Why it’s time to completely, totally, finally give up on economic impact studies in the arts

no, I don't think it will really workThis is my last attempt at this topic, based on some recent (friendly!) twitter conversations and questions.

One. Let me start with some data. Here, from the US Bureau of Economic Analysis, are sector shares of GDP (i.e. the total value added from each sector) for recent years. If you are interested in a broad-based conception of the creative industries, I would look to line 49, with the Information sector (publishing; motion picture and sound recording; broadcast and telecommunications; and data processing and internet publishing) at 4.7% of total GDP, and line 82 for ‘Arts, Entertainment, and Recreation’ (performing arts, museums, spectator sports, recreation and gambling) at 1.0% of GDP. Are these figures ‘big’ or ‘small’? We can’t say, because it’s always possible to group a large number of activities under one general category and make it a ‘big’ sector, or sub-divide it finely to generate a ‘small’ sector.

Are there any policy implications in these figures – ‘we ought to have more public support of the arts because 5.7%!!!’?

No.

If there were, then every single sector in the BEA list would have the ability to make the same claim.

Two. ‘Indirect impact’ refers to the idea that when funds are spent in one sector, that generates income for those who work in that sector, some of which is spent in other sectors. Here’s an economic impact study from the Colorado Business Committee for the Arts (and I’m not picking on them – I could find a hundred other examples just like it):

For every dollar spent, there is a ripple effect across our regional economy. Buying produce from a nearby farm to feed animals at the Denver Zoo supports a local business. Paying an actress at the Arvada Center for the Arts and Humanities means she can shop at her neighborhood stores.

No doubt such things happen, that’s how an economy works: an artist buys food, a farmer buys real estate services, a real estate agent buys art, and on and on. Input-output models try to calculate the linkages and flows.

Are there any policy implications in the indirect impacts – ‘we ought to have more public support of the arts because Bob the sculptor shops at the local hardware store!’?

No.

If there were, then every single sector in the BEA list would have the ability to make the same claim.

I have a lot of quibbles about how indirect effects are often calculated, but, to be honest, they don’t really matter, because the whole concept of using indirect impacts as a rationale for public support is groundless anyway.

Three. ‘OK, maybe economic impact analysis is, in fact, bogus. But, it gets the attention of legislators!’ I would suggest the following:

There is not one bit of solid evidence I have ever seen – and I have worked in the field of cultural economics and policy for twenty years, edited a major journal, subscribe to and read everything – that backs up this claim. I am open minded, and pleased to accept examples that prove me wrong. A newspaper story of a politician saying she supports the arts because ‘economic impact’ is not what I would consider evidence.

Economic impact studies reduce the arts to the level of every other sector in the economy: one that hires people, sells things, earns people income. There is no argument for public support anywhere in those ordinary facts of life. And we might ask arts policy folks if that is really where they want to be – just another sector like all the others.

And, as a final shot, one thing we hope for in the arts is a rejection of the superficial appeal of false ideas. Time to drop this one.

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  1. Studies from the Lyon Opera in France suggest that each government euro invested produces three euros in revenue for the city (since most of the money was spent locally and audiences generate hotel and restaurant business, etc.) They also tracked international internet traffic and found that the international traffic subject number two in Lyon was the opera (their famed soccer club was first). International corporations know that increasing debt can make businesses grow. That is why private debt is many times larger than government debt. More and more, economists are encouraging governments to invest more in infrastructure, etc. to generate growth and revive economies. Study the complex issues before making pronouncements. You devalue the arts but you should examine the example of Francis I, King of France. He recognized immediately the importance of Leonardo da Vinci and supported him massively. He was smart enough to know that in a few hundred years, his name would be remembered by a few historians and smarties who could rattle off the list of all the kings of France. He understood, unlike you, that great art is an eternal gift and the greatest expression of human existence.

  2. The problem with such studies is that they always (in my experience) omit individuals, and only look at nonprofit groups. It is individuals who form the platoons of arts-ists, who earn and spend, rent and own, but are never counted. Why it could matter is it should help validate our existence to bean-counters, and give us a lobbying voice. But, you’re right, we’re too small and will always be marginalized. But we also marginalize ourselves with our individualism and lack of mass organization. There is no one publication or organization serving all of the arts. Congress hears from professional organizations, groups serving segments, but no representative of all. If we had a national arts magazine, at least its readers would be a concrete population, an identifiable quantifiable something. Not just a principle.

