Orley Ashenfelter, Professor of Economics at Princeton and the former editor of the American Economic Review wrote a brief review of my book in Barron's (December 4, 2004). Here is the gist of what he had to say.

"This is a remarkable assembly of two decades of Arthur De Vany's efforts to study the movie industry using the tools of modern economics. Okay, movie lover, if that sounds dry, what about a hard-headed, dollars-and-cents answer to film critic Michael Medved's question: "Does Hollywood make too many R-rated movies?" De Vany's answer: a resounding "yes."

His answer isn't based on a red state versus blue state discussion, but on careful analysis showing that, at the production rates in the period he examined, G-rated movies had lower risk at each rate of return than did R-rated movies. From 1985 to 1996, De Vany found, Hollywood churned out more than 1,000 R-rated movies. If it had made more than a mere 60 (you read that number right) G-rated movies in that stretch, De Vany asserts, the industry would have been far better off economically.

Hollywood Economics brings to the movies what some call the New Economics of Art and Culture. A key ingredient in his approach is what he considers the industry's key characteristic, what screenwriter William Goldman (Butch Cassidy and the Sundance Kid, A Bridge Too Far) calls the "Nobody Knows Anything" principle. The basic idea: In Hollywood, a movie's revenues, costs-and thus returns-are extremely uncertain.

It appears that De Vany came to appreciate both the evidence supporting this proposition and the power of its implications only late in his academic career. (Earlier this year, I met him over dinner to discuss his work. A retired economics professor from the University of California at Irvine, De Vany, who's in the same age bracket as Clint Eastwood, looks a bit like that actor-and every bit as fit!)

The kind of risk De Vany describes is associated with the Stable Paretian hypothesis, in that once you know that revenue, costs or returns have reached level X, the expected value of future levels increases in level X.

Basically, it's about exponentials: The downside is called the "angel's nightmare." De Vany estimates, for example, that if you have spent $20 million on a film and are already over budget, you shouldn't expect to spend less than $32 million before you finish! The upside: Once you reach a certain level of revenue, you can expect even more, which leads to the virtually unimaginable financial success of movies like Titanic.

One of the most fascinating parts of Hollywood Economics is De Vany's analysis of superstar actors and directors. Due to the nature of the blockbuster phenomenon, a director like James Cameron (Titanic was his biggest hit) has made films with total gross revenues that equal those of movies by Ron Howard, who's made twice as many films.

On the other hand, De Vany shows that it's far more likely for a blockbuster movie to produce a superstar than for the presence of a superstar to produce a blockbuster movie.

He also argues that paying superstars a sum equal to the increase in revenues they're expected to generate usually means a movie won't be profitable. Indeed, in one chapter, he shows that not all superstars are worth such payments. Though Tom Hanks, Tom Cruise and Clint Eastwood may be; Jack Nicholson, Robert DeNiro or Bruce Willis may not be.

As venture capitalist Kip Hagopian (a/k/a B. Kipling Hagopian, producer of the blockbuster Ron Howard-Mel Gibson hit Ransom) told me last summer, the most difficult part of the Hollywood process is "to get the movie made."

My advice: Read this book before you try."

ORLEY ASHENFELTER is Joseph Douglas Green 1895 Professor of Economics at Princeton University.