jwilzewske: public goods

Showing posts with label public goods. Show all posts

Tuesday, October 21, 2008

Performing Arts, Free-Market Failure, and New Institutional Economics

Market w/ externalities, social and private ‘goods’ and ‘bads’

W alt Whitman was democracy’s poet—who understood that democracy is not just a form of government but a way of life rooted in culture. Bill Ivey is culture’s eloquent advocate who knows that, as democracy needs the arts, the arts need the advocacy of government. His manifesto [Arts, Inc.] is a passionate attack on the commercialization of culture and a plea for a cultural ‘Bill of Rights’ that will restore to all Americans their right to a heritage, to creative expression and to a creative life. This is not just a vital book about the arts, but a vital book about democracy.”
— Benjamin Barber, author of ‘Jihad vs. McWorld’ and ‘Consumed’.

A rts, Inc.’ is the first comprehensive effort to explore the role and potential of a coordinated vision for art, culture, and expression in American public life. Through strands of personal and professional memoir, policy analysis, for-profit and nonprofit industry insights, and personal conviction, Bill Ivey defines a new canvas for more productive and inclusive conversations on the expressive life of our nation and its citizens.”
— Andrew Taylor, Bolz Center for Arts Administration, University of Wisconsin-Madison.

T he boom in music festivals poses a challenge to economists because of the glaring contrast to the financial distress that standing orchestras and opera companies and other performing arts entities find themselves in. Unit costs of production in the performing arts are still steadily increasing while labor productivity in the art is constant. This is the essence of [Baumol’s & Bowen’s] so-called ‘Cost Disease’. As a result, the performing arts ... are faced with a secular threat of survival because of [their] continually increasing cost relative to other consumer goods and services. The relevance of the Cost Disease has been challenged for various reasons. In particular, if demand [for concerts] rises more quickly than that for other goods (income elasticity > 1) and the price elasticity of demand is larger than –1, then prices and revenues can possibly be raised sufficiently to keep pace with the rising costs... The basic idea [of the validity of Cost Disease in the performing arts] has, however, been accepted and [today] provides one of the major building blocks for economic analysis of the arts.”
— Bruno Frey, Arts & Economics, p. 73.

Should we change our ticket prices or booking fees this year? How much discounting or comping should we do to get more attendee butts in seats and, if we do more than we’ve done in the past, will that help or hurt sales of regular tickets or subscriptions? If our ensemble does pro bono or deeply-discounted performances in some cities, will that help or hurt our bookings for bigger-margin gigs elsewhere?

These questions are perennial ones, for artists, agents, presenters, governmental and NGO policy makers, and others. For all of these stakeholders, the questions are even more salient during the present economic downturn.

There are several new books that elucidate how to go about making these decisions—both the microeconomic/operational ones, and the macroeconomic/policy ones. The books by Bruno Frey and by Bill Ivey are especially notable.

Frey maintains that people are genetically, evolutionarily disposed to seek status and strive for experiences—it is part of the psychology and ‘economy of happiness’, which is the subject of his new book. The analysis and its logic are, I think, particularly germane to chamber music and other of the performing arts. Frey focuses on ‘taxes on positional externalities’ [not necessarily the ordinary types of taxes; ‘taxes’ can equally well be embodied by specific, differentiated price structures such that not everybody pays the same price]. Economists who advocate ‘taxes on positional externalities’ underestimate the consequence of the innate human drive for status: when one outlet is blocked, individuals aggressively and reflexively seek alternatives to differentiate themselves. All economically-active individuals do this, able-bodied and non-able-bodied alike. Even if taxation of consumption were successful in countering negative positional externalities, people would still try to distinguish themselves. (The only ones who do not are those who are institutionalized or otherwise economically inactive.)

The positional externalities in those other dimensions might be weak, in which case the taxation of consumption differences may be warranted and effective, according to Frey’s theory. But if the negative external effects created by differences in the other dimensions are strong—as they are with performing arts—then taxation of consumption differences will be ineffective and counterproductive. Frey’s highly-readable chapters assess in detail the consequences of substituting other dimensions when positional externalities due to income or consumption are effectively blocked by taxation.

