Still a work in progress, but a draft essay summarizing the economic approach to public funding for the arts is available here for (free) download.
Public goods and externalities, there’s no disputing tastes, or maybe there is, nudges, merit goods, Leonard Bast, The Children of Men, contingent valuation, and an attempt to define neoliberalism.
I finish by citing this most highly recommended essay:
David Throsby (2003) gets to the heart of the issue: there might be “cultural value” in the arts, “their aesthetic properties, their spiritual significance, their role as purveyors of symbolic meaning, their historical importance, their significance in influencing artistic trends, their authenticity, their integrity, their uniqueness,” that cannot be captured in estimates of “economic value” even with the most sophisticated techniques for determining the monetary values the public places on public goods and externalities. This means arts-policy makers will sometimes face a trade-off between stated economic values, calculated through the methods described in this chapter, and other values that exist outside of the economic method.
There’s not much talk of equity here – it gets its own treatment in my next entry…
UPDATE (June 9): A friendly reader writes:
In the middle of page 11, you state:
“It is important that the subsidy actually do something in terms of increasing the activity which is presumed to generate the externality; a grant to an orchestra that is mostly wasted on unnecessary internal expenditures, and that does not affect the artistic output of the orchestra in any way, is pointless, is not fulfilling the purpose of the subsidy.”
How might you define an “unnecessary internal expenditure” in this case? Do you feel general operating grants would qualify as “unnecessary internal expenditures” since it might not be tied a specific activity/artistic output to generate an externality? General operating I guess could perhaps affect the output, so perhaps that would ‘ok’ under this definition. Do you have specific examples in mind of what would be unnecessary internal expenditures, perhaps that you’ve seen organizations use subsidies for in the past?
This points to something I should make clearer. Suppose a grant is being made to a local theatre company, on the rationale that there is a positive spillover effect from its activities: it makes for a better community, people value its history and want it to be maintained for future generations, it is very innovative and advances the art of theatre, or a combination of all these.
A grant is given on the grounds that the funds will produce some outcome: the company will be able to do more plays, or it could afford to do performances with higher production quality, or expand its outreach activities into the community, or it can take some risks with innovative new works, or it could hire some office staff that allows the artistic talent to better focus on their art … something. The company is being subsidized so that it can do more on some quantity or quality axis.
Suppose the funds were spent in ways that benefitted the employees of the company, but did not affect what they do in any way we could observe – simply an increase in perquisites. Then we would have to ask why subsidize at all.
Arts council grants are not transfer payments to artists and arts administrators. They are a payment meant to drive some sort of result. It doesn’t have to be quantifiable – I remain a devotee of old public management – but it has to be some kind of outcome.
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