1.How many different cost types exist and how are they computed?

   2.What are characteristics of the markets in the performing arts?

   3.What is unique about the nature of costs in the performing arts? How does this effect pricing if the firm is
        (i) a for-profit organization and
        (ii) not-for-profit organization?

   4.What are the sources of growth in physical output per work hour? Which one of them is effective for the live performing arts?

   5.What are some of the offsets to the problem of productivity lags in the performing arts?

   6.How do social scientists such as Edward Barfield and Leslie Singer define art?

   7.What types of costs are particularly important to understanding the functioning of art markets?

   8.Describe the nature and functioning of the primary market and the secondary market for visual arts?

   9.What is an art auction? How does it function? What is meant by "hammered down" or "bought in" in the context of an art auction?

  10.Write short notes on why households consider acquiring art works?

  11.What are the different functions of museums? Which is the most important function and why?

  12.Please explain why museums would be regarded as a decreasing cost industry? Do you think a museum is justified in charging higher entrance fees for "blockbuster" events?

  13.What are some of the economists' suggestions for managing a museum's collection or for improving distribution of art works among big, medium, and small museums?

  14.What is market failure and how does it relate to the art sector?

  15.How does censorship relate to public support for the arts? What lessons can the artist learn?

  16.What are some of the assumptions regarding the functioning of a free labor market for artists? How does the presence of labor unions affect the working of the labor market for artists?

  17.What are some of the positive externalities or spillovers associate with the art sector that would justify public support?
     Are there other ways of achieving the same ends?
 
 

Notes for Final

1. What are the four basic cost concepts? Write notes on each.

    The four basic cost concepts of cost analysis are
i) fixed costs,
ii) variable costs,
iii)marginal costs and
iv) total costs.

    Fixed costs are the costs associated with the fixed input used in the production process. These costs are incurred at the time
there is a commitment to production, even at zero units of output, and do not vary with the level of output. Items of fixed costs
that cannot be recovered upon liquidation of the business are also referred to as þsunk costsþ. Examples of fixed costs are rent,
insurance, interest payments, contractual labor, depreciation, repair and maintenance, and storage.

    Variable costs are zero at zero levels of production and increase directly with the level of output depending on the nature of the technology embedded in the production function. They are associated with variable types of inputs. Examples of variable type costs are the costs of raw materials, the costs of energy and water, and hourly labor.

    Total costs are costs that include all fixed and variable type costs and are calculated by adding the totals of the two. Total costs are equal to fixed costs at zero levels of output and increase with output depending on the nature of the production function.

    Marginal costs are associated with an incremental unit of production and can be defined as the change in total cost or total
variable cost due to a unit change in output. Marginal costs comprise solely of variable type costs.

2. How many different cost types exist and how are they computed?

    There are seven different cost types. These are
i)the total fixed cost,
ii) the total variable cost ,
iii) the total cost
iv) the average total cost,
v) the average variable cost,
vi) the average fixed cost, and
vii) the marginal cost.

    The total fixed cost (TFC) is computed by finding the sum of all fixed cost types.

    The total variable cost (TVC) is computed by finding the sum of all costs associated with variable inputs used in the production process.

    The total cost (TC) comprises of the sum of all TFC and TVC.

    The average fixed cost (AFC) is computed by dividing the TFC by the quantity of goods produced or output Q.

    The average variable cost (AVC) is computed by dividing the TVC by the number of goods produced or output Q.

    The average total cost (ATC) is found by dividing the total cost by the number of goods produced or output Q.

    The marginal cost (MC) is the quotient of the change in TC by the change in the number of goods produced or output Q. It is also equal to the quotient of the change in TVC by the change in the number of goods produced or output Q.

3. What are the characteristics of the markets in the performing arts?

    Most markets in the performing arts are monopolistic types though a few markets existing in the smaller cities are of the oligopolistic type. The structural characteristics of monopolistic competition are
i) many producers,
ii) many consumers,
iii)product is differentiated,
iv) the firms use advertising as a key strategy to emphasis price and non- price related differences associated with quality, design, performance and service,
v) each firm has some monopoly power to affect pricing of the goods, and
vi) the key to successful product differentiation is building product loyalty.

