These three explanations correspond with different positions on the gift-duty continuum presented in the previous chapter. It involves three different views of the government. In the .rst explanation, the govern-ment is sel.ess, it has an obligation, but it is not under any pressure to give. Government subsidies are located at intermediate positions on the gift-duty spectrum. In the second explanation, the government is forced to pay duties. Such duties are located at the duty-end of the gift-duty con-tinuum. In the third explanation, the government is a powerful donor; it gives to the arts and it receives rewards for giving. It has an interest in these returns, in other words. This explanation is located at the gift-end of the continuum. In this chapter, I will examine the .rst two explana-tions. Both fall under the heading 'the government serves art'.

In Europe, approximately half of the registered gifts to the arts comes from the government. In the us it's a quarter, while Britain is somewhere in-between.2 (Taking into account tax deductions, government spending on the arts per capita in the us is about half of that of Europe.) Compared to other sectors, the size of the government gift to the arts is extraordi-narily large in Europe as well as in the us. The large government gift needs some explanation. Because a substantial part of the total gift for the arts comes from governments, its explanation will also contribute to the answer to one of the main questions of this book: why is the gift-sphere so large in the arts?

In this respect, the present a.n.a.lysis treats many more aspects of gov-ernment involvement in the arts than direct subsidization. For instance, even though not all of the .gures are known, the a.n.a.lysis also applies to tax deductions on gifts to the arts, regulations that channel lottery money towards the arts, and money that .ows from public broadcasting and public universities to the arts.3 These are indirect forms of subsidiza-tion. It also comprises government purchases of art, regardless of whether these can be considered gifts or not. For instance, the govern-ment buys paintings for public museums as well as for government buildings.

As an artist, I see many reasons why it is in everybody's interest that the government supports the arts. I agree with Paul, Peter, Anna, and Martin that art often contributes to society for free. Without subsidies, these kinds of contributions would become smaller and ultimately just disappear. Moreover, I also believe that art is good for people, even though they might not realize it. Therefore, inexpensive subsidized art is necessary to persuade people to consume art. And the government must keep art affordable for everybody, because it would be unfair if poor people could not consume art. And lastly, the government must subsidize the arts to prevent artists from starving.

As a social scientist, I have no opinion on the artist's reasons why the government should support the arts, but I do not see how they can explain the current high level of government support. I am inclined to think that art world pressure applied to governments helps increase sub-sidies. Moreover, I become increasingly convinced that the government supports art because it needs art. This view is examined in the next chap-ter.

Art Subsidies Need Reasons In answering the question of why the government supports the arts, Paul, Peter, Anna, and Martin, all give reasons as to why the government should support the arts. They evidently think that reasons referring to the public interest explain why the government supports art. They, and many others, a.s.sume that the explanation lies in the legitimization. This is a fallacy, however. There is an extreme and arti.cial example of this. Even if , with hindsight, one agrees that the construction of the palace of Versailles served the public interest, it is not public interest but the pri-vate interest of the Sun King, Louis XIV, that explains why the palace was built. Without the latter there would have been no palace.

Although explanation is not directly attributable to legitimization, the two are often related in modern society. Legitimization is irrelevant only in the cases of two opposite, extreme situations. First, legitimization is irrelevant when all of a government's orders are handed down directly by an absolute ruler like the Sun King or when a single 'lobbying' group completely controls government policy. Legitimization is also irrelevant in another hypothetical situation: when a particular government works like a computer and is able to detect and subsequently carry out all of the populace's demands and is automatically able to convert them into poli-cies that serve the public interest. In reality however, these extreme situa-tions cannot exist. Instead we have situations that fall between the two extremes and here, argumentation and discussion become increasingly important.

In a democratic society, lobbying groups can only get subsidies, when they effectively argue that government subsidies will serve the general public. This is a prerequisite for subsidization. Nowadays, anybody who wants something from the government, whether it be the king, .sher-men, truck drivers, surgeons or artists, argues that their plans are in the public interest. However disingenuous these arguments may be, if they are temporarily convincing, they can lead to government support. There-fore, it is not only the pressure of lobbyists that explains subsidization but also their reasons.

Government is not a populist mechanism or a blind machine that automatically serves the general interest. Instead, government of.cials feel an obligation to serve the public interest and so they listen to the arguments of various groups who try to convince government of.cials that their particular plans would better serve the public interest than other plans. The arguments involved can come from political parties, social scientists, civil servants, as well as from various lobbying groups. And so, when speci.c arguments are convincing they contribute to art subsidies, even if these arguments can be proven false. Therefore argu-ments can, at least partly, explain art subsidization. Nevertheless, in the long run, the explanatory power of sound arguments is larger than that of false arguments. Therefore, in the following sections I will examine some common arguments in favor of art subsidies. If they end up being predominantly false, it is likely that the rent seeking justi.cation is more important than the public interest justi.cation for art subsidies.

'Art Subsidies are Necessary to Offset Market Failures'

Because of art's aura many art lovers feel little need to legitimize art sub-sidies. A vague legitimization is often enough. Because art is thought to be sacred and 'good for mankind', the government has an obligation to subsidize the arts. And because of the mystique of art both the bene.ts of the arts for society and of art subsidization are obvious.

Since the sixties, however, the art world has been requested to specify the bene.ts of art subsidization. The request arose out of the develop-ment of a more rational approach to government expenditure that was inst.i.tuted to control overall budget growth. Since then, a hypocritical morality exists when it comes to legitimization. On the one hand, the art world and the government cultural ministries continue to claim that the bene.ts of the arts for society are evident and beyond discussion. On the other hand, because bureaucrats in other agencies require more details, the art world and government cultural ministries eagerly welcome any argument that may help justify subsidization.

In response to these art world demands, economists have written numerous articles on the subject of the legitimization of art subsidies.4 The art world embraced their arguments in favor of art subsidies. Any argument seemed welcome. This eagerness in the art world can arouse suspicions, however. Maybe the numerous new arguments help hide a bad conscience. Maybe Jonathan is right in looking for group interests in art subsidies.

