The economic impact of everything: a response

we get lettersI will present a thoughful comment from my previous post in full, since it is worth addressing in depth:

Respectfully, so what if “many, many firms will approach government with the same claims” of job creation and economic impact? So what if every living organism announces what economic benefit they bring to the universe? Whereas you see in it something bad, mendacious or even destructive, I would argue that this is precisely one of the kinds of information we want. Note my use of the words: “one of the kinds.” It should never be only metric by which we value, for example, the arts. But surely it should be one of them. To reject it, as you suggest in your final graph, is to knowingly amputate a good argument for the arts’ existence.

Last time I checked, we live in an era in which threatening proportions of the population fervently believe that all things government-related are suspect, injurious, horrid, ridiculous. I say let’s have as much sunshine as possible regarding what tax breaks and incentives our government (or the UK government) gives corporations and then let’s do something directly addressing your assertion about the “false promise of economic impact studies”: let’s make the recipients of such civic largesse prove they really did create those jobs, really did drive that fiscal activity, really did generate that kind of difference to our society. If they did, why shouldn’t we know? If they didn’t — if the numbers are lies — why shouldn’t we know that, too?

Your post implies the opposite — that we should “reject” economic impact studies, assume they’re inherently flawed, propagandistic, products of wild, vivid imaginations or simply full of lies. I don’t believe all are flawed or made of spin or conjured from whole cloth or made of Pinocchio-worthy whoppers. To “reject this method of analysis,” as you call it, is really to play the ostrich when what we need is better reporting and better facts.

Economic impact is real. It is quantifiable. It is not, and it shouldn’t be, the only method of analysis available to us, in or out of the arts. But to “reject” a method entirely — to characterize economic impact studies as the 21st century equivalent of Piltdown Man — makes no sense to me at all.

Let’s focus on the single issue of how to deal with this method if every sector is claiming economic impact. In other words, for the sake of this post assume that the economic impact studies of various sectors that have commissioned them are generating accurate numbers.

There is a real cost to the economy in gathering tax revenue, over and above the amounts collected. When the government taxes earnings from work or savings and investment, it discourages those activities. We may have anecdotes about people who would not adjust their career decisions or number of hours worked or amounts of savings based on tax changes, but the empirical evidence is overwhelming that in aggregate the economy does respond. Economists refer to the losses from taxing work and saving as deadweight loss. This doesn’t mean taxes are bad – there are valuable things government does that need to be paid for, and the benefits we receive from them more than compensate the deadweight losses of taxation. So this is not an anti-government position, or a call for minimal government, and I agree with the commenter that we must resist those who see everything the state does as a waste of money.

Now, suppose the government recognized that every sector has an economic impact. And so it would give grants to firms, nonprofit and commercial, in every sector as a consequence. We would all be poorer for it. We would experience the deadweight losses of taxation all so that the government could take that money and transfer it right back into the economy. As an analogy, suppose we adopted a policy of one day taking our loose change and moving it from our right pocket to our left, and the following day moving it back again, and endlessly repeating, but that each time we do this we spill some change on to the ground where it is lost. We would simply become worse off. The true economic impact would be negative.

The reason for giving a grant to a specific firm, or a sector of the economy, needs to rest on something other than economic impact. There must be something that makes the sector different from the others in terms of its public benefit, that makes it worthy of support. And this is the problem with the arts using economic impact studies, where the whole point is to show that the arts are not special, they are just another sector. I just don’t see how that is effective arts advocacy.


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  1. says

    I think John Kay put the flawed concept of economic impact and the misappropriation of ‘cost’ in context very adeptly back in 2010.

    A good economist knows the true value of the arts

    “Many people underestimate the contribution disease makes to the economy. In Britain, more than a million people are employed to diagnose and treat disease and care for the ill. Thousands of people build hospitals and surgeries, and many small and medium-size enterprises manufacture hospital supplies. Illness contributes about 10 per cent of the UK’s economy: the government does not do enough to promote disease.”

    “Such reasoning is identical to that of studies sitting on my desk that purport to measure the economic contribution of sport, tourism and the arts”

    “The analogy illustrates the obvious fallacy. What the exercises measure is not the benefits of the activities they applaud, but their cost; and the value of an activity is not what it costs, but the amount by which its benefit exceeds its costs. The economic contribution of sport is in the pleasure participants and spectators derive, and the resulting gains in health and longevity. That value is diminished, not increased, by the resources that need to be diverted from other purposes.”

