Economic Analysis of Artists' Behaviour

ECONOMIC ANALYSIS OF ARTISTS' BEHAVIOUR: SOME CURRENT
ISSUES
David Throsby
Dalloz | « Revue d'économie politique »
2010/1 Vol. 120 | pages 47 à 56

ISSN 0373-2630
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Economic analysis of artists’ behaviour:
DE LA CULTURE
some current issues
David Throsby*
Artistic labour is characterised by features that combine to set artists apart from other
• L’ÉCONOMIE
workers when viewed in terms of their labour market behaviour. Here, the value of a
work of art can be simplified down to two essential elements – the work’s economic
value, and its cultural value, measured in terms of criteria of artistic worth such as
aesthetic, spiritual, symbolic, and other types of value. In regard to the weights on
economic and cultural value in the objective function, the model will allow for a range
of financial and artistic motivations as stimuli to creative work. At one extreme, a
unitary weight attached to cultural value and a zero weight to economic value would
indicate that the artist’s aims relate purely to the quality of the artwork itself, with
complete disregard for its financial prospects. At the other extreme, a unitary weight on
economic value and a zero weight on cultural value would imply that the artist is in the
game solely for the money. The majority of artists in reality probably lie somewhere
between these two polar cases.
artist - economic value - cultural value - labor supply - cultural industries
Le comportement économique des artistes :


de nouvelles questions
L’activité artistique présente des caractéristiques qui peuvent opposer le profil de l’ar-
tiste à celui des autres travailleurs. Son activité s’organise en fait autour de la création
de deux types de valeurs : une valeur économique liée au revenu monétaire qu’il peut
escompter retirer de son activité à des fins de consommation ; et une valeur culturelle
identifiable en termes de critères artistiques ou encore, esthétiques, spirituels ou sym-
boliques. Selon les pondérations accordées à ces deux types de valeurs dans sa
fonction-objectif, on peut expliciter le rôle relatif des motivations économiques et artis-
tiques dans son offre de travail. Il existe alors deux cas extrêmes, celui où le compor-
tement répond exclusivement à des motivations artistiques, et celui où son comporte-
ment s’explique exclusivement par la maximisation de son revenu monétaire. En fait, la
majorité des artistes se situe entre ces deux extrêmes : s’ils sont motivés par une vision
créative, ils savent qu’il leur faut aussi satisfaire des contraintes en termes de revenu
monétaire.
artiste - valeur économique - valeur culturelle - offre de travail - industries culturelles
Classification JEL : J01, J22, J24, J28, Z10, Z11.
*
Professor of Economics, Macquarie University, Sydney, Australia. Email:
david.throsby@mq.edu.au
REP 120 (1) janvier-février 2010

48 ——————— Economic analysis of artists’ behaviour: some current issues
1. Introduction
The role of artists as economic agents has been a continuing topic of

interest in cultural economics ever since the classic work in the field by
Baumol and Bowen [1966] drew attention to the relatively low earnings and
high degree of income variability that is a universal characteristic of artistic
employment. A number of studies in various countries over the years have
elaborated the nature of labour markets in the arts in both theoretical and
empirical terms [Filer, 1989; Throsby, 1992; Wassall and Alper, 1992; Karhu-
nen, 1998; Jeffri and Greenblatt, 1998; Benhamou, 2000; Rengers, 2002;
Greffe, 2002, Chs. 3-4; Alper and Wassall, 2006]. Increasing attention has
been focussed recently on the changing nature of artistic careers as labour
markets generally become more liberalised and as opportunities for the
deployment of creative skills open up in other parts of the economy [Men-
ger, 2006]. A particularly intriguing topic has been the psychic income cha-
racteristics of artistic work, leading to the testing of hypotheses concerning
the preference patterns of artists in making their labour supply decisions
[Throsby, 1994; Cowen and Tabbarrok, 2000; Robinson and Montgomery,
2000; Abbing, 2002].
Looking back over this considerable amount of research into the econo-
mics of artists’ behaviour, and considering the ways in which the working
environment of professional artistic practice is changing in the contempo-
rary world, we can identify some issues of current interest in this field that

deserve closer attention. In this paper I review some of these issues, looking
particularly at creativity and talent as determinants of artistic output, how
artists fit into broader concepts of the “creative economy”, and the influence
of evolutionary change in labour markets on artistic practice. The paper
concludes with some implications for cultural policy. First, however, it is
necessary to consider the fundamental characteristics of artistic work and
how it might differ from labour in other occupations and in other parts of the
economy.
2. The nature of artistic work
Artistic labour is characterised by three features that combine to set artists

