WHERE ARE WE NOW ON CULTURAL ECONOMICS?

Transcription

1 WHERE ARE WE NOW ON CULTURAL ECONOMICS? Mark Blaug University of Amsterdam Abstract. A survey of progress in cultural economics since its virtual birth in 1966 with the publication of Baumol and Bowen, Performing Arts: The Economic Dilemma, distinguishing between `theoretical progress' and `empirical progress'. Following in the footsteps of Towse's recent anthology of classic papers in cultural economics, I address nine topics that between them cover the subject, namely, 1) taste and taste formation, 2) demand and supply studies, 3) the media industries, 4) the art market, 5) the economic history of the arts, 6) the labour market for artists, 7) Baumol's cost disease, 8) non-profit arts organisations, and 9) public subsidies to the arts. I conclude that there has been some theoretical and empirical progress in the treatment of almost all these topics. Keywords. Cultural economics; Performing and visual arts; Taste formation; Arts subsidies; Baumol's cost disease; Empirical progress 1. Introduction Cultural economics or the Economics of the Arts, as it used to be called, may be said to have been created almost de novo thirty years ago by Baumol and Bowen's book, Performing Arts: The Economic Dilemma 1966). Since then, one or two writers have sought to widen it to embrace the `economics of culture', turning it from a sub-discipline of economics into a sub-discipline of anthropology Klamer, 1996; Throsby, 1999), but most of the literature remains wedded to the older narrower conception in which cultural economics means the economics of the performing visual and literary arts. It is in this latter sense that I shall be surveying developments in the subject over the last 30 years. My survey is more than a survey: I want to ask whether the subject has in fact progressed since Baumol and Bowen. 1 Are we getting any better at understanding cultural phenomena from an economic standpoint? Progress in economics can take at least two forms, namely, analytical progress or empirical progress or both. By analytical progress I mean the elaboration and refinement of basic theoretical concepts such as, say, option demand or externalities in consumption. By empirical progress, I mean more accurate estimates of fundamental empirical relationships, such as, say, the elasticity of demand for the arts or the cost functions of artistic organisations. I believe that /01/ ±21 JOURNAL OF ECONOMIC SURVEYS Vol. 15, No. 2, 108 Cowley Rd., Oxford OX4 1JF, UK and 350 Main St., Malden, MA 02148, USA.

2 124 BLAUG there has been both analytical and empirical progress in cultural economics since 1966 but, more strikingly than either, there has been a steady enlargement of the subject, that is, the application of economics to an ever widening domain of artistic phenomena. I hope to show that this process of evolution in the subject has by no means come to an end: there are still a surprising number of outlets for artistic creativity which have so far received very little attention from cultural economists. To give just one example, there is the topic of publishing and book production, which cries out for economic analysis that has so far hardly been received. Let us take stock: what is the proper scope of cultural economics, that is, what holds the field together as a sub-discipline of economics? As Ruth Towse 1997, pp. xvi ± xvii) has noted, cultural economics lacks a single dominant paradigm or overarching intellectual theme that binds all its elements together. Labour economics has human capital theory and efficiency wages, health economics has moral hazard and adverse selection, microeconomics has asymmetric information and missing markets, macroeconomics has time inconsistency and rational expectations, but cultural economics has only Baumol's cost disease Ð which is no doubt why the cost disease has received so much attention. Cultural economics has been a largely empirical subject and insofar as it has been theoretical at all, it has employed what Tyler Cowen 1998b) calls `loose neoclassicism', that is, rational choice theory not in the tight Chicago sense of Becker and Stigler but in the loose Adam Smith sense of self-interested individual action constrained by costs, incomes and the norms of economic institutions as exemplified by the writings of Mancur Olson, Ronald Coase, Douglas North and, nearer to home, Bruno Frey. It will prove convenient to hang my view of cultural economics over its brief 30- years history on some sort of framework. The subject is now endowed with as many as six textbooks, two of which are in French and Italian 2 and a superb survey article by David Throsby 1994) in the Journal of Economic Literature, any one of which might have served me as the appropriate framework for my tour d'horizon. But I prefer to follow in the footsteps of Ruth Towse's 1997a) twovolume anthology of cultural economics because its classification of papers seems to me to cover all the main topics that I want to address in assessing progress in the subject: taste and taste formation, demand and supply studies, the media industries, the art market, the economic history of the arts, labour markets for artists, Baumol's cost disease, non-profit arts organisations and finally, public subsidies to the arts. Most of the papers I cite are in the two Towse volumes and are starred to mark that fact. 2. Taste formation Let us begin with taste formation. George Stigler and Gary Becker 1977) once espoused a particularly strong version of rational choice theory in their famous `De Gustibus Non Est Disputandum' essay, involving the assumption that all individuals have identical tastes, so that differences in individual behaviour are

