The Economics of Art Funding
April 17, 2006
In the absence of such a marginal externality, the economic
approach implies that artistic production is best left to the market.
Consumers will then buy just enough art until the social value from
producing more art, as defined in terms of willingness to pay, would
equal the social cost of producing that art. No further improvement in
human welfare would be possible.
In contrast, most subsidy
advocates start by asking whether art subsidies make our society more
beautiful. We then can weigh whether this beauty is worth the cost in
terms of efficiency, but efficiency alone does not prejudge the matter.
In this view art has a value above and beyond what people are willing
to pay for it. It may be better, all things considered, to have a less
efficient but more beautiful society.