The piece about “pull the plug” that I can’t reconcile: 40% of the NEA’s budget passes thru to state arts councils, to fund locally. Cutting the agency means cutting that more local source of support, which is hard to reconcile with the policy goals to “push it to the states” in other policy areas.
If I can put on my “economics of federalism” cap (a course I used to teach up north): sometimes states and provinces are in a better position to administer programs and distribute funds, simply because there is variation across them in what people want the government to be doing, what to prioritize, etc. But … it is far easier for the federal government to collect revenue, since states and provinces are limited in what they can do with tax rates due to tax competition between them. The solution can be for the federal government to collect revenue and then hand it out to states and provinces, on the condition that they use it to cover at least some essentials, with variation permitted. Canada does this to an extensive degree, and it more or less works (though don’t ask an Albertan about it). The US much less so. My worry in the current US “let the states do it” is that states are really revenue-constrained - they will need transfers from the feds for this to work.
Thank you for this very interesting post. I was wondering if you had ever published anything about the only temporary nature of public grants for artistic and cultural activities. I know that economists like Keynes and Peacock supported this idea and I recently read an article on the subject (https://theconversation.com/why-public-funding-of-the-arts-should-always-be-temporary-59469). Please do you know any other articles supporting this idea?
Nothing comes to mind, but this is an excellent question. I am glad you mentioned Peacock, since like Keynes he took an active role in arts policy (in Scotland), and was maybe the first to apply contemporary microeconomic policy analysis to the question.
By the way, I realise that one last economic argument seems to be missing in Ryan Bourne's article: that of the existence of a natural monopoly with economies of scale (sometimes invoked for a museum, a symphony orchestra, etc.). No?
I think there are a few questions. A museum might have, over a certain range, economies of scale, but I’m not sure it holds true for a performing arts organization - you either have an orchestra or you don’t, and they are limited in terms of their capacity of venue and how many performances they can handle. Normally the market failure with ordinary monopolies is that they restrict output and charge higher prices than we would get in an idealized competitive market. But while all arts organizations, big and small, are price setters, they don’t have the same sort of monopoly as the power company or the water supplier, since they are constrained by consumers in what they can charge, serving only a small minority of the population.
When it comes to subsidies for the arts, we need to ask (Peacock was adamant about this): what do we think it will do? What will happen that would not happen in the absence of the subsidy? And so if we thought “our local orchestra has a natural monopoly”, we would need to ask “what do we think would happen if we offered a subsidy? how would it change anything regarding what they would do?” And I don’t see a clear answer to that.
The piece about “pull the plug” that I can’t reconcile: 40% of the NEA’s budget passes thru to state arts councils, to fund locally. Cutting the agency means cutting that more local source of support, which is hard to reconcile with the policy goals to “push it to the states” in other policy areas.
If I can put on my “economics of federalism” cap (a course I used to teach up north): sometimes states and provinces are in a better position to administer programs and distribute funds, simply because there is variation across them in what people want the government to be doing, what to prioritize, etc. But … it is far easier for the federal government to collect revenue, since states and provinces are limited in what they can do with tax rates due to tax competition between them. The solution can be for the federal government to collect revenue and then hand it out to states and provinces, on the condition that they use it to cover at least some essentials, with variation permitted. Canada does this to an extensive degree, and it more or less works (though don’t ask an Albertan about it). The US much less so. My worry in the current US “let the states do it” is that states are really revenue-constrained - they will need transfers from the feds for this to work.
Thank you for this very interesting post. I was wondering if you had ever published anything about the only temporary nature of public grants for artistic and cultural activities. I know that economists like Keynes and Peacock supported this idea and I recently read an article on the subject (https://theconversation.com/why-public-funding-of-the-arts-should-always-be-temporary-59469). Please do you know any other articles supporting this idea?
Nothing comes to mind, but this is an excellent question. I am glad you mentioned Peacock, since like Keynes he took an active role in arts policy (in Scotland), and was maybe the first to apply contemporary microeconomic policy analysis to the question.
Thank you.
By the way, I realise that one last economic argument seems to be missing in Ryan Bourne's article: that of the existence of a natural monopoly with economies of scale (sometimes invoked for a museum, a symphony orchestra, etc.). No?
I think there are a few questions. A museum might have, over a certain range, economies of scale, but I’m not sure it holds true for a performing arts organization - you either have an orchestra or you don’t, and they are limited in terms of their capacity of venue and how many performances they can handle. Normally the market failure with ordinary monopolies is that they restrict output and charge higher prices than we would get in an idealized competitive market. But while all arts organizations, big and small, are price setters, they don’t have the same sort of monopoly as the power company or the water supplier, since they are constrained by consumers in what they can charge, serving only a small minority of the population.
When it comes to subsidies for the arts, we need to ask (Peacock was adamant about this): what do we think it will do? What will happen that would not happen in the absence of the subsidy? And so if we thought “our local orchestra has a natural monopoly”, we would need to ask “what do we think would happen if we offered a subsidy? how would it change anything regarding what they would do?” And I don’t see a clear answer to that.