Like you, I am not convinced, but for slightly different reasons. B & B asserted that theater and music (we'll stick with those) couldn't take advantage of technology to increase productivity, but it seemed to me that this was sleight of hand--movies, TV, and music recordings ARE the technological versions of theater and music. Yes, we still need the same number of actors or musicians, but it is the audience that is "more efficient"--you can only fit so many into the Broadway theater where "Wicked" is playing, but way more can see it when the movie is distributed across the nation. To assert that it isn't "the same experience" as live theater and music performances is true, but neither is a ride in a car "the same experience" as a ride on a horse, yet they are both means of transportation. The question that we have to face is whether theater is the horse-and-buggy of the arts, and if not, how to emphasize what makes it worthwhile. (By the way, the thing B & B didn't address is the ballooning personnel associated with the growth of institutions -- the salaries of artists are nothing ompared to the salaries of people "needed" to run an institution the size of, say, the Guthrie.)
You're right - I DID like it (although Cowen's understanding of theater's business model in the Renaissance exposes a lack of theater history background research). Also, I'd point out that artistic choices also affect the economics of theater: Jacques Copeau or Jerzy Grotowski, with their minimalist aesthetician, would have spent far less on scenery than, say, Julie Taymor's maximalism on display in "Spiderman: Turn Off the Dark."
So why do you think B & B is still granted so much attention? My guess: it allows nonprofits to justify their reliance on foundations and public funding. Agree?
I think B&B gets so much attention is because it provides an excuse for the ruling class to cut salaries and intimidate workers. It isn't about non-profits; it's about profits. If labor is a primary cost of a business, then getting labor to be cheaper is the easiest and most obvious way to increase profits. Labor costs loom large, and, unlike the cost of rent, maintenance, advertising, royalties, and management itself, it is something that can be attacked. Salaries are frozen or cut. The workforce is downsized and overworked. Work is restructured as gig work outsourcing operating risk. Benefits are cut.
There was a period a few decades back when Broadway was going through a labor cost "crisis". There were a lot of one or three actor plays, often with a lot of clever doubling. Music was automated. Sets were simplified. There was a lot of discussion of the future of theater with one actor plays performed on a bare stage. The solution was different, but it took some creativity. Broadway turned away from minimalism toward spectacle. Broadway is full of plays with lots of actors and impressive sets. It took a lot of expensive promotion to get this to happen, and it's easy to criticize some of it, but it didn't involve crushing the guilds or reducing theater to some bare minimum.
I’d add that at least some of the changes in popular music styles, even performed live over the 20th and 21st centuries, were driven by Baumol.
It wasn’t just changing tastes that saw big bands displaced by four piece rock and roll bands, or the rise of electronic dance music in the 1990s. It was the development of technology that allowed smaller and smaller groups of musicians to put on live (or, in the case of EDM, “live sets” of recorded music) to larger and larger venues, with a full sound.
I saw a documentary about Norman Cook (aka Fat Boy Slim) talking about his early days as a bass player in a band while beginning to DJ. He commented that he made a heck of a lot more money when it was just him spinning tracks than when he was sharing the money with multiple band mates. The documentary then went on to talk about how they developed elaborate video backdrops to go with his music to provide some visual interest to what otherwise was one guy fiddling with electronics.
I really enjoyed that, thank-you. It was well written, clear and I loved the way you presented the information. I learned a lot from it and will read it again. Well done!
Thank you for this very clear text. However, I once again have the feeling that a hypothesis is missing in the theoretical model, on the demand side (in addition to the hypotheses made on the evolution of productivity and the evolution of all wages). Since there are many economic services that do not have a "cost disease" problem, it is because there is sufficient demand for these services. So, if there is a "cost disease" problem for the performing arts, or rather for certain forms of performing arts, it is that we implicitly make an assumption of, say, inertia of the demand curve from consumers. A demand curve which does not move over time or too little, resulting in an ever-lower volume of exchanges between suppliers and consumers as the prices proposed to consumers increase. In other words, I have the impression that Baumol and Bowen's model for performing arts works based on three (and not two) hypotheses: a hypothesis about productivity, a hypothesis about all wages in the economy, and a hypothesis about consumers demand (which would be price elastic but whose other components would be fixed over time). Am I wrong?
Yann, this is a good question - thank you for the chance to clarify:
Cost disease is about changes in relative costs. As you point out, organisations face a problem if the demand curve is not shifting (as people become wealthier). So, to take an example from the post, so long as people adjust their household budget to pay less for manufactured goods and more for services like haircuts, then the number of haircuts people buy will not change. Yes, your grandparents might say “I can’t believe what they charge for a haircut these days!”, but the sector does fine.
