Performing Arts: The Economic Dilemma. A Study of Problems Common to Theater, Opera, Music and Dance, by William J. Baumol and William G. Bowen

October 1, 1967

Performing Arts: The Economic Dilemma. A Study of Problems Common to Theater, Opera, Music and Dance, by William J. Baumol and William G. Bowen.  New York: The Twentieth Century Fund, 1966. 582 pp. [$7.50]

It is a thesis of this study that the root of the cost pressures which beset the arts is the nature of their technology. For the economy as a whole, productivity (output per man-hour) has risen at a remarkably steady rate of roughly 2 percent per year over the last half-century, and there is every reason to expect that the discovery of new knowledge and the invention of new techniques of production and capital accumulation will yield comparable increases in production per man per hour in the future. But the technology of live performance leaves little room for labor-saving innovations, since the end product is the labor of the performer. While increases in money wages in an industry such as auto manufacturing are offset, either partly or in full, by increases in productivity, the corresponding increases in salaries in the arts are directly translated into higher costs. The more successful such industries are in keeping up the rate of increase in their productive efficiency, the more will the cost of the living arts rise relative to costs in general.

—Page 390


. . . this study . . . was conceived as an undertaking parallel to the inquiry of the Rockefeller Brothers Panel, the one concentrating on policy recommendations, the other on the economic underpinning . . .

A result of this study, it may be hoped, will be a raising of men's sights all along the line. To know the dimensions of a problem is the first step in dealing with it; and one cannot but believe that the American people, with their vast resources and with their readiness to see the arts as crucial to a society worthy of their strength, will assure something more than the precarious and unexamined status that has heretofore been the lot of most artistic institutions. Without wanting to apportion the economic charge, I suggest that the analysis and the figures contained in this report point the way to a considerably larger contribution by government. . . . by a government program that neither limits the freedom of the arts nor diminishes their quality.

From the Foreword by AUGUST HECKSCHER

Following are three reactions to a significant and recent appraisal of the economic difficulties faced by the live performing media. An experiment in team reviewing, the individual sections have been written by an economist, a sociologist and an orchestral conductor. There has been no attempt to bring their views into alignment.



In their Performing Arts: The Economic Dilemma Professors William J. Baumol and William G. Bowen of the economics department at Princeton University provide a thorough and rigorous analysis of the economic forces which have kept vital areas of our cultural life under continuous financial pressure. Their analysis is convincing as is their projection of financial difficulties and deficit operations for performing-arts organizations into and throughout the foreseeable future.

Although the book has been written for a general readership, the empirical and theoretical analysis contained within it meets the very highest critical standards of the professional economist. As a side thought, the book might very well be taken up by social scientists as an ideal example of how significant and original research can be made accessible and meaningful to a wide public. Baumol and Bowen respect the intelligence of the nonprofessional reader and by avoiding jargon for its own sake and by careful exposition—the extra paragraph or two to explain a statistical procedure or a concept in economic theory—they present virtually all of their arguments and findings intelligibly yet with no loss in scientific rigor.

I will indulge myself with one minor quibble over the authors' popular formulation of the material. Baumol and Bowen place a great deal of emphasis on the statistical aspect of their research. They have in fact compiled an impressive record from historical sources and their own current surveys, and much of the material such as data on the income sources of artists is of great intrinsic interest. Yet the stress given the empirical work throughout the text distracts attention from what is really the most significant aspect of the study, the authors' theoretical formulation of the problem. I have a feeling that some readers may come away from the study with the hope that another set of statistics or another reading of the data might suggest a brighter future for the live-performance industry or an alternative interpretation of its financial past. Such hopes, however, would be misplaced. The difficulties of the performing arts are inevitable given the technology of live performance—there is no effective way to increase the productivity of a string quartet in concert hall performance—and the facts of economic growth—as productivity increases elsewhere in the economy wages increase and performers will be discouraged from professional careers in the arts unless their compensation keeps up to some extent with the general level of wages and salaries. Either some way must be found to finance the increasing salary burden or the areas of live performance will wither away due to a dearth of talent. It is this analysis of the fundamental economics of live performance that gives the study its strength. The analysis is of great general importance—it applies as well to the case of "live" education—but I fear that it has been dominated by the stress given the statistical materials. The data, after all, are fragmentary while the theoretical argument even in isolation has enormous force. I take it as my duty to alert the reader to this organizing logic in the study. (The theoretical analysis is an original contribution in itself and has been published separately by Baumol as "Macroeconomics of Unbalanced Growth", American Economic Review, June 1967.)