    If the entire live performing arts were to be considered a single industry, the opera company, the symphony orchestra, the dance groups and the resident theater companies in major cities are all competing with each other by offering competitive products that are unique but also substituteable as forms of artistic entertainment.

    Advertising functions to raise the level of demand for the specific firm's product and to make the product demand less price sensitive or inelastic. It also helps in the cultivation of taste and artistic culture.

4. What is unique about the nature of costs in the performing arts?

    One aspect of costs in the performing arts that is different from other forms of production is that is difficult to measure the output. Some suggestions by economists are to measure
i) the number of performances (this method does not provide much information as there are differences in quality and costs),
ii) the number of productions (this method can not help to determine the demand),
iii) the number of seats filled (yet the experience is not captured),
iv) seat utilization, which is equal to the number of performances x the capacity of the house x the capacity utilization in percent. Economists have generally adopted the seat utilization method of measuring output in the performing arts.

    Another aspect of costs in the performing arts that is unique is the average variable costs are equal to the marginal costs, both of which remain constant. The price of production does not increase with the sale of one more ticket, nor do the variable costs rise with the additional sales of tickets.

5. How does this effect pricing if
    i)the firm is a for- profit organization,
    ii)the firm is a not-for-profit organization?

    A for-profit organization wishes to maximize profits by maximizing the difference between total revenues and total costs. Pricing is set to maximize profits. Quality and quantity factors are important to a for-profit firm but so is economic efficiency. It is necessary for this type of firm to maximize profits by setting output where marginal revenue equals marginal cost.

    A not-for-profit organization typically has quality and quantity goals. The quality goal may be a wish to excel according to it's own internal standards of excellence. The quantity goal may be to attract the largest possible audience for its performances. Spending on quality and quantity will diminish the marginal returns as costs for production are increased. The not-for-profit firms do not intend to recover more than their average costs since this has legal and tax implications on account of their
incorporation as not-for-profit firms. Thus they intend, rather, to merely break even. This is the point on the diagram (Refer Fig 7.1 handout) where the average cost curve intersects the demand curve. The price of a ticket is set corresponding to this point on the demand curve and it ensures that the firm will at best break even.

    Not-for-profit performing arts companies also receive donation and grants from foundations, private patrons and donors, the NEA, the federal, state and local governments and the art councils. These contributions may often make up 35- 38 percent of the operating revenues of the not-for-profit firms. Some contributions may have conditions attached such as for strict purchase of equipments or improving or enhancing the quality of the theater or augmenting its capacity or for renovation works. However if there are no conditions attached, then the firm has a choice to use the money to improve quality or to increase audience participation (viewership). If the firm chooses to do the latter, then the price will be set at a point below average cost and the losses made up by the amount of donations and grants received. Thus in effect the price of admission is being subsidized to encouage audience participation in the specific type of performing arts in which the firm specializes. (Refer figure 7.2 handout).

6. What are the sources of growth in physical output per work hour? Which one of them is effective for the live
performing arts?

There are 5 possible sources of growth in physical output per worker. These are as follows:

1. Increased capital/worker (capital by economists is defined as the produced means of production. examples are machinery, equipment, factories, warehouse space etc). Having more machinery helps labor create more output. Thus output per work hour rises.

2. Improved Technology Technology can be defined as the state of knowledge about methods of production. Improvements in the state of knowledge bring about increased production efficiencies. For example, using bulldozers with frontloaders instead of pick axes and trucks in road building efforts.

3. Increased Labor Skills More skilled the worker, more output can be created per worker. Skills can be learned although the learning curve itself follows a sigmoidal pattern with an eventual levelling off. Investment in human resources such as education and job training are important to building labor skills.

4. Better Management If production is organized efficiently, then the output per worker will rise. The number of managers in performing art companies has been rising. Managerial skills can have payoffs in the performing arts.

5. Economies of Scale In some production processes output per unit of input rises when the scale of production rises.

    As Baumol and Bowen point out the conditions of production themselves in the live performing arts preclude any substantial change in productivity because the work of the performer is an end in itself, not a means for the production of some good. Since the performer's labor is the output- eg. singer singing, dancer dancing, actor acting,- it is not possible to increase the output per hour.

