Cultural Economics

By Christiane Hellmanzik

The cultural industries and their products and services make a significant contribution to the global economy and are seen as strategic sectors for sustainable economic growth. However, industries such as art, design, film, music, performing arts, publishing, television and radio, present particular challenges for economic analysis. They can be goods or services that are both public and private, protected by copyright and freely available, consumed and created, as well as susceptible to fashion and technological development.

In this fascinating introduction to the cultural economy, Christiane Hellmanzik examines the market for creative work and reveals the economic relationships between human creativity, intellectual property and technology. Through the careful use of case studies, the book explores the core economic considerations such as supply and demand, competition and pricing, alongside macro trends such as globalization, digitalization and the internet, which are changing the industry’s business models.

• Language: English
• Publisher: Agenda Publishing
• Release date: Jul 30, 2020
• ISBN: 9781788213738

Christiane Hellmanzik

Christiane Hellmanzik is Professor of Urban, Regional and International Economics at the Technical University of Dortmund, Germany, and a Board member of the Association of Cultural Economics.

Book preview

Cultural Economics

The Economy | Key Ideas

These short primers introduce students to the core concepts, theories and models, both new and established, heterodox and mainstream, contested and accepted, used by economists and political economists to understand and explain the workings of the economy.

Published

Behavioural Economics

Graham Mallard

Bounded Rationality

Graham Mallard

Cultural Economics

Christiane Hellmanzik

Degrowth

Giorgos Kallis

The Gig Economy

Alex de Ruyter and Martyn Brown

The Informal Economy

Colin C. Williams

The Living Wage

Donald Hirsch and Laura Valadez-Martinez

Marginalism

Bert Mosselmans

Productivity

Michael Haynes

The Resource Curse

S. Mansoob Murshed

Cultural Economics

Christiane Hellmanzik

© Christiane Hellmanzik 2020

This book is copyright under the Berne Convention.

No reproduction without permission.

All rights reserved.

First published in 2020 by Agenda Publishing

Agenda Publishing Limited

The Core

Bath Lane

Newcastle Helix

Newcastle upon Tyne

NE4 5TF

www.agendapub.com

ISBN 978-1-78821-161-1 (hardcover)

ISBN 978-1-78821-162-8 (paperback)

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Typeset by Newgen Publishing UK

Printed and bound in the UK by CPI Group (UK) Ltd, Croydon, CRO 4YY

Contents

Acknowledgements

1 Introducing cultural economics

2 Markets, prices and agents

3 Society and culture: public provision and institutional aspects

4 Demand for culture

5 Artists, superstars and creativity

6 Quality in the arts and culture

7 The organization of cultural industries

8 The internet’s impact on cultural sectors

9 Globalization’s impact on cultural sectors

10 Conclusion

References

Index

Acknowledgements

I would like to thank John O’Hagan, Lukas Kuld, Sara Mitchell, Martin Schmitz and Danielle Kedan for their support, guidance and the many inspiring, fun exchanges over the years; all the many others in the scientific community who inspired me as well as offered fresh perspectives during my explorations of economics and cultural economics in particular; and Jan Lordieck, Jens Kirsten and Adrian Hinse for their excellent research assistance.

Moreover, I would like to thank the anonymous reviewers for their invaluable comments and suggestions and Alison Howson at Agenda Publishing for her advice, many of the examples in the book, and bearing with me and my writing process.

And above all I am grateful to the loves of my life. For being there and for being just the way you are.

Thanks a million to you all.

1

Introducing cultural economics

By way of starting this book, let us point out the obvious: culture and economics are in many ways contradictory, if not antithetical. Is it not the mere essence of art, and culture more generally, that its beauty lies in the eye of the beholder? Its true value is hard to grasp and goes way beyond the price paid at the box office or the bookshop. When we think about the artist’s perspective, is art and, more precisely, the spark of genius that results in the Mona Lisa, Oliver Twist or Bohemian Rhapsody not the result of some divine inspiration that cannot possibly be subject to such banal forces as the market? How many musicians, writers or painters take great pride in their independence of the market? One might think that most of the cultural avant-garde of the 1960s and 1970s were inspired by that very sentiment when we think of Woodstock, the Sex Pistols or Pink Floyd.

On the other hand, we have the likes of Banksy and Damien Hirst, whose claim to fame, as well as their works of art, is to toy with eclipsing existing definitions of art and its market. Hirst’s Shark in a Tank sold for US$8 million in 2004 and, although graffiti and tagging are illegal, Banksy’s graffiti of a Girl with a Balloon sold for £37,000 in 2007; and, more recently, a framed version of the very same image self-destructed by means of an in-built shredder, at the point that it was auctioned for US$1.4 million. For both these modern artworks we might be forgiven for thinking that they are a far stretch from a Van Gogh oil painting. Similarly, with the advent of the internet many musicians have adjusted the way they produce and market their art, as evidenced by the many artists who have since been discovered on YouTube or Soundcloud. And what about George R. R. Martin, whose novels inspired the Game of Thrones television series? Surely his writing process was influenced by the market he was catering for.

These examples capture several mechanisms at play. One is the evolution of our definition of what constitutes culture. The other is the interaction between the artist and the audience (or consumer) via ever-changing platforms, or what economists would simply call the market. Although I leave it to critics in the field to determine what constitutes a good musical piece or painting, cultural economists can certainly contribute to the debate on the second point by offering their tools in order to understand what they would call market outcomes, such as in the case of the graffiti artist Banksy’s success in the fine art market or the cult success of a television series such as Game of Thrones, which reached an audience way beyond the usual fantasy genre crowd.

