Creative Industries and Economic Evolution
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Creative Industries and Economic Evolution

Jason Potts

The creative industries are key drivers of modern economies. While economic analysis has traditionally advanced a market-failure model of arts and culture, this book argues for an evolutionary market dynamics or innovation-based approach. The book explores theoretical and conceptual aspects of an evolutionary economic approach to the study of the creative economy. Topics include creative businesses and labour markets, social networks, innovation processes and systems, institutions, and the role of creative industries in market dynamics and economic growth.
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Chapter 2: Cultural Economics vs Economics of Creative Industries

Jason Potts


Prolegomena Starting at the CCI in 2006, my first order of business was to elucidate the difference between cultural economics – the standard economic line in arts and cultural domains – and an evolutionary ‘economics of creative industries’. This unpublished chapter is what I arrived at. I felt then and still do now that this distinction is crucial because upon it turn very different analytic world views, problem domains and solution concepts. Both are ‘economics of . . .’ but they differ between analysis of closed-system allocation problems (cultural economics) versus open-system coordination and change problems (economics of creative industries). This explains why evolutionary (not neoclassical) economics is the proper foundation for analysis of the creative industries. 2.1 CULTURAL ECONOMICS AND THE EVOLUTIONARY CHALLENGE Like many modern things, the economics of arts and culture – cultural economics – properly arrived only in the 1960s. There had been previous gestational steps (for example Veblen 1899, cf. Ruskin 18801). But cultural economics (or better, Cultural Economics, JEL: Z1) arrived with the seminal application of Keynesian and neoclassical concepts and tools to analysis of the production and consumption of cultural commodities in a market economy.2 This was motivated by: (1) the problematic economic viability of this (culturally and politically valued) sector, and (2) the manifest disjunction between high cultural value and low economic value. From these axioms, cultural economics developed about the standard applied microeconomic and econometric analytical set pieces of, in prime instance: the structure of consumer demand; the extent of market failure; the inefficiencies of industrial organization;...

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