The arguments in favor of art subsidies that economists and others have presented all refer to public interest. As noted earlier, a modern gov-ernment's expenditure no longer solely serve the interests of a single indi-vidual like a monarch, or of a single group like the aristocracy; it must serve the public interest. The notion of public interest represents an important binding element in and around government inst.i.tutions and in general society. Policy doc.u.ments on the arts often contain the term 'public interest'. Civil servants and citizens both tend to evaluate govern-ment actions in terms of their contributions to the public interest. Mean-while, art consumers, art companies, and artists seeking subsidies all directly or indirectly refer to the public interest as well.

The meaning of 'public interest' is not given and the 'best' way the government can serve public interest is a matter open to political discus-sion. Frameworks, however, do exist that structure the discussion. The framework offered by welfare economics, a specialization within eco-nomics, makes the effects on welfare visible when it comes to markets without intervention and with intervention. This framework is appar-ently in.uential.5 So the art world has welcomed arguments in favor of art subsidies that derive from welfare economics. Consequently, other arguments for art subsidies are sometimes also worded in welfare-eco-nomic terms, or otherwise they can be translated into these terms. There-fore, even though many fundamental objections can be raised against the welfare-economic approach, I shall use this approach to structure the discussion in this chapter.6 The fact that subsidies are provided at all implies the a.s.sumption that the government can do a better job than the market. Therefore the market is supposed to fail and so-called market failures are present. In the ill.u.s.tration, Paul, Peter, Anna, and Martin implicitly point to market failures in the arts. Their arguments are not unlike the welfare-economic notion that the correction of market failures increases welfare and serves the general interest.

First, the merit argument demands a correction because the market is indifferent to tastes. The market ignores the collective desire to correct 'incorrect' tastes and to educate people. Therefore Paul and Martin want the government to educate people through art so that people can develop 'better' tastes.

Second, the equity argument demands a correction because the market does not produce a fair distribution of income. Paul and Anna's request that the government interferes to raise the low incomes of artists is an indirect reference to this argument. The same applies to Anna and Martin's demand that the government keep the arts accessible for people of fewer means.

Third, the collective good argument demands a correction because the market fails to produce goods and effects, like seawalls, that cannot be sold in the market. (This is market failure par excellence.) Paul, Peter, and Anna referred to art's free contributions that would barely exist without government support. They are indirectly referring to collective goods (also called public goods) and external effects, like for instance, an exciting cultural climate. 'See how much society would lose if the gov-ernment were to stop subsidizing art.'7 These three types of arguments have directly and indirectly played a role in the political debate on art subsidies. They have often been suc-cessfully employed to help increase or at least maintain art subsidy levels.

'Art has Special Merits and must be Accessible to Everyone'

In the above ill.u.s.tration, Martin and Paul argue that art must be subsi-dized because people do not necessarily know what is good for them. People must be educated to become aware of the special merits of art. Martin is a well-to-do art lover while Paul comes from a traditional and a cultural family. They believe in the importance of art not only for them-selves, but for others too. They feel responsible for other people and they worry about them. 'Many people don't buy art because they don't realize how good art can be for them. They must be convinced by low prices.'

People who care about other people the way Martin and Paul do often express their responsibility for other people in terms of gifts. (Martin gives to the opera.) But the market and private sector fall short when it comes to some people's desire to educate others. That's why the govern-ment steps in, to correct this market failure.8 (Important donors were often the .rst ones to pet.i.tion their governments with requests for art subsidies.9)Peoplewhodon'tbuyartsupposedlyunderestimatethevalue of art and so governments subsidize art to persuade these people to con-sumeart.Inthiscase,artiscalledameritgood.Meritpoliciesarethought toservethegeneralinterestbecausetheyeradicatemarketfailures.When merit policies work everybody ends up better off in the long run.10 Art is a merit good par excellence. Sacred objects and activities are always thought to have special merits. 'Art has magical powers.' 'It can change people's lives.' 'It turns them into better people.' 'It heals.' These qualities are attributed to art either implicitly or explicitly. This may sound exaggerated, but if one listens to average art lovers discuss art, it is not. These kinds of conversations con.rm the mythology of the arts that was presented in table 1, section 1.8.

In the past people were converted to Christianity under duress and in this manner became 'civilized'. Today art is considered a prerequisite for civilized people. No western government wants to spread the gospel any more; they all prefer to spread art. Art is a modern form of 'religion'.

As with religion, a necessarily elite point of view is involved. 'We know what is good for the common people better than they do themselves.' One group is enlightened; the other is in need of enlightenment. Some people decide for others. If the .rst group donates money to enlighten others through art, they do not donate randomly, nor do they support all forms of art. They pick and choose their preferred art forms. As was noted in the previous chapter, they have the power to choose and thus have the power to be paternalistic. This also applies to governments.

Subsidies derived from the merit argument are meant to 'change' people. Civilized tastes should be replacing uncivilized ones. Art with its miraculous powers can do that. The aim of educating through art is twofold. The .rst aim is enlightenment for its own sake. Because people don't know what they're missing, they must learn to enjoy art. Art brings enlightenment. In a .gurative sense, people are enriched by their expo-sure to art. The second aim of education through art is emanc.i.p.ation. Through education people increase their cultural capital and thus increase their opportunities. As they reach higher positions in society, they also literally become richer.

With both aims, the equity argument strengthens the merit argument. An unequal distribution of income is unfair, but according to Martin and many others, it is more unfair that poor people cannot afford art than not being able to afford a holiday in the sun, for instance. They see the merits of art as more signi.cant than the merits of a vacation. Because they prefer to offer poor people low priced art and not tax deductions, which they can spend at their own discretion, the desire to change behav-ior takes precedence. The a.s.sumption, that art can improve poor people's chances in society and thus contribute to a more equitable distribution of income in the long run augments the argument.

This view basically states that when art is too expensive and thus unavailable, poor people are basically being denied their rights to an education and to an equal chance at bettering their lot. Art subsidies are both a matter of knowing what's good for others and are rooted in the notion of social justice. Unaffordable art is contrary to the notions of social justice, and so art people like Anna and Martin end up feeling guilty and indignant about high art prices.