3 CULTURAL ECONOMICS 125 always explained by observable differences in the constraints individuals face and not by unobservable differences in their preferences. But although they advocated this surprising thesis with undeniable elegance, it has received some of its best criticisms from cultural economists Ð indeed, it has hardly been criticised at all outside cultural economics. What I say it is a surprising thesis, it is because most economists before Stigler and Becker always insisted on consumer sovereignty in opposition to state paternalism precisely because individual tastes are believed to be different. `Do not do unto others as you would that they should do unto you. Their tastes may be different' was one of Bernard Shaw's `Maxims for Revolutionaries' appended to his play Man and Superman and it is a maxim that certainly won the endorsement of all economists in the good old days before Stigler and Becker. In a really effective answer to Stigler and Becker, Tyler Cowen 1989) argued that to assume constant and identical taste and to throw all the weight of explanation on the constraints facing individuals merely moves the problem one step backwards in a process of infinite regress. It only works because Stigler and Becker adopt Becker's household production model Becker, 1996), according to which households do not maximise utility but instead maximise the production of Z `commodities' with the aid of their own time and skills plus goods purchased in the market; these Z commodities have only `shadow' prices and the full income of households now includes the value of the age and gender-specific time of the various members of the household. So, what we usually call `tastes' Ð the utility or preference functions of individuals Ð Stigler and Becker call Z commodities, and what we usually think of as the variety of tastes among individuals is simply passed back to their formulation of the Z commodities. But apart from that trick, there is real doubt as to whether Stigler and Becker do in the end manage to account for differences in consumption between individuals McCain, 1995). Besides, endless studies in cultural economics, beginning with Baumol and Bowen 1966, Chap. 4), show that audiences for the arts are skewed to the right in income, age, occupation, and levels of education and indeed differ more markedly in years of schooling achieved than in any other personal characteristic see, in particular, Dobson and West, 1988; Dickenson, 1992). If this is not direct evidence for differences in individual tastes, I do not know how else to account for it. In addition, there is ample evidence of the crucial importance of early arts education in accounting for later participation in arts events independently of differences in incomes and the costs of attendance O'Hagan, 1996), in short, of the endogenous formation of taste for the arts. No doubt, tastes are not directly observable Ð and neither is utility Ð but, surely?), we do not lack observed behaviour from which to infer changes and differences in individual tastes. The fact that the products of cultural industries are typically `experience goods' for which tastes have to be acquired by a temporal process of consumption, sometimes leading to `rational addiction', only strengthens the point that stable and identical tastes are an implausible assumption. All in all, the study of cultural economics militates against the complacent orthodox

4 126 BLAUG view that preferences are given and that the formation of tastes is a subject best studied by sociologists rather than economists. Bruno Frey with the late Werner Pommerehne) has long advocated a softer version of rational choice theory, meaning no more than that individuals pursue their own interest, taking account of prices and incomes but also of the norms and conventions governing the organisations to which they belong and the institutions which surround them. Frey's book, Not Just for the Money 1977) goes a long way to qualify the neoclassical perspective on rational choice without entirely abandoning it. His distinction between `basic preferences' which he assumes are given, and `revealed preferences' which are shaped by the constraints that individuals face, allows him to have his cake and eat it too, that is, to discuss both how tastes are formed and to grant the Stigler-Becker thesis that our explanations of behaviour should appeal as little as possible to differences in tastes. 