Technological conditions are then the cause of the problem, and in their discussion Baumol and Bowen compare productivity in live performance with productivity in the general economy. However, productivity increases averaged out over the entire economy may not be entirely germane to the matter. Productivity can affect individual sectors in enormous spurts and it can be argued that the problems of the performing arts are aggravated by the fact that the live-performance areas are adjacent, as it were, to areas such as broadcasting, films, and recording which are characterized by incredible increases in effective productivity (that is, increases in audience size per performance-man-hour). Each new broadcast channel, each improvement in recording or broadcast fidelity, each improvement in record or film distribution worsens the relative position of the live arts. One question which naturally arises is whether these "substitute" areas are at the end of their productivity spurt or whether more years of intensified pressure from this source are in store for the live performance areas. Baumol and Bowen did not need to deal with conditions in these closely-related areas in order to make their main point, but it seems to me that their basic analysis can be supplemented usefully in this direction. The cost problem is intensified by the fact that compensation for ancillary personnel is largely determined by the easy economic conditions in the prosperous progressive industries and that these costs are directly passed on to the live performance fields. Similarly, as the broadcast and recording areas develop an artistic media they bid with enormous leverage for the customer's dollar.

The interrelationship between the areas of live performance and the more progressive media provokes some questions of a hopeful cast: can income derived from the progressive areas ease the financial pressure on the individual performer, and can the revenues from the progressive areas underwrite live performances? Baumol and Bowen provide some information touching on the first question. Their data on individual incomes shows that revenues from outside sources—in many cases connected with the progressive sectors—are an important supplement to incomes earned from live performances. This adaptation, although it is associated with the cost problem of live performance, does ease the economic problem of the performer and I think that it is fair to argue that a fall in the ratio of live performance income to total earnings (where total income is at an adequate level) may not reflect an unhealthy situation. The second question is perhaps more fundamental in nature. To what extent can the live areas share directly in the good fortune of the more progressive areas? After all they are not entirely independent of one another in an artistic or functional sense. Can the "subsidy" needed to support live performance come more or less directly from the adjacent progressive areas as it does already in the case of individual performer's incomes? One possible approach, from which many will recoil, would have the performing arts transformed into a minor league, feeding talent into the progressive areas. To some extent this is already happening with voluntary (guilt?) grants flowing from major firms in the progressive areas to support arts centers and non-commercial enterprises. It is doubtful, however, that one would want to see a formalization of this behavior. An alternative approach would involve taxing revenues from the progressive sectors to provide support to the performance areas (a plan along these lines is proposed for non-commercial television). The "tied funds" approach, although equivalent in most respects to direct government assistance, has an aspect of appropriateness that might mean political acceptability. Arrangements of this sort might substitute for the explicit subsidy; further studies and some concrete proposals are needed.

The authors consider the question of why the "cultural explosion" has failed to support the performing arts; here I find their analysis somewhat less satisfactory. They demonstrate correctly that much of the evidence for a cultural explosion results from a wishful misreading of the data. After correcting for changes in the overall price level, incomes and population over the years, they show that we are left with something considerably less forceful than an explosion. The data indicate that as individual incomes increased, more in total but less of each additional dollar flowed toward live performance. I would have hoped for extensive comment or speculation on this critical aspect of observed behavior. Why, in fact, have the performing arts not captured more and more of the increases in personal incomes if the arts are, as one might expect a priori desirable and fulfilling goods. One possible explanation, suggested by the survey data, is that economic growth has lead to no significant widening of the audience for live performance; that is, live performance is still a socially-exclusive and geographically-restricted activity. The sociological inquiry into this phenomenon remains; one can speculate that there may yet be a cultural explosion in the near future if the pattern of consumption alters to catch up with the growth in real income or if the arts find the content, style and repertoire to attract a broader audience from that of the present, which is predominately urban and professional in composition. However, the authors' survey data for England indicates that this may be a vain hope; audience characteristics there differ only slightly from those here. One may also speculate that "improvements" in the nation's cultural life have, in fact, occurred but that these improvements are associated primarily with the progressive areas. Defining the relationship between the total cultural life of the nation and economic growth is, of course, a far broader question than the one to which Baumol and Bowen limit their study. Their analysis does, however, lay the basic ground work for such inquiry.

