Commercial art dealing found its firm ground at some point in the 18th and 19th century. Tickets to plays and operas too, were bought by the public at large commodifying performances. At a point in history, people started to value the process of these artworks and not the art solely. To some extent, this is one of the reasons that laid the foundation and led to the definite concept of cultural economics, also known as the economics of arts and literature.
Cultural economics deals with the economics of artwork which broadly includes visual and performing art presently. With the evolution of time, the domain has been exposed to modern definitions of art and therefore, today it also includes in-depth analysis of the contribution to and role of the creative industries to the entire economy at large. Currently, cinema, television programs, book and periodical publishing and music publishing are too included in the field. More so, this field of economics is also inclusive of places linked to cultural heritage; for example museums, art galleries and libraries.
The field involves trade of goods and services which at times are unique and not entirely tangible. The demand for the same goods depends on and is relative to the consumer’s preferences. The intrinsic value of these goods, therefore, is not always equal for different individuals. The worth is driven by factors other than the pure economic value of labour or materials utilised, one of them being subjective content. Cultural economics uses economic theory and principles to deal with problems and often, utilises empirical evidence to validate arguments. In the recent history of the discipline, statistical tools have been used to derive answers to various questions in the field. For example, using ‘ordinary’ economic theory of labour markets is not enough for understanding artists’ economic behaviour. Much like other subfields within economics, cultural economics adapts economic ideas to the specific features of the cultural sector.
The very first systematic work in the field was presented by William Baumol and William Bowen on the performing arts. This was in the year 1966, when they studied the working of performing arts and its commercial nature, leading to the use of the term “Baumol’s cost disease.” Prior to this academic discovery in the discipline, it is important to understand the views posed by economists before Baumol and Bowen. There had been arguments which questioned the economic behaviour of the cultural and artistic sector, and whether it followed the ordinary laws. Here is a look at the views of men prior to a formal approach to the topic.
Over a long period of time, perhaps a couple of centuries, opinions and views of well-known economists in and out of the discipline aided in forming a base for the ideologies and principles in the field of cultural economics. Adam Smith, a world renowned economist, for example, believed in interference of education of these cultural goods and the fact that there was no need for the state to intervene in this world of arts. Slightly contradicting Smith’s thought, William Jevons linked the field to the concept of “social investment” and till today we see art as an integral part of promoting intellectual wellbeing of individuals. J M Keynes along with Jevons, stressed on the involvement of the state to influence market forces and eventually, the market would operate independently. Further, Alfred Marshall discussed the consumption and marginal utility of these goods. The consumption argument made sense to understand the working of the markets, to further throw light on the supply end, John Galbraith laid emphasis on the “artistic” methods of production which drew a line between exceptional goods and normal economic goods. Later, Tibor Scitovsky, an American economist, argued that consumer behaviour could be explained not only by the satisfaction of existing wants but by the craving for novelty. The “exceptional” nature of the said goods is derived from its potential to not only satisfy the buyer but also provide an additional stature of a kind. A selection of principles from the past has helped economists derive a concrete framework for cultural economics as a sub-discipline. The growing ubiquity of these goods made people wonder about the concepts of beauty, and whether these goods served symbolic content more than their tangible features.
The uniqueness of the goods in these markets lies in the fact that once a piece of art is produced (whether a painting, song or a play), the power to determine the value is no longer with the creator - the value is now solely dependent on what the end consumer perceives. Over time, the entire arts and cultural sector has transformed, but public perception still lies at the center of determining value for these goods. The key market features include unequal income distribution, intangible returns and a blurred distinction between valuing the artist and the art work. In terms of economic market types, many markets within the cultural sector are a mix of oligopsony and oligopoly. For certain cultural goods, there is an immense supply with proportionately limited buyers whereas for some, the limited number of suppliers is combined with huge demand.
Over the years, the goods in discussion have evolved as well. The economy of art is not limited to wealthy aristocrats ordering works from painters and attending theatre. The commodities have changed and have also made way for more modern products to be traded in the market. This would include, as mentioned earlier, advertising, designs, fashion, publishing, television, video, music and so on.
These additions introduce an interesting area of study in the field of cultural economics. The determination of their value and positioning along the curves of market forces has been of keen interest for many individuals in the field. As a society, we have come a long way in understanding the commercial side of a field full with highly relative demand. Today, this area of study is linked with other disciplines like that of behavioural and social economics to understand the valuations of assets such as a painting and the behaviour of consumers towards the same.
So the next time a Banksy is under a gavel and ends up going for a million dollars, there is a lot to think about.
Information in this piece reflects on views and opinions published in the following two books. For further in-detail understanding of the topic refer to the same.
A Textbook of Cultural Economics by Ruth Towse
Handbook of the Economics of Art and Culture by Victor A. Ginsburgh and David Throsby
Misri Kothari