The Merit Argument has been Used Successfully The arguments about the educational qualities of art have been around for a long time; .rst they helped legitimize donations and later they justi-.ed subsidies. The speci.c reasons why people should be educated through the arts have varied however.11 For instance, at the end of the nineteenth and the beginning of the twentieth centuries, socialists and liberals promoted the betterment of the working cla.s.s. They were con-vinced that avant-garde art and 'art with a message' could change the existing taste of the working cla.s.s who preferred low forms of entertain-ment.12 In the period after the Second World War most political parties in western countries prescribed subsidized art to distract people's atten-tion away from the new, successful and supposedly poisonous products of ma.s.s culture. Publicly .nanced broadcasting dedicated to culture was another outcome of this desire to civilize the common man.

After 1968, 'socially relevant' art was supposed to educate people.13 Art needed to be 'diffused' among common people. These notions gradu-ally became less important, until recently when socially relevant art became relevant again. The same applies to the notion of art education that recently began to reappear in the political debate in many countries including Britain, France, Germany, and the Netherlands as well as the us, where, after his inauguration, President Bush jr. proposed a 7% increase in nea funding, earmarked for education.

The protagonists of art subsidies who think art should educate people have always been concerned about how accessible art is for the lower cla.s.ses. Not unlike health care and public education, they have demanded that art be accessible for the lower cla.s.ses. Centuries of collec-tive action actually did lead to the eventual establishment of 'social rights' to health care, public education and social security.14 In the 1960s and early 1970s, in a number of European countries, a movement con-sisting of artists, art administrators, and civil servants demanded a simi-lar social right to art. These attempts failed however.15 In the discussion of art policies in government reports and in parlia-mentary proceedings the notion of an art policy that educates or 'civi-lizes' people has been a recurring theme for at least the past 150 years.16 Evidently, the notion of art as an educational tool for people who show little interest in art is a common one. Nevertheless, the fact that the right to art never was actually inst.i.tuted as a social right demonstrates that art is less essential for survival and emanc.i.p.ation than, for instance, health care and public education. However miraculous art may be, it is not an effective instrument for educating people.

Inthe caseofthearts,themeritargumentisfalse.Itisfalseintermsof the argument's objective, in terms of alternatives, and in terms of the effectivenessoftheproposedmeans.First,theobjectiveisdubious.There islittleproofthatsubsidizedartenlightensoremanc.i.p.atesanyonewhois not interested in art. The a.s.sumed bene.ts of art subsidies may very well beinsigni.cant,nonexistent,ornegative.Secondly,therearebetteralter-natives. Spending on public education contributes more to education than art subsidies. Thirdly, subsidies are ineffective in two ways. Lower-ing prices has a negligible effect in persuading people with limited cul-tural capital to start to consume .ne art.17 The majority of art subsidies go to people who are already well educated. (So it's not so amazing that Anna and Martin can only come up with a few individual cases of a-cul-turalpeoplewho,becauseofthearti.ciallylowprices,occasionallygoto theopera.)Iftheargumentweretobetrulya.n.a.lyzedonewouldhaveto admitthatthealreadyeducatedbecomeevenbettereducatedandrelative inequality actually increases; the net effect then is decidedly negative.

The .ne arts advance distinction. They enable people from the higher cla.s.ses to distinguish themselves from people lower on the ladder. There-fore, it is peculiar that the .rst should want to undermine distinction by desiring to use art to educate people and to promote equality. It could be used to veil other purposes. Even though education may be a genuine goal, its eventual failure is often welcomed just as enthusiastically because it proves that art is not for everybody and thus it reinforces dis-tinction. This kind of double standard may well have contributed to vari-ous government art diffusion programs in several European countries in the 1960s and 1970s.18 Art subsidies based on the merit argument are, on average, ineffective or counterproductive; they do not serve the public interest (thesis 83). Therefore it is likely that other interests can hide behind the merit argu-ment. Nevertheless, the merit argument has enabled subsidization (thesis 84). The argument has been used successfully to solicit art subsi-dies. Because of high art's mystique people look up to it and believe it has miraculous powers and thus agree that it must be subsidized.

'Government Must Help Poor Artists'

However miraculous art may be, it cannot .ll an empty stomach. If the sole aim of art subsidies is to correct the income distribution among con-sumers, then they are in fact counterproductive. In general, poorer con-sumers are far better off when they receive a 10-Euro tax deduction to spend as they wish, than when through subsidization they and every-body else receive a 10-Euro discount on theatre tickets. After all, a cheaper theatre ticket doesn't really do someone who needs food, cloth-ing, or medicine much good. Moreover, because the average theatergoer earns a relatively high income, the subsidy skews the distribution of incomes even more thus exacerbating economic inequity. Therefore, when Anna and Martin say that it is unfair that people with low incomes cannot afford to purchase art or buy performance tickets, they cannot say this just because of inequality, but because they believe art has special merits. They use the argument treated in the two previous sections rather than the equity argument. Existing inequality can only strengthen the merit argument.

Paul, Anna, and many others not only worry about poor people in general, but also about poor artists. (It is possible that they consider low incomes among artists less fair than the low incomes among the general workforce. Artists who make sacred art deserve even less to be poor than other workers. It's an att.i.tude that brings up the merit aspect again.) Governments are generally concerned about low incomes and thus some-times aim a speci.c aid package at a particular group of workers or other social groups. This strategy can be more effective than general measures. For instance, .shermen who were adversely affected by an unexpectedly reduced quota have been aided effectively by temporary subsidies in the past.

After the Second World War, many European governments subsidized art and artists to help relieve their wretched .nancial situations. They focused their a.s.sistance on artists as a group. In the post-war period, the costs of art production, especially in the performing arts, rose quickly and people were worried about artists' incomes. Therefore, as I argued in chapters 5 and 6, the argument that the low incomes of artists must be corrected has played an important role in the growth of art subsidization after the Second World War.

The recent introduction of new strategies to raise artists' incomes shows that the equity argument remains important. Several European countries developed plans to improve artists' .nancial situations.19 Sometimes these plans come directly from the ministry of culture. In other cases, governments prefer to keep their culture and subsidy plans separate and so the ministry of social welfare administers the subsi-dies.20 (An example of the latter is the wik plan in the Netherlands, dis-cussed in chapter 6.) Whereas the equity argument can be justi.ed in the case of other workers, it cannot be in the case of artists. Aid is counterproductive because it actually increases the number of poor artists, as was shown in chapter 6. (In theory, distinct types of aid might work, if it was tempo-rary and the government simultaneously limited the access to the arts through effective information campaigns and, if necessary, through an of.cial limit on the number of people who can become artists. At pres-ent, this is not an option.) There are better alternatives in the struggle to alleviate poverty in the arts. For instance, a general income policy involv-ing social security and general tax measures to a.s.sist the poor is more effective. Artists bene.t more from these measures than other profes-sionals do because they generally earn less and receive social bene.ts more often than other professionals do.