Frey is, in the end, open-minded as regards taxing positional externalities; he takes a pragmatic view, and makes his determinations on the goodness or badness of the consequences of the policies on a context-sensitive, case-by-case basis. For Frey, the answer to the public agency’s or presenter’s or manager’s or ensemble’s question of whether positional externalities due to differences in income and consumption should be taxed depends on the effects of taxation on incentives, on consumer’s buying decisions, and on the resulting net public welfare. If the nonprofit presenter (or government or other agency) tries to reduce prevailing inequalities by setting a ticket price-structure (or discount or comp ticket policies that back-handedly ‘tax’ those who are more able to bear a larger expense) and that price-structure only weakly affects the buying decisions of those market segments who are affected by the top-tier prices, then the taxation is effective and justified in terms of the net public welfare or public good. If, on the other hand, the ‘progressive tax’ on positional externalities in income and consumption causes the top-tier market segments to transfer their drive for status to other consumables or other dimensions, then the pricing/taxation scheme is ineffective and unjustified, on the grounds that it harms the public good.

Under Frey’s rubric, the same could be said of performing artists or ensembles. If an ensemble establishes a ‘progressive taxation’ structure in which engagements have booking fees priced according to the ‘ability-to-pay’ and/or incremental kickers (‘base-plus-percent-of-boxoffice’) and this policy does not deter presenters from booking the ensemble, then the scheme can be said, post facto, to have been effective and justified. By contrast, if many presenters will not accept the price structure and terms, then in hindsight it can be said to have been a failure and unjustified in terms of the net public good, insofar as the pricing will have deprived the public of valuable cultural experiences or in some way diminished the cultural diversity.

Ivey’s book analyzes the consequences of relentless corporatization of the arts and of performing arts outputs in particular. Bill Ivey had served as NEA Chairman from 1998 to mid-2001. While he had prior to that time had a long career as head of the Country Music Foundation and as an advocate for the arts, it was that 3-year term of service that appears to have galvanized his concept of the arts as a collection of public goods—a set of resources as vital as clean air and water and endangered species and wilderness—to which everyone has a basic human right, and to which government and other institutions owe a duty of stewardship. Prior to 2002 he would merely preach; but today in this book his ‘hair is on fire’ as he expounds prophet-like words of alarm and proposes essential elements of public arts policy in his call-to-arms.

V ery few observers of the contemporary U.S. and global arts worlds have Bill Ivey’s capacity for first-hand examples of how trade representatives, artists, music executives, corporate attorneys, elected officials, non-profit executives and many other participants influence the course of the arts, and in particular, the public’s access to the arts. ‘Arts, Inc.’ is an important work because it asserts, in an urgent manner, that people have a right to a better expressive life.”
— John Kreidler, formerly Executive Director, Cultural Initiatives-Silicon Valley.

These recent books are each, in their own ways, emblematic of New Institutional Economics (NIE), an interdisciplinary field that has emerged since about 1995, combining economics, law, organization theory, systems engineering, neuroscience, philosophy, political science, sociology, and anthropology—to understand the institutions of social, political, and commercial life, and to help set policy and perform quantitative program evaluations. The objective is a set of rational frameworks for future developments of regional politics, regulations and protection, infrastructure amenities, finances and taxes so that the public goods are sustainable and can have durable popular support. NIE inevitably entails intensive political re-evaluation. NIE draws upon various social-science disciplines, but its primary language is economics. Its broader goal is to characterize what our societies’ institutions are, what purposes they serve, and how they change and how they might best be improved and changed—all institutions, not just arts organizations. Have a look at the International Society for New Institutional Economics (ISNIE) and other of the links below to find out more about this.

It’s these days inconceivable that politicians or government agency officials will choose well or support a sufficient diversity of programs or foster robust innovation and creativity. The politics of divisiveness and fear and recrimination is too extensive, and CoverYourAss ‘cartels’ are too strong.

