Academic journal article Atlantic Economic Journal

Bringing Culture to Macroeconomics

Academic journal article Atlantic Economic Journal

Bringing Culture to Macroeconomics

Article excerpt


Should macroeconomists be concerned with the cultural sector? In 2010, there were 2.2 million artists and 3 million people employed in cultural industries in the United States, (1) representing 1.7 % of nonfarm employment; consumers spent $148 billion on the arts and culture, or 1.52 % of personal consumption expenditures; (2) and the arts and culture contributed $41 billion in net exports ($64 billion in exports less $23 billion in imports) to GDP, or 2.82 % of GDP. (3) These figures are not large and may not be compelling to those seeking explanations for significant changes in long-run economic growth or short-run business cycle fluctuations. However, there may be more than is suggested by these numbers.

The advocacy group Americans for the Arts has offered the following list of reasons why one should care about the health and vitality of the arts and culture in America: (4)

* Aesthetics: The arts create beauty and preserve it as part of culture.

* Creativity: The arts encourage creativity, a critical skill in a dynamic world.

* Expression: Artistic work lets us communicate our interests and visions.

* Innovation: The arts are sources of new ideas, futures, concepts, and connections.

* Preservation: Arts and culture keep our collective memories intact.

* Prosperity: The arts create millions of jobs and enhance economic health.

* Skills: Arts aptitudes and techniques are needed in all sectors of society and work.

* Social Capital: We enjoy the arts together, across races, generations, and places.

From among those items on their list, economists from Schumpeter (1942) to Lucas and Moll (2011) have found reasons to study from a non-cultural perspective: Creativity, innovation, preservation, prosperity, and skills. Gary Becker (1996) has been a strong advocate of the importance of social capital in utility theory. However, for all of these studies, there is no systematic theoretical analysis of how the cultural sector affects the macroeconomy. This article introduces three of these aspects of culture into an otherwise traditional general equilibrium macroeconomic growth model: Innovation, preservation, and social capital (in a narrow sense).

What are Cultural Goods?

Cultural goods have been broadly grouped into three (somewhat overlapping) categories: Fine Arts, Heritage, and Cultural Industries. Fine Arts consists of the live performing arts of symphony, theatre, opera, dance, and jazz, the visual arts of painting, sculpture, and graphic art, and literature. (5) Heritage is: moveable heritage, such as the art in museums, art galleries, and art festivals; built heritage, including national monuments, buildings on the National Registry of Historic Places, and national parks and seashores; and intangible heritage, that captures such items as American Indian crafts, the Irish language, falconry, tango, and Mongolian throat singing, among many more. (6) A final catch-all category of Cultural Industries comprises the popular arts and mass media: broadcasting from television, radio and the internet; publishing of newspapers, magazines, and popular books of fiction and nonfiction; the music industry as it relates to popular music and concerts; and the film industry, which encompasses movie productions, movie theaters, and other more recent delivery devices and content providers such as DVDs, Netflix, and Hulu. Anyone looking at this list would recognize the potential for cultural goods to affect consumption, investment, and public policy decisions. The questions relate to whether there are significant macroeconomic consequences of these decisions that are not captured by traditional non-cultural macroeconomic theory.

An important feature of cultural goods is that they represent both consumption goods and capital goods. This is particularly true of Fine Arts and Heritage, and less so for Cultural Industries. …

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