  3. This article from what I can tell at a glance is absolutely right and completely misses the point.

    As anyone who has attempted to raise finance from Government or anywhere for the Arts and or the Cultural Industries, hell you know what let’s go for broke and say anywhere for anything knows you say what you need to say to get what you need to get.

    If economic impact statements open your wallet then you’re getting them in triplicate, oh you want a jar of red M&Ms as well, ok here’s two and here’s an economic impact study to prove that red M&Ms and Art will make the world a better place for you and your family until the sun explodes.

    It’s a dog eat dog and cat and hamster world in the Arts where funding is concerned and I will step over your bloodied corpse to get my cheque. Sorry.

    We really have to stop this whole ‘Bean Counter’ thing. Creative people get together with other creative people of similar backgrounds who attended similar schools and tut and shake their heads and eat the canapes and sip the red or white wine and curse those that don’t see the world the way they do. Not being creative is not a crime [for reference everyone is creative but that’s another story].

    However, Creative people look at the Sistine Chapel and say “wow, that’s beautiful, how much creative genius went into that [translate to Artspeak if you will]” and less creative [but decidedly more normal] people say “wow, that’s beautiful, that must have cost a fortune!”

    And that is why this article misses the point. If I can convince ‘them that holds the purse strings’ that the fortune that was indeed required to create the Sistine Chapel was worth spending by way of an economic impact statement then guess what I’m going to do.

  4. I don’t have any real-world examples to the contrary, but are economic impact studies really completely groundless? I am asking genuinely as someone that has only casually dabbled in both economics and public policy.

    To me, the trouble here seems to be that BEA numbers for the whole nation are used as a broad-brush justification for state or local policy (i.e. the folks in Colorado). Like Dr. Rushton points out, EVERY sector the BEA analyzes can make a case for its worth because the US is huge and has a diversified national economy that encompasses all of these sectors somewhere within its borders.

    What about locations where there are dominant industry clusters, though? Would it be valid to cite local economic impact studies as justification for policy in those instances?

    As a hypothetical example, what if a state like California, which derives large shares of its gross regional product from A&E, tech, and agriculture was (bafflingly) considering a huge state appropriation for something they do not specialize in, like coal mining or textile manufacturing instead of their existing strong local sectors? Common sense would suggest that an input-output model would clearly demonstrate why the proposed policy was a terrible idea, with very small indirect impact multipliers for mining or manufacturing and very big ones for entertainment etc.

    I recognize that this example is ludicrous because CA already (probably) has a lot of favorable policies in place that support its strong sectors and that sane lawmakers aren’t likely to try to make that shift anytime in the near future.

    Perhaps it is a non-issue because the existence of dominant industry clusters largely negates the need for protective public policy in the first place. After all, if local (or state) arts advocates HAVE to convince policymakers that the arts are important enough to be supported with public funds, can they really have that strong of a case to begin with?

    However, in general, should we abandon economic impact claims for the arts entirely, even if we are measuring them relative to other sectors or using local data?

    • Alex, Yes, I would still abandon them entirely. The presumed “indirect effects” per dollar subsidy are not correlated with the share of the industry in the economy. Indiana grows a lot of soy beans, less carrots. But $1 of public funds devoted to soy beans does not have larger linkages with other sectors relative to an additional $1 put into the carrot sector. My main point is that there is no argument for public subsidy either in the size of the sector, its share of GDP, or the fact that it is linked to other sectors in terms of indirect spending. The case for public support of the arts must lie elsewhere.

      • Thank you!

        In that case, is there a different, better economic case to make for supporting the arts?

        The first one that jumps to mind is the one made in “The Rise of the Creative Class”, (i.e. A&E and other things like it attract “creatives” who then go on to drive economic growth), but that theory has been met with a lot of criticism, too.

        I can totally see why arts advocates are quick to look for hard numbers to make a case for public funding. After all, every other sector seems to do it. In Michigan, there are strong lobbies for corn, soybeans, and auto manufacturing whose representatives are all making the same claim.

        Do you think it is a better strategy for arts advocates to make qualitative arguments? If arts advocates do NOT make these claims, do they risk losing out to the other lobbies that do?