Tuesday, December 27, 2005

Art sub-oh-sidy

I love art. Whenever I travel abroad, I'd love to visit museums. Many of those museums are publicly supported. Meaning, the government collects money from taxpayers and allocate part of it to maintain museums.

When I pay cheap pass to a museum, I feel weird. Back then, honestly, I didn't care: hey, who doesn't love subsidy? But the more museums I visit, the more I think it's unfair to charge me less to enjoy the artifacts in Makassar's Fort Rotterdam, than to stare at Mona Lisa in Louvre. In other day, when I visited The Art Institute of Chicago Museum, I knew some Americans paid partial cost of my pass, through taxation. But not everybody of them loves museum. In short, the costs of art subsidy are very dispersed, while the benefits are concentrated.

My co-host Ujang loves art, too. So do many other goers of Yale University Art Museum. They all benefit if the pass to the museum is subsidized. But who bears the cost? Some art lovers and some art non-lovers (plus, probably some art-haters). Is it fair? Maybe not. But isn't this how every kind of public subsidy works? If that's bad, then every subsidy is bad.

Well, consider national defense. There is no way (at least, there should be no way -- that's the idea) in which the government can exclude certain citizens from national defense/security. This is called "non-excludability". And my consuming the good should not reduce the level that you can consume. This is "non-rivalrous". Art may qualify for the second condition, but almost always not for the first one.

Of course the above definition of "pure" public good is blur. So, let's just do the easy way: Marshallian distribution of wealth. If the aggregate benefits are greater than the aggregate costs, then it's a go. National defense is surely a go. But I'm afraid art is not: the costs to the many taxpayers are likely to exceed the benefits to the minority, museum visitors.

There have been some ways offered around this problem. One of which is to use "local subsidization" of culture. It works like this, more or less: it's alright to collect taxes from Makassar citizens to pay the maintenance of Fort Rotterdam. But not from Javanese. The more able the government to identify who's willing to pay more, the more succesful the program. Nobody says this is easy.

For good and healthy debate, see the special issue of Journal of Behavioral Economics, "Symposium on Subsidization of Cultural Activities", Vol 8 Issue 1, Summer 1979 (esp. the paper by Milton Russel, pg 69-75).


  1. I know I was playing with fire when I mention the 's' word. Subsidy is a 'non-kosher' word here in Cafe Salemba. But for a good reason.

    Indeed, I was at a risk of contradicting myself when I first said artists are risk takers working in a high risk sectors and then afterwards asked the question whether the public should help bear parts of the risk (see my comments on Rizal's posting ). Granted, the question of whether government shoud subsidize the arts does not seem to be the same as whether government should subsidize artists. Unfortunately, it is ultimately the same thing.

    Aco posting makes it clear that like other subsidies, subsidy on the arts benefits a few (e.g, the artists supported by the public fund and the selected few who enjoy the type of arts produced by them), at the expense of many (taxpayers). Like other subsidies, subsidy on the arts will distort the market, favoring some types of arts (and artists) while marginalizing others. At the very best, government choosing what type of arts to subsidize is, well, paternalistic. Then there's a host of other problems such as the incentive for people with less artistic talent to enter the subsidized sector, etc.

    This just goes to show, when one's faith on the market economy is tested, a visit to Cafe Salemba for a tall cup of 'Subsidy 101', prepared specially by Aco, works like a strong elixir. Even for the hosts.

  2. To those interested in this issue, I recommend a book by Tyler Cowen (of Marginal Revolution): In Praise of Commercial Culture. Honestly, I haven't read it myself, but I have been a regular reader of Tyler's blog, and I think I know where he goes in that book.

    Here's the introduction from the publisher:

    "How capitalism liberates the arts.

    Until capitalism flourished, Western artists, writers and composers generally depended on the patronage of fickle kings and aristocrats.

    Cowen tells how capitalism has liberated art, literature and music by providing alternative ways of financing it. For example, he explains how "Beethoven and Michelangelo, who sold their artworks for a profit, were entrepreneurs and capitalists," as was Rembrandt. Even when artists, writers and composers couldn't earn an adequate living from their creative work, capitalism enabled them to continue pursuing it. For instance, Cowen shows how "Jane Austen lived from the wealth of her family, T.S. Eliot worked in Lloyds bank, James Joyce taught languages, Paul Gauguin accumulated a financial cushion through his work as a stock broker..."

    Cowen reports that it was private funds, especially from family members in business, who financed some of the most anti-establishment artists. "The list," he says, "includes Delacroix, Corot, Courbet, Seurat, Degas, Manet, Monet, Cezanne, Toulouse-Lautrec, and Moreau. French writers Charles Baudelaire, Paul Verlaine, Gustave Flaubert went even further in their anti-establishment attitudes, again at their parents' expense."

    Fascinating book."

    Note the "alternative ways of financing [art]"....