Art subsidies based on the equity argument that are intended to raise artists' incomes, are ineffective or counterproductive (thesis 85). Because these subsidies don't really raise incomes other interests proba-bly hide behind the equity argument. Nevertheless, the equity argument has enabled subsidization (thesis 86). The argument has been used suc-cessfully to solicit art subsidies. Because of the mystique of art, people worry more about the low incomes of artists than of other types of work-ers. Therefore, the public is usually easily won over to the idea that subsi-dies should be used to raise the income of artists.

'Art is Public and the Government Must Intervene to Prevent Underproduction'

In the ill.u.s.tration, Paul, Peter, and Anna point out that the arts provide free contributions to society. Because the arts don't receive adequate reimburs.e.m.e.nt for these contributions in the market, they count on sub-sidization as a guarantee against the under-production of art. To prove their case they invite us to imagine a situation without government subsi-dies. In this scenario, they see the arts as a much smaller sector and they see all the free contributions that art used to provide as largely drying up. Therefore, in their view most people would be worse off.

This is a collective good argument. Paul, Peter, and Anna hit at the core of the welfare approach to public expenditure: markets fail because the free contributions or bene.ts of the arts cannot be sold in the market. Because contributions are free, art products affect not only the well-being of people who pay for them but also of those who do not pay. Thus because of the free contributions art will be underproduced. This is market failure par excellence. (The implicit logic of the market that 'com-pet.i.tion insures survival of the .ttest', breaks down.) An obvious exam-ple of market failure is that people enjoy public sculpture or the beautiful facades of the mansions along the ca.n.a.ls in Amsterdam for free. There is no market for these goods.

In many ways, art is public and free. The arts produce so-called collec-tive goods and external effects.21 If the view of beautiful sculptures or facades could be somehow marketed, people would be willing to pay for them. Since people cannot buy these goods, they could eventually become under-produced. In that case the government steps in and subsi-dizes art on behalf of its citizens.22 This is the collective good argument.

This argument, furnished by economists trained in welfare economics, was employed intensively in the 1970s and 1980s to convince politicians and civil servants about the necessity of subsidies for the arts.23 It is a 'textbook' argument that indirectly in.uenced policy-making. The col-lective good argument con.rmed existing views on art deriving from the aura or mystique of the arts. It reinforced the notion of art as having a general bene.cial in.uence in society. It also reinforced the idea that the arts are vulnerable. Without government guardianship the arts would wither. These are the kinds of ideas that have always played a role in public discussions on art subsidization.

Nevertheless, it is questionable whether the collective good argument is sound in the case of the arts. In this respect, two questions must be asked: 1 How important are collective goods and external effects in the arts? 2 Are they underproduced when there is no or less subsidization?

In the case of cultural collective goods and external effects that have a physical presence, like facades, public sculptures, church carillons, and street artists, there is little reason to doubt their existence. The majority of possible relevant collective goods and external effects are, however, not immediately perceivable and hard to pin down. In that case, it's even more dif.cult to determine their signi.cance. These intangible collective goods and external effects are probably ubiquitous in the arts.24 Never-theless, economists tend to be suspicious of arguments based on intangi-ble externalities. I don't agree. After all, the presence and value of these goods can never be determined 'objectively' other than through political debate.25 Therefore, intangible collective goods in the arts can certainly be relevant, as the next two examples will reveal.

First, both the inhabitants and visitors of a particular town observe and enjoy its artistic or cultural climate. This climate is not for sale; it's a collective good. In this case the collective good is more than the sum of numerous external effects produced by various sources. The number of sources and their effects is so large, that it's impossible to accurately describe the collective good in any detail. Nevertheless, the climate it cre-ates is important for the well-being of many people. It's free, enjoyable, and bene.cial for such varied sectors as artistic innovation, design, shop-ping and tourism, and for the overall economic growth.

Second, the artists' innovations are often free.26 Unlike most indus-trial innovations they cannot be patented. Therefore, once they are made public, anybody can use them for free, as long as the artworks are not copied exactly.27 Both artists and the general society pro.ts from these cost-free innovations in the arts.28 These kinds of goods clearly matter, they have value and are important question 1; but will they necessarily be underproduced question 2; when they receive much less or even no subsidization? Even if collective goods and external effects are important in the arts, is it possible that without government intervention they might still continue to exist?29 The fact that collective cultural goods and external effects are ubiqui-tous suggests that they are not being underproduced. Apparently, non-market rewards exist that contribute to their production. Among others, gifts and internal subsidies represent rewards that keep the production of many collective goods and external effects in the arts going. The works of street artists are a good example. Although these works are unmistak-ably collective goods, they are .nanced exclusively by private gifts from small donors. Moreover, storekeepers' a.s.sociations, corporations, and large donors also subsidize activities that contribute to the cultural cli-mate in a town. Above all, artists incessantly subsidize their own activi-ties and thus contribute to the artistic innovation and cultural climate of a particular urban area.

When art consumers and art producers 'produce' external effects they often also receive indirect reimburs.e.m.e.nts. Because the facades of their houses along the ca.n.a.ls are so beautiful, many Amsterdam homeowners receive indirect reimburs.e.m.e.nt in the form of prestige and are therefore happy to keep up their facades. In this context, all the returns of the gift discussed in the previous chapter contribute to the production of collec-tive goods and external effects.30 Abolishing subsidies will necessarily alter and, to some extent, reduce the free contributions offered by the arts. But because subsidies are only one among many factors, that promote free contributions, the cutback doesn't have to be all that substantial. The savings may well outweigh the loss in bene.ts. For the most part there is little reason to a.s.sume col-lective goods and external effects will just disappear, as Anna and Martin suggest. Moreover, as has been noted earlier, donations and sub-sidies often complement one another. When subsidies go down, dona-tions take up the slack or vice versa.