apart from other workers when viewed in terms of their labour market be-
haviour. The first is that financial rewards to professional artistic practice are
generally lower than in other occupations with otherwise similar characte-
ristics (i.e. requiring similar levels of education and training, etc.); thus many
artists’ labour market profiles exhibit multiple job-holding. Typically artists
allocate their working time between three types of jobs, corresponding to
three separate labour markets: the market for their creative work (including
all preparation, practice, rehearsal, research and similar time); the market for
David Throsby ———————————————————————————————————————————————————————— 49
“other arts-related work” such as teaching in their artform (especially rele-

vant to visual artists, instrumental musicians, singers and dancers); and the
non-arts labour market (for actors this seems inevitably to involve work as a
taxi-driver or a waiter in a restaurant).
Studies of artists’ time allocation between these three labour markets
have generally shown a preference ordering placing the core creative prac-
tice as the most preferred line of work, followed by arts-related work, with
non-arts work being undertaken simply as a means of providing a survival
income [see, for example, Throsby and Hollister, 2003]. It has been found
that in the majority of cases, the factors inhibiting artists from working
full-time at their core practice have been overwhelmingly time- or income-
related; i.e. output from the core practice does not command a high enough
price to provide an adequate return (writers, visual artists, composers, etc.)
or work in the preferred field is not available (actors, dancers, musicians,
etc.).
The second feature of work as an artist is the level of variability of artistic
earnings, which is generally higher than in comparable occupations, making
an individual artist’s attitudes to risk an important determinant of his or her
labour market participation. There is no obvious direction in which this
determinant operates, since it depends on preferences that are likely to differ
widely amongst individuals; those who are risk averse will be deterred from
entry into the artistic workforce, whereas others may be attracted by the
prospect of a winner-take-all lottery in which the prize is superstardom.
Superstars are artists such as rock musicians and film actors whose incomes
are greater than those of their competitors by a much larger differential than

marginal productivity theory would suggest. Rosen [1981] attributed this
phenomenon to two features of the demand for superstars’ services. First,
since consumers rationally prefer one good performance to two mediocre
ones, particular types of services (such as rock music) are imperfect substi-
tutes on the demand side, leading to convexity in sellers’ returns and to a
skewness in the distribution of earnings. Second, scale economies in joint
consumption allow relatively few sellers to supply the entire market. Add to
this the possible “herding” behaviour of consumers, who follow the lead of
others in making their demand decisions, and a plausible explanation as to
why some performers command excessively high rents is obtained.
The third aspect of artistic occupations that distinguishes them from
others in the labour force is the role of non-pecuniary motives in determi-
ning artists’ time allocations. Unlike the typical worker whose behaviour is
represented in the theoretical models of traditional labour economics, artists
in general do not regard work as a chore whose only purpose is to earn an
income. Rather, their commitment to making art means that they have a
positive preference for working at their chosen profession, and empirical
evidence indicates that they often forgo lucrative alternative employment in
order to spend more time pursuing their creative work. This can be model-
led as a time allocation problem where the worker has to choose between
preferred but less remunerative work in the arts on the one hand and less
desired but better-paid non-arts work on the other. The choice is subject to a
minimum-income constraint, necessary to prevent starvation, a condition
often romantically associated with artists but rarely observed in practice.
Such a “work preference” model of labour supply yields predictions of be-

haviour at variance with the usual textbook construct – for example, a wage
rise in the non-arts occupation may induce less work in that occupation,
because it enables more time to be devoted to the arts, a phenomenon akin
to the backward-bending supply curve of labour in the conventional model.
3. Creativity and talent
Efforts to dissect the elements of an artist’s creative process are by no

means new, especially in the fields of art history and art theory, and exten-
ding into psychology and even neuroscience. From the viewpoint of econo-
mics, probably the most appealing approach is to see the process in
decision-making terms. If the creation of artistic work is a purposeful activity
and not simply some random unmeditated act, then it must be possible to
specify some objective or set of objectives that the activity seeks to achieve.
If so, it is but a short step to identifying an objective function, at least in
theoretical terms, and thence to specifying the variables whose levels the
decision-maker has to choose in order to pursue the given objective(s).
Whether the objective function is couched in optimising or merely “satisfi-
cing” terms, it is likely to be limited in some way, so that the specification
process can follow the familiar path of identifying constraints on the objec-
tive function, and the decision model is formally complete. The variables in

