Handbook of Cultural Economics, Third Edition
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Handbook of Cultural Economics, Third Edition

Edited by Ruth Towse and Trilce Navarrete Hernández

Cultural economics has become well established as a subject of interest for students and teachers of courses ranging from economics to arts administration as well as for policy-makers and practitioners in the creative industries. Digitisation has had a tremendous impact on many areas of the creative economy and the third edition of this popular book fully reflects it.
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Chapter 50: Public support

Bruno S. Frey


The arts can be supported directly by government by public expenditures, or indirectly by making private and corporate sponsorship tax deductible. The extent to which these forms are used differs widely among countries. This also holds for the proportion of public support coming from the central government or from lower levels of government. To take the impact of art activities on the economy as an argument for public support is most questionable. Would-be consumers of art in its very different forms are constrained by imperfect information, irrationality and little experience and education. Moreover, a considerable part of art (such as operas and theatres) focuses on the higher-income and well-educated sector of the population. The market is subject to failure with respect to the supply of art owing to imperfect competition, economies of scale, cost disease and distributional concerns. However, these aspects have partly been rejected. A comparative view is needed in which the failures of the market are compared with the failures of political and administrative decisions. A switch to a constitutional view is required: what matters is how decisions are taken, be it by direct democratic measures or by decisions in a representative democratic setting.

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