Economic & social implications in international cultural indicators

1. Economic & social implications in international cultural indicators Elisabetta Lazzaro University of Padua Department of Economics elisabetta.lazzaro@unipd.it OECD Workshop on the International Measurement of Culture Château de la Muette, Paris December 4, 2006

2. Issue Economic models for the demand for cultural goods & services: Hps about the origin and the evolution of preferences Theoretical & empirical implications in international cultural indicators • Reference Traditional economic theory + cultural research in dynamic demand analysis Applications and examples from the cultural sector • Objective & contribution Inclusion of accumulated experience, social interactions and diversity in cultural participation and its indicators E. Lazzaro, Economic & social implications in international cultural indicators 2

3. Outline • Economics & cultural indicators • Preferences and the demand for the arts • Habit formation • The role of experience & exposure in taste formation • From rational addiction to learning by consuming • Toward a more realistic process in the building of taste • Economics & the impact of social interactions on preferences • Cultural diversity & participation • Implications in international cultural indicators/1 • Empirical testability • An application: Spouses’ effects in museum demand E. Lazzaro, Economic & social implications in international cultural indicators 3

4. 1. Economics & cultural indicators From a “traditional” economic approach.... production/supply consumption/demand of products, services Individuals’ maximisation of preferences which are given, stable and homogenous ... to an interdisciplinary one: Broadening of the field of individuals’ choice process and behaviour (psychology, sociology, behavioural sciences...) E. Lazzaro, Economic & social implications in international cultural indicators 4

5. 2. Preferences and the demand for the arts Neoclassical theory: fixed and exogenous preferences Utility maximisation ≠ Concrete evidence in consumption of artistic goods and services (e.g. concert attendance, museum visit, purchase of works of art): preferences are not given Origin and transformation of preferences E. Lazzaro, Economic & social implications in international cultural indicators 5

6. 3. Habit formation Pollak (1970) JPE All past consumption levels Individual’s current preferences Criticism: deterministic, myopic E. Lazzaro, Economic & social implications in international cultural indicators 6

7. 4. The role of experience & exposure in taste formation Stigler & Becker (1977), AER Becker & Murphy (1988), JPE Rational addiction Model of household production of commodities = perception of goods ⇒ shadow prices ≠ effective prices Accumulated specific consumption capital Goods’ appreciation Beneficial addiction (e.g. music): elastic demand, ↑ sensitivity Harmful addiction (e.g. drugs): inelastic demand, ↓sensitivity Criticism: Stable & homogeneous preferences among individuals; positive increment of capital E. Lazzaro, Economic & social implications in international cultural indicators 7

8. 5. From rational addiction to learning by consuming McCain (1979), JCEC McCain (1981), AER McCain (1986), JCEC McCain (1995), JCEC McCain (2003) Cultivation of taste Application of catastrophe theory Bimodal distribution of cultivated and not cultivated consumers Criticism: complicated framework; short-sightness/bounded rationality (→market intervention); unknown proportion of cultivated vs. not cultivated E. Lazzaro, Economic & social implications in international cultural indicators 8

9. 6. Toward a more realistic process in the building of taste Lévy-Garboua & Montmarquette (1996), JCEC Lévy-Garboua & Montmarquette (2002) Learning by consuming Experience = expectation + surprise Taste ⇒ Shadow-price elasticity = market-price elasticity Contributions: Non-deterministic/stochastic increase in taste; +/- increment in taste; heterogeneity of tastes; quality & individuals’ attitude toward risk; empirical testability; long-run equilibrium E. Lazzaro, Economic & social implications in international cultural indicators 9

10. 7. Economics & the impact of social interactions on preferences Social interdependence in taste formation has already been admitted in the previously considered contributions without being formalised Toward a formal incorporation of social interactions in modelling preferences formation • Social effects have long been central to sociology and social psychology • Overall, economists have been at best ambivalent as to whether social interactions constitute a proper domain in the discipline • Notable exceptions: Duesenberry (1949), Leibenstein (1950), Arrow (1974), Stigler and Becker (1977), Schelling (1978), Akerlof (1984), Frank (1985) E. Lazzaro, Economic & social implications in international cultural indicators 10

11. 7.1 What are social interactions? “By social interactions, we refer to the idea that the utility or payoff that an individual receives from a given action depends directly on the choices of others in the individual's reference group, as opposed to the sort of dependence which occurs through the intermediation of markets.” (Brock and Durlauf 2001: 235) Influence: others’ past & current consumption patterns in a shared environment of common tradition, information & social norms, reference group Effects: social interactions, social pressure, peer and neighbourhood effects Results: contagion, conformity, learning, imitation, bandwagons, herd behaviour E. Lazzaro, Economic & social implications in international cultural indicators 11

