Measuring Intrinsic Value: how to stop worrying and love economics
Written by Hasan Bakhshi, Alan Freeman and Graham Hitchen
This paper seeks to transcend entrenched misunderstandings between economics and arts policymaking. These misunderstandings, which have long dogged discussion on arts funding in the UK, tend to manifest themselves in the long-running debate about ‘instrumental’ and ‘intrinsic’ approaches to public expenditure on culture and the arts.
This paper argues that the reluctance to use rigorous economic methods has hindered rather than helped the case for the arts, and offers a provocative reconsideration of the outdated and poorly-informed prejudices which lie behind this reluctance. It seeks to demonstrate how economics can provide the tools to ‘measure’ and validate the intrinsic value of art, and to do so in a way which is commensurable with other measures of value for other calls on the public purse.
Here are some thoughts and comments from early readers:
“I really enjoyed reading the “measuring intrinsic value” paper. It’s the first paper I’ve ever read which begins to argue the case for the arts in a way that I understand and can support. I hope you are circulating it to all local authority Arts/Cultural Officers and at the same time suggesting a methodology for local surveys.” – Ray Dinsdale, Board Member, Cultivate East Midlands
“This is an excellent paper …..Very clear and cogent, and a significant step forward.” – Bill Sharpe, Independent researcher in science, technology and society
“Hasan, Graham and Alan have produced in this paper a timely and interesting argument about how economics can account for the so-called ‘intrinsic value’ of the arts and culture. Developments in cultural economics are not widely understood either by economists or by many working in the arts. This report brings new thinking and a fresh approach. I recommend reading it” – John Holden
And do please share your comments and feedback below
Dec 14, 2009
This paper, along with work by E. Belfiore and recent papers in Cultural Trends, should help change the insipid conversation the sector has been having on this issue for too long. Hopefully, in the future the conversation about economics and the arts or cultural economics can move beyond the agenda of measuring impact or trying to justify ideologies (art for arts sake, instrumentalism, etc). The field of economics (but not of cultural economics as many commentators have noted) has moved beyond this issue decades ago and considered them as settled. Instead, they are using them to build more sophisticated arguments and empirical research.
What cultural policy needs and most economists are pursuing is empirical research to support, guide and inform cultural politics. Whether the arts should be funded or not is a political decision. Economics has a great deal to say on how the policy is managed and implemented. Empirical research has plenty to say about what works and doesn’t work in trying to increase demand for culture: it has a great deal to say about how to improve working conditions for workers: it has plenty to say about what works and what doesn’t in the role of the arts in education and regeneration.
Just because the field of cultural economics seems to be stuck around issues of contingent valuation (which are unlikely to influence or change civil servants’ minds about whether they should fund hospitals, schools or an arts centre), it doesn’t mean that applied economics as it refers to the arts needs to do the same.
Dec 14, 2009
This makes an excellent contribution to a debate that has been chasing its own tail for longer than is strictly healthy or productive. I read the paper with that section of cultural policy and funding concerned with film in mind, and a few things struck me:
I’m broadly with you on the substance of the argument: I think you set out with admirable clarity and vigour the contribution that good economics can make to arts funding decision-making. The methods of Contingent Valuation (CV), and the like, seem fit for purpose, practical and achievable. But their application in relation to film policy needs very careful handling (this is a methodological rather than an epistemological point).
Let’s consider the ‘existence’, ‘bequest’ and ‘option’ benefits of film. I doubt these have much currency with the general public at large, many of whom may think about film culture only in very narrow terms (film’s a business, right?). So while most of us may willingly accept that ‘art galleries’ are a Good Thing in an of themselves (because even if we don’t use them regularly, we’re happy that they exist for the collective good, for future generations or as a place to head on a rainy Easter weekend). But how many people will be prepared to offer the same generalised support to independent cinemas that show art-house films, if asked to make a trade off with hospital funding? Or to the production of blockbusting films like the Harry Potter franchise, which benefit from UK tax relief?