But it’s also lately inconceivable that the illustrious so-called free market will sustainably support diversity in the arts either. The free market has done so well, after all, in messing up such ordinary things like banking. Leaving things to the free market, we end up with ‘McWorld’ lowest-common-denominator populism and commodification of the arts.

So NIE-style approaches and deep re-evaluations of the sort that Bill Ivey and Bruno Frey are advancing are therefore timely. I strongly recommend that you pick up copies of their books. And, imagining that some of you CMT readers may like to contact Bill or Bruno regarding speaking to your group or collaborating on research or other activities, I’ve put their contact coordinates in the links below.

Saturday, October 11, 2008

Econometrics and the Separation of Music and State

B elieving with you that [Music] is a matter which lies solely between man and his God, ... and that the legislative powers of government reach action only and not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should make no law respecting an establishment of [Music], or prohibiting the free exercise thereof, thus building a wall of separation between [Music] and State.”
— Thomas Jefferson, letter, 01-JAN-1802.

The case of independence between music and state is often considered as being an ideal towards which all societies should aim. Social scientists of music have long anticipated the gradual separation of music from state as one of the predictions of the well-known secularization theory. But independence appears to be far from being the norm in the world today, however. In the U.S. it is not clear how the First Amendment should apply to the separation of Music and State.

It is common for states to fund the provision of some musical goods and to exert influence on musical practices, such that a surprisingly small proportion of countries in the world have fully achieved independence of Music from State. Alarmingly, lawless cooptation of music by political parties—in political contests in which the state itself does not participate—is also increasingly common. “Get Off My Lawn” McCain and “Barracuda” Palin, for example, have belligerently refused to cease and desist from playing certain music for promotional purposes at rallies and campaign events without consent and without paying any fees or royalties, thereby flouting the property rights, financial interests, and wishes of the composers and copyright holders of that music (for example, Ann & Nancy Wilson (Heart), Chuck Berry, John Hall, Jackson Browne, John Mellencamp, Tom Scholz, ABBA, and their respective publishers/record companies). Illegal behavior like this by elected officials is beyond appalling.

Some form of state influence or control over the provision of musical goods is typical in traditional societies. By contrast, state ‘control’ of the music is relatively uncommon in modern times. In the ancient world, musical institutions were typically subordinated and controlled by the state or by clerical authorities. In some societies, the ruler was also the musical leader, as was the case for gamelan music in Indonesian states. The ruler’s control of music has also been the norm among tribal societies throughout the world.

The Arts and State are arguably the two most important social institutions created by humankind. Not surprisingly, therefore, the history of their relationship has been stormy, ranging from cooperation to conflict. It would be desirable to develop a quantitative econometric model that accounts the relationship from an economic perspective. Such a model would answer the question as to what role does Music play in supporting the ability of the sovereign to extract resources from the people through taxation? The idea that Music, through its motivations (or ‘doctrine’ inducing citizens’ beliefs and actions) can facilitate this function of the State is an inchoate one, underlying both ancient and modern civilizations but never stated outright.

A proper model might posit two avenues by which an alliance with Music benefits the State. The first is the [Marxian] notion that musical goods pacify the populace, allowing the state to extract more resources before citizens reach the threshold of revolt. The second is the fact that citizens pay taxes more willingly (i.e., tax evasion declines) when the State is seen as musico-motivationally more legitimate.

This second avenue that potentially makes state control of music—i.e., the establishment of a State-funded Music or, conversely, the indirect repression of certain music—desirable. The reason is that an independent Music serves the pacifying function without the need for distortionary tax financing. If this were Music’s only function vis-à-vis the State, an independent Music would be optimal. However, an independent Music will not provide the sovereign’s ideal level of legitimacy. As a result, it may pay the sovereign to seize control of Music, even at the cost of having to finance it out of taxes, in order to maximize the State’s net gain.