3 Cultural economists therefore face a choice: to follow Frey's reconciliation of orthodox rational-choice theory with the unorthodox idea of endogenous taste formation or to scrap the entire neoclassical framework in order to take up a long series of inductive case studies of taste formation in the literary visual and performing arts, which may eventually result in some genuine theories of taste formation. It will be interesting to come back to that question of choice in five or ten years time. 3. Demand and supply The preferences of individuals aggregate into market demand and supply functions for the arts Рand it is with markets and not individuals that economics is ultimately concerned. That brings us naturally to the price and income-elasticities of demand for theatre, dance, opera, concerts, films etc. This is the bread-and-butter of all economists, no less of cultural economists as of microeconomists in general. Ruth Towse includes a half-dozen of these demand studies in her readings book, those by Glenn Withers 1980), James Gapinski 1986), Samuel Cameron 1990) and David Throsby 1990) but there are literally dozens of others. 4 However, I want to draw attention to a recent study of demand for theatres in France, which goes beyond all previous work on demand for the arts in terms both of sample-size and the numbers of variables included. Le vy- Garboua and Montmarquette 1996) include such variables as income, price, quality of the performance, past theatregoing experience, general knowledge of the arts and a list of socioeconomic characteristics of the respondents too long to list here, concluding that the demand for theatre in France is price-elastic, which contradicts previous estimates. That result may in time be overturned but there is little doubt that their study marks a new and more sophisticated stage in estimates of demand for the arts. It affords use with the first clear sign yet of empirical progress in cultural economics. Work on cost functions and the supply of the arts has been less innovative, which is hardly surprising. Again, Towse includes a half dozen papers on statistical cost functions by James Gapinski 1980), Steven Globerman and Sam Book 1974) and Alan Peacock 1976), Rene Goudriaan and Evert Pommer

5 CULTURAL ECONOMICS ) and Charles Gray 1992), providing widespread evidence of economies of scale in many of the performing arts. 5 Cost data are much more difficult to extricate from reluctant arts organisations than demand data as I discovered when I worked on opera seat prices) and because most arts organisations are non-profit companies pursuing multiple objectives, the old econometric trick of inverting profits data to infer cost data will not work for them. It is fair to say that econometric work in this area has produced no surprising results and fewer insights than are obtainable by the inspection of accounting data. As we shall see, attempts to verify Baumol's cost disease from time series on the revenues and expenditures of individual arts organisations have taught us more about the supply of the performing arts than all the statistical cost studies put together. However, if we recall the idea that artistic goods are `experience goods', it is doubtful whether we can actually identify demand for the arts separately from the supply of the arts Ð and vice versa. Health economists have come in recent years to believe in what they call `supplier-induced demand', that is, that doctors in most health care systems have the power to shift out the demand curve for their services see Blaug, 1998). Is there supplier-induced demand for visual and performing arts? There must be if tastes for the arts are formed by the prior act of consuming the arts. This dynamic interlinking of demand for and supply of the arts has not so far been successfully tackled, or even squarely faced in cultural economics. It remains an item on the future agenda of our subject. 4. Industrial organisation Next come a series of papers on museums, galleries and heritage sites with classic papers by Lionel Robbins 1971), Bruno Frey 1994) and Alan Peacock 1994), raising the famous question of entrance charge for public museums. 6 This is where economists confront the equity=efficiency quandary most clearly. There is an efficiency case for museum charges but it is not a strong case; the equity argument for entrance charges with exemptions for students, the aged and perhaps the unemployed, on the other hand, is simply overwhelming. However, given the different functions of museums collecting, preserving, exhibiting and studying) and the multiple objectives of its principals and agents trustees, donors, public funding agencies, directors and officers of museums), it is not at all clear just what is meant by the `efficiency' of museum activities. This is the sort of question that is made to order for the professional expertise of economists. Professional managers of arts organisations have never had much use for economists but the gap in thinking between economists and arts administrators appears to be wider in the museum world than anywhere else. Starting with the pioneering paper of Michael Montias 1973), economists have written a good deal on the economics of museums, much of which has been eminently sensible but without much discernible effect on museum people. 7 Deaccessioning, for example, is still regarded as if it were original sin and the `magpie philosophy' of museum

