Ruth Tawse· Abdul Khakee (Eds.) Cultural Economics With Contributions by F. Abbe-Decarroux, N. O. Alper, H. Baumol, W. Baumol,S. Cameron G. Carbonaro, V. Dickenson, C. T. Duffy, P. Eijgelshoven D. Elshout, C. M. Gray, F. Grin, C. Hjorth-Andersen, M. Hutter T. Ito, S. Karttunen, M. Kesten, A. Khakee, Y. Kurabyashi, C. Lingle R. Mitchell, G. Mosetto, D. Netzer, J. W. O'Hagan, A. Peacock S. Pflieger, B. Rouget, A. Rubinstein, D. Sagot-Duvaroux M. Salamon, B. Seaman, D. Throsby, R. Towse, G,H. Wassall R. Welford With 15 Figures Springer-Verlag Berlin Heidelberg New York London Paris Tokyo Hong Kong Barcelona Budapest Ruth Towse Department of Economics University of Exeter Amory Building Rennes Drive Exeter EX4 4RJ, Great Britain Prof. Dr. Abdul Khakee Center for Regional Science (CERUM) University ofUmea S-901 87 Umea, Sweden The photograph on the cover represents the Ammarniis model of early settlement in the Swedish Lappland. By courtesy ofViisterbottens Museum, Umea. Photograph by Jostein Skeidsvoll. ISBN-13:978-3-642-77330-3 e-ISBN-13:978-3-642-77328-0 001: 10.1007/978-3-642-77328-0 This work is subject to copyright. All rights are reserved, whether the whole or part ofthe material is concerned, specifically the rights oftranslation, reprinting, reuse of illustrations, recitation, broad casting, reproduction on microfilms or in other ways, and storage in data banks. Duplication of this publication or parts thereofis only permitted under the provisions ofthe German Copyright Law of September 9, 1965, in its version ofJune 24, 1985, and a copyright fee must always be paid. Violations fall under the prosecution act of the German Copyright Law. © Springer-Verlag Berlin· Heidelberg 1992 Softcover reprint of the hardcover 1s t edition 1992 The use of registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regula tions and therefore free for general use. 2142/7130-543210 -Printed on acid-free paper Foreword Cultural economics as a field of research involves -as the title implies -two areas, culture and economy. These two areas have been traditionally regarded as each other's antithesis. However, the economic aspects of culture have increasingly become a matter of everyday reality for persons working in the cultural field. They have plans, ideas and ambitions for which they need resources. Demand for resources is one good indicator of the dynamics of cultural life. The economy of culture has always been in the focus of political interest. Political decisions concerning such priority areas as the development of regional institutions, support to the artists and cultural programmes for children and youth have of course important economic implications. Even in times of increasing public support to the arts, the best possible distribution of public subsidies has become an important issue and, thereby, the need arises to evaluate national cultural policies as well as individual cultural projects. Evaluation lets us know what has actually been achieved and reveals also what still needs to be dome. Evaluation has still one more function, namely to promote international exchange. In recent years, when public policy towards the arts has been subject to thorough scrutiny, it has become all the more important to learn from other countries' experience. The reviews of cultural policies undertaken within the framework of the Council of Europe are involving more and more countries in Europe. Sweden, one of the first countries to be examined under this programme, has learned much both from its initial self-evaluation and from the analysis made by the group of foreign experts. This is surely a field where economists can contribute much more than before. Culture is an aim in itself. It should not be looked upon as an instrument for other aims in the society. It is, however, quite possible to accept that cultural policy can work along the same lines as, for example, regional policy. An active cultural life must be a part of the infrastructure in every region. The Cultural Decade, proclaimed by the United Nations in 1986, designates the role of culture in the development of our societies as first among four goals. The role of culture in developing countries involves a wide problem area and an important challenge for cultural economists. This book contains a selection of papers presented at the Sixth International Conference on Cultural Economics. Its purpose is to review recent developments in the field of cultural economics and the important changes which have taken place in this field. Hans Sand Undersecretary of Cultural Affairs Ministry of Education and Cultural Affairs Sweden Preface Werner E. Pommerehne* University of Saarland and of Zurich About ten years ago, even most economists would have been surprised to hear about a subject called "Economics of Art and Culture". Up to that time, only a few economists, mainly those personally interested in the arts, had provided