A crucial factor in this decision is the nature of musical doctrine—that is, how favorable or unfavorable is musical teaching toward the State? The more favorable is the music’s doctrine, the more likely it is that the State will benefit by taking control of music. In contrast, when Music is regarded by the State as antagonistic to its power over the populace, the State may act to suppress Music.

A useful consequence of the model would be to better define the nature of musical doctrine. This poses a significant challenge, since Music and music organizations are complex, and distinct institutions, the former being a collection of “texts” and “teachings” aimed at illuminating the mysteries of the universe and humankind’s place in it, and the latter being the organizational structure supposedly established to inculcate and spread those teachings. Music doctrine therefore must be comprised of a constellation of rules and ideas that reflect an amalgam of practical considerations and genuine “revelations,” and any attempt to explain them as originating from a single decision maker or as the product of a single econometric ‘objective function’ is unrealistic.

One possible model is a direct adaptation of one developed by Brennan and Buchanan (2006), and extended by Wintrobe (2000), in which a self-interested sovereign maximizes the surplus of taxes over spending on a public good. To keep the model simple, we only consider spending on a “musical good,” either by the State (in the case of a State-run Music), or the musical community (in the case of an independent Music). The basic conclusions of the model would not be affected if the state also provided a public good.

In the model, the representative citizen has a utility function given by:

U = x + v(q), (1)

where x is composite consumption, and q is the quantity of a musical good, where v' > 0, v˝ < 0. The musical good consists of those services typically provided by Music. The citizen is endowed with wealth of E, an amount T of which the government confiscates in taxes. The citizen therefore has after-tax wealth of, E–T, which he or she can spend on x and, in the case of an independent Music, on musical goods.

Tax collection is costly to the government because of resistance by citizens to having their property confiscated. We capture this by assuming that a fraction δ of each tax dollar collected must be spent on enforcement. This cost will tend to be lower, however, as the government is seen as being more legitimate. As noted, musical spending can potentially provide this legitimacy, for example by proclaiming that the sovereign is divinely inspired (or is himself a classical music prodigy or rock-star). We thus write δ = δ(λq), where λ is a parameter that reflects the extent to which musical goods convey legitimacy, δ' < 0.

W e do not restrict λ a priori in magnitude or sign; λ > 0 means that Music legitimizes the State, λ = 0 means that music is neutral regarding the state, and λ < 0 means that Music de-legitimizes the State (e.g., incites resistance). Thus, we assume that for q > 0, δ —> 0 as λ —> +∞ and δ —> 1 as λ —> -∞. We also assume that δ(0) ≡ δ₀, where 0 < δ₀ < 1. The objective for the State is to maximize tax revenues net of enforcement costs and, in the case of a State-run Music, the cost of the music good.

Over the range where λ < λ₂, the State suppresses Music (that is, takes over Music and sets q = 0). Here, the de-legitimizing effects of Music are so detrimental to the state (or political parties) that the State (or political parties) finds it advantageous to eliminate Music altogether (or to curtail music spending, or to refuse to seek consents or pay royalties, or to embroil music rights-holders in ruinously expensive litigation).

It cannot be disputed that throughout history that there have been cases where Music has manifested motives other than beneficence toward its public. So a proper econometric model of Music and the State ought also to examine the implications of allowing independent Music to act in a self-interested manner; specifically, to maximize profit to the detriment of the public and the State.

Let π be the profits earned by a hypothetical ‘non-beneficent’ Music, where π > 0. That is, R - c(q*) = π or R = c(q*) + π. Solving for T yields the citizen’s tax payment:

T = E + v(q*) – c(q*) – π - U , (2)

and the corresponding return to the State:

V₂(q*, π) = [E + v(q*) – c(q*) – π – U] (1 – δ(λq*)). (3)

Higher values of π reflect a stronger Music in the sense that a stronger Music can extract a larger share of the citizen’s total ability to pay. (So π is bounded above by E – v(q*) – c(q*) - U, the point at which T = 0.)