And this is where this book has its point of departure. Cultural Economics seeks to understand cultural phenomena using an economic toolbox to analyse the supply and demand for culture. To that end, economists like to use two things: models and numbers. First, we use models to describe the key dynamics between and behind demand and supply, abstracting from other factors. In this book I will use simple diagrams to illustrate these models. And, second, I refer to scientific papers which use numbers to quantify and empirically test a model’s hypothesis. As such, cultural economics is the application of concepts and methods of economics to the field of culture.

The economic toolbox

Economic analysis offers a way of understanding culture that makes market dynamics of cultural industries transparent and offers a means of understanding how culture is affected by the market. This pertains both to artists, as the producers of culture, and to audiences, as the consumers of culture.

Figure 1.1 depicts a simple framework that will be helpful for exploring the thinking of an economist. Essentially, the market consists of the supply and demand of cultural goods and services. At a basic level, the market is conceived of as the exchange of what the artist offers and what the consumer wants in a specified quantity at a specific price. Seller and buyer have several considerations in their market decisions, which are discussed in turn in the following chapters.

Figure 1.1 Economic framework

On the supply side, for example, we can think about the way the industry is organized: are there many producers? If so, what is competition like? Is it a highly regulated market? What does it take to become famous in this market? And, on the demand side, we typically ask questions such as whether people are sensitive to price changes. If people become rich, will they want more of a certain good? Is it desirable to offer some culture in a way that everyone can have access to it? A simple demand and supply model as used in economics is a helpful tool to answer such questions. Thus, this simple framework gives us the necessary bones around which we can put conceptual flesh.

In addition to these theoretical models, statistics are used to verify the predictions of these models in the real world. For example, one could use viewer statistics or licensing fees to quantify the success of Game of Thrones. Moreover, we could think of the regulation in various countries, as well as access to broadband internet, to understand the show’s reach better. And, lastly, one could assess the show’s quality by means of the prizes it received. For all these dimensions of understanding a cultural product, economics offers a helpful analytical toolbox.

As the potential applications of economics to the field of culture are vast, this book discusses a diverse set of topics, starting from supply and demand in the cultural industries and societal considerations in the provision and consumption of culture, as well as the superstar phenomenon, quality in the arts and the impact of digitization and trade on cultural sectors. All these topics have been the subject of growing attention in the field of economics, not least because of the simple fact that there is a lot of change in the cultural industries as a result of technological developments.

The best examples for the impact of technological change come perhaps in the music, film and publishing industries. Nowadays it seems almost impossible to imagine these markets without digital technology, to imagine buying a physical record or a box set in a shop rather than downloading or streaming a digital file from the provider of your choice. And, of course, the death of broadcast television has been confirmed by many at a time when young and old are streaming the latest shows via Netflix or other digital platforms. Needless to say, I am fully aware of the irony of writing a book in the day of e-readers, and ever shorter attention spans, when I consider myself part of the digital era.

Finally, in terms of data as a tool for analysis in economics and for cultural economics more particularly, as with many other disciplines, digitization has opened an entire host of opportunities in terms of quantitative research. It is fair to say that economics has been at the forefront of quantitative analysis in the social sciences. With the availability of big data (from sources such as Wikipedia, IMDb.com or Goodreads.com, to name a few that are relevant for research in cultural economics) and digitization information that was previously buried in archives, books, journals and magazines across the globe, information is now readily available via the web whereas previously it was extremely difficult to access.

Combined with advances in computer programming, which integrate data-harvesting techniques into software packages for data analysis, we are in a playpen of opportunities for anyone wishing to crunch numbers in his or her research. If we start from the premise that there is something to be gained from such an empirical approach to culture, economics certainly has a lot to offer in terms of theory as well as quantitative rigour.

The field of cultural economics

First, we need to define what cultural economics analyses – that is, the sectors that are relevant and that we will investigate in this book. Figure 1.2 depicts the key industries for cultural economics and cultural studies more generally.

Figure 1.2 Cultural industries

These branches of culture are largely what is defined as the cultural sector by national statistical offices and international institutions. Moreover, they are helpful in grouping various cultural activities by the similarities of their markets, and often this is reflected in the various research strands in the field. They range from classical art forms such as music, visual and literary arts to the gaming industry, from low- to highbrow cultural forms. There is an ongoing debate about whether advertising and sports should be included as cultural forms, but, for the purposes of this book, I will use the undisputed cultural sectors given above.

We have entered an exciting time for cultural economics. Cultural industries have experienced many substantial changes in light of technical transformations over recent decades. Digitization, as for most other industries, has had a profound effect on culture and has changed the way art is being produced as well as consumed considerably. Not only have we seen goods turn into digital services (think of CDs having become MP3 files lodged in the cloud, from which you stream your favourite track – via a mobile device) we have also seen completely new forms of competition and complementarities between art forms. In terms of competition, the epic quality of some productions from television companies or internet streaming hosts easily competes with a Hollywood film production, thus making competition for limited leisure time and audience attention span fiercer. At the same time, we see musicians exploiting complementarities in the music industry, with an increasing share of their market activity being dedicated to live performances and engaging with fans via social media maintaining their interest in future new releases.

After digitization the other great disrupting influence for cultural goods is globalization. With trade in international markets becoming ever more important and accessible in the last 30 years, cultural goods and services have become more heavily exchanged. Consider the global phenomenon that was Gangnam Style, the worldwide reach of broadcast series such as Game of Thrones or the international legs of art expos such as Art Basel; one cannot help but acknowledge that culture, too, has gone global.