ists be Interested in

THE ECONOMIC RECORD, VOL. 88, SPECIAL ISSUE, JUNE, 2012, 106109Why Should Econom

Cultural Policy?

DAVID TH

uar

puperf ea rgoos;

exports and growth in the economy. This factalone might be sufficient to indicate a positiveanswer to the question posed in the title of thispaper. But theresimply by an apppaper suggests fitools and methomake a contriburational culturalarts; cultural goomanagement of cultural assets; industry andinnovation; and foreign policy. These issueshave particular relevance in Australia at thepresent time, given that the federal government

and galleries; assistance to consumers to encour-age access and participation; use of regulatoryinstruments such as copyright protection for cre-

arts education.ates in the fieldwhether or not

ic rationale fora (Towse, 1997,any suggestionslain the existing

levels of arts subsidy, including rent-seekingand regulatory capture by artists, and the possi-bility that the arts are merit goods. The mostpersuasive argument from the viewpoint of neo-

JEL classification: Z11

Correspondence: David Throsby, Department of

Economics, Macquarie University, Sydney, Australia.Email: david.throsby@mq.edu.au

1 A field now established as a mature sub-disciplineof economics; for overviews of the field, see Throsby(1994, 2006), Towse (2011).intends to introduce a new national culturalpolicy during its present term.

classical economics is that the arts are a case ofmarket failure. If the production of artisticgoods and services yields public-good benefits 2012 The Economdoi: 10.1111/j.1475is more to it than is impliedeal to industry economics. Thisve areas where the theories,ds of economic analysis cantion to the formation of apolicy: support for the creativeds in international trade; the

ative works; and support forOne of the longest-running debof cultural economics1 has beenthere is a plausible econompolicy interventions in this arepp. 499719; Frey, 2011). Mhave been put forward to expDepartment of Economics, Macq

Cultural policy is an area ofcant economic content. This patheories, tools, and methods ocontribution to the formation offor the creative arts; culturalmanagement of cultural assetforeign policy.

I IntroductionIn recent years, cultural policy has begun to

figure more prominently in national and interna-tional policy agendas around the world. Animportant driver of this trend has been a grow-ing recognition of the contribution the culturalsector makes to output, employment, incomes,106

ic Society of Australia-4932.2012.00808.xROSBY

ie University, Sydney, Australia

blic policy-making with signifi-suggests five areas where the

conomic analysis can make aational cultural policy: supportds in international trade; theindustry and innovation; and

II Support for the ArtsTo the extent that developed countries have

had an explicit cultural policy in the past, suchpolicies have mainly focussed on the creativearts. Elements have included: subsidy for artisticproduction by artists and arts organisations; sup-port for cultural institutions such as museums

in addition to the private benefits enjoyed byconsumers, a prima facie case for governmentintervention may be established, as long as thebenefits to be gained from intervention outweighthe costs.

case for special treatment; it is argued that thecultural content of these goods yields value tothe community that is not reflected in markettransactions. Such value may be expressible asthe communitys willingness to pay for thesocial benefits derived from local cultural indus-tries,3 and also possibly as a cultural value thattranscends economic evaluation, reflected in the

2012 WHY SHOULD ECONOMISTS BE INTERESTED IN CULTURAL POLICY? 107From a policy standpoint, the validity of themarket-failure case for arts support must reston whether or not there is empirical evidencefor significant public-good effects, and if so,whether the community is willing to pay forthem out of taxation or by some other means.Such evidence was gathered for Australia morethan two decades ago (Throsby & Withers,1984), and more recently a study of willingnessto pay for conservation of cultural heritagefound positive results (Allen Consulting Group,2005). However, contemporary processes of cul-tural policy formation would be helped by newdata in this area, especially given improvementsin techniques for measuring demand for publicgoods.

III Cultural TradeCultural goods and services such as films,

television programs, etc. have presented prob-lems for international trade negotiations eversince the formation of the GATT in 1947. Whenthe WTO was established in 1993, France andCanada proposed that it should include anexception for cultural products. This was notaccepted, but a de facto exemption for audio-visual products has existed in the GeneralAgreement on Trade in Services (GATS),because countries can decline to make commit-ments for these specific products; this provisionallows governments to pursue their own culturalpolicies of protection for domestic producersand distributors, if they so desire.Economists have taken a keen interest in

these issues.2 The argument for treating culturalproducts differently in trading arrangementsdepends on a definition of such products thatdifferentiates them from ordinary commercialgoods. It is now generally agreed that culturalgoods and services exhibit three distinct charac-teristics: they require creativity in their manu-facture; they convey symbolic meaning ormessages; and they embody, at least potentially,some intellectual property. It is the second ofthese properties that is the principal basis of the

2 For overviews, see Acheson and Maule (2006),Schulze (2011). 2012 The Economic Society of Australiaimportance to society of issues such as culturalidentity, diversity, etc.