the model may be fuzzy, the relationships between them may not be able to
be specified in any estimable form, and the whole model may in reality be
unstable, contingent and incapable of prediction. Nevertheless, the core of
the model relating to the essence of the decision under study can in its own
terms be made logically consistent and hence can provide, in the manner of
such abstract theories, at least an interesting view of the production process
under study.
Artistic works can be interpreted as stores of value, where value is inter-
preted as a multidimensional phenomenon. It can be suggested that the
value of a work of art can be simplified down to two essential elements – the
work’s economic value, represented for a given consumer as the amount of
a numeraire good that he or she is prepared to give up to acquire the work,
and its cultural value, measured in terms of criteria of artistic worth such as
aesthetic, spiritual, symbolic, and other types of value, all of which may or
may not be capable of being assessed, or amalgamated into a single sum-
mary indicator. If the attribution of these two types of value to artworks is
accepted, the production of the artworks can be interpreted as a process of
value creation. If, as noted above, this is a deliberate and not a random
occurrence, creativity can be modelled as a directed process of value crea-
tion. In the rational economising framework, the artist’s objective could then
be stated as one of maximising a weighted function of the economic and
cultural value of the artwork or works created.
Such a model requires a specification of the variables whose level the
decision-maker must choose. In the simplest version of this model [Throsby,
David Throsby ———————————————————————————————————————————————————————— 51
2001, Ch. 6], the decision variables can be specified as the amounts of la-
bour the artist chooses to allocate to different tasks or to producing different
types of output. Such a proposition conceals some potentially strong as-
sumptions about the very nature of the creative act. The artist in whatever
artform allocates time to different tasks involving thinking and doing. Some
require imagination, others the application of technical skills, in still others
these ingredients cannot be separated out; all of them come together to
constitute creative activity. For the mediocre artist large amounts of time
spent at these tasks will still yield work judged to be of little economic or
cultural value; for the so-called genius, the reverse obtains. Thus differences
between artists in the location of the relationship between time spent and
value produced are, in this construction, a measure (other things being
equal) of differences in creativity, in much the same way as in microecono-
mic analysis differences between production functions in input/output space
measure differences in technology.
Clearly the objective function in this model would, as in most decision
models, be subject to a set of constraints. In line with our earlier observa-
tions, it is not difficult to see that the most important constraint on the
artist’s time allocation is likely to be a financial one. Like anyone else artists
have to live, and unless they are fortunate enough to have a wealthy spouse,
a substantial inheritance, a beneficent patron, or an arts council grant, they
must earn an income in order to pay for food, clothing and shelter. Thus the
income constraint in this model can be entered as a minimum constraint on
the economic value of the work or works produced.
The income constraint may affect the production of value directly in a

number of different ways. It may shift the orientation of cultural production
towards forms of output that have more income-earning potential than
those which would be chosen in the absence of the constraint. For example,
a playwright may have no choice but to write for a small cast or a single set
in order to ensure the work will be performed and the required minimum
income earned. Further, the constraint may mean that less costly inputs
have to be used by the artist compared with those that would be employed
if the constraint were absent. Thus, for example, a painter or sculptor may
have to limit the materials used for a particular work to those that can be
afforded, so that the net financial outcome will satisfy the minimum income
requirement.
In regard to the weights on economic and cultural value in the objective
function, we can readily see that the model will allow for a range of financial
and artistic motivations as stimuli to creative work. At one extreme, a uni-
tary weight attached to cultural value and a zero weight to economic value
would indicate that the artist’s aims relate purely to the quality of the ar-
twork itself, with complete disregard for its financial prospects. Even so, the
minimum income constraint might force a type or quality of work that in
unconstrained circumstances the artist would avoid. At the other extreme, a
unitary weight on economic value and a zero weight on cultural value would
imply that the artist is in the game solely for the money. The majority of
artists in reality probably lie somewhere between these two polar cases,
driven by their creative vision but not unaware of the incentive provided by
the fact that their vision may yield a financial return. In these circumstances
the creative process is depicted as one where the artistic impulse is media-
ted by the economic circumstances and aspirations of the artist.
A formal presentation of a more precisely articulated version of this model
has been put forward by Bryant and Throsby [2006] in a study which inclu-
des some empirical estimation. The study raises the issue of the distinction,
if one exists, between creativity and talent. The latter concept is widely
referred to by artists, critics and consumers as a means of differentiating
between good and not-so-good artists. In common usage, talent relates as
much to technical skill and proficiency as to creativity, the latter being a
more complex quality that is correspondingly more difficult to measure.
4. Artists in the creative economy
In recent years the idea of the “creative economy” as a dynamic sector

