In my last post I wrote about cost disease, the powerful analysis of economic shifts that results from labor-saving technological change occurring at different speeds in different sectors of the economy. This is an addendum: cost disease explains some changes in costs and prices, but not all of them. It explains why school districts struggle to attract teachers and balance budgets, but it doesn’t explain why it costs so much to attend Wellesley. It explains why it’s hard for high schools to find bands they can afford to perform at school dances, but doesn’t explain why the Philadelphia Orchestra has an annual budget of $46 million.
What are the differences?
The markets for teachers, and for local dance bands, are competitive – many sellers and buyers, none with much market power. People will only enter those professions (teaching, live performance of dance music) if the pay (and conditions) match those of other professions that are available to them. As wages rise everywhere else, so they must rise for teachers and local musicians to attract anybody at all to the job. For those who would hire them, they have to find some funds to do so, and that will become increasingly difficult as wages rise. That’s pure cost disease.
But elite schools and arts organizations are in a different position: their status gives them a product with very high demand, expressed in terms of what people will pay and what they will donate. As nonprofit organizations, they have to spend – eventually at least – what they take in. But they are able to take in much more than the market cost of doing what they do; this leads to what economists call rent. And the organizations capture that rent by finding innovative ways to use up all those funds. Cost disease will explain a part of their costs – professors’ and cellists’ salaries will need to rise with the rest of the economy, after all. But it doesn’t explain all of the cost increases, which in elite nonprofits arise from rents. Their costs are determined to a large degree by their revenues.
Consumerism: the more money you get, the more money you need. Community, spirituality, and integrity are replaced with competition, materialism, and disconnection. When all needs are met, artificial desire is created to keep business flowing. Value becomes a social construct.
Participatory culture: individuals do not act as consumers only, but also as contributors or producers. People look past taking and think of giving. The ideal of working for the common good is strengthened. Community, spirituality, and integrity are strengthened.
This is why the social democracies of Europe are so much more humanistic than America. Concepts of the common good balance the impulses of capitalism. And of course, one manifestation is that the arts are much better supported because they are seen as part of the common good.
Until Americans reform their economic philosophies, the disease of consumerism will continue to destroy their cultural identity (and their ever-greedy major cultural institutions.)