Finally we come to the matter of subsidy. Assuming no delayed cultural explosion, the performing arts will continue as a deficit operation and, after all short-run tactical expedients1 are exhausted, the dignified survival of live performance will depend upon its ability to attract financial support. Furthermore, unless there are radical changes in the institutions of private giving, the support must increasingly flow from public sources. Baumol and Bowen inject a note of hope into the matter; for, although projected deficits may provoke the anxiety of individual managements, they are of a negligible order of magnitude on the scale of national economic policy. Government subsidy that would be ample would hardly disrupt the nation's finances, although the stereotyped reactions to subsidy legislation might suggest the opposite. In passing, Baumol and Bowen recite some formal economic arguments that might be marshalled in support of such legislation. These arguments might be useful in attracting some local support, but ultimately the issue will be resolved in terms of values that go beyond the economic. There are dangers in the purely economic arguments (one such is that an active local cultural establishment is necessary to attract high-level industry to an area). Someone can always propose a more pressing or productive use for funds (slum clearance, cancer research, highway construction). One would not like to wholly rely on the purely quantitative arguments—though one should use them when one can—on a matter so germane to the quality of life. Baumol and Bowen point out in their concluding comments that the issue must rest on a determination to support such a basic value. They do not propose precise plans for developing support or for implementing subsidy programs; controversies on this matter will emerge.

In looking towards the future, one notes that the performing arts have developed as a relatively exclusive aspect of the nation's cultural life. It might be hoped that a support program might be designed that could lead to a broadening of the audience. The survey results indicate that a slightly more diverse group than the typical audience attends the free or low-cost performance; we can speculate on what changes in audience composition might occur if a wide range of such programs were made available and accessible. The study points the way towards such speculation and also towards speculation on how performance and composition itself may alter in the future to reflect changing technological and cost conditions. A significant entry in the economic literature, the Baumol and Bowen analysis suggests a range of constructive solutions to the problem it defines and reveals. We can also expect that their theoretical analysis of the economics of performance will provoke a review and reconstruction of the history of artistic production.

New York University


Baumol and Bowen are excellent economists. They have here performed a major task by the very fact that their professional skills have been put to a subject sadly lacking in precise study and documentation. Furthermore, in the 20th Century Fund they have found a sympathetic patron-sponsor, especially in the person of the Fund's director, August Heckscher, who for sometime past has been in the front rank of those concerned with the fate and the place of the arts in our time.

Now, there were three major methodological roads open to the authors. One could have been a mere descriptive aggregate of fundamental data, organized so that others could interpret for their own purposes. Such is the model of the Census Bureau, or in the field of consumer expenditures, the 18 volumes of the Wharton School of Finance. In the present case, this aspect alone provides a valuable service. See the 34 tables and 85 appendices that comprise the last 135 pages.

But the authors go beyond quantitative materials as such, and use their descriptive data to provide insights into the elements of the arts as a social process, and to a lesser degree also into the interaction of these elements. An example is their "rationale of public support" (pp. 369-386), an excellent summary of arguments that goes further than purely economic considerations. Here is expressed a concern with future generations and an acknowledgment of the broad educational contribution of the arts.

The authors cannot be criticized for remaining largely within the secure confines of their discipline. However, a sociologist concerned with the arts feels uncomfortable that nowhere is there a significant attempt to conceptualize the relationship of an economics of the arts to other dynamic constituent factors, whether they are educational, sociological, psychological, historical, or aesthetic. And this is where the authors commit their major error. Although it moves into interpretation beyond the economic scope, by failing to provide such a foundation the book, for all its contribution, proceeds on dangerous ground, perhaps even constituting a disservice to the cause of the arts.