    “The only intelligible meaning of “benefit to the economy” (or economic impact) is the contribution – direct or indirect – the activity makes to the welfare of ordinary citizens.”

  2. says

    As an arts administrator who has commissioned and participated in several major economic impact studies, I sought to understand their methodological and macro-economic weaknesses. But I also had great success in using economic and social impact studies. to raise additional government and private funds. The simple fact is that the language of these studies is a language many politicians and business people understand.
    Nimble arts leaders have an obligation to keep a diverse box of advocacy tools. Because people support the arts for a variety of reasons. Articulate cases regarding student achievement, community vitality, even happiness studies augment the art for art’s sake arguments which seemed to stop working years ago.
    As long as economic impact studies are part of the rhetorical currency of the realm, we should continue to use them. BUT as numerous people have pointed out, with our statistical eyes open.

  3. says


    Since the comment you published in full was mine, let me please thank you for doing so. (You could have used my name but, then again, that might well have scared the birds from the trees.)

    Respectfully, you seem to have made an assumption here — that I believe if government “recognized that every sector has an economic impact,” it would “give grants to firms…as a consequence.” I did not suggest all sectors ought to receive special benefits or incentives after demonstrating their economic impact. Fast-food restaurants, Apple retail outlets, car dealerships and state-sanctioned casinos all have economic impact of one type or another, but none of them, to my mind, necessarily need, merit or deserve much in the way of tax breaks or incentives. (We could grouse separately about the obscene tax breaks often received by real estate developers and interests.)

    Where we disagree relates to the fact that you believe “giving a grant…needs to rest on something other than economic impact.” I believe it needs to rest on a calculus that includes, but is not limited to, economic impact.

    This is the problem with the arts sector: we trade in black-and-white, in absolute yesses and absolute nos. Too often we reflexively head for the door marked “either/or” even as the “and” door stares us in the face.

    One last point: I object to the notion that economic impact studies only show how “the arts are not special,” how it’s “just another sector.” Let’s try this experiment: put 20 elected officials in a room, representing both parties, and demand that they speak extemporaneously about why the arts are special. Some, of course, may nail it: the social benefit, educational benefit, moral benefit, and so on. But most will probably do a lousy job of it. Well, that’s not reflective of them, that’s reflective of us — our collective failure to employ all the tools at our disposal to make the case. Notice, too, that I omitted the phrase “economic benefit” from my little list. I have written repeatedly that fiscal impact is neither magic bullet nor panacea, but it is another arrow — a powerful one, potentially — in the quiver of the arts advocate. I would argue that it’s because the arts ARE special that we ought to use economic impact studies as part of our strategy. Of those 20 generic politicians, how much would you bet that, say, 10 don’t know, don’t believe or don’t care that the arts deliver an economic impact?

    I’m not a betting man, but we need to give powerful people every reason to support our cause, not to cherry-pick our arguments based on philosophical wariness. If a policymaker responds best to philosophical views on the societal benefits of the arts, then great, use it. If a policymaker responds best to jobs created, why not use that, too?

  4. says


    Given the opinion you express can you address John Kay’s argument that “the value of an activity is not what it costs, but the amount by which its benefit exceeds its costs. The economic contribution of sport is in the pleasure participants and spectators derive, and the resulting gains in health and longevity. That value is diminished, not increased, by the resources that need to be diverted from other purposes.”?

    • says

      I’m unclear what aspect of Kay’s argument you want me to address. Actually, may we back up? I’m an arts journalist and advocate working in government and I’m certainly no more than an armchair economist — it wouldn’t be imprudent for me to opine about something I haven’t studied. (Surely that doesn’t mean I can’t participate in the conversation, right?)

      Nevertheless, this part of your earlier comment intrigued me:

      “Many people underestimate the contribution disease makes to the economy. In Britain, more than a million people are employed to diagnose and treat disease and care for the ill. Thousands of people build hospitals and surgeries, and many small and medium-size enterprises manufacture hospital supplies. Illness contributes about 10 per cent of the UK’s economy: the government does not do enough to promote disease.”

