Social & Economic Studies within the Framework of Emerging Global Developments - Volume 4

1.1. Recent Interest in, and Future Relevance of Cultural and Art Economics

The literature points out a recent “steady expansion in the […] interest in the economics of art and culture [with] suggestions for promising lines of future research [and] we are likely to see [its] expansion in the future” (Throsby, 2006, p. 21). At the same time, basic questions about art and cultural economics keep being asked for a long time now, exemplified by Blaug’s 2019 book The Economics of the Arts: its sixteen chapters are all reprints of writings from between 1956 and 1974. Several of these are cited in detail in this research, revealing their thoughts still valid in today’s globalized and complex economic, artistic and cultural landscape(s).

One challenge of analyzing “economics” together with “arts” and “culture” is the reputation of economics as “the dismal science” (see the book titles of Levy, 2002; Marglin 2008, and Rodrik, 2015), whereas art and culture, even when analyzed through an economic lens, are considered “sublime” human experiences (see the book and the chapter titles of Amariglio et al., 2009a, 2009b), characterized by “the creative genius in literature, music, and the visual arts” (see the chapter title of Simonton, 2014), in which the perceived value of the “aesthetic experience” (see the chapter headings of Locher, 2014) contribute to “art’s economic exceptionalism” (see the book title of Beech, 2015).

Another challenge is the state of flux in the field’s most basic elements – starting with its very name. As Ginsburgh and Throsby maintain in the second volume of their Handbook of the Economics of Arts and Culture (2016), the “historical evolution” within the decade since the publication of the first volume (2006) allowed for “the discipline known as cultural economics [to be] more appropriately referred to as the economics of art and culture” (2016, p. 1; similarly Frey, 2019, p. 3). I use the short terms “art economics” and “cultural economics” for euphony and concision.

The field is divided into numerous economic investigations of art aspects and products: from paintings (Throsby & Zednik, 2014, pp. 81–100) over music (Levinson, 2014, pp. 101–117) and concerts (Courty & Pagliero, 2014, pp. 299–356) to festivals and cultural awards (English, 2014, pp. 119–143; Frey, 2019, pp. 63–70), cultural heritage and museums (Frey, 2019; pp. 77–88, 97–114; Willis, 2014, pp. 145–182), up to movies and books (Walls, 2014, pp. 185–214), or from organizational and technical aspects such as new technologies (Potts, 2014, pp. 215–232) over labor, property and investment (Whitaker, 2021, pp. 177–243) to international transactions and trade (Bisin & Verdier, 2014, pp. 439–484; Mandel, 2014, pp. 233–260; Platteau & Wahhaj, 2014, pp. 633–678), up to cultural organizations (Castañer, 2014, pp. 263–276), or from legal aspects such as digitization and copyright (Waldfogel, 2014, pp. 277–298), over media ownership (Doyle, 2014, pp. 357–378) up to cultural trading systems (Iapadre, 2014, pp. 381–410; Macmillan, 2014, pp. 411–438), or finally from considerations of cultural values over diversity up to open conflict (Aldashev & Platteau, 2014, pp. 587–632; Ginsburgh & Weber, 2014, pp. 507–544; Montalvo & Reynal-Querol, 2014, pp. 485–506; Schwartz, 2014, pp. 547–586).

Against this plethora of viewpoints, and integrating the most relevant recent literature (see Whitaker 2021), we combine historical, macroeconomic and sociopolitical perspectives in favor of government support and subsidies in cultural and creative industries.

1.2. Origin, Terms and Relationship of Cultural and Art Economics

The birth of the field of Cultural Economics is acknowledged to be Baumol and Bowen’s 1966 book Performing Arts – The Economic Dilemma: A Study of Problems Common to Theater, Opera, Music and Dance, in which the authors “demonstrate that straightforward economic analysis could illuminate […] the role of the arts sector in the economy” (Throsby, 2006, p. 4). Yet only in the book’s last part, “Sources of Financial Support”, and in two of the last chapters do the authors deal with “Government Support in Practice” or the “Rationale of Public Support” (Baumol & Bowen, 1966, pp. 347 ff., 369 ff.).

The first journal in the field, Journal of Cultural Economics, was established in 1977, and only as of the end-1990s had the field gathered enough material to warrant an overview of it (Throsby, 2006, pp. 4–5). One of the first findings was that cultural economics was the wider area, embracing media, heritage and art studies, but also that it was not yet well defined, being concerned with multiple disciplines including art history, art philosophy, sociology, law, management and economics (Throsby, 2006, p. 5).

Only in the 21st century did scholarly confidence grow that “a sufficiently cohesive body of work has accumulated […] to identify a field labeled “cultural economics” or “the economics of the arts and culture” […] even though the outer boundaries […] remain somewhat fuzzy”, allowing the “assembling a purposeful collection of essays commissioned from researchers working at the theoretical and empirical frontiers of the field” (Throsby, 2006, p. 6).

I was immediately pointed out that “a basic issue […] is that of defining whether and how cultural goods and services differ from other goods and services in the economy”, and “whilst it is the mysterious and possible unfathomable nature of art in all its forms that ultimately must underlie much of the behavior of individuals, firms and markets in the arts, economics requires a more systematic basis on which its analysis can rest” (Throsby, 2006, p. 6).

