Economics of the Arts and Cultures Flashcards
What is Cultural Economics?
The study of how economic principles apply to the arts, heritage, and creative industries.
What does Cultural Economics examine?
Market demand, production, funding, and policy within the cultural sector.
What cultural goods are included in the scope of Cultural Economics?
- Performing arts
- Visual arts
- Literature
- Museums
- Built heritage
- Music
- Publishing
- Film
- Broadcasting
- Digital content
What are some economic characteristics of cultural goods?
- High fixed costs
- Uncertain demand
- Mix of public and private funding
- Non-rivalry
- Non-excludability
What is the difference between market and non-market aspects in cultural products?
Some cultural products are sold in markets while others rely on public funding, philanthropy, or subsidies.
Who formulated Baumol’s cost disease theory?
William Baumol and William Bowen.
What is the role of government in the cultural sector?
Through policies, subsidies, and regulations to support public access to cultural goods and preserve cultural heritage.
How does Cultural Economics intersect with other fields?
It overlaps with sociology, political science, and arts management.
What are creative industries?
Sectors like music, film, publishing, broadcasting, and video games where creativity and intellectual property are central.
What are the economic characteristics of creative industries?
- High fixed costs
- Low marginal costs
- Unpredictable demand
- Importance of intellectual property rights
What impact has digitization had on creative industries?
- Transformed production, distribution, and consumption patterns
- Decreased distribution costs
- Emergence of piracy and unauthorized sharing
- Altered revenue structures
What analytical tool is used in welfare economics for cultural projects?
Cost–Benefit Analysis.
What do economic impact studies assess?
The broader economic contributions of cultural activities, such as job creation and tourism stimulation.
What are some challenges in public finance for cultural subsidies?
- Ensuring effective budget allocation
- Maximizing public welfare
- Transparency and accountability
What is a principal-agent problem in cultural policy?
When cultural organizations do not fully align with the goals of policymakers.
True or False: Cultural goods are often considered public goods.
True.
What are positive externalities in cultural economics?
Benefits to society beyond those who directly consume cultural goods.
What are some unacceptable arguments for cultural subsidy?
- Elitism
- Tradition for tradition’s sake
- Job creation alone
What is the main justification for public support of arts and culture?
Market failure due to public goods and externalities.
Fill in the blank: _______ is the study of the role of government in the economy.
Public Finance
What does social welfare aim to maximize?
The sum of utilities or benefits for all individuals in a community.
What is market failure?
When the price mechanism cannot optimally allocate resources.
What are some sources of market failure in cultural economics?
- Public goods
- Externalities
What is Baumol’s cost disease?
A theory explaining rising costs in the performing arts sector.
What is the focus of cultural policy?
Government interventions and initiatives to achieve cultural objectives.
What is a significant challenge in measuring performance in cultural organizations?
Ensuring accountability and alignment with public interest.
What is the purpose of the British Council as described by Keynes?
To stimulate, comfort, and support societies presenting the arts.
What does the term ‘infinite variety’ refer to in the context of arts and culture?
The differentiation of products by quality and uniqueness.
What is the ‘Motley crew principle’ in creative production?
The need for diversely skilled inputs for complex creative products.
Who is Richard Caves, and what was his view on writing about the arts?
A scholar who postponed writing about the arts due to concerns over professional reputation.
What is the primary reason for taxpayer money to be spent on the arts?
social welfare
This includes addressing market failure and providing public goods and external benefits.
What are the sources of market failure in the cultural sector?
- Public goods
- External benefits
Market failures lead to under-provision of cultural goods.
What is Baumol’s cost disease?
Not a case of market failure
It refers to the rising costs of labor in the arts without corresponding increases in productivity.
What is the optimal level of supply in the context of public goods?
Efficiency
It refers to society making optimal use of scarce resources to meet individuals’ needs.
What does ‘collective demand’ refer to?
Total willingness-to-pay (WTP) for public goods
It’s calculated by adding up everyone’s WTP for a given quantity.
What does the ‘benefit principle of taxation’ entail?
Those who pay taxes should benefit from public expenditure
This principle raises concerns about fairness in funding the arts.
What are some equity measures in arts funding?
- Concessions on ticket prices
- Access for people with disabilities
- Geographical distribution
These measures aim for fair access to cultural resources.
How do lump sum subsidies affect the market for theatre?
Leads to an outward shift of the supply curve
This results in more performances being produced and increased social welfare.
What is a per unit subsidy?
A specific sum per unit given to the producer
It is intended to reduce variable costs.
What is the purpose of contingent valuation?
Estimating demand by questioning people’s willingness to pay
It’s often used for public goods not yet offered in the market.
What factors define an artist?
- Time spent on artistic work
- Income derived from artistic activities
- Reputation among the public
- Recognition among peers
- Quality of work produced
- Membership of a professional association
- Professional qualification in the arts
- Subjective self-evaluation of being an artist
These criteria highlight the complexity of defining who is considered an artist.