Another possible approach would have been to tie their economic data to a hypothesis. This they do, implicitly, using the hypothesis that the economic picture provides the valid interpretation toward a judgment of the "culture boom." See all of chapter two. Of course, the "cultural boom," and whether it is a reality, can take its place as one of the "implications" of the economic picture. Yet there already exists a sizeable literature on this subject and one looks in vain for evidence of the authors' acquaintance with it. It does not do to assume such a grasp from their prior work with the Rockefeller report, for that report is itself singularly lacking a theoretical frame, and is, therefore, largely a reassertion of familiar observations. We can surely expect here some reference to Edward Shils, or Dwight McDonald, or Clement Greenberg, or Jacques Barzun, or Leo Lowenthal, or the volumes edited by Norman Jacobs and by Rosenberg and White. Even De Tocqueville could have been resurrected profitably as a starting point. Instead, the authors call upon Alvin Toffler for an extensive quotation (with some of their own materials later bearing him out), a study of the Stanford Research Institute, and a popular piece from the New York Times in 1964. Critical of the "boom," the authors rely on Harold C. Schonberg of the Times, and statements by two Congressmen at the House Hearings. The level of the latter is indicated by Rep. David Martin of Nebraska: "I attended the symphony concert last night, a very fine performance, but I was quite surprised, in view of all this testimony that we have had as to the great interest in the arts, that the opera house was not sold out by quite a number of seats." Schonberg himself, after making the most of the qualitative argument for years in his columns, and shunning the quantitative aspects of the "boom" as unrealistic, now finds that the statistics of the Baumol-Bowen volume support his doubts, and are therefore completely acceptable. See his review of the present volume in the Times, December 4, 1966.

In quoting from the Rockefeller report, which is recommended as a "more balanced" view, the authors had a chance to expand from the Panel's quite accurate statement, that "Almost all this expansion is amateur." They do not, however, move from this into what might have been some theoretical position on the dynamic relationships between amateur, community, professional, and educational elements and institutions in the arts.

For example, among the factors that cannot be minimized in any balanced discussion of artistic health of the nation is the activity in the high school and on the college campus. With respect to high schools, the authors display a singularly disappointing knowledge of what the past half century has achieved. The only discussion takes place in the context of Federal funds. They present as one rationale for such support, "It is felt that if children and adolescents are not exposed to artistic performance during their minority, by the time they become adults it will be too late. The arts must be made available early, while tastes are still being formed and behavior patterns developed." Then comes an astounding paragraph:

It should be made clear that while the logic of this argument is acceptable enough, it rests on an allegation of fact which has yet to be tested: the hypothesis that taste for the arts is instilled by early experiences. No one seems to have any overpowering evidence that this is so. No one has tracked down the children who attended the New York Philharmonic's young people's concerts which were given continuously from 1898 . . . until 1939, or the WPA performances, to see whether they subsequently showed greater interest in the arts than persons coming from otherwise similar backgrounds."

But would we put the same question to a taste for literature, science or learning itself? Whether or not those specific studies have been made, at this late date in human history the "allegation" indeed has a solid base in education theory and human experience.

Concerning the American university, the volume is more perceptive. A brief discussion concludes with the view of a former president of Indiana University that in our time "educational institutions have taken over the role of sponsorship for the arts that was once played by the German princeling. It is even possible that the university-sponsored performing group will be the pattern for the future." The campuses have, say the writers, provided new sources of livelihood for composers, choreographers, writers and other creative and performing artists. The evidence they cite on these points, is related to the economics of the arts in a most direct way, and might well have entered the discussion of Chapter II on the "cultural boom."

