Down to Business

The links between elaborate economic models and reality can be downright mysterious! In 1959 economist Stefan Valavanis described economic models this way:

Econometric theory is like an exquisitely balanced French recipe, spelling out precisely with how many turns to mix the sauce, how many carats of spice to add, and for how many milliseconds to bake the mixture at exactly 474 degrees of temperature. But when the statistical cook turns to raw winebottle1materials, he finds that hearts of cactus fruit are unavailable, so he substitutes chunks of cantaloupe; where the recipe calls for vermicelli he uses shredded wheat; and he substitutes green garment die for curry, ping-pong balls for turtle’s eggs, and, for Chalifougnac vintage 1883, a can of turpentine.1

Valavanis’ main concern is the quality of empirical data that economists introduce into their models—the classic garbage-in/garbage-out problem. But the larger point is that reconciling economic theory with reality has not been a particularly strong suit for the field of economics. Quite a lot of economic theory must be accepted on faith. These leaps-of-faith are basically assumptions—and some of these assumptions are dubious, to put it mildly.2

Even so, in recent years there has been a movement among library, arts and cultural organizations to enhance their public images by advertising purely economic benefits that their organizations ostensibly produce. This practice became especially popular when the theories of economist Richard Florida appeared in his book, The Rise of the Creative Class, and in prestigious periodicals like the Harvard Business Review. Some economists later concluded that his thesis was a bit of a stretch. (See Lang, R. & K. Danielson, eds. 2005. Review Roundtable: Cities and the Creative Class. Journal of the American Planning Association, 71(2), 203-220.) In the meantime, arts and cultural organizations took the bait and began promoting their institutions as mini-economic powerhouses.

This advocacy strategy continues to be in vogue, for instance, in a reportOAC issued by the Ohio Arts Council, a state agency that funds and promotes the arts statewide. The report is based on economic modeling software that uses a technique originally developed in the 1960’s known as “input/output analysis.” Economists enter various economic data from federal and other sources into the modeling software. And—presto!—the model formulas produce a detailed breakdown of economic impacts that occur within the region of interest (in this case, Ohio). Extrapolating from whatever data the researchers feed it, the sof- tware identifies both “direct” and “indirect” impacts a given industrial sector is likely to have on other sectors. These figures indicate how the invisible hand of the market magically multiplies dollars and spreads them around.

The final product of this whole process is a total amount of economic impact that the model says a given industry produces. So, the Ohio Arts Council report declares confidently that Ohio’s “creative industries contribute more than $25 billion to Ohio’s economy annually” (p.8). Of course, this figure depends on the set of assumptions that the economist(s) and the model make. Other economic cooks using different recipes will come up with different figures.

The Ohio report includes an appendix listing about 500 industrial categories that these economic effects spread to. Here’s a selected list of the categories and dollar impacts that are supposedly produced by Ohio’s arts and culture sector:

OhioArtsImp

Maybe  it is true that arts and cultural organizations bolster oilseed farming  and ornamental metal work manufacturing and keep bowling-aloners occupied. We might well be happy to hear news like this.

But here’s the problem: Other economic sectors may also be capable of producing these same economic effects. Say for the sake of argument that government sponsored day care centers could have an equivalent economic impact, or that Ohio’s unpopular vehicle emissions testing (E-Check) program could. What incentives are there, then, for Ohio to invest in arts and culture—or in public and academic libraries—rather than these other industries? And what if an industry, say gambling (the Ohio Lottery, race tracks, not-for-profit Bingo and raffles, etc.), produces even greater economic impacts? Shouldn’t Ohio then divert arts and culture dollars to the gambling sector?

monopoly$When cultural and library organizations are viewed as mere stimulants to the economy, they are no longer distinguishable from rival public or private economic “engines”—daycare programs, E-Check, gambling, amusement parks, tattoo parlors, and so on.

In the short run, funders and supporters of library, arts, and cultural organi- zations may be pleased by these glowing economic impact reports. However, making the almighty economic-bang-for-the-buck a primary measure of value is a mistake. It completely misrepresents the fruits that these organizations bear, which are by definition societal and cultural and therefore very difficult to quantify. Recognition of the value of libraries and cultural organizations should not be relegated to econometrics and accountancy. Our advocacy campaigns need to move beyond these fanciful and inadequate portrayals of these institutions as “strictly-business.”

 
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1  Stefan Valavanis quoted in Kennedy, P. (2008). A Guide to Econometrics, 6th ed. Oxford: Blackwell Press, p. 2.
2   See Keen, S. (2001). Debunking Economics: The Naked Emperor of the Social Sciences, New York: St. Martin’s Press. And also Nelson, R. H. (2001). Economics as Religion: From Samuelson to Chicago and Beyond, University Park, PA: Pennsylvania State University Press.

One thought on “Down to Business

  1. There is no doubt that Arts & Culture contribute to the health and well being of any community, state and country. However, a focus on the arts as a mere source of revenue and financial gain for any group is shortsighted myopic tunnel-vision. The primary purpose of the arts is self expression that provides joy, meaning, and new perspectives on the lives we are living. If profit and financial gain are side bars of works of art so be it, all the better. But let us not confuse filling our bank accounts with fueling our spirits and enhancing quality of life. The power and richness of the arts goes beyond the cost of a front row seat or someone sitting in the balcony. Art like the rain can nuture all who thirst for beauty and goodness regardless of the cost of admission or profit gained by the impresario

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