    Of the five sources of productivity discussed, economies of scale has some potential in the performing arts. Length of seasons as measured by number of performances or for symphony orchestras, the number of concerts can be an appropriate indicator of scale. Economies can be effected because orchestras can play more concerts without investing in additional rehearsal time for example by selling subscriptions in three series (Thursday evenings, Friday evenings and Sunday afternoons). Also administrative expenses of running the orchestra need not increase by increasing the number of concerts. This results in reduced overhead per concert as the season lengthens.

7. What are some of the offsets to the problem of productivity lags in the performing arts?

    According to Baumol and Bowen costs in the performing arts increase relative to costs in the economy over time. This is because wages to artists must keep up with the rest of the economy even when productivity lags in the performing arts sectors relative to more dynamic manufacturing and agricultural sectors of the economy. This is the only way that the performing arts sector can compete for people with artistic skills in a nationally integrated labor market.

    There are however some countervailing forces to productivity lag in the performing arts sector. These forces tend to ease the pressures generated by the productivity lag. These are as follows:

1. The effect of rising living standards. Technological progress in the economy tends to raise rising living standards. This implies more income accruing to individuals in the economy. Since with rising costs, prices of admissions increase, it implies reduced attendance at performances. However, since individual income has increased the income effect tends to offset the effect of price increases and attendance at performances is maintained despite higher prices.

2. The effect of economies of scale. This effect works in tandem with the rise in living standards. As individual income rises, demand for admissions shift to the right, more tickets get sold and the performance seasons get longer. This results in decreased per unit cost and offsets the cost increasing effect of productivity lags.

3. Income from mass media. Technology has small direct effect on the performing arts but the impact is much larger through the mass media. Technological advancements such as phonographs, motion pictures, television, LP records, tape recordings, video cassettes, satellite and cable systems, CD and video disks have improved the opportunity for royalty income for the performing arts. Although for sports, royalty income outweighs ticket sales, this is not the case for the performing arts. for eg. classical musical production went to Europe because they had lower production costs and the invention of audio casettes and VCRs have promoted self recording thus royalty income potential has been lost. Royalty income payments from TV programming have also been poor. In the 1950s and 1960s, there were high expectations since the networks wanted to promote "high art".  But during the 1970s through the 1990s, TV has been blamed for programming more speed, violence and sex rather than "high art". Thus royalties contribute less than 1 percent of the income to the performing arts. Part of the problem lies in the fact that
television itself is subject to productivity lags.

8. How do social scientists such as Edward Banfield and Leslie Singer define art?

    Edward Banfield a political scientist and an art collector as well as the author of 'The Democratic Muse: Visual Arts and the Public Interest (pub 1984) says art can be defined as having the capacity to engender in a receptive viewer an aesthetic experience. The problem with the definition is that no two people may have the same notion as to what constitutes an aesthetic experience.

    Leslie Singer who wrote about "Microeconomics of the Art Market" in the Journal of Cultural Economics (1978) sees art as an object having 2 attributes.

1. Decorativeness (size, weight, physical condition, subject matter) 2. Intellectual Appeal (art- historical significance, quality of work, artist's reputation).

    These attributes apply to paintings, drawings, sculptures and related collectibles. The principles are similar for all media utilized by artists to express themselves.

9. What types of costs are particularly important to understanding the functioning of art markets?

    These are transaction costs and information costs.

    Transaction Costs - these are costs associated with over and above the payment of goods sold incurred by all parties involved in the transaction.

For buyers examples are costs of: time looking for art works examining merchandise waiting in lines discerning alternatives one would want to minimize these costs of transaction.

Information cost relate to gaining or improving upon imperfect information related to: product quality resale value price and availability of substitutes risks involved developing accurate information results in costs associated with expended time, effort, material resources and money. Higher the cost of being wrong, more money is expended on information.

10. Describe the nature and functioning of the primary market and the secondary market for the visual arts?

    More and more the art markets resemble the financial markets. They seem obscure, chaotic, esoteric, organized and sophisticated. The primary market could be artist's studio art fairs festivals galleries and other similar outlets.  Considerable risk is involved with the intellectual attribute since artists are generally unknown and thus the appeal is uncertain.
    The decorativeness attribute on the other hand is recognized and understood. For the neophyte buyer, it is difficult to know what works of art are for sale, quality of the art work and its availability without expending time and effort.  For the artist who sells he must know how to price the art work (above the reserve price - the minimum price acceptable to the artist) but not a price that is too high for the buyer. When a artist works through a dealer who reprents him/her there is generally a 50 percent mark up in pricing over the costs of production. However costs of production is imprecise since there is no accurate information regarding the opportunity cost of the artist's time.