      Correct me if I’m mistaken, but economics is rather an inexact science. If we can adopt the argument that disease benefits the economy, then we can adopt an argument that disease diminishes the economy when one factors in lost wages, productivity, and so forth. We can therefore look upon this subject as “Rashomon.”

      Clearly, too, there is a political dimension here: If a Republican were to read that quote you used, a thrill would go up and down their leg because it essentially argues against heathcare, affordable or not. Well, if that’s the case, wouldn’t the easiest way to ease unemployment be to shorten our lifespans?

  5. says

    Military spending provides an even bigger boost to local economies than the arts. That’s a major reason why our military budget is 5000 times larger than the NEA’s. By contrast, quite a few European governments spend as much on the arts as their military, because they understand that the unique value of the arts extends far beyond their economic impact. So why don’t we?

    In some respects, economic impact arguments reinforce the current American movement toward situating the arts in the marketplace. It’s part of neo-liberalism’s philosophy that the he market should be the sole arbiter of all human endeavor. Privatize everything. Shrink the government to a small weakling and drown it in a bathtub. Eliminate arts funding. Let the market handle it.

    It’s an unfortunately philosophy. Art addresses higher ideals than the marketplace alone will ever be able to define.

    • says

      Seriously? Where did anyone write this? I’m looking for it, looking for it, looking for it, looking for it, but I don’t seem to be able to locate the part of anyone’s post or comment in this series in which anyone wrote anything like “…the market should be the sole arbiter of all human endeavor. Privatize everything. Shrink the government to a small weakling and drown it in a bathtub. Eliminate arts funding. Let the market handle it.” Where is that?

      Despite your attempt to make “neo-liberal” a pejorative, understanding and quantifying the value of the arts in the marketplace is not a curse, not a condemnation, not a backhanded method to destroy arts funding and not an evil plot by subversive Ayn Randian elements to reduce our atlas of the arts to a shrug.

      Your comment tells me that you, too, subscribe to the all-or-nothing, black-and-white madness that I objected to in my earlier comment — the madness that asserts that we should never, ever use economic impact arguments as part of the arsenal of the advocate, as opposed to being smart and wise and measured in the way that we use them.

      You believe, it would seem, that the sole argument for the arts, the singular strength of the arts, should only be the fact that art “addresses higher ideals than the marketplace alone will ever be able to define.” Sir, of course art has that power. If I could have italicized the word “course,” please do be assured that I would have. I have spent the entirety of my life working in the arts — creating and commenting equally. No one who might read Mr. Rushton’s posts needs to be re-educated on the paramount intrinsic value of the arts.

      But where you imply some menacing, fascistic, reactionary slip-slide into conservative freakonomics by so much as citing the words “fiscal impact,” I see opportunity — opportunity for all of us, not just policy makers and not just economists, to make more broad and more compelling the whole discussion of what the arts delivers to us as a society. With all due respect, it’s comments like yours that worry me — not the idea that some shlub somewhere thinks it’s a good idea to know how many jobs were created by the Kabuki Hamlet Theatre Company’s revival “Arsenic and Old Lace.” Well, go ahead and call me one of those shlubs. I want to know. That doesn’t make me some mindless Randian to all things market. It makes me someone who respects the market. And I don’t have to apologize for that.

      • says

        You are creating a straw man out of my point in order to have an excuse to polemicize. Ironically, I wasn’t referring to anything you said. I was reinforcing Mr. Rushton’s point about the intangible and unique value of the arts.

        Good business models for arts institutions are essential, but the efforts are too often going to far. A good example is the shift taking place in orchestral culture. It is, for example, ridiculous to use the Philadelphia orchestra to play more film music, or to break the orchestras in Denver and Minneapolis into chamber groups to play even weddings and Bar Mitzvahs. These are examples of changes being proposed, and as in Denver, already established, and all under the rubric of innovation and better business models.

        Forgive me if I leave it at that, since I get the impression you aren’t really interested in dialog.

        • says

          I don’t need you to give me an excuse to express my viewpoint. And of course I’m interested in dialogue. What I’m not interested in is dialogue with those who reflexively demonize the idea — the idea — of innovation.

