The contemporary economics of culture most often takes as its starting point Baumol and Bowen'sWilliam Baumol, William Bowen, Performing Arts-The Economic Dilemma : A Study of Problems Common to Theater, Opera, Music and Dance, Ashgate Publishing, 1966, 582 p. () seminal work on the performing arts, which argues that reflection on the arts has been part of the history of economic thought since the birth of modern economics in the seventeenth century.
Until then, the arts had an ambivalent image. They were morally condemned as expensive activities that offered little benefit to society and were associated with the sins of pride and laziness. If they had any merit, it was in their educational value, or in their ability to prevent the rich from wasting their resources on even more harmful activities.
In the eighteenth century, Hume and Turgot helped to give a more positive image to cultural activities, presenting them as useful incentives for enrichment, and therefore for economic growth. For his part, Adam Smith highlighted the particularities of the supply and demand of cultural goods, which were to form part of the basis of the cultural economics research program.
Nineteenth-century economics sought to express general laws in the same way as the exact sciences. As a result, neither the authors of classical political economy nor the marginalists paid much attention to the specific features of the economics of culture in their research programs, even though several of them (Alfred Marshall, William Stanley Jevons) were individually sensitive to questions about the role of the arts in an industrialized economy. Reflection on the economic role of the arts and the economic conditions of their production thus came from intellectuals who integrated economic dimensions into an essentially political or aesthetic approach (Matthew Arnold, John Ruskin, and William Morris).
From the mid-twentieth century onwards, important figures such as Galbraith began to take an interest in these questions, but he failed to generate interest among both artists and his fellow economists. Similarly, although Keynes had a decisive influence on the actions of the Bloomsbury Group, which led to the United Kingdom setting up an institutional structure to support the arts (the British Arts Council), he did not directly devote any personal research work to the subject.
It was during the 1960s that the economics of culture emerged as a close disciplinary field, under the impetus of the work of Baumol and Bowen as well as work emanating from the analysis of addictive goods (Gary Becker) and the theory of public choice. Initially conceived as a crossroads between several disciplines, cultural economics has had a specialized journal since 1977, and achieved full academic recognition in 1993 with the publication of a literature review in the Journal of Economic Literature and two reference manuals.
Cultural economics Cultural economics is the branch of economics that studies the relation of culture to economic outcomes. Here, 'culture' is defined by shared beliefs and preferences of respective groups. Programmatic issues include whether and how much culture matters as to economic outcomes and what its relation is to institutions. • Luigi Guiso, Paola Sapienza, and Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, 20(2), pp. 23–48.
• Mark Casson (2006). "Culture and Economic Performance," Handbook of the Economics of Art and Culture, V. 1, Chap. 12, pp. 359–97. doi:10.1016/S1574-0676(06)01012-X
• Paul Streeten (2006). "Culture and Economic Development", V. 1 Chap. 13, pp. 399–412.
• Jeanette D. Snowball, 2008. Measuring the Value of Culture, Springer. Description and Arrow-page searchable chapter links.
• Joseph Henrich et al., 2005. "'Economic Man' in Cross-Cultural Perspective: Behavioral Experiments in 15 Small-scale Societies," Behavioral and Brain Sciences, 28(6), pp. 795–815.
• Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, 36(1), pp. 75–111.
• Guido Tabellini, 2008. "Institutions and Culture," Journal of the European Economic Association, 6(2/3), 2008), pp. 255–94. • Raquel Fernández, 2016. "Culture and Economics." The New Palgrave Dictionary of Economics, 2nd Edition. As a growing field in behavioral economics, the role of culture in economic behavior is increasingly being demonstrated to cause significant differentials in decision-making and the management and valuation of assets.
Before the 18th century
The economy prior to the eighteenth century was essentially a subsistence economy, which was also very much subject to the vagaries of geopolitics, which meant that attention was focused on ways of allocating resources to activities that produced food or strengthened the means of defence.Handbook of the Economics of Art and Culture. Chapter 2. p. 29–33 : "The earliest years". As a result, cultural activities that detracted from production, defence or religion were generally viewed with suspicion,Handbook of the Economics of Art and Culture. Chapter 2. p. 29–33. except by mercantilists, who saw them as a way of improving the trade balance. Cultural activities were seen as deeply linked to the passions, and as an expression of vices such as jealousy, envy, pride and lust, they were seen as something to be fought. So when Jean Bodin ranked city dwellers in order of social merit in 1576, he placed artists at the bottom. Even Bernard Mandeville, for whom the organisation of selfish passions is the driving force behind economic growth, only advises indulging in the arts as a means of avoiding other, more costly extravagances.