In the live performing arts, cost disease means inescapable rising costs. The “problem” happens if the presenting organisation is unable to get people to cover those costs with higher ticket prices, in the same way they continue to pay more at restaurants, at the spa, or at the barbershop.
Cost disease bites hardest when labor expenses have to be covered by earned income. The non-profit arts sector has the luxury of being able to fundraise so as not to have to do that. And of course the ability of an economy to support charitable donations to the arts goes up with productivity. I’ve always that Baumol’s emphasis on orchestras in particular was misguided because of this.
But foundation and charity support for the performing arts has gone down, especially recently, and federal and state funding has never been more than symbolic and has decreased since the Reagan years. I would argue that an institution that relies on unearned income is vulnerable to changes in priorities. When B & B were writing, the arts were the darling of foundations like Ford and Rockefeller; today, not so much.
I don’t think the data supports your contention about private funding. And depending on any kind of income - perhaps excepting endowment income - is a vulnerability for any enterprise, more or less by definition. Orchestras at least have found contributed income more stable than earned revenue over the years.
I would say that orchestras are in for a rude awakening as the next generation of entrepreneurs arrive and don't give a darn about traditional culture. I would also argue that, as Holly Sidford reported a decade ago in "Fusing Arts, Culture and Social Change" (https://www.giarts.org/article/fusing-arts-culture-and-social-change) the centralization of grant funding in the richest institutions is killing innovation.
It’s certainly possible that the next generation of wealth won’t care so much about high culture. But I’ve been hearing predictions like that for 50 years and it’s yet to happen.
In the case of the MOOCs, I think the germane sector does "lack incentives to get their acts together." Demand for higher education in America peaked in 2010, it's bracing for a massive correction in 2026...
...and probably would have cratered long ago if not for the strange and immoral way we fund the enterprise. The MOOCs might have done better if the core business of the universities was education. But in practice, it's social signaling around education, and actual education happens in conjunction with it as needed.
Come 2027, people will feel grateful that all that MOOC infrastructure is in place.
Like you, I am not convinced, but for slightly different reasons. B & B asserted that theater and music (we'll stick with those) couldn't take advantage of technology to increase productivity, but it seemed to me that this was sleight of hand--movies, TV, and music recordings ARE the technological versions of theater and music. Yes, we still need the same number of actors or musicians, but it is the audience that is "more efficient"--you can only fit so many into the Broadway theater where "Wicked" is playing, but way more can see it when the movie is distributed across the nation. To assert that it isn't "the same experience" as live theater and music performances is true, but neither is a ride in a car "the same experience" as a ride on a horse, yet they are both means of transportation. The question that we have to face is whether theater is the horse-and-buggy of the arts, and if not, how to emphasize what makes it worthwhile. (By the way, the thing B & B didn't address is the ballooning personnel associated with the growth of institutions -- the salaries of artists are nothing ompared to the salaries of people "needed" to run an institution the size of, say, the Guthrie.)
These are good points: you might like this piece from Tyler Cowen in 1996 (which I saw him present live):
https://d101vc9winf8ln.cloudfront.net/documents/27978/original/10.1007_s10824-005-7214-1.pdf?1523464843
You're right - I DID like it (although Cowen's understanding of theater's business model in the Renaissance exposes a lack of theater history background research). Also, I'd point out that artistic choices also affect the economics of theater: Jacques Copeau or Jerzy Grotowski, with their minimalist aesthetician, would have spent far less on scenery than, say, Julie Taymor's maximalism on display in "Spiderman: Turn Off the Dark."
So why do you think B & B is still granted so much attention? My guess: it allows nonprofits to justify their reliance on foundations and public funding. Agree?
I think B&B gets so much attention is because it provides an excuse for the ruling class to cut salaries and intimidate workers. It isn't about non-profits; it's about profits. If labor is a primary cost of a business, then getting labor to be cheaper is the easiest and most obvious way to increase profits. Labor costs loom large, and, unlike the cost of rent, maintenance, advertising, royalties, and management itself, it is something that can be attacked. Salaries are frozen or cut. The workforce is downsized and overworked. Work is restructured as gig work outsourcing operating risk. Benefits are cut.
There was a period a few decades back when Broadway was going through a labor cost "crisis". There were a lot of one or three actor plays, often with a lot of clever doubling. Music was automated. Sets were simplified. There was a lot of discussion of the future of theater with one actor plays performed on a bare stage. The solution was different, but it took some creativity. Broadway turned away from minimalism toward spectacle. Broadway is full of plays with lots of actors and impressive sets. It took a lot of expensive promotion to get this to happen, and it's easy to criticize some of it, but it didn't involve crushing the guilds or reducing theater to some bare minimum.