6 128 BLAUG administrators continues as always to be impervious to the asking of economic questions. 8 Towse follows her reprint of papers on museums and galleries with a few papers on the media industries, leading off with two extraordinary papers by Ronald Coase 1966, 1979), on radio and television, one as early as 1966 and the other as late as 1979, extraordinary because they describe and comment as historians do instead of modelling and testing as economists are wont. Coase's essays are followed by a beautiful paper by Alan Peacock 1986) summarising The Report of the Committee on Financing the BBC, which he chaired. 9 I now jump forward to Towse's second volume and the section on non-profit organisations in the arts because they continue the theme of industrial organisation in the arts, that is, the internal structure and governance of organisations. The topic begins with an influential paper by Henry Hansmann 1981), centering around the necessity of arts organisations to practice price discrimination to cover fixed costs and to adopt the non-profit organisational form in order to encourage tax-deductive donations as a supplement to box office receipts. It gave rise to a whole series of elaborations and refinements by Edwin West 1987, 1988) James Heilburn 1988) and Bruce Seaman. 10 There is a paper by Dick Netzer 1992) which summarises his book, The Subsidized Muse, a classic in the microeconomics of our subject as much as Baumol and Bowen is a classic in its macroeconomics; it employed survey methods to ask, not just whether and by how much we should subsidise the arts, but what actually happens to artistic organisations when they are subsidised. Subsidies, Netzer proceeded to show, lowered ticket prices, increased attendance, increased artists' salaries but did almost nothing to create wider access Blaug, 1999). A fine paper by Frey and Pommerehne 1990) concludes the discussion with a comparative glance at the motives of theatre managers, including the rent-seeking that seems to be an inevitable by-product of a system of public subsidies. More on that theme anon. 5. The art market We come now to an extremely active area of cultural economics, the economics of art markets, which clearly draws inspiration from the recent upsurge of financial economics and the theory of auction pricing in microeconomics. This is an area which Baumol did not invent but which was certainly much encouraged by his 1986 paper on `Art Investment as a Floating Crap Game'. Frey and Pommerehne 1989) have figured heavily in this literature and Towse reprints one of their best papers. 11 Virtually all of these studies, with one or two conspicuous exceptions, have found lower returns for investment in art objects than in financial assets, which is exactly what one would expect if the collecting of objets d'art yields psychic returns. It is amusing to notice that Baumol in 1986 drew attention to the well-known efficient market hypothesis, according to which stock prices are unpredictable because they behave like a random walk, all profit opportunities being fully exploited at every instant of time. He concluded that the same was true of art

7 CULTURAL ECONOMICS 129 prices Ð they also behaved randomly Ð but not because price expectations are rationally held as in financial markets but because fashions in art are too fickle to permit reliable predictions of future art prices. More than a decade later, opinion in financial economics has swung decisively away from the efficient market hypothesis because there are too many `anomalies', that is predictable patterns in stock prices, that contradict rational expectations and hence perfect efficiency in stock market trading see Lo, 1997 pp. x, xvii±xix). In time, we may see a similar revolution of opinion in the analysis of art prices, particularly now that Guerzoni 1995) has shown that the data source that many have employed for rate-of-return analysis of art sales is corrupted by the failure to register art dealers' sales that occur between auction house sales. Indeed, these behavioural anomalies, that is, systematic deviations from expected utility maximisation, are actually more likely to occur in art markets than in financial markets because many private collectors are not profitoriented, while museum buyers are severely constrained by their peculiar governance rules Frey and Eichenberger, 1995; see also Pesando and Shum, 1996; Chanel, et al., 1996; Keser and Olson, 1996). Until