This all comes down to the extent to which the public see film as a deserving cause. I’m confident that a very good case can be mounted for the public funding of film, in terms that the general public can understand and appreciate, but that such preparatory work is necessary before they can be asked to complete a CV questionnaire on the subject. One approach to this, which has worked in other contexts where a degree of familiarity and understanding is required, is to use citizen juries (a much maligned practice of late, but worth keeping in the research toolkit), whereby the case for and against any proposition can be made and an informed decision taken at the conclusion of the process.
The final point I’d like to make is that CV techniques can, and perhaps should, be used to help inform decisions about funding levels between the arts, as well as between art/culture and other areas of public policy (like health, education, defence etc.). This links to the point above, and places the onus on bodies like the UK Film Council to champion film in a way that helps to establish in the public mind the rationale for public funding (they do a lot of good work in this regard already). Without this, film may suffer in relation to other arts/culture sectors, who may be better able to mobilise latent support for ‘existence’, ‘bequest’ and ‘option’ benefits of things like art galleries, theatres, orchestras etc. The news last week that the UK Film Council is in line for a £22 million cut in Lottery Funding over five years, to help pay for the Olympics, is a reminder of exactly how crucial these issues are.
Dec 14, 2009
Thanks for these terrific comments. You are right to point out that CV methods – like all approaches relying on preferences stated by people – make the assumption that the public are aware of their own preferences and can articulate them in terms of willingness to pay. In some contexts these assumptions are more convincing than in others. Sure, the more that individuals ‘identify’ with a good or service the more likely they are to give unbiased and more accurate estimates of its ‘existence’, ‘bequest’ and ‘option’ value. But then we must ask why the informational assumptions are any more demanding for, say, film, than other areas where there is a call on public funds. I think the use of contingent valuation methodologies in the arts in the context of well-organised and transparent citizen juries would be very interesting indeed.
Dec 14, 2009
Very thought provoking and interesting.
If for so many years the Arts Industry had been arguing against economic methods to value its work then this suddenly throws the door wide open. If by using the methods presented in this paper we can present a more coherant argument to funders and governments then we can access more investment in the field and, long-term, deliver more excellent work in the arts. There obviously needs to a united front in presenting information in this way and then a drive to ensure funders understand the methods. Should that happen, though, this could become a very powerful tool.
Dec 14, 2009
This paper is very welcome.
Our organisation is a non-profit supported by Channel 4 which funds socially important documentaries. Our mission is to develop new funding and distribution models for such public service media and our biggest challenge is improving the standards and knowledge around the impact and valuation of such work.
Without doing so, we – and other similar organisations – will struggle to bring new private, public and third sector funders into our arenas. This clear advocacy of CV and WTP studies is really timely and I hope that it leads to a round of new studies around public cultural goods.
Dec 14, 2009
This is a really helpful and stimulating paper. See my Arts Counselling blog for some initial comments. http://artscounselling.blogspot.com/2009/04/how-do-you-measure-intrinsic-value-of.html
Just these few comments here though show some of the difficulty of changing mindsets. Jim Barratt seems to suggest that there is still a link to advocacy – establishing a ‘level playing field’? I’d argue orchestras don’t necessarily have the advantage over film, but then I would wouldn’t I? Don’t we need to move away from championing ‘our team’ and towards weighing up the evidence? What funders do with their info/data then becomes really key. Are we all – sector, funders, politicians, ministries – mature enough to look at the evidence in a new way?
Dec 14, 2009
This is a timely report. Whilst all eyes are on the financial markets, the arts sector doesn’t do itself any favours by continuing to pitch its ‘intrinsic’ and ‘instrumental’ benefits against each another in non-economic terms.
The broader idea of public value enables arts organisations to focus on their relationship with the public, providing us with a stronger case when we negotiate with various stakeholders – including tax payers – in what Mark Moore refers to as our ‘authorizing environment.’ (For his analysis on public value and the arts, see Creating Public Value through State Art Agencies, 2005. Available as a pdf at http://www.wallacefoundation.org)
Since arts organisations choose to operate in the financial marketplace when seeking both public and private sector funds it is not unreasonable to expect that they need to then adopt economic tools to demonstrate cost effectiveness.
