Introduction
Interest in the role of the cultural industries as a sector of the economy can be traced back at least to the 1980s. Although the term“industry” applied to the arts was not in widespread use at that time, it was beginning to be recognised that the arts sector generated output, incomes, employment and exports that were of some economic significance. Arts advocates in a number of countries, concerned at the tightening of public budgets and an increased questioning of the rationale for government funding of cultural activity, turned to the economic contribution of the arts industries as a justification for continued financial support. In fact, simply demonstrating the economic size of the sector provided no such justification, although numbers showing the extent of job creation or the proportion of GDP that the arts contributed at least served to indicate that the cultural industries were not some economic backwater but a significant component of the macroeconomy.1
During the 1990s the concept of arts-as-industry was widened to co-opt broader notions of culture, identity, heritage and creativity into an economic framework, laying the foundation for an expansion of cultural policy into the economic arena.
An interpretation of cultural policy simply as arts policy began to be replaced with a more broad-ranging agenda, as synergies were increasingly recognised between the cultural industries and economic progress (Throsby 2010). The celebrated Creative Nationstatement of the Australian Government in 1994 encapsulates this merging of artistic and economic purpose in its vision of the information and communications revolution, and its foretaste of the arts in the digital economy (Commonwealth of Australia 1994). Subsequently these ideas were picked up by the first Blair govern-ment in the United Kingdom (UK), setting the scene for the Creative Industries Taskforce of 1997 (Department for Culture, Media and Sport 2001). The agenda here, however, was shifted from culture to a focus on creativity; in this scenario, creative dynamism was seen as a source of innovation, and the intellectual property that creative output generates was looked to as the primary source of revenue. It was
no accident, therefore, that the economic activities of interest in the UK policy initiative were called creative and not cultural industries (Garnham 2005).
As is well known, the designation of 13 creative industries in the UK was influ-ential during thefirst decade of the twenty-first century in the formation of cultural policies in a number of countries, particularly in Europe. The concept of the creative and/or cultural industries that took shape during this period in academic and policy-making circles was consolidated into the collective term the “creative economy”.
This term was used to describe a subsector of the macroeconomy that was reputed to be a source of dynamism in creating output and employment growth in otherwise sluggish economies. Data showing that this sector was growing more rapidly than traditional sectors such as manufacturing persuaded politicians and their bureaucrats to take notice.2
Whether the creative economy was comprised only of the cultural industries or whether it embraced something more was a question that was answered in different ways in different countries, as discussed further below. But the role of the specifically cultural industries in the creative economy was strongly asserted in the influential Creative Economy Report, published by the United Nations Conference on Trade and Development (UNCTAD) in 2008 and updated in 2010. These reports were parti-cularly oriented towards talking up the development potential of cultural industries in countries of the global South as a means towards the economic and cultural empowerment of the people and as a panacea for poverty alleviation. The reports had much to say about the scope for increased trade in cultural goods, although the lack of data on trade in cultural services such as audiovisual product meant that an important component of cultural exports and imports was not adequately covered.
In 2013 responsibility for producing the report shifted from UNCTAD to the United Nations Educational, Scientific and Cultural Organization (UNESCO) (with the involvement of the United Nations Development Programme continuing); a new Creative Economy Report was produced in that year with a focus on local cultural development (UNESCO 2013). In this forum, and many others, debate about the role of cultural industries as an economic sector continues.
Why might economists, whether in the academy, in government, in international organisations or elsewhere, be interested in the cultural industries? One obvious reason has been the rapid increase in interest in the creative sector amongst policy-makers, as referred to above; the emergence of a group of industries not previously regarded as of any consequence in the policy hierarchy served to awaken economists to possibilities for applying their traditional tools of trade in a new arena. The tasks that economic analysts set themselves in addressing issues relating to these industries can be grouped under three headings, which reflect in turn the structure of this chapter.
First, notwithstanding the endless discussion as to whether or not culture can be or should be corralled into an industrial framework, economists have no difficulty in identifying cultural activities of all sorts as industries. Production, distribution and consumption of cultural goods and services take place in an orderly manner that readilyfits the economic definitions of an industry, as we shall see in the next section.
But beyond the broad industrial interpretation lies a host of definitional issues that must be addressed if the concept of a cultural industry as a sector of the economy is to be made operational.
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Second, simply defining industries is by no means the whole story. The interesting analytical issues arise when attention is turned to the relationship amongst the cultural industries themselves and between them and the rest of the economic system. A discussion on how we might interpret the structure of the cultural sector of the economy follows.
Third, we consider measurement. What are the principal economic variables to be accounted for and how are they to be evaluated? Estimates of the economic contribu-tion of the cultural industries require a sound statistical foundacontribu-tion and appropriate analytical methods. These issues are discussed in the light of recent developments in the estimation of a wide range of cultural statistics.