recently, it would be true to say that economists only studied art markets because they provided ample data and the pork belly markets would have served just as well for the application of the latest fancy econometric techniques of time series analysis. Butthatglibaccusationwillnotdofortherecentliteratureonartmarkets, which has finally come so far as to suggest some direct and indirect methods of measuring the psychic income of art collections so as to explain the gap between the financial returns on art investment and those on financial assets Frey and Eichenberger, 1995). In short, the analysis of art markets by economists seems finally to be showing real promise as a genuine branch of cultural economics per se. 6. Economic history of the arts That brings us to the economic history of the arts as a sub-discipline in cultural economics, which seems once again to have been sparked off by Baumol in his 1972 paper with Mary Oates) on Shakespeare and Elizabethan theatre, followed by further papers on Athenian drama and Mozart with Hilda Baumol 1994). But Michael Montias' magnificent book on the porcelain industry of 17 th Century Delft 1982), preceded by his 1979 paper on Delft painters in the 17 th Century, deserves as much credit as anyone in establishing the economic history of the arts as a legitimate area of concern in cultural economics, not just a barely tolerated step-child as economic history so often is for economists at large. These works are truly economic history: their concern with costs and prices, with substitutes and complements and with the finance of the arts in past periods is something that sets it well apart from standard art histories. 12 One may well ask: why do we need economic histories at all and what is the meaning of progress in historical explanation? That is too difficult a question to answer here but let us just say that our knowledge of economic relationships is

8 130 BLAUG profoundly illuminated by historical studies if only because so many economic outcomes are path-dependent, such that history matters to the nature of those outcomes. That is true in economics as a whole and it is particularly true in cultural economics. Just imagine trying to explain without any reference to history why the Vienna Philharmonic and the London Philharmonic are labourmanaged enterprises, while most other orchestras in the world are non-profit companies owned by municipal governments, broadcasting authorities and private trusts. Similarly, in the modern world it is all too easy to believe that the arts would soon die without public subsidy and yet a slight acquaintance with the history of opera, that most extravagant of all art forms, will show that opera survived for more than a century without public support and with only occasional princely patronage Rosselli, 1984). Even Keynes 1971, p. 137) could not resist, in the middle of his great Treatise on Money 1930), offering a number of what he called `rash generalisations' about the connection between economic booms and periods of cultural renaissance, concluding with the thesis that `by far the larger proportion of the world's great writers and artists have flourished in the atmosphere of buoyancy, exhilaration and the freedom from economic cares felt by the governing class, which is engendered by profit inflations'. Who can doubt that this thesis is at least a half-truth and only a philistine would condemn consideration of such a thesis as irrelevant to cultural economics. 7. Artists' labour markets Labour markets for artists are the subject of the next section in Towse's anthology. The subject started off with Baumol and Bowen but the next wave of interest came in the 1980's with Sherwin Rosen 1981), superstar paper which produced a string of comments by Moshe Adler 1985), Glenn Macdonald 1988) and Ruth Towse 1992) on the `peculiarities', as Marshall might have said of artists' labour markets. The empirical studies by Gregory Wassall and Neil Alper 1992), Throsby 1992) and Towse 1992) agree that artists' labour markets are special in being invariably part-time and little influenced by years of schooling. There is an almost chronic excess supply of labour in the performing arts which accounts for the prevalence of multiple job-holding on the part of artists. Only Randall Filer 1986) stands out against the rest by insisting that artists are not different and that human capital theory of the Mincer-Becker type works as well for them as for workers in general. Filer published his findings in the mid-1980's. Wassall and Alper, Throsby and Towse published their results in the early 1990's see also Towse, 1996; Throsby, 1996; and Heikkinen and Kooskinen, 1998). It is perfectly clear that the latter employ a richer and better individualised data set than was available to Filer via the US census. In other words, work in this area shows clear evidence of both empirical and theoretical progress in a relatively short period of time and will, I believe, remain a promising area for further work.