          (By the way, please link to some articles in which orchestras in Denver and Minneapolis are playing weddings and Bar Mitzvahs. That’s a shame. But as far as using the Philadelphia orchestra to play film music, why is that ridiculous? Do the events draw and build audiences? Do people talk about the event? Do they generate word of mouth? Do they drive earned income? Do they interest philanthropic organizations that would not otherwise fund them? Do they get press — good or otherwise? Do they employ people who would otherwise, for whatever reason, be unemployed? After all, the one thing we’d never, ever want for our orchestras are events that draw and build audiences, generate word-of-mouth and buzz on social media, drive earned income, interest potential benefactors and philanthropies, get press and employ people. No, we’d never want any of those things. Those things would be a shanda!

          Not every idea labeled as “innovative” is good.
          Not every idea labeled as “innovative” is terrible.)

          • says

            The article below doesn’t mention it, but 20 of the Colorado Symphony’s trustees resigned in mass when they weren’t successful in making the musician’s contracts part-time. They were to be hired part-time based on various chamber formations that could be hired out. The musicians managed to keep fulltime contracts but are hired out in chamber groups as needed. The quality of orchestras are severely reduced when used as a source for mixed formations hired to a wide range of purposes and venues. There are no restrictions on the types of events for which the musicians must play. See:


            The Detroit Symphony had a very long and bitter six month strike to oppose a similar arrangement but eventually had to give in. The Minnesota Symphony’s musicians are striking in opposition of a similar plan and a 30% pay reduction.. As a result the entire 2012-2013 season was cancelled.

            Another market oriented strategy is to reduce the number of fulltime musicians and fill out their ranks with free lancers – something that obviously reduces quality. This article discusses this idea and other aspects of more market oriented business models, some good and some less so:


            Orchestras need effective business models, but most of these changes are taking place because our funding system based on private donations doesn’t work very well. The numbers clearly illustrate how much better Europe’s public funding systems work. As one example, the USA only has 3 cities in the top 100 for opera performances per year. (See Operabase for the stats.)

            There are quite a few articles about the new, more market oriented business models for orchestras which can be found with Google. But again, if your response is rude and pushes words into my mouth or others for the sake of polemic, I will not bother responding.

          • says

            Another example of an excessive market orientation in arts management is the practice of replacing resident performing arts organizations with traveling for-profit shows. A good example is the Florida Philharmonic which was closed in 2003 and replaced with a long-term guest residency by the Cleveland Orchestra.

            This was a very cost effective solution for giving Miami good orchestra music, even if the offerings are limited, but now metro Miami with a population of 5.5 million has no regular professional orchestra of its own. And of course, there is a corresponding loss in the community’s engagement with classical music.

            While still on the Board of the Florida Phil, Daniel Lewis, a native of Cleveland living in Florida, made unprecedented donations to the Cleveland Orchestra, including one of 10 million dollars, the largest in the Cleveland Orchestra’s history. He was then instrumental in closing the Florida Philharmonic and establishing the Cleveland residency. In essence, Cleveland became a scab orchestra.

            The cultural life of most larger regional cities in America is heavily occupied by these traveling shows which makes it more difficult for resident groups to exist. It’s cost effective, but is it the best solution? Should the most efficient business model and best market strategies be the principle concern of arts management? Can we really measure the value of the arts by economic impact, or is that concept so reductive, that if over-used, actually weakens our understanding of what art is?

          • says

            Sorry, I must have been unclear. I was speaking about the politicians who ask the question in a specious manner to discredit arts funding. On the other hand, utilitarian arguments haven’t seemed to help much with the general public either. The NEA’s budget has hardly moved since it was almost halved in the 90s.

  6. says

    Let’s get back to the issue at hand, the fact that every industry and activity has a measurable economic impact, but it does the arts no favours to rely on such impact for advocacy arguments.

    “‘Economic’ impact studies have been popular in arts and cultural advocacy. Yet the application is inappropriate. ‘Economic’ impact studies are not designed for the purposes of advocacy. In the case of art and culture, they are more likely to be self-defeating. They also distract attention and resources away from the articulation of better advocacy arguments. Economists have warned against the use of ‘economic’ impact studies for advocacy, but their efforts have been only partly successful.”