I’d add that at least some of the changes in popular music styles, even performed live over the 20th and 21st centuries, were driven by Baumol.
It wasn’t just changing tastes that saw big bands displaced by four piece rock and roll bands, or the rise of electronic dance music in the 1990s. It was the development of technology that allowed smaller and smaller groups of musicians to put on live (or, in the case of EDM, “live sets” of recorded music) to larger and larger venues, with a full sound.
I saw a documentary about Norman Cook (aka Fat Boy Slim) talking about his early days as a bass player in a band while beginning to DJ. He commented that he made a heck of a lot more money when it was just him spinning tracks than when he was sharing the money with multiple band mates. The documentary then went on to talk about how they developed elaborate video backdrops to go with his music to provide some visual interest to what otherwise was one guy fiddling with electronics.
I really enjoyed that, thank-you. It was well written, clear and I loved the way you presented the information. I learned a lot from it and will read it again. Well done!
Thank you for this very clear text. However, I once again have the feeling that a hypothesis is missing in the theoretical model, on the demand side (in addition to the hypotheses made on the evolution of productivity and the evolution of all wages). Since there are many economic services that do not have a "cost disease" problem, it is because there is sufficient demand for these services. So, if there is a "cost disease" problem for the performing arts, or rather for certain forms of performing arts, it is that we implicitly make an assumption of, say, inertia of the demand curve from consumers. A demand curve which does not move over time or too little, resulting in an ever-lower volume of exchanges between suppliers and consumers as the prices proposed to consumers increase. In other words, I have the impression that Baumol and Bowen's model for performing arts works based on three (and not two) hypotheses: a hypothesis about productivity, a hypothesis about all wages in the economy, and a hypothesis about consumers demand (which would be price elastic but whose other components would be fixed over time). Am I wrong?
Yann, this is a good question - thank you for the chance to clarify:
Cost disease is about changes in relative costs. As you point out, organisations face a problem if the demand curve is not shifting (as people become wealthier). So, to take an example from the post, so long as people adjust their household budget to pay less for manufactured goods and more for services like haircuts, then the number of haircuts people buy will not change. Yes, your grandparents might say “I can’t believe what they charge for a haircut these days!”, but the sector does fine.
In the live performing arts, cost disease means inescapable rising costs. The “problem” happens if the presenting organisation is unable to get people to cover those costs with higher ticket prices, in the same way they continue to pay more at restaurants, at the spa, or at the barbershop.
Thanks!
Cost disease bites hardest when labor expenses have to be covered by earned income. The non-profit arts sector has the luxury of being able to fundraise so as not to have to do that. And of course the ability of an economy to support charitable donations to the arts goes up with productivity. I’ve always that Baumol’s emphasis on orchestras in particular was misguided because of this.
But foundation and charity support for the performing arts has gone down, especially recently, and federal and state funding has never been more than symbolic and has decreased since the Reagan years. I would argue that an institution that relies on unearned income is vulnerable to changes in priorities. When B & B were writing, the arts were the darling of foundations like Ford and Rockefeller; today, not so much.
I don’t think the data supports your contention about private funding. And depending on any kind of income - perhaps excepting endowment income - is a vulnerability for any enterprise, more or less by definition. Orchestras at least have found contributed income more stable than earned revenue over the years.
I would say that orchestras are in for a rude awakening as the next generation of entrepreneurs arrive and don't give a darn about traditional culture. I would also argue that, as Holly Sidford reported a decade ago in "Fusing Arts, Culture and Social Change" (https://www.giarts.org/article/fusing-arts-culture-and-social-change) the centralization of grant funding in the richest institutions is killing innovation.
It’s certainly possible that the next generation of wealth won’t care so much about high culture. But I’ve been hearing predictions like that for 50 years and it’s yet to happen.
In the case of the MOOCs, I think the germane sector does "lack incentives to get their acts together." Demand for higher education in America peaked in 2010, it's bracing for a massive correction in 2026...
https://dissidentmuse.substack.com/p/will-risd-survive-2026
...and probably would have cratered long ago if not for the strange and immoral way we fund the enterprise. The MOOCs might have done better if the core business of the universities was education. But in practice, it's social signaling around education, and actual education happens in conjunction with it as needed.
Come 2027, people will feel grateful that all that MOOC infrastructure is in place.
Doubtful. Education is about much more than knowledge transfer.