Does it matter if the subsidized arts are mostly attended by the well-off?

Not so much

I have a new paper out, “The pursuit of equality through public funding for the arts”, in Innovating Institutions and Inequities in the Arts, edited by Joanna Woronkowicz and Doug Noonan.¹

To explain what it is about, let me start with a completely different policy field: reducing the use of fossil fuels. Here is the abstract from a working paper from the NBER released just a week ago, by Severin Borenstein and Lucas Davis, “The distributional effects of U.S. tax credits for heat pumps, solar panels, and electric vehicles”:

Over the last two decades, U.S. households have received $47 billion in tax credits for buying heat pumps, solar panels, electric vehicles, and other “clean energy” technologies. Using information from tax returns, we show that these tax credits have gone predominantly to higher-income households. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the tax credit for electric vehicles, for which the top quintile has received more than 80% of all credits. The concentration of tax credits among high-income filers is relatively constant over time, though we do find a slight broadening for the electric vehicle credit since 2018.

So, is this distribution of tax credits across the income distribution a problem? Does it indicate that the tax credit is poorly designed? Not necessarily.

There are many sorts of public policy issues that governments face, but let me focus on just two: high levels of inequality across individuals and families in terms of resources, well-being, or capabilities; and market failures resulting from externalities or public goods, where those externalities might be negative (carbon emissions, or other forms of pollution) or positive (from scientific research, or the preservation and creation of art).

The tools that one would use in addressing these problems are different. For externalities, the usual solutions are subsidies for goods with positive externalities, and taxes or regulations for goods that produce negative externalities. Tax credits for the adoption of technologies that reduce the use of fossil fuels is one example, and so are subsidies for the arts, and for research.

For dealing with inequality, different tools are much more effective. The first thing to look at is ensuring people have enough money to live a decent life. Cash is good. So, a progressive income tax, a wealth tax, and generous tax credits for people with low income (especially important if you are going to rely on a retail sales or value-added tax to increase the government’s budget) are great tools for tackling inequality.

Should we provide certain goods and services directly to the poor? In some cases, yes: policies that shield people from catastrophic expenses, say in health care or in dealing with the legal system help - universal public health insurance, and an adequately funded public defender’s office are good things. Policies that ensure all children have good, safe schools, nutrition, opportunities for art, sport, and fun, are important. But as a general rule, when it comes to policies for adults, as far as possible it is best to let people decide for themselves what things they need, and ensuring sufficient cash income is the best way to do that (I particularly loath “food stamps” as a transfer mechanism, giving recipients a paternalistic menu of what goods they may or may not obtain with them. Give people money). Subsidies for some goods but not others might be useful in dealing with externalities, but are not really the best way to try to help the less-well off.

So I don’t worry about tax credits for solar panels and electric cars mostly going to the rich: it is not a policy meant to address distributional concerns; it is a policy to reduce the use of fossil fuels. If I were to look at who attends PhD programs in the United States, I am going to guess it also skews towards students from the top half of the income distribution. It doesn’t mean we shouldn’t do all we can in K-12 and college education to open opportunities for all students, but those opportunities can never be truly equalized across income groups - too much depends on parents and zip code (In his essay on “The Idea of Equality”, Bernard Williams, who is a committed egalitarian, admits as much). And that doesn’t mean we should stop funding PhD students.²

My essay applies all this to the arts. It is well-known that the subsidized arts are mostly consumed by those with higher incomes and (even more important) higher levels of formal education. But before we say this is a problem, we need to ask what arts funding is for. And arts funding is just not a very good tool for dealing with inequalities. It is good for correcting for market failures in the arts. Or, if you think economics is not the best framework for dealing with this (and if so I would agree with you), but rather the point is to conserve and inspire great art and critical appreciation, then well-targeted subsidies can help towards that goal too. To direct arts funding towards trying to mitigate inequalities in well-being is not going to be awfully effective - it is simply not a good tool for that.

The essay concludes:

Surveying the evidence, there is no indication that public expenditure on the arts is an effective instrument for achieving egalitarian goals, compared to relying on a progressive tax and transfer system, supplemented by the provision of goods and services that complement the optimal tax framework, such as subsidized or free child care that encourages labor force participation, free public education and health insurance to help equalize somewhat the opportunity set of life paths for young people, and goods designed to be targeted to individuals with special needs, whether chronic conditions that reduce the person’s capabilities for valuable functionings, or unexpected conditions that require extraordinary expenditures, such as catastrophic health emergencies, or the need for legal representation. Public expenditure on the arts can help serve other goals, such as the correction of market failures generated by externalities, leading to a more efficient allocation of resources, or, perhaps, going against citizen preferences, the pursuit of excellence in the arts that goes beyond what most of the public values, or even understands.  

This does not mean arts funding bodies need not care at all about equality. Public funding of the arts for reasons of market failure must ensure that all citizens’ preferences count equally, and that expenditures are directed to arts presenters (or directly to consumers) in ways that reflect an equitable accounting of where the market is failing most badly, with fair consideration to the low-income and isolated Philadelphians of the Mantua neighborhood, and not just to the wealthy Philadelphians of Chestnut Hill. Claims about the pursuit of excellence in the arts need to be subject to scrutiny that “excellence” has not been defined, and then reinforced, by the criteria set by an exclusive set from the art world, criteria that serve to devalue great works from artists outside of the sightlines of that elite. As Elizabeth Anderson puts it, the concerns of the egalitarian are not simply about the redistribution of resources, by some accounting of who is deserving of assistance, but “integrates principles of redistribution with the expressive demands of equal respect”.³ Public education needs to ensure that all children, rich and poor, from the majority and the minority, have the chance of enjoyment from participating in the arts, learning about the diverse aspects of our culture beyond what is cheaply available through commercial channels, and the opportunity to develop their talents. Many of the essays in this volume are directed towards these issues.  

But arts funding as such, in the traditional means of grants to selected artists and nonprofit arts presenters, is not an effective means of addressing population inequalities in resources and welfare. Put another way, if a modern, reasonably wealthy, reasonably liberal country were without an arts council, we can imagine some good reasons for creating one, but addressing inequality would not be one of those good reasons. This should not be seen as an anti-egalitarian sentiment; an arts council that focuses on subsidies where externalities are greatest, or focuses on the fostering of excellence in the arts, does not preclude having a comprehensive set of policies through other public agencies designed to reduce economic and social inequalities. But public funding of the arts is a policy instrument best aimed at other targets. 

UPDATE: Matt Yglesias has a new post on separating the distributive and resource allocation goals of government (about which we agree).

1. If you would like a copy of the essay but your library doesn’t have the book, send me an email - I am easy to find.

2. The theoretical paper that explains this best (though you’ll need your calculus) is Kenneth Arrow’s “A Utilitarian Approach to the Concept of Equality in Public Expenditures” from 1971.

3. Elizabeth Anderson, “What is the point of equality?” Ethics, 1999.