The Trouble with Arts Impact Studies

Sousa’s “Stars and Stripes Forever” is as commonplace to the Fourth of July as is hearing news about a symphony orchestra that is on the brink of bankruptcy or another museum having to cut its staff.

To rally support for government funding that is increasingly coming under the budgetary knife, a number of arts impact studies have been commissioned to demonstrate the economic importance of the arts. If it can be shown that the arts are an economic windfall, then, it is argued, maintaining or even increasing government arts funding is the economically responsible thing to do. We should not, however, fall prey to the siren song of arts subsidies as economic panacea.

Arts impact studies straightforwardly claim that non-profit arts organizations boost economic prosperity through their spending. Their stimulus is magnified through audience purchases of meals, lodging, transportation, and souvenirs. Because one person’s expenditure is another’s income, the economic benefit of arts funding is multiplied as the money makes its way through the economy. If a symphony orchestra spends money on programs, the printer spends part of that money on employee wages. The employees spend their money on housing, groceries, and other consumer goods, thereby generating income for other local firms.

Consequently, it is concluded that arts organizations and the government subsidies that support them stimulate the economy. A small random sample of studies affirms that the non-profit arts annually generate $934 million in Louisiana, $290 million in Wisconsin, $115 million in Delaware. A Texas study including for profit arts organizations as well concluded that the arts generated $64 billion in Texas. These reports further argue that increased economic activity also means increased tax revenues, so arts subsidies actually more than pay for themselves. Are we not foolish failing to maintain our support for government arts spending?

Alas, as a justification for government arts subsidies, these economic impact studies fail on several counts. First, such studies always base their conclusions on data from past economic activity. Arts-generated prosperity in the past does not guarantee that such bounty will continue in the future. Gideon Toeplitz, outgoing managing director of the financially struggling Pittsburgh Symphony Orchestra, recently was quoted that one of his major mistakes was the same that “everyone else in the world made…We thought the good times would last.”

Additionally, arts impact studies necessarily measure economic activity in dollars. Monetary measures accurately represent how people actually value economic activity only if the money spent is a reflection of voluntary exchange. Whenever government subsidies enter the mix, arts spending occurs with money that was involuntarily taxed from someone. It is, therefore, very difficult to distinguish arts projects that have been undertaken because people valued them enough to voluntarily sacrifice their own money from those that proceeded because of government subsidies.

This issue of funding government arts subsidies brings us to the most important flaw in economic arts impact studies. Such studies completely ignore the economic activity that does not occur because people have part of their incomes taxed away to pay for arts subsidies. While trumpeting the number of jobs created as a result of arts spending, they fail to note those who were thrown out of work or were never hired to begin with because of decreased savings and investment due to higher taxes. What government arts subsidies giveth, the taxes necessary to pay for those subsidies taketh away. There is no way for economic studies to account for these losses, because the lost investment never occurs.

The arguments for and against arts subsidies should be debated on their own merits. An argument that has no merit is that government arts subsidies are a boon to the economy and tax revenues alike.