Sunday, June 05, 2016

Tyler Cowen's Good and Plenty

As the subtitle "The Creative Successes of American Arts Funding" suggests, Tyler Cowen defends the decentralized approach to arts funding adopted by the USA against the more centralized approach of the European states. The defense is, to my mind, thoughtful and thorough. Thoughtful because it takes into account both aesthetic and political claims, not over-stating either, but exposing excessiveness where he sees it. Thorough because it examines the long history and the contemporary context of American arts funding. The only caveat here is that the book was published in 2006, and so its data and findings need updating. The update is unlikely to overturn the book's conclusion.

The decentralization argument, or the use of indirect subsidies instead of direct subsidies, is the core of Cowen's thesis. It helps to answer not only the demand for more arts funding coming from the arts community, but also the demand for less funding, arising from Christian critics of immoral art and libertarian critics of coercion. By decentralizing arts funding, society does not place the impossible responsibility on the state to define what is art, and to decide what is worthy of funding. Instead, society provides for different ideas of art, and therefore encourages innovation and creativity. How Cowen phrases the decentralization argument has particular relevance to Singapore, with its top-down, centralized approach to arts policy and funding:

In some areas of human life, we learn by amassing the cooperation of "the best and the brightest" through centralized institutions. The Manhattan Project proceeded this way in its later stages. Or if we wish to study quarks, it may be best to invest heavily in a single, high-powered particle smasher (though not all scientists agree on the cost-effectiveness of this approach). 
Other endeavors require more decentralization. Artistic discovery, for instance, is rarely a matter of brute force, or amassing enough laborers to work on perfecting a single technology. Rather we are hoping that the artist can "look at things differently" and see something that others have not. To make this happen, the artist must have the ability to market his or her vision to a diverse set of consumers, donors, and funders. It is unlikely that any single source of support will grasp the important of all these innovations. Creativity flourishes when many different visions have a chance of succeeding. 
Along these lines, we can view arts funding as a portfolio or investment problem. In most cultural markets, if we are trying to pick tomorrow's winners, we cannot forecast in advance what will work. In this regards cultural markets resemble Internet start-up firms or classic R & D problems. A few tries will hit it big, and many more will fail. In this kind of environment it makes sense to try many different approaches, rather than put all our eggs in one basket. 
The American system helps generate artistic innovations, encourages new ways of marketing and distribution, and supports competing critical visions for artistic contributions. In essence, the American system satisfies the "Hayekian" standard that institutions should support the generation and dissemination of knowledge. Austrian economist Friedrich A. Hayek emphasized "competition as a discovery procedure" in many of his writings, and stressed the inability of a central authority to plan discovery. Entrepreneurs have opportunities to test their diverse visions in a setting with many different sources of financial support. 
Hayek's argument has often been viewed as a plea for laissez-faire, but a look at arts policy belies the necessity of that interpretation. In reality, the argument implies that we should have many decentralized sources for producing and evaluating ideas. This may or may not imply laissez-faire, depending on the institutional setting. Both tax-breaks for knowledge-producing institutions and a publicly subsidized university system may encourage decentralization, to provide two examples. American arts policy uses government to induce a more decentralized pattern of financial support than would arise through pure laissez-faire.  
These policies do not imply that investments in the arts, relative to alternatives, yield especially high social returns. We should not think in terms of subsidizing the arts at the expense of other activities, or giving the arts special status. Rather we should think of American policy as encouraging decentralization for all creative activities, the arts included. 
In this regards the development and decentralization arguments are distinct. The development argument asserts that the arts bring net economic advantage at the relevant margin. The decentralization approach seeks the greatest possible chance of generating, at the margin, whatever brings the greatest net economic advantage. 
Most deliberate governmental attempts to stimulate the discovery process have failed, and for reasons that Hayek and other economists have outlined. Government does not have the knowledge needed to centrally plan innovation. To provide one well-known example, after the energy crisis of the 1970s, the U.S. government subsidized research into alternative energy sources, such as synfuels and solar energy. The end result was wasted money and little or no net technological progress with energy conservation. The government had no idea which energy-saving technologies were going to be the winners. Most improvements in energy efficiency have come from market-based institutions, encouraged by a desire to save money or to earn a profit from a new technology. 
Governments usually stimulate discovery best when they eschew central planning, instead providing support according to some non-market criteria. This approach does not require that government can do an especially good job of picking winners, or that government is smarter than the market. It requires only that government distributes support according to some principle differing from what is already available. The real question is not whether decentralization is beneficial in today's world, but rather how we should encourage decentralization at the margin. 

Cowen goes on to argue why we should support decentralization by giving one aesthetic and two economic reasons. From the aesthetic perspective, more art is desirable and so we should invest in the preconditions of quality art, namely diverse sources of financial support. The second reason, from the economic viewpoint, is that art, like information, is a public good and involves a positive externality. The last reason, also economic, is that extant analyses suggest that entrepreneurs undersupply variety to consumers. I think of how literary festivals all over the world recycle the same few writers. To increase variety, we should support a variety of arts funding.

Cowen defines indirect subsidies, the tool of decentralization, very broadly. They take the form of tax breaks as well as subsidies to organizations not usually or solely considered arts-related, such as the military, which commissions and buys art, and the public university, which sponsors artists and art programs.

At the end of the book, Cowen asks what vision of arts and arts funding will command wide public adherence, offer the possibility of inspiration, and mesh with American politics, economics and religious beliefs. Without a Goethe or a Shakespeare, the USA could and should look to a set of values, Cowen suggests, for its guiding myth. He nominates three values as cultural central to the liberal vision of his book:

1. Innovation
As a culture we should value and reward the ability of individuals, including artists, to strike out on new paths. Openness to innovation is commonly perceived as an American value, relative to the attitudes of other countries. 
2. Entrepreneurship
As a culture Americans recognize and admire the ability of ambitious individuals, including artists, to change the world for the better. Often we refer to these individuals as entrepreneurs. We seek, however imperfectly, to maximize opportunities for these individuals. 
3. Charity and Generosity
Americans are the most generous private donors in the world, including to the arts. As outlined in chapter 2, they have given time, money, energy, and vision to the nonprofit sector in unprecedented magnitudes. Furthermore this attachment to charity is rooted deeply in American culture.

Similar to America in so many ways, Singapore can do worse than to adopt these three values for its vision of the arts and arts funding. To the skeptics of Singaporean charity and generosity, I venture to say that the present niggardly situation is new to Singapore, and that it has been brought about by decades of relentless economics-only development. Before our time, Singaporean arts philanthropy from the elites and masses was prevalent. The tremendous financial support for the setting up of Nantah (a form of indirect subsidy for the arts) was one prominent instance. Our current situation is the result of mistaken engineering, and with some ingenuity it can be reversed.

Thanks, Winston, for getting me the book.

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