It’s not your impact, it’s your value

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Guest blogger Dr David O’Brien decided to stop us in our tracks by giving into our cheeky request to guest blog for The Culture Vulture. The good news is there will be no exam at the end of it, so what’s the bad news….?

It’s not your impact, it’s your value. Or: how I learned to stop worrying and love a report by Bakhshi, Freeman and Hitchen

So, the culture vulturess asked me to do a blog post and I’m in the middle of writing some stuff that seems relevant in the face of government cuts, so I figured it might be useful to start some wider conversations going beyond the ivory tower and out into the real (or at least virtual) world.

Back in the day I studied bits of economics, where our first lesson was the fundamental economic question: how should we divide up scarce resources?  At the moment Britain is in the middle of a particularly painful example of the economic question (thank you, the banks) but that notwithstanding, the economic question is always with us. One of the defining aspects of humans is their infinite capacity to think of possible ways of life, but yet there’s a limited amount of goods, services and, as the Green Movement has thankfully shown, natural resources to fulfil these possibilities.

Central government takes the economic question very seriously. Indeed some political scientists think that it’s the question that defines politics. Central Government in the UK even has guidance that directly reflects the economic question applied to public policy, the Treasury’s Green Book:

http://www.hm-treasury.gov.uk/data_greenbook_index.htm

I’ll be honest, it’s not the most thrilling thing you’ll ever read, but it’s especially useful at the moment. It asks for decisions to have some kind of cost-benefit analysis associated with them, derived from an explicit statement of the economic question (HMT 2003:1):

‘The purpose of the Green Book is to ensure that no policy, programme or project is adopted Without first having the answer to these questions:

Are there better ways to achieve this objective?

Are there better uses for these resources?’

Now this second question is a big issue for arts and culture. Historically arts and culture has always had a relationship with the state, alongside its associated bodies, such as the major organised religions, but since the transformation of the British state in the late 1970s/early 1980s, British (and post-1999 English) arts and cultural infrastructure (organisations, artists, administrators, teachers, etc) has had to try and think up its answer to the economic question.

It’s done this in a number of ways, particularly pointing to the ‘impact’ generated by government funding, whether in terms of economic impact or social impact. Since the early noughties academics, the arts and cultural sector as well as key think tanks have questioned these versions of impact, asking if they give accurate versions of what they purport to show (e.g. number of jobs generated by central government funding an art gallery) and, more fundamentally if we should be talking about ‘impact’ at all.

Economic impact has been especially difficult, for several, interrelated, reasons. First off there’s proving (or at least demonstrating) economic impact, which has gradually become more sophisticated since the pioneering work of Myerscough’s The economic importance of the arts in Britain (1988). More importantly there is a much bigger issue about the extent to which funding should be justified in terms of its economic impact, which, for many, seems to miss the essential purpose of the arts: economic impact really is not what the arts and cultural sector exists for. Finally there is the sticky issue that the arts and cultural sector can demonstrate their economic impact reasonably well, but this becomes more difficult when compared with other sectors of the economy (and before we get bogged down in discussions about creative industries, there are definitional issues with this sector that seem to suggest the highest economic impact comes in those parts of the creative industries that only tenuously related to the arts and cultural sector). But let’s not fight about creative industries! It seems, despite the rhetoric, central government decisions haven’t really been swayed by the narratives of economic impact put forward by the arts and cultural sector. There is a similar story with regard to social impact.

What is to be done, so the arts and cultural sector can better answer the economic question? I have a very straightforward idea about how the arts and cultural sector might answer the economic question: use economics. However DON’T concentrate on the economic impact of the arts and cultural sector, but rather DO talk about the value of the sector in the language of economics. Economics is very interested in what people value, reflected in their choices and preferences. As opposed to the language of multipliers, visitor numbers and Gross Value Added (the amount each producer contributes to the overall economy), economic valuation (rather than impact) simply asks ‘what are people’s preferences?’ and tries to reflect this in a common currency, which is usually money (excuse the pun).

There is already a relative success story for this kind of economics, from the Green Movement. One of the things that proved most useful for the Green Movement’s attempts to answer the economic case (although it still struggles against powerful forces with little or no interest in making life sustainable) has been the development of environmental economics. Running alongside the development of scientific consensus on major environmental issues, environmental economics has made those aspects of our natural world that we wouldn’t usually associate with price and money visible in governmental cost-benefit analysis. This isn’t to say that all decisions are sensible, or that they reflect the advice of environmental science. But rather the Green Movement now has a way to talk to central government in its own language.

The question then becomes can the art and cultural sector tread the same path as the Environmentalists? I think we can, but it will take a bit of a leap of faith. After being told, regular as clockwork since the early 1990s, that the arts and cultural sector needs a new way of ‘proving’ its worth, there’s a danger that a comment like ‘learn to speak economics’ will be greeted with a resigned shrug and seen as another box to be ticked, with another consultant’s fee to be paid. Also the language of economics isn’t easy: techniques like ‘willingness to pay’ surveys or ‘subjective well-being income compensations’ require expertise to carry out, interpret and to narrate so they make sense. But they give another layer to the arts and cultural sector’s answer to the economic question.

Obviously this discussion has been very closely focused on central government, as local decisions are a bit different and don’t have the all seeing eye of the Treasury just down Whitehall. Also, a friend of mine commented that ‘philanthropists don’t care about this kind of thing either’.  Of course decisions are inevitably political, often ignoring, or playing down, cost-benefit analysis. The arts and cultural sector also have the much discussed mixed model of public funds, private investments and audience revenue, so maybe it’s not ‘cost-effective’ to get too involved in economic valuation (and, if we’re honest, drop some of the, justified, prejudices and objections to economics). Finally its probably fair to ask what is this arts and cultural sector I’ve been talking about anyway?

But the fact remains that it’s a great deal easier to convince someone of the importance, value and worth of something if you can explain this using the language in which they speak and listen.

You can read more about this in a report to DCMS, written at the end of Phase One of an ongoing AHRC, ESRC and DCMS funded programme called ‘measuring cultural value’

This post reflects the invaluable advice and work of Hasan Bakhshi, Alan Freeman and Graham Hitchen. Their report ‘Measuring Intrinsic Value: how to stop worrying and love economics’ is here

And a good example of the methods I’m talking about can be seen in Jura consultants’ valuation of Bolton’s Museums, Libraries and Archives:

I’m hoping this introduction to some of these issues will generate discussion, as Arts Council England are currently thinking about research into economic impact, DCMS (Department of Culture Media and Sport) will be issuing guidance in the next year and research councils, such as AHRC, are taking this stuff seriously as well. What do we all think?

Dave O’Brien is a Lecturer at UKCEM, Leeds Metropolitan University