gaining by sharing this?

SPEAKER_04 7:24

So, I mean, and on the simple level, money, right? He he makes money from it. And he also artists tend to love their songs and love their work, and so he gets a career out of creating.

SPEAKER_01 7:35

And the audience, what do you think his objective was for his audience?

SPEAKER_04 7:39

People love to listen to music and love to listen to excellent music, and it's been something, since it's so popular, it's been something that connected people, something that people can enjoy themes of religion and love through. Um art is very powerful, and so it's it's good to see it connecting people and benefiting people on an individual and an economic level and to have those merge together.

SPEAKER_01 8:03

This song ordinary, did it I I did do a little research on it. It was what was it? It was something in his own personal life that he then wrote about. Was it him fighting his wife or how was it?

SPEAKER_02 8:12

Uh it was about when him and his wife first started dating. They were like living out of a trailer, living out of their car, and they um got through that together, and now they're in a really good place, and they got married in a really good place. So it's kind of like their the journey of their love.

SPEAKER_01 8:32

That's lovely. And I'm sure a lot of people can can relate to that, having maybe hard times and then coming out on the on the you know, successful end. So, Natalie, um your section connects the writing of the song to specialization and collaboration. Could you share with us a little bit about how or what you learned um when it comes to the people contributing to something that appears to come from just one person?

SPEAKER_02 8:53

Yeah. Um, it was really surprising to learn that when you're looking at a song like that, you're not really thinking about how much goes into the background of it. Um, but I mean, we kind of learned firsthand from writing our script because we each did uh we each picked out a small part and then put a lot of focus in that one part. And then we kind of um built everything around our one part. So um I think we got to like experience it firsthand and see how everyone putting in work on one specific thing is a lot more meaningful than just one person trying to do all of it themselves.

SPEAKER_01 9:38

So which would be that central command, right? Yes, right, and the c versus the collaborative effort. It really is a team sport pulling something like this together. And I think in terms of creating anything, any product um from a business standpoint, um, it it really when you go through it, or myself going through building a school, the the myriad of people and um and just pieces that have to come together to to actually bring something to fruition or to reality is it can be overwhelming, but it's sometimes best you don't know that when you when you start an endeavor. Um and I'm sure Alex has probably learned a ton through this whole process, right? Um okay, lastly, before we get into the podcast, your teacher, Mrs. Schweiser, um, she she had earned her, what was it, her undergrad degree um in economics, I think of from Washu. Um she had said once that student once students begin seeing the hidden cooperation embedded in everyday life, economics stops feeling abstract and instead it starts to feel alive. I'm curious, did that happen for you all studying, going through this process? Did you feel like economics became more personal to you, more realistic to you?

SPEAKER_04 10:46

Yeah, I mean, putting specific numbers on things or specific uh examples to ideas is always helpful to see it in the real world to see. And as Susanna was saying, that's one of the reasons we chose a popular song, is because we've all interacted with that song, and so to see the background that we had never considered was definitely enlightening in some ways. Interesting.

SPEAKER_01 11:07

Okay, so I would love for you all to share your wonderful creation here. So this is I song and take it away.

SPEAKER_04 11:16

In 1958, economist Leonard E. Reed published his essay, i Pencil. Told from the perspective of a pencil, yes, an ordinary wood and graphite pencil, Leonard describes the processes necessary to get a single pencil in a store. Something seemingly simple, it requires an immense and somewhat surprising amount of knowledge, materials, and organization to bring a pencil to existence.

SPEAKER_03 11:37

It really is an amazing essay and shows us how much we take for granted. Every man-made thing we interact with was touched by many people in its creation. The essay emphasizes the lack of a central planner to coordinate everything, relying instead on the spontaneous order of the market. Today we're going to explore how this applies to the process of creating a hit song, specifically Alex Warren's Ordinary. This top ten song has been popular for a while, so we're going to give you a glimpse into how he made it. Hopefully, this musical version of iPencil helps you appreciate the music you listen to just a bit more and gives you an idea of what decentralized planning has done for us.

SPEAKER_02 12:11

As Warren says in his song, looking into this kind of topic can take us out of the ordinary. We interact with an astonishing amount of media daily, and most of us don't know or consider how it gets created.

SPEAKER_00 12:23

Today we're going to look at how the economic forces present in the writing, producing, and marketing and publishing of the song Ordinary, and how it occurs within a market system through voluntary trade instead of with a centralized planner coordinating it.