contributions in this area. One of them is Alan Peacock, who in 1969 had already been involved in analysing the public promotion of arts and culture. Along with the broadly based study on the perfonning arts in the U.S. conducted by William Baumol and William Bowen (1966) his work has marked the starting point of "Economics of Art and Culture" as an independent subdiscipline within the field of economics -although it took more than ten years until the Journal of Cultural Economics, a specialized scholarly journal, was first published. Since then biennial congresses have been held, which are organized by the Association for Cultural Economics. At first glance, the present volume contains the contributions to the sixth congress held in Umea, Sweden, in 1990 (following those in Edinburgh, 1979, Maastricht, 1982, Akron, 1984, Avignon, 1986 and Toronto in 1988). Nevertheless it is clearly distinct from its predecessors in tenns of quantity, content and methodological rigour. First, it is a publication of a restricted number of papers. In particular it draws on those contributions emphasizing the economic approach to the analysis of human behaviour. This implies an obvious improvement in comparison with the output of fonner conferences, which offered a forum to every potentially interested person from all possible branches just to present their likes and dislikes, which often were not analytically well-founded. This has led to the production of numerous (up to four) volumes per conference with a content which has become less and less attractive to the professional reader. Second, this volume exemplifies a new development in cultural economics, as it manifests a "deepening" of the analysis of cultural pursuits. This deepening becomes evident, for instance, in the carefully conducted research by Fran~ois Abbe-Decarroux and Fran~ois Grin on the demand for the performing arts, based on the straight application of modern consumer theory (decision under uncertainty where risk aversion is crucial). By employing a relation between age and attitudes towards risk, this study leads to a better understanding of why older people prefer (less risky) symphony and opera perfonnances to (more risky) theater perfonnances. Another outstanding example of a serious attempt to suitably apply economic theory - instead of presupposing that culture and arts are too exceptional to be subjected to an economic analysis - has been provided by Bruce Seaman's application of modern organisation theory to the international trade in cultural goods. His results indicate a way that should enable policy makers to choose the least inefficient option out of the protectionist measures increasingly being propagated nowadays. The attempt to consequently utilize an economic approach with respect to the artists' labour market has also been fruitful. We now not only know more about the labour supply decisions (see Gregory H. Wassall and Neil O. Alper), but thanks to other studies, such as for example the one by David Throsby, we are also provided with sound empirical evidence that artists supply labour viii on two essentially different labour markets: an arts market for the pursuit of creative and aesthetic goals; and a nonarts market to ensure an additional income for the support of their artistic career. As has been shown by Ruth Towse, the attempt to explain the considerable skewness in the distribution of earnings and the phenomenon of the "superstar" has proved to be quite complicated, but not inaccessible to economic analysis. To the existing superstar theories, which are either based upon the importance of the mass media or emphasize the importance of information costs for the formation of consumption capital, she adds the plausible hypothesis that performing arts companies will spend less on research costs rather than making use of the market determined performance fee as a quality index. The last mentioned study, dealing with the singing profession in Britain, provides much more than just a good example of this deepening process. The analysis is clearly relevant to any artistic profession and, also, to many other occupations in which people are self employed and where those asking for their services have to assess the quality of their work. Thus, the new development in cultural economics also includes a "widening" process. This becomes obvious in the contributions by Dominique Sagot Duvaroux et al. where the "stratification" of the market is analyzed in the context of contemporary visual arts and that of Gianfranco Mossetto, taking the city of Venice as an example of a cultural good. The widening process also becomes evident in some of the specific applications of the economics of the arts (e.g. in the comparative exploration of data on the performing arts in the USSR and the USA by Alexandre Rubinstein, William Baumol and Hilda Baumol), and again in a number of papers dealing with the