In other discussions as well, the authors go beyond a mere statistical approach, yet never far enough. A case in point is the discussion (p. 228) of the shortage of capable string players for American symphony orchestras. They point out that the shortage exists abroad as well as here, but they are surely confused in attributing the cause of the shortage to the international "mobility of skilled performers." The facts are that while mobility exists for opera singers, who often must go to Germany to find steady employment and experience, there has been no comparable movement of string players to England or the continent. A few years ago a Tanglewood symposium was devoted entirely to this issue of shortage, and your reviewer pointed to sociological reasons, having much to do with the Americanization process of Eastern European immigrant families and their class aspirations in the 1910's, and 20's. These goals contrast strongly with the aspirations of satiated, more affluent suburbanites of America today, or with the nature of the new poor represented among the Negro.

A last illustration of the limits and strengths of the volume is to be found in Chapter 4 on the profile of American audiences as derived from more than 29,000 replies to questionnaires at 153 theatre, orchestra, opera, dance, and chamber music performances. Elements of the profile are carefully tabulated on difference in attendance by sex, occupation, education and income. There is found to be a heavier proportion of males than expected; the important age grouping is 20-24 years in age; by comparison with white collar groups, and especially compared with professional persons few workers attend; audiences are "exceedingly well educated" (55% of the men has some post-college education); and audiences are very well off financially. Later we are told that only 3% of the total population makes up this profile, for that is the number that attend even one concert annually.

This material is valuable, and well presented. It should, on the surface, provide some expectations of hope for tomorrow. The 20-24 age group will carry its values into middle and late adulthood as new youth becomes active. The white collar group is growing and as Daniel Bel notes in a recent issue of The Public Interest, now constitutes more than half of the work force. The well educated segment increases in number and proportion. Income goes up, even as leisure hours increase.

But these facts and hopes do not touch the most significant aspect of the discussion, an aspect that takes us beyond economics alone. It is, indeed, the central fact that underlies the question of "mass culture"—a concept that differs from "cultural boom" and is more fundamental. This is the fact of accessibility to the arts. Who are the 3% who attend the one or more concerts per year; who were they a generation and two ago? Quality in the arts we have on a high level; but this is an issue that cannot be approached by social scientists, nor by cultural critics who refuse to note what we were a generation ago, who persist in comparing the best of older eras with the mass product of today, who quote each others books without going to all parts of the country to observe the hunger and sophistication of audiences everywhere for quality productions. Quality is a matter of going back with our ears, but the availability to the arts that is the keynote of democratic art can be approached by our history; the arts provide a major historical clue to class changes. The authors touch upon these issues, but back away in this crucial paragraph:

Before presenting the results of our survey we shall comment briefly on one important audience characteristic which, for a variety of reasons, we did not investigate directly—ethnic composition. Several persons experienced in the management of performing organizations emphasized that this is a crucial characteristic. As one commented, musical performances are often in trouble in a city without a large German, Italian or Jewish population. A Jewish holiday can decimate the audience . . . Negroes, on the other hand, attend infrequently . . . these are only casual observations, and we have no way of substantiating them—let alone any way of separating out the effect on attendance of ethnic characteristics per se from the effect of income.

Granting that the authors cannot, in an economic inquiry, be expected to pursue a large range of social changes that enter an interpretation of the arts in our society, this reviewer's concern is that too many readers—even as a Schonberg—will interpret too much from this excellent and workmanlike work in economics. In some cases, having been suspicious of artistic quality, they now have evidence of even quantitative realities. Having moved, with their discussion of "boom" into a difficult area that cannot be handled by economics alone, or even the social sciences as a group, the impact of the volume may be to circumscribe future debate. This would be unfortunate. For the facts resulting from this important study are well worth emphasizing. Since the work of Toffler is quoted as an extreme view, it may perhaps be said that without a mountain of surveys and detailed inquiries, Toffler's explanations for the high cost of artistic creation and performance parallel those of Baumol and Bowen, but they are more dramatically argued.

The Twentieth Century Fund and August Heckscher are to be congratulated for having made this volume possible. Some six years ago they also sponsored an important work, On Time, Work and Leisure, by Sebastian De Grazia—a volume that cast some doubts on whether America has the values to permit a significant use of its new social and technological resources. That was a large challenge, brilliantly stated by a political scientist; now the economists have put an equally impressive challenge to us in respect to one of the increasingly important prototypes of leisure—the arts. Let us hope that the impact of such books is not to discourage us from the necessary leadership, but to create a new resolve. Baumol and Bowen state it well in the last sentence of their book, "Fortunately, the very rise in productivity in other sectors of the economy which lies at the heart of the problem will also provide society with the wherewithal to pay the mounting bill if it is determined to do so. It is upon the strength of that determination that the future of the live performing arts depends."