Finally in this chapter we draw some conclusions as to the uses and limitations of an economic approach to the cultural industries. It is argued that economic analysis of the cultural industries should not be seen as oppositional to other disciplinary approaches, but rather as complementary to alternative interpretations of the place of culture in society.
Definitional issues
The concept of an industry is an essential one in economics as a means of inter-preting the structure of an economy on the basis of how production is organised.
The most obvious way to group business firms in this system is in terms of the products they produce; industries are then defined as collections of firms that produce a similar product. This then leads to the standard analytical approach of industrial organisation theory, which addresses how industries function, looking at:
their structure, i.e. the level of concentration, the nature of product differentiation, and the extent of barriers to entry and exit of firms;
their conduct, i.e. the wayfirms compete through price setting and by other means;
and
their performance, i.e. how efficiently they operate, what rates of return and levels of profit they achieve, and how effectively they service other non-profit-related objectives.
The application of these standard methods of industry economics to the cultural industries is apparently straightforward. Structural issues are of interest, for example, in the global music industry, where major transnational publishing and recording companies dominate the market, and smaller firms compete through a variety of price and product differentiation strategies. Similarly, assessment of industry conduct and performance can be applied, for example, to the operations of theatre companies or commercial art galleries in a particular city; these enterprises can be studied in terms of how they set their prices and how well they survive financially in a competitive market place.
Nevertheless there is a prior question that must be resolved before any analysis of the role of the cultural industries as an economic sector can proceed. This is the funda-mental issue of how a cultural industry is to be distinguished from other industries.
DAVID THROSBY
One could adopt a pragmatic approach to this issue, accepting that for policy purposes the cultural or creative industries are whatever a particular government defines them to be. For example, the set of 13 industries designated as creative in the UK that we referred to above has remained the standard delineation of what is meant by the creative economy in that country, even though there may continue to be argument about which industries should have been included and which should have been left out. Other countries have reached different conclusions, as we shall see further below.
For our purposes, however, a principles-based approach is preferable. From the viewpoint of economic analysis, the product-group definition provides an appro-priate starting point. Applying this concept to defining a cultural industry moves the definitional responsibility back one stage, requiring an unambiguous definition of cultural goods and services in order for it to become usable.
Two approaches to distinguishing cultural from other goods and services in the economy have emerged in recent times. Thefirst is to identify the distinctive char-acteristics of such goods that relate in some way to the concept of culture. For example it can be suggested that cultural products that are derived from the creative arts share the following characteristics:
they require the input of human creativity in their production or presentation;
they carry some form of symbolic meaning that elevates them beyond a purely utilitarian function; and
they contain, at least potentially, some intellectual property that may possibly provide a source of revenue for those who produce them.
The second approach to defining a cultural good depends on an elaboration of the second characteristic noted above. The symbolic meaning or cultural content embodied in or conveyed by a cultural good or service such as afilm, an artwork, a poem, a video game or a music performance, can be interpreted as a form of value that the good generates. This value is separate from whatever utilitarian value the good possesses. It can be referred to as the good’s cultural value; if this concept can be identified in an objective and replicable manner, its presence could be used as a means of defining a cultural good.
Of course the definitional issues do not end there. Implicit in the set of three criteria noted above are two further difficulties: the identification of creativity and the recognition of the symbolic meaning upon which in turn the definition of cultural value rests. These difficulties exercise the minds of economists interested in art and culture just as much as they do those of practitioners in other disciplines. In addition, even if these problems are set aside there may be argument as to where the borders of the product group should be drawn; cases exist of cultural goods whose inclusion or otherwise continues to be problematical. Nevertheless, despite these various obstacles we can proceed, for the purposes of this chapter, on the assumption that either or both of the above definitions of a cultural good or service provides a workable basis to categorise a recognisable product group. Accepting this assumption then enables the identification of a set of cultural industries as being those industries concerned with the production and distribution of these goods and services. Defining the
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cultural industries in this way in turn allows an economically plausible delineation of the cultural sector of the economy.