However, along with this seemingly simple supply and demand exchange we need to demonstrate our additional value, which is not always immediately recognised, but is undoubtedly there. For some of the best organisations, this is usually more relational in nature and is built up over the long-term e.g. providing children with access to museum collections and related education programmes throughout their formal education. This has all sorts of returns that are not simply ‘instrumental’.
These multiple values are not always difficult to demonstrate, but sometimes they are of less interest to some arts leaders, policy makers and politicians, who need to have an impact over electoral terms, rather than by generation. There is a difference between an organisation’s strategy and wider external policy here.
So we need to keep working on demonstrating this additional value – not necessarily with a bespoke methodology – but in relation to an ever-changing environment so that we can remain relevant and can continue to best serve the public in a variety of ways.
Dec 14, 2009
This paper is fascinating, exceptionally stimulating and illuminating by turns, and also occasionally infuriating. It is, certainly, always good to attempt to transcend “entrenched misunderstandings”, though I’m not at all sure that these misunderstandings (or polarised positions) are generally as “entrenched” as the authors imply. And most arts leaders surely sit somewhere in the middle of this argument?
Three initial comments. First, most contingent valuation/stated preference surveys that I have come across were intended to promote, even commissioned in order to promote, a pre-conceived outcome. Such valuations do not in my experience constitute the pure, unadulterated milk of objectivity that, or so the authors imply, would give us empirically unassailable bases for policy-making.
In short, such surveys can be manipulated. This is not necessarily the case of course, and larger measures of objectivity are achievable, but designing in the required methodological checks and balances is expensive (and often unwelcome!). Jim Barrett is therefore right to say that “it’s naïve to assume you can ever divorce research from advocacy in the policy arena”.
Secondly, I find the authors’ enthusiasm for “commensurability”both counter-intuitive and somewhat disturbing. I know that economists adore data, but do the arts want to end up in such a utilitarian place? I’m not comfortable with this way of thinking unless it is heavily qualified – as, to be fair, it sometimes appears to be in the text of the pamphlet.
Finally, and here I do of course reveal conclusively that I am not a “lover” of economics, for which I can only apologise, I know of no economic theory that comes remotely close to expressing the “intrinsic” value of a great performance of Bach’s “St Matthew Passion”, or for that matter of Bernstein’s “West Side Story”, or their capacity for enriching, even changing lives. That gives me a nagging problem with the use of the word “intrinsic”.
Dec 14, 2009
Mark, you are right that evidence-based policy needs the good will of all parties as well as the evidence itself. But the dearth of good quality examples in the arts makes it that much more difficult to promote widespread use of the techniques we discuss. We need to significantly extend the evidence base beyond what has been done for the British Library and the Bolton MLA sector.
Dec 14, 2009
Picking up on Mark’s comment, it’s naïve to assume you can ever divorce research from advocacy in the policy arena. In this context statistics are like a lamppost to a drunk- used more for support than illumination. My point, which Hasan has correctly picked up on, is that ‘stated preference’ methods will have improved validity if the people being asked have some kind of an informed opinion. Established art forms can benefit from tacit notions of what is deemed to be ‘worthy’. I was simply pointing out that film may not benefit in the same way. And as arts funding inevitably has a competitive element, those advocating for each artform need to be savvy about how they apply CV methods.
Dec 14, 2009
Thanks to Martin for his incisive comments. I share his concerns about ‘advocacy’. A couple of points in response.
First, every research method can be manipulated or used badly. Scandals regularly erupt in the natural sciences – witness the Lysenko case. If CVM is seen as the latest ‘toy for getting money’ it will be discredited and we will have failed. It should be done well – hence, for example, the idea of a DCMS centre of Excellence.
Second, CVM has come of age. There is a ‘right’ way to do it, and instruments to protect against the ‘wrong’ uses Martin describes. It should be applied.
