Framing Nonprofit Arts and Culture Sectors Through Economic Theory

Abstract The 1960’s contributions from Baumol and Bowen (1965, 1966) and Peacock (1969) were followed in the 1970s by Blaug (1976), Throsby and Withers (1979), and the inaugural issue (1977) of the nascent Journal of Cultural Economics. These developments generated understandable enthusiasm about the application of economics to the nonprofit arts and culture sector. Over a half century of experience with increasingly sophisticated efforts has both confirmed and tempered that enthusiasm. To critics who call for a “heterodox” approach, the tools of positive and normative (welfare) economics are simply inadequate to the task of addressing this dramatically evolving sector. This chapter narrows the focus of this debate largely to economic contributions to understanding arts/culture participation and the identification of relevant product and geographic market competitors; substitution versus complementary relationships in the allocation of time among entertainment options; and pricing and other revenue-generating strategies. Cultural economics has long been open to the contributions of nontraditional economic methods and the research of non-economists in the spirit of, for example, behavioral and Austrian economics, suggesting that further methodological reform rather than revolution is what is warranted.