Why Art? Why Economics?

What Does Economics Have to Do with Culture?

James Allen Smith

Economic language and ideas have increasingly found their way into discussions of artistic value and cultural benefit. For better or for worse, the discipline of economics has been the lingua franca of public policy discourse for at least the past fifty years. Sometimes the terms resonate harshly on our ears. How do people in the world of arts and culture answer those who speak this language, who try to value cultural activity in terms of economic multipliers, cost-benefit analysis, quantitative outcome measures and, a current favorite, contingent valuation methodology?

Some economists know how difficult it is to bridge this linguistic and conceptual divide. The Australian economist David Throsby, one of the most astute cultural economists at work today, finds that artists just don't behave as classic economic models would predict. He signals the difficulties that economists have in trying to understand the artist's working life when he writes: "...unlike the vast majority of workers — artists generally prefer more (arts) work time to less, and [this fact] requires a reformulation of conventional labor supply models. [Much] of what artists do in their day-to-day work — the choices they make, the lines of development they pursue — have nothing whatsoever to do with economics." Simply translated, he is telling us that artists often prefer work to leisure, sometimes choose less remuneration than more, and behave in ways that are not easily explained by material rewards.

If economic models have difficulty in explaining the behavior of individual artists, the discipline of economics faces equally perplexing problems in explaining the public's interest in funding the arts? Throsby puts the policy problem in its bluntest terms: Is it the business of governments to promote and to fund culture? He reminds us that economic language and thinking create the basic framework within which we must argue for or against a public policy. Economics has become the language of public policy because policy is so often about the allocation and most efficient uses of resources. Not surprisingly, foundations and others who distribute money have also adopted this language of economic rationality when they make their decisions,shape programs, seek and evaluate results. Clearly, in this context, the weight of argument favors outcomes that can be quantified.

Less obviously, however, the weight of argument also favors individual goals and choices over collective ends. Throsby explains that economic values and cultural values are different in very fundamental ways: economic values are based on individual calculations of utility, while cultural values are based on collective and communal decisions about meaning and worth. Markets can determine a price for some objects at the immediate moment when the transaction takes place, but cultural value emanates from another sort of transaction, one that is more enduring and involves many more parties to the transaction.

Cultural values arise in an exchange that is not exclusively a market transaction, say, a simple ticket sale. Cultural markets don't clear when supply and demand curves intersect. Cultural exchanges endure; their values (and valuations) are long-term; the benefits are widely diffused. Does it make sense to try to establish a marginal utility — in other words, a price — for cultural values that can arise simultaneously from the interactions of aesthetic, social, spiritual, historical, and symbolic considerations? Can we put a price or assign a number to memory, identity, a sense of place, or cohesive communities?

It is useful to know — and to be able to argue and persuade — in the utilitarian language of economists. But only at times. We can offer some measurements of the role of the cultural sector in terms of its contributions to gross domestic product, to our international trade balance, or to economic development in a city or region. We can also begin to argue that the arts contribute to human capital, helping (however obscure the underlying causal relationships) to improve educational performance and test scores, and to enhance workplace skills, creativity, and technological innovation, although these things continue to focus on individual benefits.

Some scholars have also begun to argue that the arts build social capital; that they are a source of civic strength, cooperation, trust, participation, identity, and other communal values. This approach supplies a civic rationale for our cultural endeavors.

Others are now beginning to make the case for the value of creative capital. In the post-industrial world they argue that creativity has become an asset, a resource just as coal, iron, and oil were the basic resources of the industrial era. Richard Florida is among those who contend that a creative class has emerged that now, numbering 30 percent of the work force, is double what it was twenty years ago and ten times what it was in 1900. With creative capital in mind, we can then argue that fostering creativity, protecting and preserving creative assets, is a matter of fundamental public interest in the post-industrial era. This is both a broader economic rationale and perhaps an argument fitting for a globalizing, post-industrial economy.

When we treat arts and culture as a source of human, social, or creative capital, we are admittedly adopting an economic metaphor, though not one with the restrictive language of a market place transaction. This metaphor can be a step toward bridging the chasm between economics and culture. It begins to treat culture as what it is — a resource to draw upon, as asset to preserve, a store of enduring worth and value.

James Allen Smith is senior advisor to the president, The J. Paul Getty Trust. This piece is excerpted and adapted from an address given to the Museum Trustees Association, October 12, 2002 in San Diego, California.