Most tellingly, however, I’m far from convinced that ‘instrumental’ measures offer anything better. After six years in the business of getting the numbers I would say we probably know what they are, and can even guess at what they mean – but we don’t know how they work. We know the creative industries are linked to innovation, employment, or growth – somehow. But the devil is, we don’t know how. Beyond the tacit knowledge of creative entrepreneurs, and the derived expertise of business-focussed studies like Richard Caves, no proven method exists to find out what really goes on, economically, when money goes into a new creative venture.
I’m going to stick my neck out (for discussion) and suggest that arts policy-making based on instrumental benefits is under these circumstances pseudo-objective. It looks great on paper, but no sound causal reasoning supports it.
That’s not to say instrumental benefits don’t exist. DCMS and NESTA research into finding them remains vital. A model of what should be aimed at is our growing understanding of the mechanisms of climate change. Basically, as the Stern report showed, we know enough to put a number on the human cost of getting emissions wrong. But we can’t do the same for the arts. In our present state of knowledge, we cannot reliably predict whether this-or-that arts investment will produce that-or-this instrumental benefit, or even if it will succeed.
We can however get a reliable answer to the much simpler question ‘what is the value of art?’ It’s not a perfect answer, but it is, actually, more objectively-grounded than the instrumental answer. So why not use it?
Dec 14, 2009
I completely accept Alan’s point about the dubious basis of much “instrumentalist” argumentation in arts policy-making. I do not wish to assert the superiority of “instrumentalist” over “intrinsic” approaches to policy development, but rather to argue for an evidence based progression to the deployment of methodologies which draw upon the strengths and insights of both.
The real problem here, as Alan acknowledges, is the absence (to my knowledge at least) of relevant, robust and sufficiently contemporary evidence.
If it were possible to wave a wand and fund just two properly resourced pieces of research right now, I would nominate the following:
1. following the Work Foundation’s 2007 report “Staying Ahead”, a systematic analysis of the economic “spill-overs” between the subsidised performing arts and the wider commercial, cultural and creative industries -especially, though not exclusively, the copyrightable content sectors (film, music, theatre and so on) so that we can have an informed discussion about aggregate returns on public investment in the arts: and
2. a UK study of the business and economic terrain covered by Prof. Richard Caves in his book on “Creative Industries: contracts between Art and Commerce” (Alan alludes to this). Caves’ unique and penetrating analysis is based almost exclusively on American evidence, and, having been published in 2000, is largely pre-digital in scope. This is a very serious qualification because of the huge impact of digitisation on value chains in media and creative markets. Notwithstanding this reservation, and this is a measure of how far behind I think we are in the UK, Caves’ study makes it possible for us to understand the economics of creative businesses, and the commercial dimension of the creative economy, in a way that is essential to getting the balance right between “instrumentalist” and “intrinsic” approaches to policy-making.
PS Maybe someone out there has a wand?
Dec 14, 2009
I would like to thank the three authors for this paper. By explaning that economics can take the arts’ intrinsic value into account, your are helping the arts milieu move away from an old and sterile debate.
I would however like to see more concrete examples of Contingent Value/Willingness to Pay arts value studies. Has it been done before? And what are the numbers that came out? I know you mention the Australian study (which has numbers), but it only measured the value of the overall state expenditures. Is there a study out there that measured the value attached to a given museum or symphony, or is CV/WTP only useful for the total amount of public spending in the arts?
A sub-question: if you can measure the public value of specific art disciplines/venues/artists, and find out that people are willing to see public money go to, say, Céline Dion, should legislators go that way?
Dec 14, 2009
Yes, there are a number of good, concrete examples of studies of individual cultural institutions. One of my favourites remains Trine Bille Hansen’s 1997 study of the Royal Theatre in Copenhagen (you can download it for free on the web). Closer to home – assuming you are based in the UK – Spectrum’s study of the British Library is a more recent example. Doug Noonan produced a literature review in the Journal of Cultural Economics in 2003 – it contains some further good examples.
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