within the larger macroeconomy has begun to take hold. It has its origins in
the proposition that creativity, whether in art, science, technology or com-
merce, is a key factor in generating economic success both for individual
businesses and for whole economies. At its broadest, the creative economy
extends well beyond the cultural sector, but there are grounds for seeing the
cultural industries – those industries producing cultural goods and services
– as being an essential component. If this is so, and if cultural goods and
services comprise importantly the output of creative artists, the question is

raised of the actual and potential role of artists in this new economic envi-
ronment.
A number of different models have been put forward to systematise the
structure of the cultural industries, with varying degrees of emphasis on the
economic and cultural value that these industries produce [Throsby, 2008a].
One model that places creative artists at the centre of the cultural industries
is the so-called “concentric circles model” [Throsby, 2008b]. In this model
the cultural industries are stratified as a series of circles or layers, where the
cultural or creative component of output declines in proportion to other
inputs as one moves further outwards. The core industries are those arts
industries producing original ideas in sound, text, image and performance
(literature, the visual arts, music, drama, etc.). The next layer might include
film, media, publishing. A further and more remote circle could comprise
fashion, design, architecture, etc. With the aid of this model we can observe
the way in which pure creative ideas generated by artists percolate
outwards, stimulating the provision of cultural content in industries further
from the core.
Placing artists in the context of the wider industrial economy raises once
again the question of the different types of value inherent in artistic work. To
some observers, the concept of the creative economy poses a threat to the
intrinsic artistic and cultural rationale for the creation of art, since it tends to
focus attention on the revenue-earning potential of cultural goods and ser-
vices at the expense of the purely artistic benefits that the arts bestow on
David Throsby ———————————————————————————————————————————————————————— 53
producers and consumers alike. To others, however, new communications

technologies and the opening up of global markets for cultural product offer
unprecedented opportunities for artists to explore new forms of artistic
expression and to seek a wider range of application for their creative skills.
5. Changes in labour markets
Artistic labour markets operate within the larger spheres of the demand
for and supply of labour in the economy as a whole. As is well recognised,
labour markets across the board in many countries are undergoing radical
changes with greater casualisation and increased occupational mobility in
the workforce. Markets for artistic labour have been caught up in these
changes; as Menger [2006] argues, long-term employment in the arts has
been replaced by a project-based system of production relying on short-
term hiring, large parts of business risk are transferred downwards onto the
workforce, and artists learn to manage risk and to stay alive through mul-
tiple job-holding, occupational versatility, diversification of job portfolios
and occasional income transfers from social security or other sources. Des-
pite manifold deterrents to an artistic career, an excess supply of artists
persists in many countries, attributable in part to the non-pecuniary attrac-
tion of work as an artist as mentioned above.

Research on the working behaviour of artists over the past twenty years
has mostly located itself within the labour economics field. Yet it is apparent
that increasingly over time many artists have been operating as small busi-
nesses rather than as workers in the traditional sense. Writers, visual artists,
craftspeople and composers nowadays rarely work for wages; the contracts
they enter into for supply of their services are generally framed in terms of
physical output – a book, a painting, a music score, etc. – rather than as a
number of hours worked. Even performing artists who in earlier times func-
tioned as employees now tend to supply their labour under a lump-sum
contract rather than on an hourly, daily or weekly basis. In these circums-
tances it would seem more appropriate to regard artists as small businesses
rather than as workers.
An illustration of the interpretation of artists working as small businesses
rather than as employees is provided by a recent study that explains artistic
earnings using a production function rather than a labour-market model
[Throsby 2007]. This study proposes a production function for artistic output
(proxied by earnings) where quantity and quality of output are specified as
joint products from the inputs of labour and capital provided by individual
artists. A model is constructed specifying the quantity of creative and com-
mercial output and the quality of creative output as a function of inputs of
labour time and of physical and human capital. In regard to the latter, in
addition to the conventional elements of human capital that might be iden-
tified such as levels of education and experience, a variable is added called
“creative talent” in an effort to capture the original, spontaneous and inno-
vative character of creative artistic work, combining the two concepts of

