CHAPTER 1

Introduction

This volume presents original research findings on the impacts of culturalconsumption and production on local economies. The chapters arebased on papers presented at "The Arts, New Growth Theory, and EconomicDevelopment," a May 2012 Brookings Institution symposium sponsored bythe National Endowment for the Arts. The central theme of the symposiumwas that the arts are not an amenity or a sector that exists in isolation but thatthey are wholly integrated into local economies. Indeed, the complex role ofart in local growth is what has made empirical research in the field so challengingand the new research in this volume so welcome to scholars and policymakerswho seek to advance public knowledge about the dynamicrelationship between art and economic growth.

The following chapters investigate the arts in local economies from a rangeof viewpoints, presenting original data derived from quantitative and qualitativemethods. Topics investigated include location choices by arts entrepreneurs;links between the arts and non-arts sectors; public policies to fosterlocal arts organizations; and the arts' effects on incomes in cities across theUnited States and the United Kingdom. There is no single method of parsingthe complex factors at work, and these chapters should inspire furtherresearch along various lines to advance knowledge about the place of the artsin economic development. A brief review of the evolution of arts policy andof thinking about economic growth is presented below, followed by a surveyof the contributions of these chapters and suggestions for future research.

Public Policy and the Arts

Until around the turn of the twenty-first century, public arts policy in theUnited States received relatively little attention. There was enough of a committedinterest group to keep public funding of the arts alive at the federal,state, and local levels, although budgets were generally small; however, thegreatest public support of the arts came from income tax–deductible charitabledonations to nonprofit arts organizations, not from public funding.Typically, the only time that arts policy was newsworthy was when publiccontroversy arose over specific works of art that had received, usually indirectly,some form of government support.

In the 1960s, the rationales for direct public funding of the arts tended tocenter on the benefits to the public of being able to enjoy fine arts: classicalmusic, opera, ballet and modern dance, some theater, and the visual arts.First, there was the case for equity: the fine arts are part of a fulfilling life thatought to be made available to all, including those who have low incomes orwho live far from major art centers. Public funding of nonprofit arts organizationscould enable those organizations to undertake outreach activities tounderserved populations and to keep ticket prices in check. Second, there wasa rationale based on the potential for market failures in the arts: public subsidiesare a means of encouraging the production and consumption of formsof art that provide public benefits, especially art forms that would be unlikelyto flourish in a purely market-oriented environment. Because the fine artsprovide public as well as private benefits, they do not represent purely privateconsumption. For example, people may benefit from my attending the operaeven if they themselves never attend. They might be pleased that the traditionsof operatic performance are being preserved so that they have the option ofattending one day in the future (or that their children and grandchildren havethat option), they might take special pride in knowing that their communityis considered a center of culture, or they may simply feel good because othersin the community are enjoying art of high quality.

However, even those who enjoy the arts a great deal might find those rationalesfor public funding somewhat weak. If the real concern is about inequalityin the United States, are health, education, and housing not more pressingconcerns than art museums and classical music performances? Are theclaimed external benefits of private arts consumption of any significant magnitude,or do they simply represent wishful thinking by those who themselveshappen to value the arts and their associated public subsidies?

More recently, however, two new kinds of economics-based cases havebeen made for active public support of the arts. One is the so-called "economicimpact" of the arts. In many studies commissioned by arts advocates,impact is calculated by measuring direct consumer spending on the arts (usuallyrestricted to the nonprofit sector), then inflated by a Keynesian-style"multiplier" that generates an estimate of the complete impact on aggregateincome resulting from arts expenditures. Although some arts advocates,impact studies in hand, proclaim that the arts warrant public subsidy becauseof the great amount of total income generated by arts expenditures, the problemswith the analysis are clear: the estimated benefits from increased expenditureson...