The dominant situation in the arts is one of overproduction and not underproduction.31 Above all the willingness of artists to work for low incomes contributes to a considerable excess supply. In my view, the causes of overproduction are much stronger than the causes of underpro-duction. Therefore, although market failure due to the presence of col-lective goods and external effects undoubtedly exists in the arts, it is unlikely to cause substantial levels of underproduction.

The collective good argument for art subsidies is usually false (thesis 87). Because subsidies are ineffective, other interests must be involved. Nevertheless, the collective good argument has sanctioned subsidization (thesis 88). The argument has been used successfully to solicit art subsi-dies. Because of art's mystique, people believe that art has a general bene-.cial effect on society, which would be forfeited if subsidization was sig-ni.cantly decreased. Therefore, society consents to subsidies that are intended to maintain the free bene.ts that the arts provide.

There is however, one type of cultural collective good that is occasion-ally underproduced, especially in poorer countries. A nation's cultural heritage is what we hand down from generation to generation.32 The willingness of future generations to preserve this heritage remains unknown, while the present generations in the poorer countries often have different priorities. Because cultural destruction is irreversible, the price of 'underproduction' can be extremely high. Therefore, it can be argued that government intervention is often necessary. In wealthier countries, regulations are often suf.cient to insure preservation. While most owners and consumers are increasingly willing to .nancially sup-port their heritage, regulations rather than subsidies often effectively reverse the 'irresponsibility' of some owners. This has already been proved in the case of the mansion owners along Amsterdam's major ca.n.a.ls.33 In the next two sections, I will examine in greater detail two particu-larly appealing aspects of the collective good argument.

'Art Contributes to Economic Welfare and so Must be Supported'

The argument most commonly employed in favor of art subsidization is that the arts are good for the economy. Even though the protagonists of art subsidies probably try to free ride on the general primacy of economic goals, the argument could be valid. Usually however it's not.

If the arts were to suddenly disappear in a particular city or a country, the economic effects would certainly be substantial. Basically, this is what most so-called impact studies measure.34 The effects on employ-ment in the arts and in areas related to the arts would be large, but the same could be said about any economic sector that suddenly disappears. Even when a heavily subsidized branch of industry that shows consistent losses is about to be shut down like coal mining was in several European countries impressive .gures demonstrating their contribution to the economy can be produced. The arts also consistently show losses and are heavily subsidized. Proving that their economic impact therefore does not necessarily justify subsidization.

What needs to be demonstrated is the presence of collective goods and external effects, i.e., a free contribution to the economy derived from a market failure that could not survive without subsidization. It is .rst of all questionable whether there really are no markets for the contributions in question. For instance, people argue that hotels and restaurants in Amsterdam bene.t without cost from the presence of cultural inst.i.tu-tions like the Rijksmuseum and the Concertgebouw. But the opposite cultural inst.i.tutions pro.ting from the presence of attractive hotels and restaurants is also true. Therefore this is basically a market relation in which no external effects are involved.35 (In the case of unique events, like a festival that is produced every four years, external effects on the local economy can be important. In this case, however, the economic bene.ts are relatively clear and some of those who pro.t are often pre-pared to sponsor the event.) Sometimes the existence of a.s.sumed economic bene.ts is dif.cult to prove. Some decades ago, the expression 'art as a lubricant for the econ-omy' was employed in the Netherlands. All sorts of miraculous national effects were attributed to the arts, from superior industrial design to happy factory workers. Again, these effects, if they do exist, don't need to be external and when they are external they may also develop without subsidies. The lubricant argument in relationships that involve other countries is more convincing. Art can accompany economic diplomacy, which means that foreigners impressed by a nation's culture may be more interested in its non-artistic products as well. In the next chapter, I intend to show, however, that such cultural diplomacy serves interests that go beyond the mere economic.

The argument that government must subsidize the arts because the arts contribute to the economy is usually false (thesis 89). Nevertheless, the argument that art aids the economy has enabled subsidization (thesis 90). The argument has been successfully employed to solicit art subsi-dies.

'Society Needs a Reserve Army of Artists and must therefore Support Art'

In order to support extraordinarily gifted performers and creative geniuses, society needs a huge pool of artist recruits and a correspond-ingly large number who will fail. Maintaining a large pond with many .sh is necessary to catch a few big ones. Or, to invoke another metaphor, the higher you want the point of the artist pyramid to be, the broader the base should be. Without a certain high percentage of losers there will be no artistic geniuses.

The presence of large numbers of artists can be considered a common interest or common good. Because there appears to be no market for a large reservoir of unsuccessful artists, the presence of a reservoir is also a collective good.36 In the view of many people, this collective good is likely to be underproduced if the government does not step in and subsi-dize the arts. This view has in.uenced many public debates on art subsi-dization.

This argument, however, is false. Again the presence of a collective good, in this case a large reserve of artists, does not automatically imply that without subsidies this collective good will be underproduced, i.e., that there will be too few artists. Because of forces external to the market, it is possible that the collective good is suf.ciently produced without government intervention. If this book's claim that the arts are extremely attractive is correct, then overproduction is a more likely con-sequence than underproduction. The pond will be big regardless of sub-sidization.

Frank and Cook have demonstrated that from a welfare point of view, winner-takes-all markets often attract too many candidates rather than too few.37 This certainly applies to the arts with its extreme winner-takes-all markets. Therefore, subsidies only have the effect of increasing social waste. And so what is really in the interest of society is not a bigger pond that develops naturally, but a smaller one.

(One could argue that it is unfair that at present poor and unemployed artists, who endlessly subsidize themselves, bear most of the pond's costs, but that has nothing to do with the underproduction of a collective good, but with equity. As already noted, there is little the government can do to raise artists' incomes.) A secondary argument can be added to Frank and Cook's argument. It is possible that the value of a large pond as a major factor in the discovery of extraordinarily talented artists tends to be overestimated. In this respect, the notion of whether artists are born with their talent or whether it is a matter of training becomes more important. If artistic tal-ents are innate, a larger pond will produce a larger number of talented artists. For instance, because men continue to grow taller, .nding good male tenors is becoming increasingly dif.cult. In this case, a big pond will probably produce more good tenors than a small pond. Neverthe-less, there is a limit to the amount society is willing to pay for such tal-ents.