9 CULTURAL ECONOMICS Baumol's cost disease We move now to the jewel in the crown of cultural economics: Baumol's cost disease, the proposition that the failure of technical progress in the arts to keep pace with technical progress in the economy as a whole, while wages nevertheless rise everywhere more or less at the same rate, necessarily implies irremediable cost inflation in the arts. Towse reprints some of Baumol's 1980, 1984, 1987) key papers as well as excerpts from the Peacock-Shoesmith-Millner Report to the Arts Council of Great Britain 1982), which is unique in the literature in testing the Baumol thesis on a number of individual arts organisations using cost-accounting data. The results confirm the thesis of a growing earnings gap for the arts but they do so for the wrong reasons: it is non-labour costs and not labour costs that have risen at a faster rate than the retail price index. In other words, there is in fact little evidence in UK arts organisations in the 1970's of the differential cost inflation mechanism associated with Baumol's name. 13 Some of Baumol's recent papers see Towse, 1997) seem almost to argue against himself in order to assert that the cost disease in the arts and in health care, education and the mass media) does not imply that we will be unable to afford the arts in the future: all it means is that the composition of spending has to change as we spend a larger proportion of income on labour-intensive stagnant services and smaller proportion on other things, while income as a whole keeps growing as a result of the very same productivity improvements that treated the cost disease. Not all readers of those essays have noticed that this perfectly correct conclusion mitigates the implication that everyone read into Baumol's cost disease, namely that the arts must be subsidised if they are to survive. Enough said. We devoted an entire plenary session to Baumol's cost disease at the Boston meeting of the ACEI in 1996 with a series of excellent critical papers, by Cowen, Peacock, Throsby and Ke senne see Blaug, 1996). I argued then that the cost disease thesis exaggerates the significance of process innovations for economic growth at the expense of more important product innovations. The `arts' that are costing more as time goes by in consequence of the cost disease are not the same `arts' at all: the constant labour cost of a Mozart string quartet, to echo Baumol's favourite example of the cost disease, is a very misleading example of what technical progress means in the arts. Nevertheless, if greatness lies not so much in being right as stimulating others to find what is right, then Baumol's unbalanced growth model is one of the great ideas in economics. 9. Public subsidies for the arts Towse's two volumes close with a series of papers on that hardy old perennial, the economist's case for public subsidies for the arts based on market failure. There is an early and a later paper by Peacock 1966, 1992) that says it all with the strength but also with the inherent limitations of standard welfare economics grounded in Pareto-optimal general equilibrium theory. 14 Hans Abbing 1980) and Don Fullerton 1991) try to break out of the mould by generalising the externalities

10 132 BLAUG thesis into what I would call the wider atmospheric effects of the arts but this proves too much and would just as well apply to sports or mass media. What is new in the literature of the 1980s is the application of the emerging methods of contingent valuation to the arts as a means of asking consumers what they would voluntarily contribute to the arts. This new literature showed surprisingly that most people welcome public support of the arts even if they do not themselves attend art performances. Throsby and Withers 1985) led off in Australia in this attempt to elicit people's true willingness to pay for the arts and Morrison and West 1986) also West, 1989) in Canada adopted the same appraisal to the measurement of option demand at almost the same time, albeit with somewhat negative results see also Bille Hansen, 1997). One of the great questions in public subsidies for the arts is whether to subsidise organisations Ð the standard view Ð or instead to subsidise individuals. Towse reprints papers by West 1986) and Grammp 1986) that argue the issue of art vouchers versus grants. Bruce