Calling the Tune: the Economics Of the Arts and the Art Of Economics

Listener 7 November, 1998.

Keywords: Literature and Culture;

The economy is not the ultimate end of human existence, so it would be wrong to justify the arts solely in terms of economics. Yet insofar as the arts require resources funded by the public purse, its public funding has to be subject to economic scrutiny.

The current difficulty the arts community faces making the case for public funding is that the general economic debate has shifted. Arguments which were commonplace before 1984 are no longer generally accepted, especially within the policy cadre. But the arts community has continued to use the pre-1984 rhetoric. Some of the older arguments remain sound. But even so, presenting them often involves avoiding mixing valid arguments with ones which are not valid today, and perhaps never were. What is required is a new rhetoric, which recognizes the current public policy framework, but sympathetically extends it to deal with the special, even unique, characteristics of the arts.

Policy is likely to be unresponsive to any claim which amounts to no more than that an activity – the arts, for instance – is unique or special and therefore is deserving of government assistance. Policy-makers wants to know what are the special features which generate a case for government assistance. After all, in 1984 the producers and consumers of just about every activity claimed worthy features as a justification for public support. Not only was the repetition of this argument tedious, but support of one activity is often at the expense of others. If all are assisted, then the various subsidies tend to cancel one another out.

The vast majority of New Zealand’s arts activities are delivered by the private market mechanism. While there is no estimate of the economic size of the arts sector, Statistics New Zealand estimates the broader “cultural sector”, which is about 5 percent of GDP, say $4.5 billion this year. Government funding of the cultural sector is a small proportion. Annual spending by Creative New Zealand is about $25 million, but even if other government sources are added, total public funding on cultural activities comes to only about $350 million, less than a tenth. So in practice the majority of cultural activity is funded by the private market and largely provided by private producers. This will be true for the arts component of the cultural sector. For instance, the census income reported by full time authors exceeds the entire spending of Creative New Zealand.

From this macro perspective, government intervention does not so much increase the size of the cultural sector, but change its composition on the margin. However, from the perspective of the aficionado, it matters enormously whether or not the government contributes $3.3m to ballet, $1.1m to kapa haka, or $10 million to a symphony orchestra.

While such spending needs to be rigorously scrutinized to see it is used efficiently, economics has not a great deal to say about which artistic endeavour should be pursued. Economist Gareth Morgan supports art education in schools, overlooking that art education is (one hopes) ongoing through adulthood too. An art gallery director told me her gallery’s remit was to “create an audience,” a cultural objective not too different from that of the school teacher. Because economics assumes tastes are constant, it is ill-equipped to advise on the total quantity of public spending on the arts or even much of its direction. Instead economists often smuggle in their political values to justify their arts policy stance.

Whatever claims the science of economics has to being able to advise of the effective utilisation of resources, it has only a limited role in assessing the ultimate purpose of their use. There are higher things in life than the production of material products. It is perhaps ironic in terms of the topic of this column that one of the functions of the arts is to remind us of that truth, even if its main champions sometimes get as trapped into the same economism as the philistines.