Consider how an econometric model can show the relationship between independent and State-run Music. As π gets larger, the less desirable independent music is from the State’s perspective. Figure 1 summarizes the various regions where each of the three regimes dominates, depending on the political content of music doctrine (λ) and the degree of music power (π). As the diagram reveals, an independent Music occupies a region where doctrine is neither too overtly favorable nor too detrimental to the state, and where the Music’s power is limited.

In an economic downturn such as the one that’s presently upon us, the private economy makes a truly independent Music less and less viable. Circumstances like these foster a larger role for governments and public-sector econometrics, augment Music’s vulnerability to political ideology, and make stewardship of Music as a pluralistic public good more vital than ever.

T homas Mann often spoke in the face of would-be synthesizers. They were prophets who foretold that there would eventually be a gathering of the separate forces, a centering and synthesis among the world’s legal systems and the religions. People like Mann instead contended that the world has many centers. There is no single organon, encyclopedia, summa, canon, legal code, or synthesis available to and accepted by all the people or all the peoples. Ours turned out to be a century when science propounded the indeterminacy principle and chaos theory. Indeterminacy rules religion and law when they interact... No single symbol system unites the arts or makes them intelligible to all... This decentered and decentering scene demands attention.”
— Stephen Feldman, Law & Religion, p. 26.

Friday, August 22, 2008

Recombinant Urbanism of Chou Wen-Chung

O ne must search beyond the procedures of a musical practice, discern its original aesthetic commitments, and trace how its tradition has evolved. If one is blessed with a cross-cultural heritage, one must then regard it as a privilege and obligation to commit oneself to the search in both practices.”
— Chou Wen-chung.

The Olympics-related immersion in all things Chinese has been welcome. While commuting to and from work this week I have continued to listen and re-listen to the pieces on the Ying Quartet’s new Dim Sum CD. While the acoustics of a car’s interior are far from ideal for listening to such delicate music, there is a certain poetic rightness in hearing deeply ‘architectural’ compositions while driving through urban spaces, amongst urban traffic and urban pedestrians.

Especially the Chou pieces. With divisi violins and viola on an inner part and cello on a bass line, the balance is critical. The textures imply enclosedness of human spaces, proximity to other individuals, pathways between individuals, purposeful busy-ness of individuals, storeys of office buildings filled with people interacting and not interacting, and contrasts with the non-enclosedness of natural spaces upon which the human spaces abut.

Chou has ‘wiggling’ pitch-bending figures that have a psychological effect of drawing attention to the large amount of pitch-space (or, conversely, the lack of it) that’s available for the part(s) to move in. Some parts wiggle more, and arrogate more space to themselves. Other parts wiggle less, either by choice or because of constraints that arise because of the other wiggling selves.

The voice-leading in the Chou pieces sometimes produces overlapping ascents and descents. There is a consequent ambiguity to the ear, as each voice progresses into and amongst the other voices. What time and what culture, exactly, is this ‘Larghetto nostalgico’ nostalgic for? Is it a hindsighted nostalgia, or was this composition instead premonitory (‘future nostalgia’) for a time and culture that has now arrived?

Voice-leading, overlapping and non-overlapping

The process for Chou’s ‘fusion’ or, as he calls it, ‘re-merger’ of the musics of the East and the West is one of transformation and recombination—a recombinant urbanism. The orchestration and pitch organization of Chou’s string quartet writing involve recombinant Chinese pentatonic and modal structures and Western chromaticism.

We get segmentations of the octave into polysemous ‘cells’, juxtaposed intervals evoking the ‘yin-yang’ dualism that some of Chou’s essays and scholarly articles refer to.

Chou’s melodic phrases are less melodies than a kind of ambience... Are these really characteristic of traditional Chinese music, or are they Chou confabulating a world that never was? I stop at a stop-light and a crowd of people walks in front of my car in the cross-walk. From the harried looks on their faces, they look like they badly need the excellent story-telling of Chou Wen-chung. The ambience of melodies-that-are-not-melodies would do them good.