12. 7.2 Social interactions: some recent economic models 1) Individuals' choices and payoffs are influenced directly by other individuals' actions through: imitation, learning, social pressure, information sharing, other forms of non-market externalities 2) These interactions are supposed to take place within some socially and/or spatially determined distances, that define the relevant reference group: family, household, relatives, friends, school mates, co-workers, neighbours, etc. E. Lazzaro, Economic & social implications in international cultural indicators 12

13. 7.3 Social interactions: growing body of economic empirical literature “Neighbourhoods effects”, “peer effects” or “household effects” are been increasingly applied to many different domains, such as: • school choice and school achievement • working patterns • participation in welfare programs • smoking & drinking behaviour • crime rates • residential segregation • fertility rates • savings behaviour • computer ability • asset market volatility • …. Bauman et al. (1990); Case and Katz (1991); Evans et al. (1992); Brock (1993); Glaeser et al. (1996); Katz et al. (2001); Jackson et al. (1997); Farkas et al. (1999); Topa (2000); Gaviria and Raphael (2001); Sacerdote (2001); Cipollone and Rosolia (2003); Miniaci-Parisi (2004) E. Lazzaro, Economic & social implications in international cultural indicators 13

14. 7.4 Social interactions & the consumption of cultural goods So far, the existing theoretical and empirical economic literature focused on the effects of economic, educational, and other individual characteristics, paying scarce attention to the analysis the impact of social interactions • Nevertheless, the characteristics of most cultural goods and services provide strong justifications for taking into account social effects: • they take place publicly(Becker and Murphy, 1988) • they are experience goods (Nelson, 1970) • informational asymmetries and uncertainty on the expected utility • screening behaviour, imitation or replication of the choices of friends, peers, relatives or neighbours • factors or “class reproduction” (Bourdieu & Di Maggio) -- E. Lazzaro, Economic & social implications in international cultural indicators 14

15. 8. Cultural diversity & participation • OBJECT Cultural diversity: expression, origin, creation • MODALITY Cultural participation: public’s access and fruition Cultural diversity and the need to reach the broadest audiences Necessity of a market? Cultural diversity originates from a previous exposure of its creators, i.e. from their previous cultural fruition E. Lazzaro, Economic & social implications in international cultural indicators 15

16. 9. Implications in international cultural indicators/1 • Object of the fruition: Broadening the field of cultural economic analysis: • “high brow” vs. “low brow” culture • inclusion of entertainment/divertissement (e.g. TV, cinema ...) in the public’s cultural practices • consideration of cultural non-partecipation/ consumption and of those factors which impede potential or latent demand to become effective E. Lazzaro, Economic & social implications in international cultural indicators 16

17. 9. Implications in international cultural indicators/2 • Modality of fruition: • building of perceptions, tastes and preference • public’s choices and behaviour not only on a rational, homogeneous, individual and indipendent basis In particular, importance of the social dimension: interactions and social cohesion Impact on cultural policies E. Lazzaro, Economic & social implications in international cultural indicators 17

18. 10. Empirical testability Strong need to test available consumer choice theories against empirical evidence in the cultural sector Relatively long tradition of studies applied to the demand for the performing arts (e.g. theatre, music, cinema, etc.), much more than the demand for museums, cultural heritage, works of art. Issues: available, regular and disaggregated data; selectivity bias; endogeneity; special gathering of qualitative data (interviews, focus groups, …) E. Lazzaro, Economic & social implications in international cultural indicators 18

19. 10.1 Empirical analysis of social interactions Main strategy: to infer their presence from observations of the outcomes experienced in a population of interest Problem: presence of many different interaction processes or, perhaps, processes acting on individuals in isolation In particular, outcome data do not generally allow us to separate between endogenous interactions, contextual interactions and correlated effects “Reflection problem” (Manski, 1993): mean behavior in the group is itself determined by the behavior of group members E. Lazzaro, Economic & social implications in international cultural indicators 19

20. 11. Application: Spouses’ effects in museum demand in Italy An individual’s museum/temporary exhibitions attendance at least once (possibly)* together in the last 12 months (*: Upright, 2004) explained by among other factors, her/his spouse’s education Pre-Hp: Education has a positive effect on arts attendance (DiMaggio & Useem, 1978; Blau, 1988, DiMaggio & Ostrower, 1990; Peterson & Sherkat, 1992; Robinson, 1993) Data: ISTAT 2000: 13,000+ married couples in Italy E. Lazzaro, Economic & social implications in international cultural indicators 20

21. 11.1 Some results Individual’s museum “social” attendance explained by (also) education • Conclusions: • After having controlled for an individual’s education, • spouse’s education slightly stronger effect; • though, when both attended only (reinforcement of similar characteristics and attitudes) E. Lazzaro, Economic & social implications in international cultural indicators 21