Strengthening the case

If there is one thing we can all agree on it is the need for more sophisticated public funding decisions for culture – ones that are better understood by cultural institutions and the public. This demands a much more rigorous attempt to value culture than has been the case to date.

‘Economic impact’ is not the same as value. Economic impact refers to the measurement of the employment, output and productivity consequences of cultural activities. Properly executed, economic impact studies are essential for economic development agencies that see culture as an instrument of economic development. In contrast, ‘valuation’ should be important both to cultural institutions that want to evaluate their performance against their core missions, and to funders who want to assess their return on ‘investment’.

Perversely though, the economic studies one sees in the cultural sphere tend to be of the economic impact variety. Next to none look at valuation using the empirical tools endorsed by the Treasury’s Green Book (the government’s official guide to cost-benefit analysis) that public economists have deployed so successfully in other controversial areas like the environment and health.

This strange set of affairs has two origins. First, in the lack of engagement by economists in the cultural area. The American Economic Association uses a system of codes to classify different scholarly contributions in the area of economics. Cultural economics appears in category Z: Other Special Topics. The DCMS currently has no specialist economist positions at all at Senior Civil Service grade. The second reason for the dearth of valuation studies is in the unwillingness of cultural institutions to engage with the tools of economics as a theory of value – far safer to engage with the economics of impact, in terms of jobs created and gross value added, than with economic tools that claim to shed light on value created as part of their core missions. What we see in the cultural and wider creative sector is an ever increasing number of economic impact studies, using no consistent methodology and of varying quality of execution. The poorest quality examples drag down how the better-executed ones are perceived. What’s more, everyone seems to recognise this.

There seems to be a variant of the prisoners’ dilemma at play. Arts organisations feel forced to commission economic impact studies because others are doing the same. When funding is constrained, no one wants to be disadvantaged by not having produced their own impact estimates. But the aggregate numbers just don’t feel like they stack up: the outcome is that the intended audiences – most obviously the public funders – do not believe any of the results.

Prisoners’ dilemmas call for leadership to resolve them. In this context, I’ll note again that we have next to no rigorous valuation studies that have been applied in the UK’s cultural sector. It is shocking that in 2011 there are just two comprehensive valuation studies in the UK that tend to be cited time and time again: the British Library’s study of its public value in 2003 and the MLA’s study of museums, libraries and archives work in Bolton in 2005.

With so few practical attempts to apply economic valuation techniques in the cultural sector, it is no surprise that we have not developed more fit-for-purpose tools that can be used to value the work of cultural institutions, and in particular tools that embrace the concept of ‘cultural’ value which, unlike economic value, derives from a broadly cultural discourse that cannot be expressed in monetary terms. The really alarming thing is that no one, yet, has this objective in sight: no one is working towards the long-term aim of building a rigorous body of evidence which can be used to understand the value of cultural activity in its various forms.

The research councils have a crucial role to play. Free from political interference and benefiting from a long view, they are uniquely well placed to promote the development of the more rigorous valuation techniques that the arts so urgently need. I have previously argued that the research councils should support a new multi-disciplinary programme of empirical research on economic and cultural value, and there are encouraging signs that the Arts and Humanities Research Council in particular is considering this.

But government can play a critical role too. The publication earlier this year of the UK’s National Ecosystems Assessment – an independent and peer-reviewed quantitative assessment of the value of the UK’s natural environment and the services it provides – is a timely example of this, and presents both an evidence base and policy options for implementing more sustainable environmental policy. The assessment is the outcome of a partnership of government departments and agencies, local government, non-governmental organisations and research councils. The House of Commons Environmental Audit Committee, by calling for such an assessment in 2007, played a key role in making it happen.

There are lessons here for the arts and cultural sector. As a first step, we should recognise that achieving a more sophisticated valuation of culture for public funding decisions will require a team effort from a broad-based coalition of interests, which includes cultural leaders, economists and academics. As a second step, a high-level taskforce should be put together, made up of leaders in the arts and cultural sector, senior policy-makers and the UK’s best academics, charged with deriving what a work programme for culture, equivalent to the National Ecosystem Assessment, might look like. The taskforce could help set priorities for an AHRC-led cultural value research programme. And as a third step, those cultural institutions that have already (successfully or otherwise) had to negotiate the Treasury’s Green Book process should publish their cases. This simple step will help to demystify the Treasury’s cost-benefit analysis requirements, which is essential if we want a more inclusive debate. It will also create opportunities for serious researchers to identify ways in which cultural institutions can strengthen their cases, and point to areas where methodological innovation is most needed.