SPEAKER_04 12:36

So now that we've talked about the market and how countless people and processes come together to create everyday items, let's look into the very first part of the hit song Ordinary by Alex Warren. Where does writing a song like this even begin?

SPEAKER_02 12:49

Interestingly, the writing of Ordinary actually began at a professional songwriting camp in 2024, where Alex Warren spent two weeks writing this song alongside experienced songwriters Cal Shapiro, Max Duval, and Adam Huron. Songwriting camps connect artists, producers, and writers to come together so they can experiment and share ideas. This kind of collaboration highlights another key economic concept called specialization. This means that each person brings their own skills to share, which allows the group as a whole to create something much stronger than any individual could alone.

SPEAKER_04 13:23

That's a great example of how the division of labor increases productivity. Instead of one person trying to do everything, each person focuses on what they do best. In this specific case, Alex provided the personal story and the emotion, while Shapiro, Duvall, and Yuran helped to shape the lyrics and the structure of the song.

SPEAKER_02 13:40

Exactly. Ordinary was written for Warren's wife, Kou Veran, and it reflects their marriage and the idea of finding extraordinary love in a time when genuine connections are rare. The song focuses on gratitude, devotion, and faith, which gives it an emotional depth. What's really fascinating is that many of the lyrics actually came from spontaneous jokes and casual moments in the studio. Throughout the songwriting session, random comments unexpectedly turned into meaningful lines. For example, the lyric, The Holy Water's Watered Down, came from a joke about watery coffee in the studio. These everyday moments were transformed into powerful images showing us how creativity can appear from unplanned interaction.

SPEAKER_04 14:19

That really reminds me of the idea of spontaneous order in economics. No one planned for those jokes to become lyrics, but they ended up truly shaping the song as a whole. Small unintentional decisions added up to something meaningful and valuable.

SPEAKER_02 14:34

Yes, the song originally started from just a simple guitar pattern, but it gradually evolved into a wonderful romantic ballad focused on true love and religious faith. What's crazy is that Alex didn't even like the song initially. It wasn't until the final product that he actually realized its potential.

SPEAKER_04 14:51

That's super interesting. Of course, after the song has been written, it needs to be recorded.

SPEAKER_02 14:56

So let's talk about the economics behind the recording process of the song Ordinary. We aren't discussing the meaning of it, but more like how money plays into making it.

SPEAKER_00 15:05

Yeah, people hear a song and think it just kind of appears online. But there's a lot of actual financial decisions behind it.

SPEAKER_02 15:13

So like what about it costs money first?

SPEAKER_00 15:15

Studio time. If it was recorded in a professional studio, that can cost a lot per hour. And if they're recording for multiple days, that adds up really quick. Alex Warren never released costs on his on studio time and resources, but experts estimate it took anywhere between $10,000 and $50,000 to record ordinary.

SPEAKER_02 15:35

And it's not just the studio that gambles your paycheck away, right?

SPEAKER_00 15:38

No. There's also producers and sound engineers. Producers help shape how the song sounds, and they usually get paid either up front or through royalties. So when the song makes money, they get a percentage of those profits. This number can depend on many factors, but it ranges between $10,000 and $100,000.

SPEAKER_02 15:56

Wow, so the artist doesn't just keep everything they earn from streaming?

SPEAKER_00 15:59

Not at all. Streaming already pay already pays really small amounts per stream. Then that money gets divided between the label, producers, and sometimes writers. So the song needs a lot of streams just to make some real dough. For example, Alex Warren's Ordinary had over two billion streams and made just over ten million dollars.

SPEAKER_02 16:19

Okay, so recording a song is kind of like an investment?

SPEAKER_00 16:22

Exactly. The artist or label spends money first, hoping the song does well. Well enough to earn it back. It's basically risk and reward. And let me tell you some of the uh and let me tell you some of these artists take risks and there is no reward. This is because big artists are monopolies just by themselves. Hence you hear the big names over and over and over again instead of just up up-and-coming performers. They bring so much revenue it almost pays off in the end.

SPEAKER_02 16:49

When it comes to equipment, what kind of tools are we talking about?

SPEAKER_00 16:53

Good question. Microphones, software, and mixing tools cost thousands of dollars. Even if part of it was recorded at home, that equipment still costs money. So that's another economic layer on the cake.