    Economic’ impact studies in arts and cultural advocacy: a cautionary note>
    Media International Australia Incorporating Culture and Policy, no.98 (February), 2001

    This paper summarises the case against using ‘economic’ impacts for advocacy, concentrating on commonsense issues for easy digestion by non-economists.

  7. Margy Waller says

    In another exchange related to the discussion that started with the initial post, I added the comment below. The main point: if the goal is broad support of the arts, economic impact is not a winning value statement.

    Yes, as others have noted, it may work with elected and appointed decision-makers in a one-on-one meeting. They’ve come to expect this statement. So, we can use it again and again in every single effort to get public funding, budget fight after budget fight. It’s a heavy lift every time — as we call on our supporters to contact these officials and use their political chits, etc.

    But, economic impact is not working with the public. If we don’t work to change the landscape of public understanding by helping the public to see the arts as a public good, one worthy of public funding, we will continue to be on the defense — never showing officials that people support public funding of the arts.

    We have to change the conversation, and show officials how to use language that builds broad support for the arts, and reduces the perceived political risk for officials who want to be supportive.

    Reposting comment from Linda Essig’s blog.

    Is the goal building broad support for public funding of the arts? If so, our research (see: was designed explicitly to answer this question.
    And here’s what we learned about the traditional “dollars and cents” economic impact case: “traditional economic messages end up competing with other (usually more compelling) ideas about how to bolster an economy”.

    That is, people may nod along, but when this is the primary reason we offer for public investment, we lose out as people begin to think about other sectors that they believe are a better bet for return on public investment.

    However, the broad public (and this was our target — people who go, and people who don’t think of themselves as goers) already believes that the arts create a ripple effect of benefits including vibrant, thriving places; neighborhoods are more lively, communities are revitalized, tourists and residents are attracted to the area, etc. Paint a picture, show an image — and the people are with us. They already get it.

    But when we try to put in terms of ROI, we are losing when we start the story there.

    We also learned that the other benefit people already believe the arts create, and which they really value, is the way the arts create a more connected population: diverse groups share common experiences, hear new perspectives, understand each other better, etc.

    Unfortunately, for most people — even people who are goers and lovers of the arts — the transcendent experience, the beauty of art, and educational value are not compelling as reasons for PUBLIC support of the arts. The public sees these individual experiences as something we are all personally responsible for obtaining: “It’s fine if you want to do that, but our TAX dollars shouldn’t have to support it.”

    Toward the end of our full research report, we list a few additional ideas that failed in our testing: civic inspiration, great cities, health and science, broadening our horizons, human universal, innovation, works of beauty, art and kids. It’s a most interesting (if depressing) section of the findings.

    Of course, any of these ideas can work in an individual conversation — and may also work as a secondary proposition. But if we are looking for a big idea that has broad appeal, an idea that moves people to see the arts as matter of PUBLIC (not private) concern — then we should all be talking about and sharing images of the community benefits of vibrant, lively places and a connected population.

    • says

      This is basically the urban revitalization argument. It is related to the economic impact scenario. It’s true that many towns and cities have turned their abandoned city centers into arts districts – or tried. (The Wal-Marts and Lowes come in and the community’s little businesses shut down leaving the city centers deserted.) The usual scenario for arty revitalization includes galleries, small municipal museums, cafes, up-scale restaurants, antique shops, and a venue or two for guest performances.

      On the other hand, these efforts have not led to the founding of orchestras or opera houses which would require a broader, more humanistic, less utilitarian concept of the arts and their relationship to society and human identity. Without including this broader approach, revitalization arguments will only create a relatively superficial commitment to the arts.

      There is no other developed country whose cities even approach the urban squalor, desolation, and destruction of America’s. Societies that don’t care about the condition of their cities do not care about the condition of the arts. And the opposite is also true. Societies that don’t care about the arts, don’t care about their cities. America is the perfect illustration. Destroyed cities = destroyed arts. And destroyed arts = destroyed cities.

      For 5000 years governments have supported the arts to create great civilizations, but not one of them has ever been able to define what art is, its purpose, or why it should be supported. Minds from Aristotle to Kant tried and couldn’t. The reason is that art is by its very nature ineffable. It cannot be defined, much less assigned a particular economic value.