Seaman 1987) sums up the profound doubts that all economists feel about economic impact studies of artistic events: using the same methods, we could easily show that even earthquakes generate an excess of economic benefits over costs. Finally, Towse 1994) reviews once again the public policy objectives that are typically advanced to justify public support of the arts. When we compare her treatment with even the best of the textbook expositions of this issue in the 1960s 15 we do get a real sense of progress in the clarification of issues over something like three to four decades. What is striking about this entire and somewhat hoary topic of debate is the virtually universal consensus among economists in favour of public subsidies to the arts with only Grampp 1989), Sawers 1993) and Cowen 1998) as the radical right standing out against the rest in favour of letting markets rule without any interference from the state. But, of course, the real issue is not whether to subsidise but how much and in what form to subsidise and there, far from agreement, there is great disagreement. This brings us back to public choice theory and rent-seeking by arts lobbies which may well result in excessive subsidies to the arts see Frey and Pommerehne, 1989; Chap. 4; Krebs and Pommerehne, 1995; Schultze and Rose, 1998). I once pleaded for more concrete studies of governmental decision making in respect of the arts in the spirit of `bounded rationality' and `muddling through'. We have almost no examples in any country of detailed studies of just what decisions were made and how they were said to be made by ministers and government officials but see Eigjelshoven, 1992). Is it not time for cultural economists to abandon normative arguments for public subsidies of arts and instead to study the positive consequences of public subsidies, including the rhetoric of public bodies subsidising the arts? 10. In conclusion Have we adequately conveyed the almost unlimited scope of cultural economics? There are a number of new topics coming just over the horizon that we have avoided altogether, such as the economics of copyright, 16 international trade in

11 CULTURAL ECONOMICS 133 cultural goods 17 and `culturally sustainable development'. 18 And the `low arts' as distinct from the `high arts' Ð pop music, movies and television, not to mention the whole field of literature 19 continue to be relatively neglected and must surely come into their own in the decade to come under the heading of the economics of cultural industries. Cultural economics is clearly a rich area for the application of economic theory and econometric techniques but what we have all been hoping for is that the field might actually suggest and promote developments that would spill over with benefit to economics and econometrics outside its own domain. Has that happened? Not really but is that perhaps asking too much of a subject no older than 30 years? Certainly its progress in its brief life is nothing to be ashamed of. When I surveyed developments in two other fields of applied economics Ð health economics and the economics of education Ð I was reminded of the fact that neither analytical nor empirical progress is assured in a subject like economics Blaug, 1998). The economics of education, I believe, has been moribund for more than two decades, endlessly repeating itself with cookbook calculations of the rate of return to educational investment, while failing to resolve fundamental difficulties in the very concept of human capital formation. Health economics, on the other hand, has shown vigorous progress and development of its basic concepts and techniques over more or less the same period. Cultural economics falls somewhere in between the two, more innovative than the economics of education but less fertile in exploiting its potential than health economics, perhaps a little insular and unwilling to learn from developments in other areas of economics, not to mention psychology, sociology and policy analysis, but nevertheless continuing to find fresh applications of economics to topics of cultural interest. In short, cultural economics is alive, and well, and living in new countries. Acknowledgements This paper is a revised version of a Keynote Address at the Association for Cultural Economics International Symposium in Tokyo, May 28±30, Notes 1. My own early readings book Blaug, 1976) gives me a long perspective. 