Moreover, it is likely that the majority of creative talents are primarily an issue of training, and therefore a bigger pond will usually not produce a larger number of talented artists. In this context, it is revealing that the sciences apparently rarely consider creative talent innate. The sciences are more dependent on training than on a large reserve. Upbringing and training are probably as essential in the arts as it is in the sciences.

The argument that government should subsidize the arts because soci-ety needs a large reserve of artists is false (thesis 91). Nevertheless, the argument of the big pond has helped sanction subsidization (thesis 92). The mystique of the arts has made this argument appealing.

Government Distorts Compet.i.tion in the Arts Government intervention sometimes reduces market failure, but it also causes market failure. For instance, when governments subsidize the arts in order to maintain a large reserve of artists, this leads to a waste of resources. When it comes to subsidies, people often believe that it doesn't hurt to try. The fact that art subsidies can actually lead to less welfare is usually ignored. Ultimately, any government intervention in the market has bene.ts as well as costs. And the creation of market failure through subsidization and the consequent distortion of compet.i.tion is a cost that cannot be ignored.

Although the discussion in this section does not augment the subsi-dization explanation, it is nevertheless important because it puts the legitimization of art subsidies into another perspective. In chapter 7, I suggested that the intensive subsidization of certain sectors of the arts in Europe actually hinders innovation in adjacent unsubsidized art forms. The government thus causes unfair compet.i.tion through subsidization. Subsidies produce arti.cially low prices for subsidized art. If subsidies were abolished, prices would rise and therefore art that had previously been subsidized would become less attractive and art that had never been subsidized before would become more attractive.

By only lowering the relative prices of certain artists and art forms and not of others, subsidization directly causes unfair compet.i.tion. Subsi-dization is, however, also an indirect source of unfair compet.i.tion because it only provides symbolic advantages to the subsidized parties. Subsidized art often bears the legitimate art label, art that is sanctioned by the government, and this gives it another advantage in the market.

At .rst glance, unfair compet.i.tion in the arts due to subsidization seems to be a theoretical notion. After all, unsubsidized European pop music .ourishes, while according to this theory it would suffer from the subsidization of cla.s.sical music. It seems that the arti.cially low-prices of cla.s.sical music do not make it more compet.i.tive against pop music. (It can also be argued that these art forms are not really in direct competi-tion. This is not really true however, at least not in the long run. Competi-tion can be observed through shifts in consumer behavior. As has already been noted, cla.s.sical music has lost much of its market share over time to pop music. In the years immediately after the Second World War, thirty-year-olds mostly went to cla.s.sical music concerts; this same age group now primarily frequents pop concerts.38 Maybe this shift would have been even larger had prices of live cla.s.sical music not been kept arti.-cially low, but that is not certain.) The effects of government intervention do not so much come from low prices as from indirect advantages for subsidized sectors and indirect dis-advantages for unsubsidized sectors. The fact that in the Netherlands, for instance, approximately 70% of all live and recorded pop music comes from abroad would not be a cause for concern if these large imports were offset by equally large pop exports. But even taking into account periodic export hits like presently 'Netherdance', exports are negligible and therefore imports remain much larger than exports.39 Thus, a large trade de.cit exists in pop music and other forms of unsubsi-dized contemporary art. Pop music demand has boomed, but it has been primarily been answered by imports.

Several explanations can be offered for the fact that local production in the unsubsidized sectors of mainland Western Europe has lagged behind. One reason is that English has become the new Lingua Franca and so Anglo-Saxon countries clearly have compet.i.tive advantages. The advantage is particularly large in the production of technically repro-duced art that involves language. Here there is an extra advantage because due to the large English-speaking community, scales of produc-tion can be larger which reduces costs. But it is questionable if language is that important. Some of the most inventive pop or new music involves less and less vocals. Anyway, it is my conviction that in Europe the most important disadvantage has nothing to do with cost differentials, and more to do with a lack of incentives at home.

Due to the subsidization of the .ne arts in Europe, the unsubsidized arts have a relatively lower status. The status difference between high and low art is arti.cially large. When subsidization of the .ne arts is high, there is little respect for other forms of art. The difference is smaller in countries with more moderate rates of subsidization. It is telling that as early as 1965, the British queen received the Beatles in Buckingham Palace, handed them a prestigious reward and praised them for their con-tribution to music. It is unthinkable that the Dutch could have produced such inventive pop musicians at that time, but if they had, the Dutch queen would never have received the Dutch equivalents of the Beatles. (Even now, almost four decades later, there is little chance that the Dutch queen would be prepared to hand out a reward in pop music.) In main-land Western European countries the establishment tolerates, but does not respect new unsubsidized art forms. Subsidies both con.rm and rein-force this att.i.tude.

This is not to say that unsubsidized art does not have its own centers of reward, but these centers primarily serve those involved. They lack gen-eral legitimacy and tend to remain provincial or they are primarily media events, like the Dutch tmf rewards. For instance, pop music in the Netherlands remains defensive and insular. Subsidies create a wall between subsidized and unsubsidized areas. Whereas, the much-respected prizes awarded in the subsidized areas are for instance gener-ally recognized and respected, the attention accorded awards and compe-t.i.tions in unsubsidized art forms is limited to the specialty group of producers and consumers or to the audience of the commercial media.40 Because the unsubsidized arts have relatively little symbolic income to gain, there is also little incentive to innovate.

Pop music is basically an Anglo-Saxon invention. Currently pop music is consumed and produced all over the world. Nevertheless, the bulk of the innovations continues to come from the us and Britain. Ever since the Second World War, music has continued to be renewed over and over again, but mainland Western Europe has produced a very small share of the innovations. If a similar difference were to exist in the visual arts, it would be less evident. Nevertheless, I think it's no accident that since France and other mainland Western European governments started to seriously subsidize contemporary visual art in the seventies and eight-ies, London became the center of artistic innovation in the visual arts. Recently Berlin has become a second center of innovation. Due to the recession rents are low, but subsidies for artists are also much scarcer than in, for instance, France.