However, both of these authors were interested in the problem of determining the price of works of art. For Bodin, the value of works of art or luxury items was essentially determined by demand, which in turn was linked to trends. Anticipating Veblen, he highlighted the conspicuous consumption dimension of the artistic demand of his time: it was all about flaunting one's wealth.
Mandeville, for his part, also noted that an artist's reputation and the social position of his buyers had a major influence on the value placed on his work. To these determinants, he adds rarity, but also the conformity of the work to its model.Handbook of the Economics of Art and Culture. Chapter 2. p. 9-3. In this, he agrees with Jean Bodin and Ferdinando Galiani that the fundamental value of art lies in its ability to highlight and exalt the true nature of its model and to educate viewers about virtue through its power to represent elevated feelings.
The 18th century: imitation and imagination
Hume and Turgot: towards a rehabilitation of the arts In the context of the Age of Enlightenment, David Hume clearly distinguished between art, luxury, and vice.Handbook of the Economics of Art and Culture. Chapter 2. p. 33 – 41 : "The eighteenth century: Imitation and imagination in the Enlightenment". Noting that historically, periods of greater artistic vitality were also periods of economic growth, political freedom, and virtue, he put forward the idea that luxury provided a powerful incentive for economic activity that benefited everyone.Handbook of the Economics of Art and Culture. Chapter 2. p. 33 – 41. Indeed, Hume argued, "innocent luxury" sharpens the capacities of the mind and provides an incentive to work in order to acquire it, thus avoiding idleness. What's more, he adds, the consumption of luxury goods produces positive externalities for society as a whole. In economic terms, it sustains an activity that, if necessary, can be quickly converted to suit the needs of the moment. In political terms, he joins his predecessors in the idea that art nurtures civic virtues.
In the same vein, Turgot links inequalities in development between nations to differences in the way the arts and sciences are treated, thus anticipating the notion of human capital. Using ancient Greece as an example, he noted that the development of the arts preceded that of the sciences. He established a link between spontaneous expressions of joy and dance, which in turn led to music, whose regularities encouraged the development of mathematics, and between poetry and the enrichment of language, which in turn led to philosophy.
Like Hume, Turgot insisted on the necessity, both in art and in the rest of the economy, of competition between artists by means of a large market, which implies a large demand for second-rate works of art, from which masterpieces and great artists can emerge. He bases this idea on the difference between the situation in Italy, France, and Flanders and the one in England, where the Reformation paralyzed the English art market, which was based on ecclesiastical demand, without a wealthy merchant bourgeoisie being able to take up the slack, unlike in Flanders.
He also gave a central role to patronage as the driving force behind artistic progress, citing Lorenzo de' Medici, Leo X, and Francis I as models of patrons interested in art itself, and not in an ostentatious consumer dimension. On this last point, Turgot notes that when conspicuous consumption dominates, the effects of trends and technical virtuosity take priority over genuine artistic creativity.
Adam Smith Adam Smith set out his main thoughts on the problem of culture in his Theory of Moral Sentiments (1759). His main question was to explain the reasons for the demand for works of art. In The Wealth of Nations, he considers that the essential reasons are tradition and the effects of trends, to which he adds pure emulation. His account of how wealthy people use works of art to flaunt their wealth may have influenced Veblen's formulation of conspicuous consumption. On the supply side, he notes that the greatest artists, though innovative, are always dissatisfied with their own work in terms of what they would like to produce. However, he balances this dissatisfaction against the risks of excessive self-esteem associated with the popularity that some of them achieve. Still, on the supply side, Smith cites artists as an example of professions that require skills that are costly to acquire, and whose pay therefore reflects that cost. This effect, he notes, is less for those (philosophers, poets) whose work enables them to achieve a respected social position, and stronger for those (actors, opera singers) whose scarcity of talent is accompanied by social condemnation of their type of career. However, he places them all in the category of 'unproductive' workers (who do not lead to capital accumulation and economic growth), showing how much his thinking still owes mercantilism in failing to understand the role of services and the contribution of human capital to growth.Handbook of the Economics of Art and Culture. Chapter 2. p. 33 – 44.
The age of classic economics The political economy of the nineteenth century virtually ignored the subject of arts and culture.Handbook of the Economics of Art and Culture. Chapter 2. p. 41-48 : "Classical economics: The shadow of Bentham". The challenge at the time was to gain recognition for economics as a science, and thus to express general laws with as few exceptions as possible. The Age of Enlightenment's questions about the unique and exceptional nature of the arts were therefore hardly relevant to the research agenda that led to Homo economicus.