1.3. Terminology and Differentiation

The terms “Cultural Economics” and “Art Economics” require definitions of “art” and “culture”. For simplicity and inclusivity, I follow Throsby’s broad definition of culture “comprising or being defined as a set of attitudes, beliefs or values common to a group that somehow identifies and binds the group together”, which enables us “to speak of a national culture, a religious culture, a corporate culture and so on” (2006, p. 6).

Functionally, culture can also be defined as “the practices and products of cultural activity, including especially the arts”, which are “sometimes divided into the performing arts (acting, dancing, singing, playing a musical instrument, etc.) and the initial creative arts (visual art, sculpture, craft, creative writing, musical composition, etc.) though there are obvious overlaps between these categories”, all of which makes “the arts comprise a subset of culture more broadly defined” (Throsby, 2006, pp. 6–7).

Consequently, the concept of “cultural goods” includes overlapping elements of cultural, art and creative economics, in that “cultural goods have some public-good properties; in aggregate they yield positive externalities or diffused benefits that may be demanded in their own right” (Throsby, 2006, p. 7). On this basis, we follow the literature that defines “cultural industries” straightforward and “simply as those industries producing those good” (Throsby, 2006, p. 11).

2.1. Intersection of Cultural and Economic Policy

The literature reveals “four specific areas where cultural and economic policy intersect: support for the arts; trade in cultural goods, heritage; and urban and regional development issues” (Throsby, 2006, p. 19), and five areas of cultural policy that are especially well suited for economic analysis: “support for the creative arts; cultural goods in international trade; the management of cultural assets; industry and innovation; and foreign policy” (Throsby, 2012, p. 106). The first area, support for the (creative) arts, is the focus of this chapter.

This area is further defined in the literature as follows: “The intersections between cultural policy and economic policy are extensive, including […] the appropriate level for government support for the arts and culture, and the balance between direct (grant-related) and indirect (tax-related) means of support”, as well as “the role of the arts and culture in employment creation and income generation in towns and cities; especially those affected by industrial decline” (Throsby, 2006, p. 18).

2.2. Discussion of State Support for the Arts

The originators of the field of Cultural Economics, Baumol and Bowen, expressed their insecurity about “the long-run prospect for government support in the arts”, while for the United States they merely and generally stated that it “seems favorable” (1966, p. 405), or that “future professional performance may well survive and prosper” (1966, p. 407). One can see conceptual similarities to recent literature that highlights the relationship between the arts and state support, reasoning that there is a longstanding yet still conceptually and empirically unresolved practice, causing its proponents to call for more research (Throsby, 2006, p. 19):

“The rationale for state support for the arts has been one of the longest-running issues […] in the literature of cultural economics over the last 40 years. […] The empirical evidence is by no means extensive, and positive theories of assistance may be more useful in explaining levels and patterns of support actually observed in various democratic countries around the world […] Why, at a time when the trend is towards privatization in many sectors of the economy, the provision of government grants, tax relief and regulatory protection continues in the arts and heritage industries. The answer […] lies in government skepticism that consumers know what is best for them; in these circumstances producer interests can exert a strong influence on government policy, with consequent effects on both allocative and productive efficiency”.

This justification of governmental support and related regulations is apparently rooted in a liberal economic and political tradition.

2.3. Reaches of Cultural Policies

The literature differentiates between “the broad reach of cultural policy in general terms” and the fact that “its coverage and its level of importance in national policy agendas vary considerably between countries” (Throsby, 2006, p. 18). A comparison is made between Europe and the United States of America, yet only at an unspecified “central government level”:

In Europe […] there are substantial differences between countries in the volume of public resources they devote to the arts and culture in the ways those resources are deployed. Administrative structures also vary […] ranging from arm-lengths arts councils to full-scale Ministries of Culture. There are also sub-regional and supra-regional interests in cultural policy in Europe; on the one hand sub-national regions with distinctive cultural identities promote their own artistic and cultural endeavors; on the other hand the European Union and the Council of Europe have interests in developing pan-European cultural policies in various fields (Throsby, 2006, p. 18; similarly Baumol and Bowen, 1966, pp. 360–365 for Western Europe before the establishment of the European Union).

Throsby (2006, pp. 18–19) contrasts this with America:

In the United States […] there has never been a great deal of interest in the formulation of specific cultural policies at the central government level; rather the major players in the formation and execution of direct public expenditure programs in the arts and culture are located at sub-national levels of government. […] The largest share of support for the arts and culture is provided indirectly, via tax concessions for gifts to not-for-profit arts organizations and also via tax concessions to private owners of cultural heritage buildings and sites. The role of tax incentives in stimulating cultural donations and the significance of philanthropy as a characteristic of American life are [part of] the peculiarly American tradition of individual and corporate giving that has sustained the growth of the arts in the United States for more than a century. Despite the emergence of what many see as a distinctive and successful ‘American model’ for cultural support […] it may be difficult to replicate it in other countries where institutional structures, income levels and tax-price responsiveness may differ markedly from the US situation.

We thus constate (as do Ekelund et al., 2017) a European preference for more centralized state subsidies for the arts, contrasting with a more individualistic, indirect and administrative hands-off American understanding of official artistic and cultural support.