What is the ‘work preference model’ proposed by David Throsby?
Artists do not prefer leisure time over working time
They often pursue artistic endeavors regardless of their income from other jobs.
What is the ‘superstar phenomenon’ in the arts?
A small number of artists achieve significant financial success
This is often due to market scalability and consumer preferences.
What is intrinsic motivation in the context of artists?
Driven by passion and personal fulfillment
This can influence their labor supply decisions beyond financial considerations.
What challenges do artists face in their labor market?
- Income variability
- Oversupply
These factors can lead to competition and potential underemployment.
What is the backward-bending labor supply curve?
Higher wages can lead to a decline in labor supply after a certain point
This occurs when workers prefer leisure time over additional work.
What is the trade-off between efficiency and equity in resource allocation?
Efficient allocation of resources vs. fair distribution of resources
This trade-off can affect tax distribution and social welfare.
What does the term ‘multiple job holding’ refer to in the arts?
Artists often work in multiple jobs to support their artistic endeavors
This is a common practice due to income variability in the arts.
What are determinants of demand for cultural goods and services?
- Income levels
- Education
- Price sensitivity
- Substitutes and complements
These factors influence how much cultural goods are consumed.
What is the significance of empirical research in understanding artists’ labor markets?
It helps analyze employment patterns, earnings, and career development
Empirical studies are crucial for tailoring economic theories to the complexities of the arts.
What is a determinant of demand related to income levels?
Higher disposable income often correlates with increased consumption of cultural goods and services.
This implies that as people’s income rises, they are more likely to spend on cultural activities.
How does education influence cultural participation?
Educational attainment can enhance appreciation and understanding of cultural offerings.
Higher education often leads to greater engagement with the arts.
What effect does price sensitivity have on cultural goods?
The cost of cultural goods and services affects demand elasticity, with some consumers being more price-sensitive than others.
What role do substitutes and complements play in cultural demand?
The availability of alternative entertainment options can impact demand for specific cultural activities.
Name three demographic factors that influence cultural engagement.
- Age
- Gender
- Socio-economic status
What is cultural capital?
Individuals with higher cultural capital are more likely to participate in diverse cultural activities.
How has digitalization impacted access to culture?
Digital platforms have broadened access to cultural content, allowing for more diverse consumption patterns.
What is one policy implication of cultural consumption?
Government interventions can make cultural goods more accessible, especially to underrepresented groups.
What challenge exists in quantifying cultural participation?
Accurately measuring cultural consumption is complex due to diverse definitions and informal participation.
What is Baumol’s Cost Disease?
A phenomenon where labor-intensive industries experience rising costs without corresponding increases in productivity, affecting the performing arts sector.
What are the two main types of costs in the performing arts?
- Fixed costs
- Variable costs
How do revenue streams in the performing arts typically manifest?
Income is generated through ticket sales, sponsorships, and public funding, varying based on popularity and economic conditions.
What market structure do the performing arts operate in?
The performing arts operate in a monopolistic competition framework.
What is price elasticity of demand (PED)?
A measure of the responsiveness of the quantity demanded of a good or service to a change in its price.
What characterizes inelastic demand?
PED < 1 (in absolute value) indicates that changes in price have a relatively small effect on the quantity demanded.
List two determinants of price elasticity of demand.
- Availability of substitute goods
- Percentage of income spent on the good
What does cross price elasticity (XED) measure?
The responsiveness of demand for good X following a change in the price of a related good Y.
What is income elasticity of demand?
It measures the responsiveness of the quantity demanded for a good or service to a change in the income of the people demanding the good.
What are luxury goods characterized by in terms of income elasticity?
Luxury goods exhibit a large change in quantity demanded when income changes.
What is a common finding about performing arts audiences?
Performing arts audiences are often elite in terms of income, education, and profession.
What historical significance did the Handelsbeurs in Antwerp have?
It was built in 1530 and is known as the world’s oldest bourse, facilitating intermediaries in the primary market.
What role did Rembrandt play in the art market during the golden century?
He earned money from selling his paintings, teaching, and acting as an art dealer.
What was a key characteristic of the secondary art market in the 16th to 18th centuries?
Art auctions in Amsterdam and Paris offered a system of quality guarantees by knowledgeable merchants.
What is the significance of reputation mechanisms in the art market?
They help overcome information asymmetry, ensuring buyers can trust the quality of art.
What does the term ‘addictive consumption’ refer to?
Consumers choose how much to consume based on their level of addiction from past consumption.
What is meant by ‘cultivation of taste’ in the arts?
Cultivation of taste means that preferences change by experience.
What system was offered to ensure quality guarantees in the art market?
A guaranteed high-end market supervised by knowledgeable merchants and dealers who certified the quality of the works.
What is information asymmetry in the context of the arts?
A situation where poor information about quality leads to lower overall market value.
What notable event occurred in 1863 related to rejected artworks?
