The Economic Impact of Culture Michele Trimarchi University of Catanzaro “Magna Graecia” Department of Public Organi

1. ACEI Biennial Conference – Vienna, Austria – 6-9 July 2006 The Economic Impact of Culture Michele Trimarchi University of Catanzaro “Magna Graecia” Department of Public Organisation ECCOM - European Centre for Cultural Organisation and Management - Roma

2. Summary 1. The Framework: Culture in Transition 2. Impact Studies: Do They Matter? 3. The Measurement of Monetary Impact 4. The Weakness of Impact Studies 5. The Economic Impact of Culture: Scope 6. The Economic Impact of Culture: Features 7. The Cultural Dimensions of Development 8. Prospects: Social Inclusion and Citizenship 9. Prospects: Cultural Capabilities 10. The Economic Impact on Culture

3. 1. The Framework: Culture in Transition The arts are changing role: their core is shifting from ritual consumption to demand for information and knowledge The arts are a multi-dimensional product, generating a variety of heterogeneous and sometimes contradictory effects Direct benefits are not the only effect of the arts, but it may prove difficult and controversial to identify and measure indirect benefits There are still economists who would like the arts to “return to the market”, while their production has always occurred between the public and the private sectors

4. 2. Impact Studies: Do They Matter? Impact studies “try to assess the importance of cultural activities for the local economy based upon spending effects” They respond to the need for an objective justification for public support of the arts, but limit the relevant impact of the arts to monetary effects upon the local economy Impact studies are carried out with reference to many sectors of public expenditure or private activity: this generates skepticism or indifference

5. 3. The Measurement of Monetary Impact The economic impact of the arts includes increases in: • Consumption (short run); • Income and employment (short run); • Productivity and growth (long run) Academic economists are critical towards impact studies: the only economic impact is limited to the value added in the sector, and outcomes are generally overstated Impact studies are generally commissioned by public institutions supporting the arts, and their results are often simplified by the press

6. 4. The Weakness of Impact Studies Causal relationship between visitors’ spending and the arts is uncertain, choices are influenced by various factors. What if we eliminate the arts supply? Would the expenditure and employment be diverted or eliminated? Do displacement effects occur if the Arts attract new consumers to a town or region? Gross figures of the economic impact are not sufficient: we need to evaluate: • the amount and proportion of income and employment newly generated, net of costs newly spent; • the differential impact of spending on the arts in comparison with alternative subsidized activities. The main objection is that impact studies ignore the main purposes of arts production: artistic innovation and creativity, and quality of urban life

7. 5. The Economic Impact of Culture: Scope The weakness of the traditional impact studies requires a wider definition of the impact of arts participation: Monetary vs. immaterial benefits: identity, sense of belonging, knowledge of one’s own local and national history and culture Income vs. quality of urban life: consistent framework of urban services, impact on similar activities, cultural districts Employment vs. human resource allocation: motivation of professionals, even distribution of opportunities, satisfaction Side impact vs. creativity: impact on enterpreneurship, higher competitiveness, attractive location for industry, creative atmosphere Dimensions vs. composition of the audience: social relationships, social inclusion, multi-cultural dialogue

8. 6. The Economic Impact of Culture: Features The economic impact of arts participation must be analysed and measured within a long-term time horizon. It necessarily includes non-monetary benefits for which a shadow value cannot be assigned Focusing upon the dimensional impact of the arts upon income and employment may lead to misallocation of public funds, that could generate more consistent outcomes in other sectors The analysis should focus upon the strategic choices adopted by the public sector supporting the arts: rather than asking why and if the public sector should support the arts, we must ask how it can design and manage public policies towards the arts

9. 7. The Cultural Dimensions of Development The arts feel they need to show their economic importance in times of tighter public budget constraint, but this does not fully capture the value of culture (aesthetic, spiritual, historic or symbolic importance, etc.) A broad definition of economic value may include the cultural value of the arts, which are traded in a market for ideas, where valuations are multiple and subjective Therefore, people’s preferences may opt for patterns of resource allocation due to cultural values that cannot be captured by standard economic analysis

10. 8. Prospects: Social Inclusion and Citizenship In industrialised Countries development often leads to economic and cultural distorsions: the disappearing of non-urban cultures, the appearance of urban sub-cultures, ethnic conflicts, youth problems This creates an ever wider area of social exclusion, where the elementary rights of citizenship are actually denied, and opportunities appear to be unevenly distributed among people The production and diffusion of the arts is a powerful means for social inclusion and conflict reduction through cultural exchanges, inter-racial dialogue, wide representation of different cultural signs, views and traditions

11. 9. Prospects: Cultural Capabilities Culture-based development is generally promoted with the goal of attracting tourists; in such a respect, cultural resources are viewed as a strategic stock able to generate income and employment There is an evident trade-off between tourist demand for culture and residents’ expectations related to the likely increase of their welfare through the cultural impact of the arts and culture upon their lives In such a respect the arts and culture represent the specific object of the most powerful immaterial entitlement. Equality of the starting points can be pursued through a wide and even cultural endowment The arts are an “urgent right”: they define what actually individuals are able to do and to be. In a period of rapid social change both freedom of expression and personal security depend on cultural development

12. 10. The Economic Impact on Culture Public action for supporting cultural heritage and the performing arts are rarely integrated in large-scale development programs including various other sectors of the economy The impact of economic development on the arts is not considered at all, while a partial view of development can generate negative effects on art production and participation There are attempts at elaborating an integrated view of development: these concern cultural heritage in developing Countries. Their approach should be extended to the arts within programs of urban development

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