I do not want to suggest that there is no artistic innovation in unsubsi-dized areas of the arts in Europe. For instance, Germany is producing innovative Techno. There is also successful (but hardly innovative) Dutch Netherdance, while France produces innovative digital video. Generally these innovative outbursts are short-lived. They do not induce a consistent .ow of innovation. The cultural establishment largely ignores these outbursts. Due to government-induced unfair compet.i.tion, important artistic innovations are left to other countries.

In my opinion, the possibility of government-induced unfair competi-tion in the arts hindering innovation is a signi.cant subject that deserves further exploration and more doc.u.mentation. (Apparently not all evi-dence points in the same direction. For instance, according to New York artists I know, for the most part New York is not a haven for invention. On the contrary, the survival of the .ttest means conforming to whatever is hot and trendy.) Nevertheless my provisional thesis is that in countries where some art forms are highly subsidized and thus gain more status, there is less innovation in unsubsidized art forms. In countries that spend the most money on art subsidies, unsubsidized art tends to be middle of the road (thesis 93).

When the effects of a lack of innovation become evident, there are two possible solutions: either the status-difference between the subsidized areas and unsubsidized art forms can be reduced by reducing all subsidies, or subsidies are also funneled to formerly unsubsidized art forms. Mainland Western Europe seems to have opted for the second approach. Increasingly they have begun subsidizing, directly or indirectly, formerly unsubsidized art forms, such as pop music (including hip-hop), .lm, comics (bande-dessinee), break dancing, etc.

Finally, it should be acknowledged that, depending on the circ.u.m-stances, subsidization can also harm the subsidized art forms themselves by making them complacent, resistant to innovation and thus less com-pet.i.tive with other countries. For instance, French state support is increasingly being blamed for the deplorable state of contemporary visual art in France as compared to England, the us, and Germany.41 Therefore, these art forms would have been better off with less .nancial a.s.sistance, meaning that subsidization causes market failures.

10 Self-Interest Hides Behind Arguments for Art Subsidies So far, it seems that art subsidies by and large don't serve the general interest. Therefore, even though false arguments can be in.uential, it is unlikely that these arguments can fully explain art subsidization in the long run. This brings me to Jonathan's claim that art subsidies are in part the result of the pressure in.uential parties put on governments. If art subsidies do not serve the general interest, do they instead serve the inter-ests of the protagonists who demand these subsidies? And can the pres-sure of these protagonists explain government involvement in the arts, as Jonathan has concluded?

Iftheartworldputsorganizedpressureonagovernment,itisamatter of so-called rent seeking. Groups try to acquire bene.ts or rents. When the government 'gives' rents to the arts under pressure, the government's 'gift'ispositionedattheduty-endofthegift-dutycontinuum.Inthemost extremecase,thegovernmentis'blackmailed'sothatthegovernment ends up subsidizing the arts as a form of bribe to prevent the repercus-sions threatened by in.uential social groups. The art world is thus using andexploitingthegovernment.Inordertopreventadverserepercus-sions, the government decides to serve art instead of the general interest.

Art lovers and artists who use the government for their own interests are obviously not sel.ess. Therefore, by a.s.suming that artists and art lovers are not necessarily sel.essly dedicated to art, the present approach is contrary to the mystique of sel.ess and sacred art. It distrusts the self-less motives of the art world. There are at least seven reasons why this suspicion might be justi.ed.

(1) Art subsidies do not raise artists' incomes. Subsidies, in fact, are more likely to increase poverty. (2) Art subsidies designed to educate people, largely end up in the hands of people who already have consider-able cultural capital. And (3) if the recipients have little cultural capital and thus little chance, art consumption in itself adds little to their cul-tural capital. General public education is more effective.42 In practice (4) lower prices seldom persuade people to consume (high) art.43 (Anna and Martin can only point to individual cases.) (5) Lower prices can even be counterproductive when in the eyes of outsiders they signal lower quality. And if, for example, a few of those for whom opera ticket subsidies are intended, actually go to the opera because prices are arti.cially low, then the cost of their 'conversion' is high. This is because the subsidy ends up in the hands of many more people than those for whom it is intended. Costs are also high because they are contrary to general income policies. In fact, the average taxpayer pays for the con-sumption of upper-middle cla.s.s art consumers and therefore (6) income is redistributed in an unwelcome direction.44 Suspicion is further raised because the arts employ mainly (7) general art subsidies. These subsidies do not discriminate between rich and poor consumers and therefore, income is redistributed in the wrong direction. Instead, it would have been possible to employ forms of price differentia-tion or, even more effectively, handed out vouchers. Vouchers can be designed to discriminate, between rich and poor, among other criteria. Thus the undesired effect on income distribution is limited and a larger part of the subsidy's aim is reached.45 The fact that art subsidies often have little effect or are counterpro-ductive but are nevertheless maintained, plus the fact that price differen-tiation measures and vouchers are rarely used, suggests that other inter-ests must be at stake. Paul, Peter, Anna, and Martin's motives in promoting art subsidies may very well be sel.sh.

Although suspicion seems to be justi.ed, it does not automatically imply that art lovers deliberately use sel.ess reasons to cover up self-interest. If art lovers behave in a self-interested way, a double standard can be involved, as has been noted above. So, it's questionable whether artists and art lovers deliberately and strategically try to put pressure on the government in order to receive the bene.ts of art subsidies.

11 The Art world Bene.ts from Subsidies Although the majority of economists, who have discussed public expen-diture on the arts, have only applied the earlier-discussed welfare approach, some have attempted to also .nd explanations for the subsi-dization of the arts that go beyond market failure. These economists always refer to the possibility of art world rent seeking.46 From the 1960s onwards, social scientists have become more and more impressed by the in.uence of lobbyists or so-called 'pressure groups'. At .rst, the idea was that pressure groups could make the democracy even more democratic. They informed the government on the public's needs and desires. Meanwhile opposing in.uences would bal-ance each other out.47 It became clear, however, that there was a consid-erable difference in various groups' abilities to in.uence governments. This implies that, when certain groups are relatively in.uential, it pays to put pressure on the government. In.uential groups tend to get more out of government than other groups do. They pro.t at the expense of others. They manage to h.o.a.rd a larger share of government spending in the form of subsidies.48 In many countries, it is a.s.sumed that farmers and homeowners are engaged in rent seeking. These groups are organized as lobbies. They succeed in receiving relatively high levels of subsidization, either directly or through tax deductions.

