One-page summaries of all mandatory readings for Business Administration Master's Entrepreneurship and Management in The Creative Industries track, for the course Cultural Entrepreneurship and Innovation.
week 6: Art and Policy
1. Frey (2003): Public support
2. O’Hare (2008) Arts policy resea...
Week 6- Art and Policy
Frey (2003): Public support
Paper in a Nutshell:
Looks at the pro and contra arguments for public support of the arts. Two pov: Posi ve issue: extent of
support by the government. Norma ve issue: whether arts should be publicly supported, and if so, to what
extent.
How does the government support the arts?
1. Direct expenditures: funds, founda ons, philantrophy.. decision is taken by poli cal sector
2. Tax expenditures/exemp ons: indirect support; dona ons are incen vised as they are an exemp on
from taxes. A way for the government to foster privates to support the arts
Why should the government support the arts?
Welfare theory asks if the private market misallocates the resources in the domain of the arts.Government
support for the arts occurs where there is market failures, on the demand and the supply side.
Pro government support arguments
- Demand side:
1. External bene ts: Ar s c ac vi es yield posi ve external e ects. Producers of art should be
compensated for the external bene ts they bring to the market
2. Non market demand: a lot of people value art and the possibility to a end, but would not spend
money themselves. Ar s c produc on should regardless be supported because of its power for
social cohesion and na onal iden ty, as it leads to educa on and social improvements- the
producers of art are not compensated by the market for these bene ts they create, so the gov
should help them increase produc on.
3. Art as a public good: nobody can be excluded from enjoying art. Suppliers of art should be
compensated for their e ort more to supply be er and more public goods
4. Merit goods: cultural ac vi es should be provided in larger quan es than the individual
consumers would wish to purchase in the market bc of its bene ts
5. Lack of informa on: consumers are badly informed about the supply of arts
6. Irra onality: art is hard to judge and value, which a ects demand.
7. Income distribu on: art should be open to people regardless of their ability to pay
- Supply side
1. Imperfect compe on: compe on is monopolised hence prices are high- gov can correct this
market failure by suppor ng addi onal supply
2. Declining costs: if the price it is sold to it’s lower than the average cost of produc on- prices in art
hardly value its corollary aspects, hence it is inadequately valued when produc on goes up
3. Produc vity lag: Baumol’s cost disease
4. Income distribu on: Ar sts tend to be, on average, poorer than other members of society, making
them need governmental support to keep supplying
Contra arguments
- the external e ects are claimed to be small compared to other areas in the economy.
- Gov support o en achieves the opposite than democra sing art when they fund it as higher class people
s ll bene t the most from free access
- Some mes gov support favours the successful (richer) ar sts- hard to generalise tbh
- Declining cost and produc vity lag exists in many other areas and can be solved with market solu ons
- Revenue can be increased by collateral ac vi es-issues with loosing legi macy if these become the most
Art vs other sectors:
->The cultural sector received considerable government support, but ny compared to other sectors
-> An important cons tu onal decision concerning the public support of art refers to whether decision
making is centralised or takes place in a federal system of government. In the la er case, art suppliers do
not solely depend on one public authority but can try out their ideas on several public donors. This raises
the possibility and incen ves for innova ve art.
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