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Bringing Culture to Macroeconomics

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Abstract

A two-sector dynamic general equilibrium model is constructed to examine the interaction between the cultural and noncultural sectors of the economy. It stresses three aspects of cultural economics that have been much discussed in the literature: (i) the productivity lag in the production of cultural goods, described by Baumol and Bowen (1996); (ii) the role of cultural capital in production; and (iii) the treatment of cultural goods as an acquired taste along the lines of Becker’s notion of positive rational addiction. The results suggest that the more significant the role played by cultural capital in the economy, the greater will be the growth rates of output in both sectors of the economy. The model is suggestive of future research into the importance of the macroeconomy on the cultural sector, and the potential importance of the cultural sector on the macroeconomy.

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Notes

  1. 1.

    Source: National Endowment for the Arts (based on Census Department’s Current Population Survey as reported in National Arts Index 2012) and the St Louis Fed’s FRED database.

  2. 2.

    Source: Commerce Department’s Bureau of Labor Statistics (as reported in National Arts Index 2012) and the St Louis Fed’s FRED database.

  3. 3.

    United Nations Conference on Trade and Development (as reported in National Arts Index 2012) and St Louis Fed’s FRED database.

  4. 4.

    National Arts Index 2012: An Annual Measure of the Vitality of Arts and Culture in the United States: 1998–2010.

  5. 5.

    See, e.g., Towse (2010).

  6. 6.

    For an exhaustive, but ever-expanding list, see the website of the United Nations Educations, Scientific and Cultural Organization (UNESCO).

  7. 7.

    The Tony Awards were for Best Musical, Best Book, and Best Score, and the Oscar Awards were for Best Supporting Actress (Anne Hathaway), Best Sound Mixing, and Best Makeup.

  8. 8.

    More recently, there has been mixed evidence that the productivity lag has had the adverse affects for the industry that were predicted by Baumol and Bowen. One possible explanation that has some empirical support, but which is not captured in this model, is that cultural goods are luxury goods. As wealth has expanded, the demand for cultural goods has increased sufficiently to offset the higher relative cost of production. See Last and Wetzel (2011); Heilbrun (2001); The Ford Foundation (1974); Felton (1994); and Schwartx and Peters (1983).

  9. 9.

    The real rental rate can be found from the Euler Eq. 9. With this information, the growth rate relationships in (19)–(26), the initial conditions on the stocks of cultural capital and noncultural capital allow the labor allocations, initial wage rate, the sectoral allocation of noncultural capital, and the initial relative price to be determined from the first-order conditions for the firms, Eqs. 1618, given (8), and the Euler Eq. 10. The wage dynamics can then be obtained from (17) and (18).

References

  1. Baumol, W.J., & Bowen, W.G. (1965). On the performing arts: The anatomy of their economic problems. American Economic Review.

  2. Baumol, W.J., & Bowen, W.G. (1996). Performing arts: The economic dilemma.

  3. Becker, G.S. (1996). Accounting for tastes. Cambridge: Harvard University Press.

  4. Felton, M.V. (1994). Historical funding patterns in symphony orchestras, dance, and opera companies, 1972–1992. Journal of Arts Management, Law, and Society, 24, 8–31. and an unpublished manuscript.

  5. Heilbrun, J. (2001). Empirical evidence of a decline in repertory diversity among American opera companies 1991/1992 to 1997/1998. Journal of Cultural Economics, 25(1).

  6. Last, A.-K., & Wetzel, H. (2011). Baumol’s cost disease, efficiency, and productivity in the performing arts: an analysis of German public theaters. Journal of Cultural Economics, (forthcoming).

  7. Lucas, Jr. R.E., & Moll, B. (2011). Knowledge growth and the allocation of time. NBER 17495.

  8. Schumpeter, J. (1942). Capitalism, socialism, and creative destruction.

  9. Schwartx, S., & Peters, M.G. (1983). Growth of arts and cultural organization in the decade of the 1970s. 325 A study prepared for the Research Division, National Endowment for the Arts, Rockville, MD, Informatics General Corporation.

  10. The Ford Foundation. (1974). The finances of the performing arts: Volume I. New York: The Ford Foundation.

  11. Towse, R. (2010). A textbook of cultural economics.

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Author information

Correspondence to Milton Marquis.

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Marquis, M. Bringing Culture to Macroeconomics. Atl Econ J 41, 301–315 (2013). https://doi.org/10.1007/s11293-013-9377-z

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Keywords

  • Cultural economics
  • Cultural capital
  • Productivity lag
  • Positive rational addiction

JEL

  • E00
  • E20
  • E22