The .rst characteristic of rent seeking is that members of pressure groups bene.t considerably more from subsidies than the general public does. Therefore, it pays for individual members to put their efforts into rent seeking. A second characteristic is that the memberships of these groups are relatively small in comparison to the total number of taxpay-ers. Because the price each taxpayer pays is relatively inconsequential, it does not pay to protest against certain proposed subsidies. A third char-acteristic is that these lobbying groups are in.uential enough to actually harm a particular government.49 Art consumers are likely candidates to get involved in rent seeking. First, they comprise a minority among taxpayers. Second, they stand to pro.t considerably. They pro.t both .nancially and symbolically. The .nancial pro.ts are clear. Although the arts, especially the performing arts, become more and more costly to produce, the prices do not rise cor-respondingly thanks to subsidization. Without subsidies the protago-nists would have been worse off.

If, for instance, the Dutch government were to stop subsidizing the arts and costs remained constant, the average ticket price to a symphony orchestra performance would increase from 14 Euros to 80 Euros. The ticket price to a formerly subsidized theatre performance would increase from 8 Euros to 87 Euros.50 While the average ticket price to the opera would increase from 34 Euros to 226 Euros.51 If consumers maintained the same attendance patterns with respect to these formerly structurally subsidized performing arts, this would increase the consumer's expenses by an average of ten-fold. And if consumers were to attend less often, their average spending would usually still show a considerable increase. Irrespective of how consumers decide to respond, they would consis-tently lose in terms of money and or attendance. This means that they gain considerably from the current levels of subsidization.52 Not only consumers but also arts-related personnel such as art admin-istrators and intermediaries, pro.t from subsidies and have a clear inter-est in subsidies. Subsidies help provide for their employment. Moreover, comparatively speaking, their directly or indirectly subsidized incomes are substantially higher than that of artists. Therefore, subsidization has the effect of raising income levels and increasing the number of well-paid positions. It follows that art inst.i.tutions are obvious candidates for rent seeking.

The position of artists is more complicated. On the one hand, artists with regular jobs in art inst.i.tutions are comparable to people in arts-related occupations and they are also likely to pro.t from increased sub-sidization. In the long run, on the other hand, average artists are unlikely to pro.t from increased subsidization given the a.n.a.lysis presented in chapter 6. Nevertheless, because most artists perceive themselves as having a large interest in subsidies, they may very well be the .rst to man the barricades to demand more subsidization or to .ght against potential cutbacks.

Besides .nancial gains there are the symbolic gains, which could very well be far more important. The very fact that the government subsidizes the art consumption of the elite sets this form of consumption apart. The subsidy serves as a sign of approval of elite tastes and so existing elite dis-tinction is either increased or reinforced. The same applies to the phe-nomenon of asymmetric judgment; the lower cla.s.ses look up to the subsi-dized art of the upper cla.s.ses, meanwhile they look down on the unsubsidized art forms of the lower cla.s.ses.

Public declarations of a desire to educate people adds to one's prestige. The choice of art of the elite is established as an example to others. When it eventually turns out that despite lower prices the diffusion of their high art has had little effect, it is turned around to prove that not everybody is suited for this level of art. This way, as we have already noted, the emi-nence of the art lover only increases even further.

12 The Government is under Pressure to Subsidize the Arts On the basis of the foregoing a.n.a.lysis, one would expect to .nd consider-able amounts of organized rent seeking among the arts. Nevertheless, few cases of this kind of rent seeking actually occur. The economist, William Grampp, described two cases of organized rent seeking in the arts. In both cases, rent seeking came from large art inst.i.tutions.53 Such inst.i.tutions are better equipped to put pressure on a government. In the Netherlands, there have been some rare incidents of public rallies in sup-port of art subsidies. In these cases, artists' unions but even more so the directors of large art inst.i.tutions played important roles. Other countries also report some lobbying efforts but no rallies.

So-called art lobbies exist in several countries.54 For instance, Dutch ministers of culture have been reproached for being unable to change the existing art policies, because they have often had too many personal art world ties.55 And it would have been strange, if some of the friends and acquaintances of a minister in the art world did not periodically meet in order to discuss strategies that could prevent the minister from making unwanted decisions.

In the arts these 'lobbies' are, however, extremely loosely organized. They can hardly be accused of deliberately seeking rents. Generally, they don't even have a chairperson or an of.ce, unlike farmers or homeown-ers organizations. This means that the large majority of art world partici-pants are too poorly organized to put any effective pressure on a govern-ment. On second thought, this insigni.cance of organized rent seeking in the arts is hardly amazing. Too much organization and discipline are con-trary to the autonomous artist spirit. Organization and discipline are directly contrary to the internalized rules in the habitus of most artists and many art consumers as well. The option of organizing in order to put pressure on a government simply does not arise in the art world.

Most of the people concerned naturally resist organization. Moreover, if a strong organized lobby were to exist, the lobby's efforts could very well end up being counterproductive. If art lobbyists began behaving like farmer or motorist lobbies do, they would betray the disinterestedness of the arts, which would lead to a loss of credibility and further damage their cause. (When occasionally some emotional artists manage to draw media attention to the 'desperate situation' in the arts via some anarchis-tic, confused and above all boisterous action, almost everybody in the art world feels embarra.s.sed.) Despite the obvious advantages, actual organ-ized rent seeking is largely absent in the arts (thesis 94).

This view of art world rent seeking begins to change, however, when one looks down from the tenth .oor and interprets rent seeking in a broader sense. Here we see that the government actually appears to be under considerable pressure from the art world. This pressure stems from the individual and non-concerted actions of numerous individuals rather than any one deliberate organized action. Because this kind of behavior is rooted in internalized shared values, actions do not need to be concerted; they are naturally in tune with one another.

The in.uence the art world has on the government largely rests on internalized values. Civil servants in charge of art policy often come from the same social group as art consumers and producers and have thus internalized many of the same values. Therefore, if government of.-cials were caught even toying with the idea of substantially reducing art subsidies, they will most likely end up punishing themselves by not being concerned enough about 'vulnerable and sacred art'. This means that most government of.cials never even contemplate these kinds of cuts. And if they do, a hint of outside pressure is enough to remind of.cials of th