2. Netzer 1978), Throsby and Withers 1979), Frey and Pommerehne 1989), Heilburn and Gray 1993), Trimarchi 1993) and Benhamou 1996). Of these, Netzer and Frey and Pommerehne were not designed as textbooks but may nevertheless serve as such the same might be said of Baumol and Bowen). Of the rest, my own preferred first choice is Throsby and Withers, which manages somehow to address both professional economists and intermediate students of economics. 3. Frey 1997) contends that monetary compensation for some actions sometimes crowds out action grounded in intrinsic motivation, such as moral commitment, voluntary altruism, and civic pride. He applies this thesis to crime prevention, blood donation, military conscription and work compensation policies but, strangely enough, not to the

12 134 BLAUG arts, although the commercialisation of art would seem to be a case in point of crowding out; but how would we know that this has in fact happened or is happening? 4. E.g. Globerman 1978); Gold 1980); Burke 1994); Kolb 1997); Schimmelpfennig 1997). 5. See also Richardson 1982); Lange and Bullard 1985); Blau, Newman and Schwartz 1986); Jackson 1988); Lange and Kuksetich 1993); Szenberg and Youngkoo Lee 1994); Fazioli and Filippini 1997) and Taalas 1997). 6. See also O'Hagan 1995); Steiner 1997); Kirchberg 1998) and Bailey 1998). 7. An entire issue of the Journal of Cultural Economics, 1998, 22 2±3) is devoted to museums with papers by Johnson, Thomas, Gray, Hutter, Frey, Schuster, Creigh-Tyte, Selwood, Bailey, Falconer, Anderson, Darnell and O'Hagan [see also Gassler and Grace 1980); Duffy 1992) and Martin 1994)]. 8. See the panel discussions between museum administrators and economics, sociologist and marketing consultants in Feldstein 1991) and the delightful colloquy between an `impartial' economist and a `partial' musologist in Grampp 1996). See also Grampp 1989, Chap. 5) and the attack by Cannon-Brookes in Ginsberg and Menger 1996) and the spirited defence by Peacock 1998). 9. See autobiographical reminiscences Peacock, 1992), which serves at the same time as a delightful, if unusual, introduction to cultural economics. 10. See also Baker 1991); Turgeon and Colbert 1992); Alexander 1994); Kushner and King 1994); Frey 1994); Luksetich and Lange 1995); Burke 1996) and Towse 1997b). 11. See also a whole issue of the Journal of Cultural Economics on art markets, with an introduction by Bruno Frey 21,3, 1997); McCain 1980); Singer 1990); Louargand and McDaniel 1991); Coffman 1991); Salamon 1992); Holub, Hutter and Tappeiner 1993); Pignatario 1994); Santagata 1994); McCain 1994); Singer and Lynch 1994); Chanel and Ge rard-varet 1995); Agnello and Pierce 1996); Ginsburgh and Menger 1996); Ekelund, Ressler and Watson 19989); Solow 1998); Solow 1998) AND Meyer and Even 1998). 12. See also Montias 1981, 1999); Owen 1977); Ehrlich 1983), 1987); Rosselli 1984, 1991); Pick 1988); Sullivan and Fry 1991); and Goldthwaaite 1993). 13. See also Schwartz 1982); Gambling and Andrews 1984); Shoesmith 1984; Debour 1985); Felton 1994) and Taalas 1998). 14. Peacock's 1969 paper was reprinted in the `classic articles reprint' series of the Journal of Cultural Economics 18, 2, 1994; 151±61) as benchmarks against which to evaluate intellectual progress in the subject. Unlike most, Peacock advocates not just some subsidy but an adjustment in whatever subsidy is given so as to match it more closely to the arguments usually employed on its behalf. 15. See Cwi 1980); Bamossy 1982); Ridley 1983); Schuster, 1985); Cwi and Strausbaugh 1988); Scitovsky 1989); Wijnberg 1994); Austen-Smith 1994); Benhamou 1996); Peacock 1998); Zimmer and Tuepler 1999) and Frey 1999). 16. O'Hare 1982); Burro, W. S. 1994); Burke 1996); MacQueen and Peacock 1985); Hutter 1995); Santagata 1995); Taylor and Towse 1998); Rushton 1998) and Towse 1999). 17. Marvasti 1994); Seaman 1992) and Schultze 1999). 18. Throsby 1995, 1999); Dieckman 1996) and Burt 1997). 19. But see Garvin 1981); Elke 1986); Cameron 1986, 1988); Noam 1991); Acheson and Maule 1992, 1994); Wallace, et al. 1993); Prag and Casavant 1994); Johnson 1994); Bagella and Becchetti 1995); Benhamou 1996, Chap. 4); Rosentraub 1997); Blanco and BanÄ os Pino 1997) and Albert 1998).

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