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Sunday, September 25, 2005

Marketing Colorado's Art

Joanne Kelley wrote an article in the Rocky Mountain News Business Section about how it would be beneficial to Colorado's economy promote our arts. She reports that the Colorado Tourism Board Chairman says we as a state need to be spending $15 million to 20 million to "embrace and support the arts and culture" versus the $5.7 million that is being spent right now.

First, let me say that phrases like "embrace and support the arts and culture" don't quite excite me the way it may excite others. I feel any phrase that uses the words "embrace" and "arts" in the same sentence comes from people who spend way too much time looking at and admiring crazy decorative stuff (read crap) that will never help people or benefit their lives in any way. However, my opinion on that doesn't really matter because this is soley from the vantage point of economic efficiency. In fact, because of the individualistic ethic, we have to accept art lovers' desires at face value. In other words, if they say their well-being is increased by art, then we all have to believe them.

Now on to the important stuff. This isn't just about whether someone enjoys art, it is ultimately about whether or not the government should be involved in the marketing of Colorado's art for the purpose of bringing tourists to the state. The fact the some people apparently increase their well-being by seeing Colorado's art does not justify the state spending money on it. Their are only three reasons that would justify the state's involvement with marketing art and culture. State involvement is justified if (a) a monopoly exists, (b) an externality exists, or (c) the good that is traded is a public good, meaning it is rival in consumption and non-excludable.

When going thought these three reasons, it is obvious that a monopoly doesn't exist since nobody has complete control over art. However, an externality may exist if Colorado's art and culture provide benefits or harm to third parties not involved in the transactions. While I would like to claim there is a negative externality to me because I feel like gagging every time I hear high-social class phrases like "arts and culture," I don't think that kind of suffering is going to fly as a negative externality. However, a positive externality may exist if if the local community benefits in some way from tourists who come to view our arts and culture. As for the public good aspect, it is rather difficult if at all possible to exclude people from our culture, and while at some point congestion may eventually make our arts and culture a rival good (not to mention provide a negative externality for us), it is as far as I can tell, nonrival. As for our arts, if we are talking about art in museums, those are very excludable and rival in consumption, but if we're talking about the open-for-all-to-see art that stands in the public (well, some people call it art, like that big yellow thing you can see from the highway) then that is non-excludable and nonrival and is therefore a public good.

If the art and culture is a public good, then the government should own it, but that has nothing to do with government marketing the product. If, however, there is a positive externality from marketing our art and culture that outweighs any negative externalities that exist, then the government is justified in subsidizing the marketing of the good. If the article correct that marketing the good can increase tourism, thereby increasing the economy, employment rate, land values, tax revenues, etc., then there may well be a positive externality resulting from the marketing of the good. If there is a positive externality, the next step would be to find out how much that externality increases the well-being of third parties.

The government already spends money marketing the arts and culture of Colorado to increase tourism. (By the way, tourism is an industry, so increased jobs and land values are all calculated within the market and therefore any externality cannot arise from these figures alone, but the name recognition that would result from the advertising and tourism could bring people and businesses to Colorado, and that would be an externality.) This money may already cover the externality and may even overpay for it. The amount of money that should be spent on marketing should be determined by how much benefit the marketing would provide to third parties.

What do you think? Viewing the article through the eyes of public finance, do you think the government should increase spending, decrease spending, or keep it the same, or do you think there even is an externality that justifies the spending in the first place?

Comments:
You have the right idea about art and efficiency. But, much like education, I find it unlikely that there are positive externalities associated with art.
 
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