  3. i beg to differ this time. let's not forget that even Smithsonian has board of donor and volunteers to keep it running. who the hell on earth (well, in Indonesia) would fund perservation cost of 'peci' our proclamators wore on independent day?

    at this point, it makes sense if one would sell Buddha's head from whatever 'candi' to antique seller at Jl. Surabaya. consider them doing us a favor for finding potential buyer who would look after the artifact for us better. just that 50 years from now, our children can only find them on history book that once upon a time, Indonesia used to have 1,000 temples.

    i believe some arts have commercial value. concerts and plays should be able to source money, if not attractive enough to draw funds/sponsorships from foreign embassy/foundations. but i don't think goverment should stop subsidizing art, especially those Musium Kereta Api Ambarawa alike kinds. they do need it.

    and please, comparing it to Cezzane is like apple to peanut. literally.

  4. Thanks for disagreeing, Detta :-)

    Fort Rotterdam, Chicago Museum, etc are only for illustration. Substituting them with more comparable "apples" wouldn't change my point.

    And that point is, it's perfectly fine to preserve the old kereta api and all that. But, who actually pay for it? Taxpayers. I'm sure there are many people like me, who would rather see his money goes to finance national security against pandemics like avian flu, for example (or for now: Yahukimo) than to save a peci, or even an antique train.

    So, who's taking care of the old kereta api? Here's an alternative solution. Let's use your train example. Call as many antique train-lovers as possible. Ask them to donate. (This is called local subsidization). Better yet, provide incentive for private to engage (think about National Public Radio with its "Friends of NPR" program -- this is not a perfect example, it's still partly subsidized the old way; better examples in Cowen's book, I suppose).

  5. Aco, you went to "public good" argument to defend your anti-art-subsidy position. But can we go to the "positive externalities" argument to defend the otherwise?

    Of course first we need to agree that art is good for the society --or the production of art can increase the 'art pool' of the society (taking a parallel example of R&D that contribute to the technological pool of the society, therefore subsidized)

    Then letting the market to work would end up to the less than social optimum quantity of art.

    On your argument on who bears the cost of subsidy --and its unfairness. Do you think all people love the idea of basic education or expensive aeronautics technology? Yet, they make strong cases for government subsidy,no?

  6. Rizal, one of the biggest problems with the public externalities argument of the arts is: how do you even begin to conceptualize a measure for these things, let alone argue that these externalities are large enough to justify a subsidy?

    It is hard but there a ways to quantify or at least see the externalites of education, aeronautics innovation, etc. as they are ways to quantify the externalities of health investment. It's not the case with arts.

    Stil, in reality public funding accounts for about half of gifts to the arts in Europe, and about a quarter in the US, the rest coming from private donors. Anyone has a number for Indonesia?

    I would also like to point out that we have been using arts to talk about both arts and culture or national heritage interchangeably. I was mostly thinking about subsidy on current art production, referring to Radhar's article that was discussed in Rizal's posting. You can argue it doesn't matter, but I can also think of many cases or illustrations where it make more sense to separate them.

    So here's a different, but related question, probably worth a new posting separately: if you are a social scientist, witnessing a disappearance of a certain form ritual or ceremony usually performed by the people you're studying, due to, let's say 'modernization', what do you do?

  7. Ujang,if it's possible to quantify the externalities of, say, aeronautics research, why is it not the case for art? It might be difficult, but I think it is possible. Although admittedly I don't have clear idea yet on this problem.

    As for the disappearing ritual, I'd say be it. But we're discussing the arts that is progressing. It is the same as the technology: we can discard the old technology but still we subsidize the R&D to have technological progress. It is not the technology (or art) that matters --for it can be obsolete-- but it's the technology (art) pool that matter --you can say that kind of pool is a necessary part of any society to be modern or whatever you name it

    And art, I believe, can not be disappear --like the ancient ritual--. It is always progressing, even though sometimes toward strange direction as in the case Duchamp's urinal, or some installation art that is so weird :-)

    p/s: I've read an article in AER or QJE in the recent years edition (2003-2005) on the price of art work, but I can't find it anymore. Do you guys recall that?

  8. got your point, Aco.

    but i don't think government allocate that much for art anyway, thus such amount will be insignificant to contribute to other sector. it's so small, it's not even enough to cover maintenance cost.

    charity roadshow might help? wouldn't they think like you (as well as most people too), that it's more useful to donate to Rano Karno's Ayo Sekolah programme? if you are given chance to save either a child's or an old kereta api future, what's your choice? bingo.

    and ironically, as much as our A-class society know how to appreciate Bolshoi ballet, they neglected Wayang Orang Bharata in front of their nose. they closed their venue at Senen few years back. but of course, no one notice. and when no one cares about, it's goverment's part to chip in. and really, it's not even a fracture of Sukhoi budget we spend and never used.

    i would elaborate on how private sector could help by contributing to these 'social service' and get tax rebate from goverment as incentive. but maybe it's not a good idea for our Dirjen Pajak fellows...

