Should we subsidize arts consumers, art producers, or neither?

My friends Joanna Woronkowicz and Doug Noonan have started a new venture, Arts Analytics, where they hope to bring more extensive, and shared, use of data into arts policy thinking, and also to spur discussion.

A recent post of theirs asked what is actually an old question in the arts policy world: if we are going to subsidize the arts, is it best done through grants to arts producers, or through running the subsidy through arts consumers? They think we ought to give more consideration to the latter:

A demand-centered reframing would start by letting audiences steer a portion of public funds. Converting a slice of operating grants into cultural vouchers or match-savings accounts would shift purchasing power directly to households and reveal real preferences. Public support could be indexed to robust engagement metrics—unique visitors, hours of participation, co-creation—rather than to the sheer number of productions mounted. The tax code could extend credits to ticket purchases, streaming subscriptions, or the DIY tools that turn consumers into creators. Investments in open-licensed archives, maker spaces, and remix rights would raise the psychic return on participation, while a modernized data regime could publish an “attention GDP” alongside conventional value-added, finally giving non-market demand a seat at the policy table.

They invited readers to respond, and this week published two of those responses, from former NEA Chair Bill Ivey, and from me. It’s nice to see this sort of dialogue – I hope there is more of it.

You can read Bill’s full response at the previous link. He begins:

The [nonprofit] arts sector likes to “look at itself from the stage” because a producer dominated perspective frees policy actors to pay little or no attention to audience demand, audience choice, or audience taste.  This focus conceals the reality that given the opportunity, many Americans would not buy what arts organizations are selling.  Early in the most-recent incarnation of government support for the arts (The NEA Era,1965-2025), advocates disdained popular arts and mass culture, offering an alternative that justified nonprofit access to public money.  In this formulation, the nonprofit fine arts were embraced as an antidote to TV, movies, rock ‘n’ roll, and so on.  This public interest role justified the development and maintenance of a closed system: producers and experts who “knew what is best” for audiences would frame objectives, determine costs, and then motivate a tiny audience – government officials – to “consume” the nonprofit arts product.  The pitch to funders was about secondary, instrumental benefits: an investment of a few million would make their communities happier, their youth better aligned, their nation a bit stronger.  Favorable tax policy complimented grantmaking.  Freed from the limits imposed by demand, this approach enabled a spectacular expansion of the nonprofit sector, one that over the decades all but guaranteed a “chronic oversupply” of many kinds of artmaking.  Today, nonprofit leaders know that their foundational argument – a virtuous alternative to corrupting mass culture — isn’t the political asset it was years ago.  Although no longer in the foreground, disdain for “the popular” that justified claims made to policy actors lives on in the field’s DNA.  (Our nonprofit art is just better!)  Unfortunately, no new “why?” has been advanced in support of the current model, and the “replace-TV- and-rock argument” has retreated to the background.  It is surprising that, despite the absence of a compelling justification, a closed system in which the only “demand” is what can be sustained among a handful of elected officials and societal elites remains essential to the fiscal health of the entire nonprofit arts community. …

Here is my response. You’ll see the style is pretty informal – I originally just wrote to Joanna and Doug via email, not expecting publication. In any case…

When it comes to using public funds to support the arts, a question needs to be asked at the outset: Why? What is it about the market allocation of resources and distribution of outputs in the cultural sector that could use some improvement via public policy? This has to come first, and then we can ask: so, given the goal we want to achieve, what is the best means of getting there?

Normally, we look to subsidies when we think there is under-consumption and production. But is that what we have? Recorded arts – video, music, images, text – are widely available at extremely low prices to the consumer. As you note, we already have tons of consumer surplus. This is in itself a result of a market failure – in an internet world with digital recordings, it is really hard to guard one’s intellectual property, and so any provider of product is sharply constrained in what they can charge without consumers turning to other options. So, in that sphere there is loads of access, and any state subsidy would be superfluous – would we really need to subsidize Spotify subscriptions?

So, what about “live” arts – performances, and visual art on canvas or in marble? Again, we would need to ask what problem we are trying to solve. You are correct that if we thought there was less-than optimal consumption, we could subsidize, and we could subsidize either through grants to nonprofits (as we typically now do in North America) or through consumer vouchers (as with, for example, the youth cultural vouchers that were tried in some European countries recently). Now, while in teaching undergrad public finance we show students that when it comes to subsidies (or excise taxes) on a good, in terms of outcome and incidence it doesn’t matter which we choose regarding who “officially” gets the subsidy (if we want to put a ten cent subsidy per pint of blueberries, it doesn’t matter whether it is given to consumers or producers – prices will adjust the same way), in the arts it is a different sort of thing, because the subsidy isn’t per pint of arts. Consumer vouchers are more like an ordinary subsidy – they apply to purchases – but producer subsidies are not – they apply to the grant-writing prowess of the organization, in which audience numbers play some role but are not the whole story. 

I think what you are trying to say here is that there ought to be a subsidy of some sorts, and that basing it on consumer choices is better than a system of grants that is only tangentially related to audience numbers. Okay. But it leaves the question of why we are doing this. When French kids with culture vouchers mostly ended up at the manga store, the government was forced to ask, “is this what we were trying to do?” What sorts of things would the voucher apply to, and what would be left out? Respecting consumer choice doesn’t get the state out of having to answer that question. And once it gets into the job of figuring out where to draw the boundaries, well, that has to be “top down”. It requires a statement that these things warrant a subsidy that other things do not. If I can shamelessly self-promote, that is one of the arguments in the final chapter of my book – arts policy means choosing what is going to count as art worthy of subsidy, and what is not. You can’t get around it.

Note I wrote about the French Culture Pass on this blog here and here…