Abstract
Many politicians, journalists and artists, and a large part of the general public, regard art as something outside economic reasoning and calculation. They express reservations regarding an economic analysis of artistic and cultural creation, or call for the economic consideration at least to be based on an aesthetic analysis of supply of and demand for art1. But art — like beauty, freedom or justice — is an abstract concept and therefore cannot be grasped directly. If the product cannot be accurately described, how is the economist then able to say something leading to a better understanding of art and culture, and, on that basis, about the way to finance them?
This chapter is based on Bruno S. Frey Werner and W. Pommerehne (1990), “Public Promotion of the Arts: A Survey of Means”, previously published in the Journal of Cultural Economics 14, pp. 73—95, used by permission of Kluwer Academic Publishers.
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References
Sometimes even economists assert that “to properly study the market for artistic goods, it is necessary to deal with the aesthetic nature of the art” (Shanahan, 1978, p. 13).
The New York Museum of Modern Art’s department of architecture and design displays a 1945 Bell-47 DL helicopter.
See Moulin (1967, p. 109ff). Another example is the recently deceased New York gallery owner Leo Castelli. He became famous for promoting, among others, the work of Robert Rauschenberg, the later internationally leading prepop-artist, against the then prevailing taste and against massive opposition by the artistic profession (see Pommerehne and Schneider 1983). Castelli also discovered and helped draw attention to the works of Jasper Johns, whose False Start, sold for over 17 million dollars in 1998, which is the most expensive work of art by a living artist to date (Economist, September 4, 1999).
In the 1971—72 season, about 53 percent (1974/75 as much as 62 percent) of the productions at the Metropolitan Opera House were by these four composers. In several seasons, no works by contemporary composers were performed at all at the Met; see Martorella (1977).
Over and above the five composers featured in the ten-year list presented in Table 7—1, Strauss (Jr.), Donizetti, Leoncavallo, Gounod, LehAr and Offenbach have top-ten list entries for single years (see http://www.operaamerica.org/topten.htm). Of course, composers with a large number of individual pieces may find it harder to make such a list (which may, for example, explain the absence of Wagner).
On the contrary, the weight has clearly shifted in favor of the tried and true: while in 1907 the average “age” of the performed opera pieces was still 42 years, nowadays it is more than a hundred years.
Thus, for example, Touchstone (1980) calculated values of around —0.11 for the long-term price elasticity of demand for opera performances in the United States. According to her simulations, an abrogation of all (private and state) subsidies would imply raising entrance prices by 125 percent, which would however lead to a decline in attendance of only 14 percent.
See the already “classical” treatments in Baumol and Bowen (1966, chapter 16) and Peacock (1969), also Netzer (1978, part 2), Wahl-Zieger (1978, part 4), Cwi (1979), Throsby and Withers (1979, chapter 10), Leroy (1980, chapter 4), Austen-Smith (1980), Withers (1981), Horlacher (1984, part 1), Sagot-Duvauroux (1985, part 4), Grampp (1983, 1986—7) and O’Hagan (1998).
As seen for example in the Federal Republic of Germany in various representative surveys on the theatre (cf. among others Marplan 1968, Biermann and Krenker 1974).
Interestingly, some American towns have actually refused public support for purchases of art on the grounds that only connoisseurs need the original. It was argued that to use tax money would only benefit those few who derive high aesthetic enjoyment from an original (see again Smolensky 1986).
Schuster (1999) discussed tax-based indirect aid schemes for a variety of national contexts and tax regimes.
For a formal analysis of the effects of direct subsidies (and of the tax expenditure mentioned above) on extent and quality of artistic production and on social welfare (measured by consumer surplus), see Hansmann (1981) and Le Pen (1982). Dupuis (1983, 1985) and Austen-Smith and Jenkins (1985) further discuss the questions on how far subsidies influence the target function of recipients, affect the nature of their demand for support and affect the choice of further instruments of artistic production.
See e.g. Peacock (1969), but the idea can be found earlier with respect to the American school system. For more recent discussions, see Horlacher (1984), West (1985) and Peacock (1988).
For empirical evidence, see the reports of the Bavarian Supreme Court of Auditors (B.O.R. 1984, p. 52 ff) on such behavior by the public radio orchestras, and of the Austrian Court of Auditors (RH 1988) for the national theatres in Vienna.
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Pommerehne, W.W. (2003). How Can the Arts Be Publicly Promoted?. In: Arts & Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-24695-4_7
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