In order to convey the sonic and instrumental impressions he intends to create, sometimes Chou appends a number of terms such as ‘crystal,’ ‘liquid,’ ‘water burbling,’ ‘leaves rustling,’ ‘whistling’, and ‘air moving’ to his scores. Atoms form molecules, molecules condense into bulk phases of matter, like liquids or solids or gases. Clumps of matter merge and re-merge. People likewise. This is the collectivistic, sonic, social-natural world according to Chou Wen-chung.

Chou-esque ‘re-merging’ of droplet individuals into collective pool

I am concerned with single tones as musical entities, each endowed with nature by its own acoustic attributes and expressive potential. It is these microcosmic entities in a continual and multi-leveled transformation and interaction that produce the coherent flow of sonic events that we call a composition.”
— Chou Wen-chung.

Chou creates a mysterious atmosphere that depicts the “veiled and fractured impression of an ancient city.” Here is a clip, to illustrate the texture and atmospherics that I am describing above:

[50-sec clip, Ying Quartet, Chou Wen-Chung, Larghetto Nostalgico, 1.4MB MP3]

And here is another clip:

[50-sec clip, Ying Quartet, Chou Wen-Chung, Leggeriezza, 1.4MB MP3]

What we get is Chou’s essay on recombinant cultural patterns: reinterpretations of traditional living and of new ways of living in the new China. The voice-leading suggests an ‘anthroposphere’ in which people now live in extensively 3-dimensional spaces, almost like fish or birds have done since time immemorial. The ‘architecture’ of his music evokes a ‘hyperarchitecture’ of public and private space—revealing simultaneous increases in the density of the urban fabric by allowing bigger and higher structures and decreases in the density by enforced public (common) space. Chou carves holes in the existing urban fabrics, by digging underground or swooping to above-ground elevations. He extends the conventional boundaries of the built fabrics. The public plane is extended both above-ground and below-ground—creating a public piano nobile (ground-floor atrium or mall or commons) bringing the public into these spaces by operations on the z-axis (pitch excursions)—he creates new qualitative spatial ‘volumes’.

As I have listened and listened to these pieces, I begin to recognize the importance of spaces that are indeterminate—in-between spaces; left-behind previous motifs and developments; anticipated new motifs and developments only hinted at; unintentional motifs whose future or endorsement (by Chou) is unclear. I think of myself as residing in the virtual spaces that Chou creates (and the Yings re-create); these are beautiful places I would want to live. This is an ethical, thoughtful, recombinant urban society in which anyone would like to be a member, no matter how tenuous or indeterminate our status and rights and future might be. To say our future is indeterminate is, after all, only to confess what has been true for humans always. Please give this Ying Quartet CD a listen if you have not already done so. I am sure you will like it.

Chou Wen-chung was born in Yantai and emigrated in 1946 to the U.S. to train with Edgard Varèse. Chou is noted especially for his trans-cultural East-West idioms, with respect for both cultures. His admiration for the art of calligraphy parallels his sense of music’s textual and architectural aspects. He is Fritz Reiner Professor Emeritus of Musical Composition at Columbia University, where he is also Director of the Center for U.S.-China Arts Exchange. Over the years Chou’s engaging teaching style, combined with his brilliant and infectious enthusiasm, have given impetus to many, many students. For example, composers Zhou Long, Chen Yi, Tan Dun, Chinary Ung, Ge Gan-ru, Bright Sheng, and Jing Jing Luo all received part of their training under Chou.

T he architectural approach offered by Jencks’s postmodernism did indeed seduce many architects, as it provided a sense of liberation against modernism’s over-coded design process, its formalism, austerity, and rationality... However, most postmodern projects deteriorated into theme-parkism... The demise of Jencks’s postmodernism has provided new intellectual space for the repositioning of [architectural] theories, particularly those generated with Europe—such as second-modernism, hyper-modernism, and super-modernism. These can now be viewed in the context of the emergence of increasingly important discourses... particularly in the dynamic cities of the East Asian region.”
— William Lim, Asian Ethical Urbanism, pp. 69-70.