    The Secondary Market. The exchange of existing works for established artists takes place in the secondary market. Buyers and artists work through dealers with whom they have had a business relationship. Prices may be posted or may not be posted. In the case prices are not posted, the dealer uses his experience to gauge the willingness to pay by the buyer. If the buyer's willingness to pay exceeds the artists reserve price plus the dealers commission the sale will go through. Both transaction and information costs are low in the secondary market. In the case of auction houses, commissions are about 20 percent of the sale price.

Questions for Final

Q.11 What is an art auction? How does it function? What is meant by "hammered down" or "bought in" in the context of an art auction?

    Mcaffee and McMillan describe an auction as a market institution that is bound by an explicit set of rules that helps determine resource allocation as well as prices based on bids placed by market participants. Auctions are useful when markets lack breadth (i.e. do not have numerous buyers or sellers) or depth(i.e. commodity does not have even an imperfect substitute). In such a situation, the market is unable to determine a standard price. However, an auction in such a circumstance could help determine a maximum price for the seller.

    British auction houses such as Christie's and Sotheby's employ the English auction method. In the English auction, all bidders know the current high bid for an art work. Sotheby's and Christie's have branch offices also located in the United States. Refer to Fig 9.3 of handout. In the auction process, it is unlikely that there will be an underlying smooth downward sloping demand curve. More likely because of limited buyers and varying preferences, the demand curve is discontinuous and may be shaped as a stair step line curve. In order for individual A to become a successful bidder, he must bid an amount that exceeds the offer made by individual B who may have made the highest bid upto that point. This means individual A may still retain some of the consumer surplus (i.e. the positive difference between the maximum price individual A was willing to pay and his bid amount which was just enough to exceed the bid of the next highest bidder individual B). The auction process is able to determine the maximum sale price for the art work by extracting most of the consumer surplus from the successful bidder even though it might
not be all of it. Typically the successful buyer will have a bid which will be greater than the artist's reserve price.

    In those instances, when the highest bid in an auction is below the artist's reserve price, the painting will be "hammered down" at the reserve price and "bought in." In such a case, the seller or the seller's representative is rejecting the hitherto highest bid price and in effect ends up buying the artwork from himself or herself. So, as far as the auction is concerned a sale has been made but basically the current owner of the artwork retains the artwork. In the case of a new artist, this helps determine a base market price for the artwork the next time it is offered for bids.

Q.12 Write short notes on why households consider acquiring art works?

    Households may decide to consume or save of their disposable incomes (i.e. income received by households net of all taxes). The decision to consume may relate to allocation of expenditures over a large number of goods and services. The decision to save may involve both real and financial assets. The U.S. Department of Commerce classifies acquisition of art work as consumption expenditures although in reality it helps build up the household's asset portfolio.

    According to authors Heilbrun and Gray the decision to acquire art work in the household's asset portfolio depends on the following:

1. Extent of wealth or resources available to the household.
2. Expected return on the asset relative to return on other potential substitutes
3. Expected risk associated with the asset relative to other assets
4. Consideration regarding liquidity i.e. how quickly the asset could be converted to cash
5. tastes and preferences for works of art

Q.13 What are the different functions of museums? Which is the most important function and why?

    There are six specific functions of museums. They are:
1) to collect and display art work - expenditures related to this category include spending that is related to curatorial work, exhibits, security, general administration, building and maintenance and public information.
2) art conservation - this may involve having/hiring a conservator and maintaining an up-to-date laboratory. If these facilities are unavailable, the function may be contracted out
3) research - this involves determining precisely the origin, authorship and character of each object in the collection. Often an in-house library is maintained for this purpose
4) education - this fits in with the civic responsibility of the museum. It is an important function to retain or expand subsidy from the local government, to gain an appreciative audience from whose ranks future financial supporters may be found
5) selling of membership - these provide a substantial share of the earned income for museums, and
6) development - this is important for fundraising from wealthy patrons, foundations, and federal, state and local governments

    The most important function is the collection and displaying of art work as this function fulfills the main intent of the museum: to make works of art available to the general public and future generations as a national heritage.