      It is thus clear that if we try to advocate for the arts by defining their utilitarian purpose we consign ourselves to defeat. In fact, that’s exactly why opponents of public arts funding demand such impossible justifications. It is a specious argument designed to make arts supporters chase their tails in search of answers to ineffable paradoxes.

      So why do we keep falling for this? A better approach, at least on an intellectual level, is to push the question back at them and point out that the arts are by nature indefinable and that the questioners are being specious and disingenuine.

    • says


      Sounds like you’re making my argument for me. Some tactics work with some people, some tactics do not. That doesn’t mean chuck the tactic, right? It means use it when it can be useful, no?

      Respectfully, I’ve been hearing “We have to change the conversation” for so long that I would gently argue that we need to stop using the phrase because I don’t know what it means anymore.

      You write “if the goal is broad support of the arts, economic impact is not a winning value statement.” Can you define “broad support of the arts”? Do you really mean “broad support for public funding of the arts”? OR is it also “broad support for participation in the arts”? And “broad support for participating and being philanthropic toward the arts”? And “broad support for maintaining and expanding arts in education”? Or all those things? I’d sure hope it would be all those things. But all those things won’t exist on the scale that I think you would want them to if you’re scoffing at the idea of keeping all approaches and arguments on the table.

      When I read the top of your next graph — “Is the goal building broad support for public funding of the arts?” — I thought to myself, THIS is also the problem. Public funding, public funding, public funding — it’s really the cure-all, isn’t it? It’s the everything, it’s the one, it’s the only, it’s the sure, it’s the true, it’s supreme salvation in a cardboard cup. I work in the public sector. More public funding is not the magic curative. You guys can pile on me all you want — yes, I’m getting personal here — and respectfully, you’d still be wrong. Public funding is part of the mix. It must be part of the mix. But it is not a magic bullet. And it is not going to happen. And what galls me – strong word, I know – is that none of you talk about, for example, the implosion in foundation giving for general operating expenses. Why are we not talking about that, and how advocate need to advocate for that? Why are we not talking about how much harder it is to get the young(er) and philanthropy minded to give to the arts? No, that’s unimportant because we solely equate advocacy with public money. If you really and truly want to change the conversation, I’m giving you an opening right here.

      So many of us yearn for a cultural infrastructure that died 20 years ago. Am I happy about that? Hell, no. I’m 44 years old and I know of no time when there was general societal agreement that culture deserved decent, let alone considerable, public funding. But it’s not going to happen. Period.

      Insofar as the sad fact that “traditional economic messages end up competing with other (usually more compelling) ideas about how to bolster an economy,” that may be true. Pure numbers do make average folks, who don’t spend their time in a lather about cultural policy, glaze over. Most citizens don’t understand that cultural groups, nonprofit or commercial, employ people. They keep the tax base up and tax rates down. (Mr. Rushton, is this not so?) We don’t tell that story — at least we clearly don’t tell it well. Where’s the accountant from the nonprofit theatre? Where’s the security guard from the nonprofit museum? Where’s the comptroller from nonprofit dance company? Where’s the program editor from the nonprofit orchestra? Where are these people — not just the artists — in a national, coordinated ad campaign where they look into the camera and say “I am an accountant. I am the arts”? Nowhere. Art works. Yes, NEA, art works. But we don’t work to show the nation all of who and what we are. That’s why they think we’re little more than dilettantes. Well, maybe we are — because we would never think to take the young security guard over at the museum making $20K a year and tell his story. Or even — heavens — letting him tell his own story. How sad is that?

  8. says

    “…push the question back at them and point out that the arts are by nature indefinable and that the questioners are being specious and disingenuine.”

    Yes. Terrific way to motivated average Americans about the arts. Superlative way to gather support for public funding. Yes. Let’s do THAT.

  9. Music Lover says

    Slightly off topic, but…
    I recently went on line to purchase tickets for a Philadelphia Orchestra concert. I chose my seats and price level. At the final screen, I was informed that the booking fees, etc. would be an additional 27% above the ticket price.
    I then cancelled my order.

    What is wrong with this organization (and many similar ones)? Don’t they understand that bait and switch is never a good model for sales, especially when dealing with not a one-time sale, but an audience that hopefully will want to return and purchase additional tickets in the future.

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