Aaron Steelman interviews George Mason economist Tyler Cowen for the Richmond Fed's Region Focus. Cowen, and his colleague Alex Tabarrok, are responsible for the blog Marginal Revolution.
Cowen has done distinctive work in the economics of culture, here is how he got started:
When I first started learning about economics in the 1970s, economic conditions were very bad. We had sluggish growth and high inflation. My early work tended to focus on macroeconomic and monetary questions because they seemed very pressing and important. But for the past 20 years, macroeconomic conditions generally have been good, and the policies pursued by the country’s central bankers have improved a great deal. This, obviously, is wonderful. But, in a
sense, it has made those fields much duller. Don’t get me wrong: I don’t think all the key problems and questions have been solved, but their policy relevance has become less pressing.
My professional interest in the arts began to emerge about 15 years ago when I spent some time in New Zealand. Their central bank had one of the first versions of inflation targeting, and I was hired as a consultant to come in and look at that. While I was there, I realized that I didn’t want to do just money and macro. So I started thinking about some of the niche areas in microeconomics. One of these was the arts. I thought that this was an area that had been underexplored and where I had some original things to say. I started my work on the topic around 1990. The output came quite a bit later because there was a lot of work involved, more than just doing conventional economics. I spent five or six years writing my first book in the area, In Praise of Commercial Culture, and from there my next few book projects became pretty clear. They were just extensions of that first book. In fact, much of their content came from chapters that had been cut from the original manuscript of the first book.
This selection is more autobiographical than most of the rest. Steelman poses good questions on cultural economics, political economy, avian flu, and more. Cowen has interesting answers.
What about subsidies for the arts:
RF: People who support the National Endowment for the Arts (NEA) and the National Endowment for the Humanities (NEH) claim these agencies are necessary to remedy market failures that are present in the arts. What do you think of that argument?
Cowen: I think that the American way of subsidizing the arts has mostly been indirect, through the tax treatment of nonprofit organizations, through the public funding of universities, through copyright laws. Those policies have done quite a bit to remedy the market failure problems that do, in fact, exist in the arts. But direct subsidies have not been at the forefront of the approach. And those direct subsidies, in purely quantitative terms, are very small. I think the more important issue is how tax reform would affect nonprofits and the arts. To me, that’s a more fruitful debate than how the NEA should spend its money. For instance, the President’s tax commission came up with a proposal to reduce tax deductions for some kinds of nonprofit organizations. In my view, that would be a mistake. I have a Tocquevillean sympathy for the proliferation of intermediate institutions which we call American civil society. I think the strength of those institutions enables us to get by with less government intervention than many other developed nations. So in the long run, if we moved to a truly flat tax system that removed the favorable tax treatment for nonprofits, I think we would harm the decentralized production of ideas and art.
RF: I would like to consider the issue of market failure more broadly. How widespread, in your view, are examples of market failure? And have economists who generally favor a hands-off approach to public policy not adequately addressed those cases where market failure arguments are plausible?
Cowen: I believe market failures are virtually everywhere. The key question is comparative: Where will government do better? I think of myself as a libertarian, and compared to public opinion as a whole, my views certainly are libertarian. But the case for the market is empirical, and I think that there are plenty of cases where it is desirable for the government to do something. One example is the avian flu, which I hope we will get to later. I also think, though, that there are many cases of market failure where the government shouldn’t do anything. In principle, we could come up with programs that would improve social welfare, but in practice those programs would be difficult to implement effectively. Also, I think there is a good argument for the notion that a government can do only a limited number of things well. In the big picture, you have to choose priorities, and that means you have to let some share of market failures slide.
Arts subsidies are the subject of Cowen's upcoming book: Good and Plenty: The Creative Successes of American Arts Funding (due in May from Princeton University Press)
I learned about this from Marginal Revolution .
Correction to title of Richmond Fed's publication, added link to source for story, subsidies text, note on Cowen's book, Mar 2.
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