Q.14 Why are museums regarded as a decreasing cost industry? Are museums justified in charging higher entrance
fees for "blockbuster" events?

    The cost of operating the display function of museums can be divided into two parts.
1) Basic operating cost of the galleries that includes heating, lighting, maintenance, insurance, office staff and basic security service. These costs
can be regarded as the minimum costs that must be incurred to open the museum daily. Since these costs do not vary depending upon the visitors per day they can be regarded as fixed costs. Thus with larger number of visitors the cost per visitor of this component continues to decline.

2) The museum also incurs a marginal cost for each person/visit this being the cost of additional security, information and cleaning personnel. By adding the average
fixed cost component onto the marginal cost will result in a downward sloping average daily operating cost curve. (Please refer figure 10.1 of handout). Thus museums may be regarded as a decreasing cost industry because with larger numbers of visitors, costs of opening the museum to the public can be spread over more visits. With larger number of attendees to an event likewise at a gallery the cost per display decrease.

    Special collection events or exhibitions are called " blockbusters." Due to crowding they cause congestions and long lines. Pleasure diminishes with congestion due to long waits in lines, interrupted views of specific pieces, and congestion around the most popular pieces. Higher prices at these events, at least initially, would decrease congestion and raise the same revenues with increased pleasure for each participant.

    Imposing an entrance fee or even raising them as in the case of a blockbuster event makes one wonder regarding equity considerations and whether this serves to filter out low-income visitors. But studies of price elasticity seem to indicate that imposing charges does not greatly reduce attendance. However what appears discouraging is that holding the price down does not seem to encourage attendance either.

Q.15 What are some economists' suggestions for managing a museum's collection or for improving distribution of art works among big, medium, and small museums?

    Regarding management issues economists are concerned regarding the display and storage functions of the museums. Typically artworks in reserve (in storage) at museums vastly exceed those that are on display. Noting that museums are typically not-for-profit organizations, economists like to probe whether the right balance has been struck between the quantity of art owned and the amount of building space needed to display it. Using marginal analysis, economists might point to the benefit on the margin gained by investing an additional dollar in building gallery space relative to its use in gaining additional works of art.

    Another contribution of economists has been to recommend "deacessioning" of art works at a museum i.e. a museum would sell an object out of its permanent collection such as was done by the Metropolitan Museum of Art in 1972. Reasons for deacessioning of art works would be to allow museums to better meet their chosen objectives or to let museums deploy their assets rationally. However this suggestion of economists has often raised quite a bit of controversy among the general public.

    Since there is considerable uneven distribution of art works between big, medium and small size museums, economists have also suggested ways to ameliorate the situation.

    Some suggestions by economists to museums are:
1) to have voluntary trade between museums so art works do not end up in places which have no need for them.
2) renting vs. acquisition- small and medium sized museums could rent displays from larger museums as the prices to acquire well known and quality art works are very high
3)division of labor or specialization- museums in a region could specialize in an area of art or art history. Donors would then pick the correct donation site.
4) joint acquisition- more than one museum could buy a piece and circulate it for display among the cooperating museums.
5) collection sharing on an international scale eg. Boston Museum making its extensive collections available to Nagoya Museum in Japan.
6) franchising of the larger museums- in this way a museum could display more of their stored pieces like at Guggenheim satellites around New York.

Q.16 What is market failure and how does it relate to the art sector?

    Free markets fail to achieve efficiency in the allocation of resources if for example there are increasing returns to scale. Increasing returns to scale implies that the average cost of output will fall as output is increased. This will enable a larger firm to undercut a smaller one and will eventually lead to establishment of a monopoly. Extensive monopolies will result in a non competitive economy since monopolies are price setter firms and not price takers.

    Markets can also fail to allocate resources efficiently if for example there are ownership externalities, technical externalities (positive or negative) and public goods externalities where free ridership is an issue.

    Many art institutions do operate as monopolists within the local market in the US. It is unlikely that there is more than one symphony orchestra, opera or a ballet company in most US cities. However they are not often considered to be sources of market failure. This is because most of them are organized as not-for-profit organizations. If they happen to charge a price higher than marginal cost, it is not because they are trying to maximize profits rather it is because they are operating under conditions of decreasing cost for which marginal cost will always be less than average cost.