  9. Rizal, Ujang, and Detta. Thanks for the comments and good discussion.

    First off, apology to Ujang that somehow we have expanded this art issue into culture (I take the blame, as I endorsed Cowen's book on commercial culture).


    Rizal, I consider myself as interested in environmental economics. This is the field -- like public economics -- where we deal a lot with issues of public goods and externalities. In other words, we study "why market fails" (note the quotation marks -- I prefer "why market is distorted"). You are right, I use public good approach in my argument. And you bring it to another dimension, externalities.

    To be frank, I always have problem with this externality. Standar textbooks tell us: when A smokes next to smoke-hater B, and A doesn't compensate B's disutility, then A has just created a negative externality on B. Similarly, when C builds a nice flower garden in his frontyard, neighbour D gets an extra utility. If D doesn't pay for it, then textbook says, D is enjoying a poisitive externality coming out of C's activity. Then comes the troubling part: we need government to "get the price right". How? Tax A and compensate B or give subsidy to C or tax D to compensate C, and so forth. I find this line of arguments weak in two accounts.

    First, the role of government is not a must. If A and B can negotiate, we don't need the government. Similarly to the case of C and D. This is the essence of Coase Theorem. Of course we know that Coasian negotiation might fail when transaction costs are high. (And in reality transaction costs are high). But that doesn't mean we have to resort on government's imposition of tax/subsidy (or worse yet, command-and-control). Yes, government might be of use here, but it can be limited to ensuring that the existing property rights system -- whatever it is -- are respected by both parties. (For pollution case, see my lit review in Economics and Finance in Indonesia).

    Secondly, this issue of externalities (both negative and positive) is delicate. Indeed, it's too delicate, it's rubber-ish. Using the textbook definition above, in fact, I would say that almost every activity we do creates externality to a third party. When I talk with you in a bus, I might disturb another fellow bus traveller. But we go on unpunished. When you stop by my office with an Umberto Eco book in your hands, I gather information, which I would share with my wife, who might in turn buy it in the next convenient time. But she wouldn't pay you for that valuable information.

    My point is, rigid definition of externality with it's following implication, i.e. government intervention, is dangerous. Why? Because it gives too much a room for government. While, government can fail, too. Worse yet, most of government failures are even worse than "market failure".

    "Public good" definition is less tricky than "externality". However, even public good has many variants: pure public good, local public good, club good, etc. The ones that need government role is actually limited.

    And, hey, I'm not charging Cafe Salemba visitors for reading this post. Just like Blogspot doesn't charge the Manager to maintain this Cafe here. The good thing is, this all has nothing to do with the government (at least till now, and before our Manager thinks he is a government).

    Finally, for some specifics.

    Rizal, I agree that BASIC education (primary and secondary) should be supported publicly. The government can use subsidy. Here we can use the externality approach, even in its rigid form: i.e. the whole country will benefit from knowledgeable youths.

    I see you're unconvinced. Why then, not art? Look, art is very different with general, basic education. We should ask ourselves: what do we really mean by subsidizing art? Will the country as a whole benefit from that, the way subsidizing basic education allows it? Art is just some product. Like fashion. Or, book. If we should subsidize art, then its unfair not to subsidize fashion. Basic education, on the other hand, is like a prerequisite for a country to excell. So, the state is responsible for a MINIMUM requirement of education attainment by its population. Now, I have been talking about subsidy for basic education a lot. In fact, I think there is a smarter way. Voucher system (will elaborate on this next time).

    How about tertiary education? I think this is Ape's domain :-) But in short, I don't agree with subsidy for college and universities. (Yes, I benefitted from subsidy, too, back in my college years. Call me inconsistent).

    Aeronautics tech? No. Or, I may say, the government can play a smarter role if it wants. It doesn't have to provide subsidy using taxpayers money. But it can create incentives for private to fund it. It works in many countries already.

    A final word for Detta's good point. You seem troubled by the fact that not many people care about Wayang Orang Bharata. Well, that's a reality we have to accept. If not many people care, why should the government send subsidy, in the name of public -- the other way of saying "many people"? I symphatize with your concern (Trust me, I like wayang. In fact I pride myself as a Bugis that understands Bharatayudha, Mahabharata and all that better than many Javanese -- try me). But I can't force other people to like it too. If something can be fixed, that would be a person or institution (not necessarily government) who can call for donation from you, me, and other wayang lovers without having to force non-lovers to bear the costs. And it works. The last I La Galigo performance, I believe, gets zero subsidy from the government. It's all private funding. In contrast, look at the sad Taman Ismail Marzuki. We hear, the government gives subsidy for building a good theater there. It never realizes. Why? Where is the money now?

    But Detta, I love your mentioning how private sector could help through some scheme provided by the government, i.e. tax deductible system. That's the way to go.

    Thank you all.