SPEAKER_02 17:04

So even though ordinary sounds all emotional and personal, the recording process behind it is actually really business focused.

SPEAKER_00 17:11

Yeah, every decision is so important, like who to hire, where to record, and how to how much to spend is based on cost and the chance of making that money back.

SPEAKER_02 17:21

So basically, music is art, but recording it is economics. We've heard about the inspiration and the process for recording the song. Now I'm wondering what the publishing process looks like and what sort of legal things you have to do for royalties in owning the song and such.

SPEAKER_03 17:35

Ooh, that's a good question. It's a lot more than people usually realize. The two big things for this song, well, for any major song production, are master recording rights and publishing rights. The master is the actual audio file that you hear on streaming services. Whoever owns the master controls where the recording is distributed, how it can be licensed, the collection of revenue, whether and where the song is using media, whether remixes are allowed, and stuff like that.

SPEAKER_00 17:59

That's a lot. You would think the creator of the song would have those rights. Why do people sell them?

SPEAKER_03 18:03

There are negatives and positives. There are complicated legal procedures you have to go through and possible financial ramifications, along with the loss of a lot of control over their work. But a record label has much more resources and reach for getting the song out there and people listening to it. For Alex Warren's Ordinary, Atlantic Records was the label, a subsidiary of Warner Music Group, one of the three dominating record label companies globally, which means that any use of the master requires Atlantic Records permission in the form of a master use license. It also means that Atlantic Records collects all revenue and distributes it to collaborators based on their contracts.

SPEAKER_00 18:38

That's really interesting and sounds like a lot for all the collaborators to think about. So what are publishing rights?

SPEAKER_03 18:44

So the master recording rights are for the audio itself, like who owns it, and the publishing rights are who owns the lyrics, melody, and musical structure. The publisher handles the copyright and royalties for using the song. There are three major types of royalties you can get from music publishing rights: mechanical royalties from distribution, performance royalties from public performances of the song, and synchronization royalties from use of the song in visual media. The royalties from a publisher go in tandem with royalties from Atlantic Records. Meaning if you want to use a song, you have to go you have to also get a sync license from all the publishers. So a master use license from Atlantic Records and a sync license are needed for use of the song.

SPEAKER_00 19:22

I never thought about how different parts of the song itself would need to be copyrighted. Earlier you said all publishers. What do you mean? There's more than one?

SPEAKER_03 19:31

Yes, often in modern songs, song productions, there are seven to twelve. Modern songs have more writers. In the 1970s, on average, there were 1.8 songwriters accredited per song in the top 100. In 2010, it was 5.3. Collaborative songwriting is now the norm. This is significant because often each songwriter will have their own publisher and sometimes a co-publisher or administrator. Even without that, modern lingual incentives motivate people to credit people who only helped a tiny bit because they're avoiding lawsuits. Ordinary was published by Alex Werner Publishing, along with nine other publishing organizations.

SPEAKER_04 20:04

Wow, thank you so much for all that info on the legal side of things. I had no idea. Now, after the creation of the song, the artist has to get people to listen to it. They only profit from their work if other people gain as well. An example of how markets lead to mutually beneficial exchanges. In our current digital age, a major artist, a major way artists go about the marketing process is social media. The name of the game is to get people to hear your song, so they also make deals with organizations to have their songs and commercials on the radio and in TV shows. The more people who hear your song, the more likely it will find an audience that enjoys it.

SPEAKER_03 20:37

Consumers have a massive amount of media available to them at any given time. How do artists face the challenge of getting people's attention with the vast amount of competition?

SPEAKER_04 20:45

That's an excellent point. It has become such an important and challenging part of the process that content creators have developed a myriad of strategies to gain their audiences' attention. Many artists hire others to complete or aid with the marketing process, but since Alex Warren had a background in social media himself and already had followers, he managed much of the social media marketing for the song ordinary himself.

SPEAKER_03 21:07

I know some artists see the marketing process as inauthentic and inartistic. They want their art to speak for itself and struggle with this idea of having to convince people to give their creation a chance.