University of South Florida


A book review may be a precis of its contents; or it may be a criticism, that is a careful weighing and evaluating of the contents followed by a reasonable judgment. Better hands than mine have already attempted the former. As for the latter, I cannot in all fairness do more than to point out what to me are certain lacunae, omissions which I note from a purely personal standpoint based on my own experiences, needs and feelings. Perhaps just because of these personal feelings, the following comments may carry somewhat more weight than any dispassionate attempt to sift the overwhelming amount of material provided and come up with a simple "yea" or "nay".

This book is a strange compilation of facts, conjectures and conclusions purporting to mirror the situation of the performing arts across the country, comparing this situation at intervals with a similar state of affairs (by way of reassurance) in Great Britain. The result is most convincing. The conclusions are reached by means of charts, graphs, comparisons and statistics based on many months, if not years, of research, questionnaires and interviews. At the end the authors agree that the arts will always require outside support if they are to continue to exist. This fact I believe everyone active and vitally interested in the arts has always known to be true. The hope for such support—barring new legislation or some drastic change in present statutes—depends as in the past upon the ability of each particular organization to find its own support from the various sources at its disposal.

The principal sources for statistical information given in the report are the major opera and ballet companies, and the major metropolitan orchestras. And quite rightly too—up to a certain point. However, as music director of one of this country's more active chamber orchestras, I can only deplore the fact that the economic plight of this category has not merited more than the most casual nod by Mr. Baumol and Mr. Bowen. Now this is hardly the place to try to analyse the problems that beset chamber orchestras across the country, nor would I dare speak for all of them. Each has its special function, its reason for existence and its particular artistic aim. Furthermore each has its particular financial problems, often depending on a specific geographical location and position within a community.

Certainly, we in the field of the chamber orchestra can profit greatly from some of the conclusions reached in the report, and we should do so. Yet it must be hoped that the philanthropist who has read this book and who may be approached by organizations from the world of chamber music will not be dismayed to find that we do not fall into one of the neat, ready-made pigeonholes listed in the report. The categories discussed have been arbitrarily based on the size of the annual budget of the orchestras, but they do not take into account the type of service offered in each case. Because of this, on more than one occasion it has been my sad personal experience to discover that we could not qualify for assistance since we did not fall into one of the established groups (i.e., the American Symphony Orchestra League).

The authors, being economists, state that they try dispassionately to analyze the problems in the performing arts "much as one would study any industry." This they have done well. But have their conclusions brought them to the realization that philosophically this is not only an unproductive but even a dangerous path to follow? For the arts are not industry. The authors also tell us that they have used questionnaires on audiences and held interviews with "producers, managers and choreographers." The performing artists themselves are notably lacking from this listing. If one accepts the authors' premise that the performing arts, although theoretically available to everyone, are actually patronized by only a very small segment of our population, one must be somewhat dismayed when they speak of orchestras that they ignore all but the major orchestras because the attendance at other concerts by professional groups accounts for such a small percentage of the overall attendance.

In the chapter entitled "On the Rationale of Public Support" the authors speak out loudly of hopes in their basic reasons for such support, and we in the chamber music world hold these hopes as well.

In closing may I add one further reason for public support, not mentioned by the authors, but to me is the most important of them all? During World War II an accelerated course in Art History was given at Yale University for young men about to go overseas. The professor concluded his last lecture with these words: "never forget, gentlemen, that the arts are the only tangible proofs we have that mankind is not made for destruction!"

Musical Director
The Clarion Music Society


1Baumol and Bowen show that longer performance runs for certain activities and more effective ticket pricing can provide some temporary relief from deficit pressure and management should be aware of such tactics to increase performance efficiency. Popularizing the repertoire may also yield increased revenues, but, of course, at the cost of discarding artistic values.

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