    A stronger case of market failure for the arts can be based on the premise that arts like education generates positive externalities or collective benefits. Joy, stimulation and enlightenment are some of the private benefits associated with the consumption of the arts. Although external benefits are diffuse and unobservable, there is considerable evidence to believe that art generates a certain degree of refinement and sophistication amongst the general public leading to appreciation of art and culture and benefits to society in general. Since art generates collective benefits, the output determined by the market under allocates resources and society gets less of these goods than is socially optimal. One way to rectify this source of market failure is for the government to intervene and provide public subsidies for the arts sector.

Q.17 What are some of the positive externalities or spillovers associated with the art sector that would justify public support? Are there other ways of achieving the same ends?

    Some positive externalities associated with the arts sector that would justify it receiving public subsidies for generating collective benefits are as follows:

  1) Preserving art and culture would serve as a legacy for future generations- works acquired and preserved by museums will serve future generations and provide them with a certain history. A richer culture would be bequeathed to a future generation - one that would be better than the one inherited by the current generation. The question often asked in response to this line of reasoning is whether the private sector can be more efficient in subsidizing the arts than would be the public sector.
  2) Collective pride in the international recognition of artists and performers from one's own country. Although this point is readily conceded, in the eyes of many this alone does not justify public support. In the current climate of supranationalism and globalist thinking some even consider national pride a sin. National prestige could be enhanced by sending a subsidized sports "dream team" abroad rather than apply a broad subsidy to the entire arts sector. Thus while nobody denies the contribution of the arts sector to enhancing national pride and prestige, people often question subsidies to the arts sector and wonder whether this is the most cost effective to achieve a valid objective.
  3) Arts contribution to the local economy. This can occur in two ways. Art performances, exhibitions, and special events can attract out-of-town visitors who also spend money on lodgings, food, retail purchases and souvenirs. Thus it encourages local tourism. A second way that art affects the local economy is by attracting new firms to locate in the area due to the presence of art and cultural amenities. This has a salutary effect on the local economy as it enhances employment, earnings and taxes through the multiplier effect. Since the benefits are being captured locally, the question that arises is whether the state and the federal governments should be subsidizing art activity at the local level.
  4) Arts contribution to a liberal education. Critics think it is not merely art education but also art production and distribution that bestows collective benefits. Thus subsidies do not have to be confined to educational settings. Any institutional setting that is congenial for the consumers to learn about the arts is also deserving of public support.
  5) Social improvements of arts participants. Participation in the arts benefits people and makes them better human beings because people's sensibilities are exposed to the highest and the best achievements of their fellows. If an individual's behavior is improved in the process then there is satisfaction to others -i.e. external benefits. Pigou, a famous economist, referred to this as the "elevating influence" of art consumption. The question arises whether the same effect is present when there are bad plays, bad operas or bad art works. Also critics think there is snobbery involved to cloak the argument in terms of the elevating influence of art consumption when the society has so many social problems like health care, homelessness and crime where government expenditures would be better justified rather than provide subsidies to the arts sector.
  6) Encouraging artistic innovation. The system of patents and copyrights provides a degree of security for advancements in the industrial arts where considerable risk is involved. This has helped increase the quality of life for society as a whole. Copyrights for paintings, musical compositions, and choreographical pieces do exist. However copyrights do not protect innovative principles such as a new technique in painting or a new dance style. This make artistic experiments costly and subject to failure. It discourages artists from being innovative. Success is shared but the full cost of failure has to be borne by the often not-for-profit firm alone. Thus the government needs to subsidize experimentation in the arts. However as a matter of practicality grant giving bodies shun experimentation and innovation that could lead to objectionable art works on political grounds.

Q.18 How does censorship relate to public support for the arts? What lessons can the artist learn?

