Economics of The Arts and Literature - Performing Arts: Baumol and Cultural Economics

Performing Arts: Baumol and Cultural Economics

The seminal paper by William Baumol and Bowen introduced the term cost disease for a relative cost growth of live performances. This cost growth explains the increasing dependency of this kind of art on state subsidies. It occurs when the consumable good is labour itself. To understand this phenomenon, compare the change in the cost of performing the Molière play "Tartuffe" in 1664 and in 2007 with the change in cost of calculating a large number of sums from an accounting ledger. In 1664, you needed two hours and twelve actors to perform Molière's play, and it would take, say, twelve accountants working for two hours to add up all the sums in an accounting ledger. In 2007, a single accountant with a $10 calculator can add the sums in 20 minutes, but you still need two hours and twelve actors for the Molière play.

Now, the artist trade needs a considerable investment in human capital, and needs to be paid accordingly. The artists' pay need to rise along with that of the population in general. As the latter is following the general productivity in the economy, the cost of a play will rise with general productivity, while the actors' productivity does not rise.

There are two lines of thought in subsequent literature on the economics of the performing arts:

• The first concentrates on the existence of productivity growth in some areas of production, thus contradicting the relevance of cost disease. Staying with the "Tartuffe" example, the same performance can be viewed by an ever larger audience by improvements in the design of theatres, and by the introduction of microphones, television and recording.
• The second is concerned with the allocation of subsidies to the cultural sector. While these should be in the general public interest, they may have an income distribution effect, e.g. if they reduce cost to the relatively well-off part of society. This is the case when the well-off are overrepresented in the audiences of subsidized plays, or when subsidies go to a small elitist group of artists.