SPEAKER_04 21:16

Artists definitely can have that issue. But Alex Warren saw his marketing process as an additional form of art. There are different methods to go about posting about a song or other piece of art, so it can be an interesting challenge to find the one that works for your specific song and brand. Because Alex Warren already had a social media following that wasn't associated with his music, he had to be mindful about introducing something new to his followers. He designed videos to appeal to consumers in multiple different ways. Maybe they liked the song, but he also included visuals and words. That way the videos were still interacted with even if the viewer wasn't solely focused on the song. This method helped more people discover his music and contributed to how it went viral.

SPEAKER_03 21:54

That's a lot of work. Imagine how much time he spent filming, refilming, and brainstorming. And that's after the ride. And producing of the song. It's interesting that he had to consider how his audience would receive it and what they would want. Once again, his success relies on the value he provides to people. When his product matches their desires, both parties leave satisfied. A successful trade ending with a double thank you.

SPEAKER_04 22:14

Yep. All of these actions are motivated by the market and the prices it gives. Warren based his videos off of what people watched. These incentives lead to the spontaneous order that iPencil is all about.

SPEAKER_02 22:25

Now we've seen the overview of what it takes to create a song. Resources and planning occurs in the brainstorming, producing, marketing, and publishing processes of the song. The amount of work and time that goes into making even just one song is incredible, and we have millions.

SPEAKER_04 22:40

The really exciting part is that, just like the pencil, all of this occurred with the coordination of many people and groups of people. We think of Alex Warren as the songwriter, but he didn't do all of the writing himself, much less the marketing, producing, and publishing. He signed with a record company and used supplies from studios and stores. No one told those groups what to make or do. They generated resources and policies as a result of the market. Prices function both as information and incentives, telling companies what to produce and motivating them to produce it.

SPEAKER_00 23:09

The market system is what causes all of these to come together and create the song. What economists called the invisible hand guides individuals to act in us in such a way that things like pencils and songs can be made without centralized management. The complexity of the creation process makes the amount we produce truly magical.

SPEAKER_03 23:28

We hope this podcast has given you a glimpse into the vast amount of unplanned coordination that occurs to provide consumers with the products we have. Next time you listen to a song or any other media for that matter, think about all the things that had to come together to create it. And remember, it doesn't happen with a centralized planner.

SPEAKER_01 23:45

Thank you. Thank you, Ellie, Natalie, Susanna, and Colton. That was outstanding. What you've shown us today is that economics is not merely about graphs or banks or financial markets, but it's really about human action. It's it's a beautiful thing. It really is an exciting thing. And I love how you have have clearly articulated that today. Um, the idea of creativity, cooperation, risk, reward, ownership and incentives and the way people freely work together to bring about something valuable into the world is it's a it's a beautiful thing, truly. Um I I have one actually one question as I listen to you here. If there had been a central planner to bring this song Ordinary to life, who do you think that would have been? And do you think it would even be possible?

SPEAKER_03 24:32

I think it would have made sense for it to have been Alex Warren to be the central planner, but it would have been very difficult for him to do all of the marketing and all of the like he would have to coordinate like all of the sound equipment and like either build his own studio or like yeah, the Do you think it could have come to be as great as it as it is today had he been the central planner?

SPEAKER_01 25:00

Oh it would have taken so long. So efficiencies are another benefit to having the collaborative participation.

SPEAKER_02 25:09

Yeah. He didn't write all of his lyrics himself. Like they all came up with lyrics at the camp together.

SPEAKER_01 25:14

Right.

SPEAKER_02 25:15

So his lyrics probably wouldn't have been as strong either.

SPEAKER_01 25:18

Interesting. It's just it's such a beautiful process. Well, you you've shown us today a song simply does not just appear. Um, it's got the writers, the producers, the engineers, the publishers, the labels, the label, I guess the labels is that okay, and the marketers, everybody coming together. Um, and many of them not even seen. No one really knows these names, right? We know Alex's name, but that's that's usually where it where it ends. But yet through this voluntary exchange and the spontaneous order, everything comes together and we all get to benefit and everybody gets to rise higher. It's really lovely. To me, in in essence, this is this is what classical education should do. It trains you to see clearly, it allows you to ask better questions, to do the research that you did today, um, to recognize that wonder is embedded in ordinary things, like ordinary. Um, and you've helped us today see how the song Ordinary is actually not so ordinary after all. So thank you for that gift. We appreciate you being here. And if you have enjoyed this episode of the Lady K podcast, we encourage you to share it. Thank you for being with us, and we look forward to seeing you next time.