    Dr. Art Jones, Professor and Chair of the Art Department at Radford University, gave a lecture on public sponsorship of the arts. He indicated that controversy generally surrounds contemporary works of art. He provided specific instances when such controversial works were supported by the taxpayers' dollars. Among the
controversial works that he cited included Robert Mapplethorpe's exhibits at the Contemporary Arts Center in Cincinnati, Ohio in 1990. The exhibits contained instances of child nudity, gay lifestyles and explicit sexual acts. Some people were enraged by the event and Dennis Barrie the museum director was arrested for mounting an indecent show. Likewise Andreas Serrano's exhibit of "Piss Christ" in 1988 offended people of the Christian faith. Richard Serra's public sculpture called the Tilted Arc displayed in the open courtyard in front of the Jacob Javit's Federal Building in New York served to divide it and was loathed by the employees who signed a petition to have it removed at an expense of $ 50,000. Karen Finley's performance art works were viewed as diatribes against white men in particular and having political rather than artistic content. Alice Aycock's depiction of a satellite dish on top of a police building in Queens failed to merit public appreciation. Maya Lin's Vietnam Veteran's Memorial in the shape of a black granite wall in Washington DC did not appease the vets and Frederick Hart was commissioned to
do a new Vietnam memorial sculpture which currently faces the old one.

    Throsby and Withers believe based on public pronouncements of politicians that merit good considerations have probably been a strong and significant consideration for the government's involvement in the arts. Merit goods they explain are goods that society has decided would be desirable to provide in quantities greater than consumers would wish to purchase at market prices. Thus numerous forms of subsidies and grants exist for the arts sector. However people like Van den Haag point out that subsidies actually do more harm than good in the creation of genuine art. Since the government cannot be judgmental it therefore cannot tell good art from bad art and thus subsidies are handed out indiscriminately. This causes pseudoartists to be attracted to the field who waste the government's subsidies producing "fool's gold." Even true artists may find it difficult to gain success because public subsidies have helped create a world of "false art."

    Although government has had an "arm's length" policy in the disbursement of grants usually done through a peer evaluation process, controversial shows and events such as the ones cited by Dr. Art Jones in the class have raised the politicians' ire who have criticized the NEA and other governmental agencies of supporting art works that are pornographic, blasphemous or simply lacking in artistic merit. The US Senate even voted to bar the NEA from supporting "obscene or indecent" art work, this legislation becoming tantamount to a public censorship of the arts. Antipathy towards the art world resulting from a public perception of wasted dollars reduces public support for the arts in general and thus reduces opportunities and affects living conditions for many of the "starving artists."

    It is thus important for the artist to figure out how he/she can "live upto the image" of an eccentric artist and yet meet the public's expectation of producing genuine artwork. There is no doubt that name recognition can be achieved through display of sensational art as can also be achieved with art works of genuine merit over time. However, the artist could be failing others in his profession through displays of controversial art. As a member of a polyglot multicultural society the artist may need to be sensitive to the multiple value systems existing where he/she lives and works if he/she esteems public displays of his/her art work and public appreciation of them. But then questions will abound regarding artistic freedom and creativity. Thus the public too needs to consider whether a controversy free society is a fit and healthy society in which to live.

Q.19 What are some of the assumptions regarding the functioning of a free labor market for artists? How does the presence of labor unions affect the working of the labor market for artists?

The assumptions that underlie the demand side of a free labor market for artists would include the following:
  1. employers have complete and accurate information regarding labor availability and labor productivity.
  2. employers are rational profit maximizers who would hire labor in a manner consistent with the attainment of highest profit.
  3. no single employer has the ability to influence wages in the market.
  4. employers do not collude to fix wages and employment.
  5. artists in a market are homogenous i.e. they are substitutable for each other.

On the supply side of the market, the following assumptions are made:
  1. artists have perfect knowledge of employment opportunities and wages.
  2. artists respond to non pecuniary and pecuniary incentives - wage differentials.
  3. artists are perfectly mobile between geographic regions and jobs.
  4. artists do not belong to unions that would restrict supply.

Many of the above assumptions underlying both demand and supply of artistic talent are unrealistic. Many actors, for example belong to the Actor's Equity union and many musicians belong to the American Federation of Musicians. Historical data reveal that wages in unionized art sectors have been generally higher accompanied by a higher unemployment rate in the profession. This is because unions are organized to improve working conditions and renumerations of its members. Unions are successful in achieving their objectives through the following ways:
  1) By restricting labor supply which would have the effect of raising wages.
  2) By specifying the minimum number of workers for a performance or a play eg. the American Federation of Musicians specifies the minimum number in a symphony concert. This is a demand raising activity.
  3) By requiring apprenticeships and training programs for people licensed to work.
  4) By supporting minimum wage legislation.
  5) By negotiating on royalties, health benefits and safety conditions for its workers.

Back to review