talent and creativity discussed earlier into a single empirical measure.
Whether it is more appropriate to model artists’ work-related behaviour
using labour supply functions, as in conventional labour economics, or
using production functions, as in the study referred to above, is a moot
point. Both would seem to have a claim to attention since it appears reaso-
nable to interpret artists as both workers and producers simultaneously. If
this is so, further research along both of these avenues would seem to be
warranted, and should be regarded as complementary rather than competi-
tive approaches to understanding artistic behaviour.
6. Some conclusions for policy
The areas of research and writing on the economics of artistic work that
are discussed in this paper have a number of implications for cultural policy.
I shall confine myself to three brief points.
First, it can be observed in a number of countries at present that a shift is
underway from a predominantly artistic focus for cultural policy to an em-
phasis on the cultural industries and the economic potential deriving from
the production of cultural goods and services. Such a shift affects artistic
labour in several ways. On the one hand it implies, as noted above, a move

away from regarding artists as producers of culture for its own sake and
towards interpreting them as economically valuable members of the labour
force, something that artists themselves may have cause to resent. On the
other hand, since the labour content of cultural goods is relatively high,
growth in the creative industries is likely to yield a higher rate of increase in
employment in these industries than elsewhere; hence a cultural policy di-
rected towards creative industry development may open up job opportuni-
ties and income-earning possibilities for artists that were not available be-
fore. It can be suggested that a policy stance lying somewhere between the
extremes of all-out economic value creation on the one hand and an uncom-
promising assertion of cultural purity on the other can be derived from the
concentric circles model referred to in section 4 above. While the model is
underpinned by an economic rationale for sustaining the growth of the
cultural industries at large, it accords primacy to the core creative arts as the
foundation stone upon which the cultural economy is built and, in its dis-
tinction between the generation of economic value and cultural content, it
acknowledges that the production of creative ideas in the core may indeed
have a non-economic motivation as well as an economic one.
Second, insofar as cultural policy continues to emphasise support for the
arts as an inalienable policy component, notwithstanding the increasingly
economic orientation that cultural policy might display, questions will conti-
nue to be asked as to how such support can best be provided. In regard to
the work of individual artists, mechanisms for providing assistance do need
to recognise the real-world conditions of artistic practice discussed earlier,
David Throsby ———————————————————————————————————————————————————————— 55
where shortage of time and poor remuneration are the chief constraints on
the development of an artist’s career. At the same time, for some artists it is
not so much time or income that are most needed, but the opportunity to
have work seen, performed, or published, indicating a requirement for po-
licy measures that target the dissemination rather than necessarily the pro-
duction of artistic product. Furthermore, demand-side interventions to im-
prove the operation of thin markets for artistic goods and services may also
be recommended. These considerations ramify in turn into the educational
arena, where the careers of most artists begin. It is increasingly recognised
that training in the creative arts does not necessarily have to lead to a
lifetime as a professional practitioner; rather the creative skills that are ac-
quired at art schools, in conservatoria, etc. are applicable in a wide range of
areas, and can prepare students for employment in rewarding occupations
far removed from the core creative arts.
Finally, we return to the fundamental issue of value creation. Democratic
governments have a variety of objectives, and although in the arena of
policy formation the voice of the economist is often heard most loudly, there
are other non-economic outcomes that the public sector is bound to deliver.
In regard to culture and the arts in general, and the role of the individual
creative artist in particular, a balance in policy-making between the genera-
tion of economic and cultural value would seem always to be an appropriate
ideal towards which governments should strive to progress.
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ECONOMIC ANALYSIS OF ARTISTS' BEHAVIOUR: SOME CURRENT

Dalloz | « Revue d'économie politique »

2010/1 Vol. 120 | pages 47 à 56

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artist - economic value - cultural value - labor supply - cultural industries

Le comportement économique des artistes :

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artiste - valeur économique - valeur culturelle - offre de travail - industries culturelles

Classification JEL : J01, J22, J24, J28, Z10, Z11.

REP 120 (1) janvier-février 2010

The role of artists as economic agents has been a continuing topic of

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2. The nature of artistic work

Artistic labour is characterised by three features that combine to set artists

“other arts-related work” such as teaching in their artform (especially rele-

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Such a “work preference” model of labour supply yields predictions of be-

3. Creativity and talent

Efforts to dissect the elements of an artist’s creative process are by no

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4. Artists in the creative economy

In recent years the idea of the “creative economy” as a dynamic sector

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producers and consumers alike. To others, however, new communications

5. Changes in labour markets

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vative character of creative artistic work, combining the two concepts of

6. Some conclusions for policy

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REP 120 (1) janvier-février 2010

JEFFRI J., GREENBLATT R. [1998], Information on Artists: A Study of Artists’ Work-

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REP 120 (1) janvier-février 2010

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