La salon de refusés displayed works rejected by the jury, including pieces by Manet, Whistler, and Courbet.
What are some trends in the contemporary art market?
- Changing spending patterns
- Collectors purchasing emerging artists
- Young collectors seeking direct engagement
- Shift to art dealers from auctions
- Popularity of smaller online auction platforms
- Growth of photography and installation art
- Emerging markets in Latin America, Russia, and Africa.
What defines the primary market in art?
A market where works by living artists are bought and sold for the first time.
What is the role of galleries in the primary art market?
Galleries represent artists, build reputations, and often work on consignment.
What characterizes the secondary art market?
A resale market where works of art are sold by owners, often through auctions.
What is a duopoly in the context of the auction market?
The dominance of two major auction houses, Christie’s and Sotheby’s.
What motivates individuals to buy art?
- Love of art
- Investment
- Social status
- Conspicuous consumption.
What factors influence art prices?
- Artist reputation
- Scarcity
- Quality
- Economic conditions
- Trends and popularity.
What is the hedonic pricing model?
A model that identifies internal characteristics of goods and external factors affecting price.
What is cultural heritage?
What is inherited from past generations, maintained in the present, and bestowed to future generations.
What are the different types of value associated with cultural heritage?
- Asset value
- Cultural value
- Economic value.
What is the issue with the supply of cultural heritage?
The supply is fixed or declining due to deterioration, yet heritage accrues over time.
What is deaccessioning in a museum context?
The process of permanently removing a work of art from a museum’s collection.
What does UNESCO aim to protect?
Cultural and natural heritage around the world considered to be of outstanding value to humanity.
What is intangible cultural heritage?
Traditions and living expressions inherited from ancestors, such as oral traditions and performing arts.
What are the public good characteristics of cultural heritage?
Strong public good characteristics lead to market failure and necessitate government interventions.
What are some interventions for cultural heritage?
- Ownership rights
- Financial support
- Certification (e.g., UNESCO)
- Regulation.
What are negative externalities in tourism?
Economic and social costs borne by inhabitants due to congestion and excessive tourism.
How can congestion problems in tourist areas be alleviated?
- Managing tourism with fixed permits
- Timed entries
- Promoting lesser-known attractions.
What is government intervention in the context of tourism?
Government intervention refers to actions taken to manage tourism and alleviate congestion caused by excess demand, impacting quality of visits, quality of life, and quality of the environment.
Examples include fixed numbers of permits, timed entries, and promoting lesser-known attractions.
What are negative externalities in tourism?
Negative externalities are economic and social costs borne by inhabitants due to tourism congestion, which can diminish their quality of life and the environment.
This includes issues like overcrowding and increased prices for local services.
Name three strategies to alleviate tourism congestion.
- Managing tourism with fixed permits
- Promoting lesser-known attractions
- Implementing pricing policies
Additional strategies may include reducing the number of hotel rooms and flights.
What is the economic impact of out-of-town visitors?
Out-of-town visitors can generate income and jobs for the local community, but their spending may not always outweigh the costs incurred by residents.
This highlights the issue of negative externalities in tourism.
What challenges does heritage pose to policymakers?
Heritage presents challenges such as ownership issues, responsibilities of ownership, and the need for protection against negative externalities.
Policymakers must also consider public and private interests in heritage management.
What is a museum characterized as in the context of this document?
A museum is characterized as a multi-function firm engaged in exhibiting, collecting, preserving, educating, and engaging communities.
This includes visitor services and backroom activities.
What are key performance indicators for museums?
- Return on investment (ROI)
- Appraisal from local officials
- Number of school group visits
These indicators help assess the museum’s performance and impact.
What does performance management entail?
Performance management is the process of integrating an organization’s performance with its corporate and functional strategies and objectives.
It serves as both a strategic management and communication tool.
What is the balanced scorecard?
The balanced scorecard is a strategic management tool developed by Kaplan that helps organizations identify performance dimensions and articulate performance indicators.
It starts from strategy to measure organizational performance.
What are the challenges in evaluating performance in the cultural heritage field?
Challenges include unclear outputs, difficulty in accurate measurement, and lack of established techniques for non-market activities.
Heritage production is often hard to quantify due to its unique nature.
What is price discrimination in museums?
Price discrimination is a microeconomic pricing strategy where similar goods or services are sold at different prices based on market segments.
This can include different admission prices for youth, students, and seniors.
What is ‘pay what you want’ pricing?
‘Pay what you want’ (PWYW) pricing allows customers to set their own price for a product, adapting to varying demand curves and empowering customers.
This strategy can lead to increased customer visits, though it may result in lower earnings per customer.
What characteristics contribute to a successful PWYW program?
- Low marginal cost product
- Fair-minded customer base
- Credible range of prices
- Strong buyer-seller relationship
- Competitive marketplace
These factors can enhance the effectiveness of PWYW pricing in museums.