objectives (and difficulties) of any cultural policy and of policy evaluations. As Alan Peacock correctly remarks, the role of the economist in this context consists in finding a proper role in developing an adequate institutional frame - a precondition for a lively art to arise. FOOTNOTE *Though I have only mentioned specifically a few of the contributors to this volume, this does not imply any disrespect to the others. Acknowledgements The emergence of this book owes much to the work done by the contributing authors in revising their contributions at the 6th International Conference on Cultural Economics. To a significant extent this is a collective enterprise. We would like to thank Mark Blaug for his assistance in selecting the papers at the outset and John O'Hagan for his subsequent advice. The conference was supported generously by the Swedish Ministry of Education and Cultural Affairs and the Swedish National Council for Cultural Affairs. Further support was provided by the Gosta Skoglund Fund, the Kempe Foundations, the Municipality of Ume1l, Jan Wallander's Foundation for Social Science Research, the Swedish Council for Building Research, the Swedish Council for Research in Humanities and Social Sciences, the Swedish Institute and the University of UmelL The staff of the Centre for Regional Science (CERUM) has provided general support in the arrangement of the conference and in the preparation of the proceedings. We would particularly like to thank Jennifer Wundersitz, Cathy Kingdom, Barbro Roos and Erik Sondell for their assistance. Our thanks are also due to Margareta Gallstedt who has redrawn some of the figures. The brunt of all the editorial changes has been borne by Ingrid Lindqvist, who has done a wonderful job in preparing the manuscript in camera-ready copy. A tremendous responsibility which she has undertaken with good humour and patience. CONTENTS Introduction by R. Towse and A.Khakee ...................................................................................... 1 Section I: Policy and Policy Evaluation 1. Economics, Cultural Values and Cultural Policies .................................................. 9 by A. Peacock 2. Public Choice and Public Funding of the Arts ....................................................... 21 by C. Lingle 3. Problems of Planning Cultural Programs under Endogenous Tastes. .................... 31 by S. Cameron and R. Welford 4. The Rationale for Public Funding of a National Museum ..................................... 37 by C.T. Duffy 5. Assessing and Financing Cultural Investments ...................................................... 49 by G. Carbonaro 6. The Wexford Opera Festival: A Case for Public Funding? ................................... 61 by J.W. O'Hagan 7. Trends in Art Policy: The Dutch Case ................................................................... 67 by P. Eijgelshoven Section II: Pricing Issues 8. Some Unanswered Questions in the Economics of ArL ....................................... 77 by L.P. Singer 9. Auction of Works of Art ........................................................................................ 85 by M. Salamon 10. Factors Affecting Price on the Contemporary Art MarkeL .................................. 91 by D. Sagot-Duvaroux, S. Pflieger and B. Rouget 11. The Classification of Prices: An International Comparative Inquiry into the Admission Prices for Cultural Events .................................................................. 103 by D. Elshout Section III: Audiences for the Arts 12. Art Productivity in the Information Age .............................................................. 115 by M. Hutter 13. Risk, Risk Aversion and the Demand for Performing Arts. ................................. 125 by F. Abbe-Decarroux and F. Grin 14. Museum Visitor Surveys: An Overview, 1930-1990. .......................................... 14I by V. Dickenson xii Section IV: Trade in Cultural Goods ~~~~~ri~~~n~r~d~fna@~l~~dG=.~~~~~.~~.~.~ ~~~:.~~.~~~ 15. .. ...................... 153 by B.A. Seaman 16. The Canada-U.S. Free Trade Agreement: Provisions Directly and Indirectly Affecting Trade in Cultural Product ..................................................................... 163 byM. Kesten Section V: Artists' Earnings 17. Why and How to Define an Artist: Types of Defmitions and Their Implications for Empirical Research Results. ....................................................... 175 by R. Mitchell and S. Karttunen 18. Toward a Unified Theory of the Determinants of the Earnings of Artists ........... 187 by G.H. Wassall and N. O. Alper 19. Artists as Workers ................................................................................................. 