IV Cultural AssetsAn important aspect of cultural policy con-

cerns the efficient management of a countrys,regions or local communitys cultural assets.Economics has made a contribution to under-standing this problem by proposing the conceptof cultural capital as a distinctive form of capi-tal in the economy (Throsby, 1999; Ulibarri,2000; Cheng, 2006; Wang, 2007). Cultural capi-tal includes tangible assets such as heritagebuildings, artworks, etc., and intangible culturalitems such as language, rituals, traditional skills,etc. These are assets which embody or give riseto a distinctive form of value over and abovewhatever economic value they may possess.This specific value has been labelled culturalvalue, and theoretical and policy interest liesin identifying and measuring it in terms thatare objectively distinguishable from the sortsof value measured by the tools of economicanalysis.4

Research on the nature of cultural capital ineconomics has pointed to the parallels betweenthis concept and that of natural capital as it hasevolved in environmental and ecological eco-nomics. Both forms of capital have been inher-ited from the past, will deteriorate if notmaintained and impose a duty of care in theinterests of intergenerational equity. Both canbe integrated into the framework of sustain-able development as a basis for formulatingstrategies for long-term management (Rizzo &Throsby, 2006).The immediate issue for cultural policy con-

cerns finding the optimal balance between theeconomic and cultural values yielded in the flow

3 As revealed, for example, in a study of Australiandemand for local content in television programs(Papandrea, 1999).

4 Measurement issues are discussed in OBrien(2010).

of services provided by cultural capital assets. issues. But their economic implications are not

108 ECONOMIC RECORD JUNEThis may be interpreted as identifying the trade-offs implied in a social welfare function inwhich economic and cultural value are argu-ments. Such information may assist, for exam-ple, in deciding whether or not to demolish ahistoric building that stands in the way of adevelopment project: How much economicreturn is a society prepared to give up in orderto achieve a certain cultural payoff?

V Cultural IndustryOver the past ten years or so the concept

of the creative economy has taken shape(UNCTAD, 2010). Following the establishmentof the Creative Industries Task Force in the UKin 1997, interest grew in a number of countries,notably in Europe, in the creative industries as adynamic subsector of the macroeconomy thatcontributes significantly to growth in output andto employment creation (Caves, 2000). In par-ticular, these industries are seen as importantdrivers of innovation which lead in turn to tech-nological change, growth and competitiveadvantage both for businesses and for wholeeconomies.The cultural industries those producing cul-

tural goods and services as defined above area subset of the creative economy; they includethe arts, film, media, digital applications such asvideo games, publishing, architecture, designand fashion industries, all of which conveysome cultural content in their output (Throsby,2008). In policy terms, these industries lie at theintersection between cultural and economicpolicy. The fact that they all contribute in oneway or another to the cultural wellbeing ofsociety makes them an object of interest topolicy-makers concerned with the generation ofcultural and social value in the community. Atthe same time, the very real contribution theseindustries make to economic outcomes meansthat they attract the attention of ministersresponsible for employment, innovation, tradeand industrial development.

VI Foreign PolicyApart from trade as discussed above, econo-

mists have two reasons for taking an interest incultural policy when seen in an internationalcontext. The first has to do with cultural diplo-macy, international cultural relations and theexercise of soft power. At first glance thesemight seem like purely diplomatic or politicalfar below the surface. The adage where cultureleads, trade follows is more than just an articleof faith. There are strong arguments forbelieving that bilateral economic relations aresignificantly enhanced through the mutual under-standing fostered by cultural exchanges andintercultural dialogue. Cultural policy in thisarea requires a collaborative endeavour betweenministries for culture and foreign affairs.The second aspect of international economics

of concern to cultural policy relates to the roleof culture in development (Sen, 2004; Common-wealth Group on Culture and Development,2010). The fact that culture is intimately con-nected with human development in the ThirdWorld has implications for the direction of for-eign aid provided by developed countries andalso for the lending strategies of agencies suchas the World Bank. It is becoming increasinglyclear that small-to-medium enterprises producingcultural goods and services for local markets indeveloping countries can contribute significantlyto economic empowerment, cultural cohesionand sustainable development. Thus, aid and lend-ing programs can be aimed at supporting small-scale cultural industries in developing countriesthrough measures such as technical assistance,micro-credit, business start-ups, investment fund-ing, entrepreneurial training, etc. Managing theseprocesses is of concern to cultural policy in bothgiving and receiving countries.

VII ConclusionsThere are many policy arenas beyond those

discussed above which demonstrate why econo-mists should be interested in cultural policy,including education, urban and regional devel-opment, media and communications, labourmarkets and intellectual property law (Throsby,2010). Economists in a number of countries inEurope, North and South America, Asia andelsewhere have made important contributions tothe cultural policy debate in all of these arenas.In Australia, by contrast, there has been littleinterest shown by economists in discussion ofcultural policy issues. It may be hoped that theprocess of formulating a new national culturalpolicy in this country currently underway couldbring about a reversal in this state of affairs,if only because ABS data for the Australianeconomy in various years indicate that: thecreative industries comprise around 3 per centof GDP; the value of production of cultural 2012 The Economic Society of Australia

goods and services is more than $50 billion perannum; the cultural industries account for about4 per cent of employed persons; annual fundingfor cultural activities by federal, state and localgovernments is almost $7 billion; and about 4per cent of household spending is on culturalproducts. In the words of former Prime MinisterPaul Keating,5 this could be described as abeautiful set of numbers.

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Papandrea, F. (1999), Willingness to Pay for Domes-tic Television Programming, Journal of CulturalEconomics, 23, 14764.

Rizzo, I. and Throsby, D. (2006 ), Cultural Heritage:Economic Analysis and Public Policy, in Gins-burgh, V. and Throsby, D. (eds), Handbook of theEconomics of Art and Culture, vol. 1. Elsevier North-Holland, Amsterdam; 9831016.

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