The above definitions also facilitate a resolution of the tedious argument about whether the industries of interest should be referred to as creative or cultural industries. According to the approach outlined above, a creative industry emerges as one to which only the first of the three distinguishing criteria applies; a cultural industry, on the other hand, will be defined as one complying with all three char-acteristics. Thus the set of cultural industries in the economy can be seen as a subset of the more wide-ranging group of creative industries, and the ambit of the industrial content of cultural policy is accordingly more specific than that of creative industries policy generally. In other words, it is argued that the distinction between cultural and creative industries is not a matter of philosophical principle or disciplinary preference, but simply one related directly to the meaning of words used to describe the products of these industries.3
We noted at the beginning of this section that the cultural or creative industries could be defined de facto as those that happen to be accepted as such in any particular jurisdiction; it is readily observable that different countries have reached different conclusions in applying whatever criteria they regard as relevant to the definition of cultural or creative industries for their own policy purposes. Nevertheless, certain commonalities can be found in the resulting industrial mix. For example, in a com-parison of the creative or cultural industries designated as such across 17 European countries, Mikic´ (2012)finds that film and video, radio and television, performing arts, music, architecture and publishing are included in all or most classifications. The next most prominent group includes visual arts, design and advertising, followed by museums, archives, libraries and heritage. Somewhat similar conclusions can be reached if a comparison of included industries is made across different models of the cultural sector as seen from various disciplinary perspectives (Throsby 2008a).
Structural relationships
As an economic sector, how do the cultural industries function and how do they relate to one another and to the economy at large? These questions can be addressed from several different directions. Here we consider four approaches to portraying and analysing the economic role of the cultural sector once a particular set of cultural industries has been determined.
The first interpretation is that depicting the sequential process whereby raw materials are transformed into afinished cultural product. The process can be seen as a supply chain or a value chain, with successive stages providing further services and adding value until the point offinal demand is reached. The book industry is a good illustration. A novel, for example, begins life as an idea in an author’s mind, trans-formed into words that may go through many iterations before landing on the desk of a publisher. A literary agent may assist along the way, and editorial input is likely once the book is accepted for publication. If it is to appear in hard copy, designers and then printers are brought in, followed by distributors, advertisers and the book stores which convey thefinal product to the consumer. Each stage can be seen as a
DAVID THROSBY
transformative process, and the value-adding that occurs along the way is rewarded ultimately as a series of allocations from the retail price at which the book is sold;
typically the share going to the original creator– the novelist – is likely to be relatively small, perhaps 10 per cent or less.
Within this sequential-production framework, the structural features of the cultural industries can be interpreted in terms of the contractual relationships existing between successive stages. Caves (2000) identifies the characteristics peculiar to cultural goods and services that give such contractual arrangements their distinctive nature.
These include the“nobody knows” characteristic that encapsulates the radical uncer-tainty regarding the likely market success of a cultural product such as a movie – films unexpectedly become block-busters, and sure-fire hits turn out to be box-office failures. Contractual conditions also affect production because each unit of an original cultural good is unique – an extreme case of product differentiation – although copies are infinitely replicable.
The apparently inexorable linear sequence depicted in the supply-chain model does not necessarily mean that influences and interconnections flow in only one direction. In any production chain, feedback effects are likely whereby downstream players may influence what happens at an earlier stage in the process. For this reason it can be suggested that the term value network may be a more accurate description of cultural production processes than the value chain (Hearn et al. 2007; Keeble and Cavanagh 2008).
Although we can point to the product group as defining a single industry producing a given product type (the visual arts industry, the fashion industry, and so on), the supply-chain sequence relating to the creation, manufacture and distribution of a particular cultural good or service is likely in fact to traverse a number of different industries. For example, the stages comprising the music industry’s operations include the separate “sub-industries” containing song-writers, publishers, record companies, agents, promoters of live concerts, music retailers, and so on. Each of these sub-industries can be analysed in terms of its own organisational and opera-tional characteristics, and each may have its own value-chain sequence that is a component of the larger music value chain covering the entire production and dis-tribution process. It is apparent, therefore, that economic analysis of the cultural industries according to the supply/value-chain model can become quite complex as finer levels of detail are sought.
The second approach to portraying the role of the cultural industries in the economy takes the supply chain or cultural production cycle model and elaborates it to interpret the interrelationships between components of the cultural sector. This approach was adopted as the basis for a model of the cultural sector proposed by the UNESCO Institute for Statistics (UIS) for use in the design of national cultural statistics collections (UNESCO Institute for Statistics 2009). The resulting Framework for Cultural Statistics groups cultural activities into several “domains”, comprising six“core” domains:
cultural and natural heritage;
performance and celebration;
visual arts and crafts;
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book and press;
audiovisual and interactive media;
design and creative services;
together with two“related” domains:
tourism;
sport and recreation;
and three“transversal” domains:
education and training;
archiving and preserving;
equipment and supporting materials.
The rationale for this approach was articulated by the UIS as being to meet “the challenge for a robust and sustainable cultural statistical framework… to cover the contributory processes that enable culture to not only be created, but distributed, received, used, critiqued (sic), understood and preserved” (UNESCO Institute for
The rationale for this approach was articulated by the UIS as being to meet “the challenge for a robust and sustainable cultural statistical framework… to cover the contributory processes that enable culture to not only be created, but distributed, received, used, critiqued (sic), understood and preserved” (UNESCO Institute for