201 by D. Throsby 20. The Earnings of Singers: An Economic Analysis. ............................................... .209 by R. Towse Section VI: Country Studies 21. On the Economics of the Performing Arts in the USSR and the USA: A Preliminary Comparison of the Data ............................................................... .221 by A. Rubinstein, W. Baumol and H. Baumol 22. Cultural Policy in an Era of Budgetary Stringency and Fiscal Decentralization: The U.S. Experience. ................................................................ 237 byD. Netzer 23. A Cultural Good Called Venice. ........................................................................... 247 by G. Mossetto 24. Thaliametrics -A Case Study of Copenhagen Theatre Market... ......................... 257 by C. Hjorth-Andersen 25. Art Costs and Subsidies: The Case of Norwegian Performing Arts ..................... 267 by C.M. Gray 26. Socio-Economic Characteristics of Audiences for Western Classical ~u~~ ~:::S:;~S~i ~~g~cI~ Analysi& ................................................................ .275 Author's index .............................................................................................................. 289 Introduction This is a collection of papers from the 6th International Conference on Cultural Economics held in UmeA, Sweden in June, 1990. The volume represents an attempt to view cultural economics as a field of applied economics. In the past, the proceedings of International Conferences of the Association for Cultural Economics have been published in toto, all the papers being included whatever their merit or orientation. Here a selection has been mainly of papers which use the tools of economic analysis to investigate cultural matters; mainly, but not exclusively. Papers by non-economists have been included which deal with issues of interest to economists. Whatever justification is used as a basis for making it, though, any selection is personal and to some extent arbitrary. The strength of economics as a discipline is its rigour and, while it may be argued that we do not want to allow cultural economics to slide into yet another branch of applied economics in which method and methodology consist largely of testing the testable bits of neoclassical theory and mathematising the other bits, nevertheless, if cultural economics is to be viewed as a serious branch of economics, some of that has to be taken on board. Cultural economics as a field remains largely unknown within the economics profession and, mutatis mutandis, it has not by and large been swift to embrace developments in economic theory. We are at a point in economics at which several of the currently evolving research programmes -the treatment of risk, principal agency theory, non-profit organisations, taste-formation, to name a few -are particular ly relevant to the field of culture and the arts. Many of these ideas are now being utilized in cultural economics, as this volume shows. It is now 25 years since Mark Blaug published a collection of papers in Economics of the Arts; that book was a selection of articles, mostly already published ones, which had been written over the previous few years, i.e. in the late Sixties and early Seventies. The Journal of Cultural Economics was first published in 1977 and the first international conference held in 1980; quite a lot has been written in the field over the intervening period. It is interesting to reflect on the progress in the subject over those 25 years. Certainly, a great deal more is now known about the arts economies of many different countries: there are more data and more people producing and analysing them. Cultural economics has not yet developed its own distinctive core research programme as did, say, the economics of education and the economics of health with the notion of human capital. This has yet to happen in our subject but we are confident that it will. One way that can come about is by making our research more appealing to economists in general. If our subject is to develop it needs to become established in the mainstream of the discipline of economics. The papers do not easily fall into sections because they cover a wide range of topics. Some classification was necessary, however, and accordingly the book is divided into sections. Policy issues till predominate and this section is longer than the others; there are sections on pricing issues, audiences, trade in cultural goods, artists' earnings, ending with a section entitled "country studies" which has work on the USSR and the USA, Italy (Venice), Denmark, Norway and Japan - an amazing range of common interests and problems. In all there are 15 countries represented in this volume, which demonstrates the international scope of our subject. The authors also range from prominent elder statesmen of the profession to young economists who have just completed graduate work. They include practitioners as well as academics. Alan Peacock is perhaps unique in having had a distinguished career as an academic economist and as an administrator of the arts, as well as having been a