Elisabetta Lazzaro
University of Padua Department of Economics elisabetta.lazzaro@unipd.it
OECD Workshop on the International Measurement of Culture
Ch âteau de la Muette, Paris
December 4, 2006

Economic models for the demand for cultural goods & services :
Hps about the origin and the evolution of preferences
Theoretical & empirical implications in international cultural indicators
Traditional economic theory + cultural research in dynamic demand analysis
Applications and examples from the cultural sector
Inclusion of accumulated experience , social interactions and diversity in cultural participation and its indicators
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1. Economics & cultural indicators
2.Preferences and the demand for the arts
3.Habit formation
4.The role of experience & exposure in taste formation
5.From rational addiction to learning by consuming
6.Toward a more realistic process in the building of taste
7.Economics & the impact of social interactions on preferences
8.Cultural diversity & participation
9.Implications in international cultural indicators/1
10.Empirical testability
11.An application: Spouses’ effects in museum demand
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From a “traditional” economic approach....
production/supply consumption/demand of products, services
Individuals’ maximisation of preferences which are given, stable and homogenous
... to an interdisciplinary one:
Broadening of the field of individuals’ choice process and behaviour
(psychology, sociology, behavioural sciences...)
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Neoclassical theory: fixed and exogenous preferences
Utility maximisation
≠ Concrete evidence in consumption of artistic goods and services (e.g. concert attendance, museum visit, purchase of works of art): preferences are not given
Origin and transformation of preferences
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Pollak (1970) JPE
All past consumption levels
Individual’s current preferences
Criticism: deterministic, myopic
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Stigler & Becker (1977), AER
Becker & Murphy (1988), JPE
Rational addiction
Model of household production of commodities = perception of goods ⇒ shadow prices ≠ effective prices
Accumulated specific consumption capital
Goods’ appreciation
Beneficial addiction (e.g. music): elastic demand, ↑ sensitivity
Harmful addiction (e.g. drugs): inelastic demand, ↓ sensitivity
Criticism: Stable & homogeneous preferences among individuals; positive increment of capital
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McCain (1979), JCEC
McCain (1981), AER
McCain (1986), JCEC
McCain (1995), JCEC
McCain (2003)
Cultivation of taste
Application of catastrophe theory
Bimodal distribution of cultivated and not cultivated consumers
Criticism: complicated framework; short-sightness/bounded rationality ( →market intervention); unknown proportion of cultivated vs. not cultivated
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Lévy-Garboua & Montmarquette (1996), JCEC
Lévy-Garboua & Montmarquette (2002)
Learning by consuming
Experience
= expectation + surprise
Taste
⇒ Shadow-price elasticity = market-price elasticity
Contributions: Non-deterministic/stochastic increase in taste;
+/- increment in taste; heterogeneity of tastes; quality & individuals’ attitude toward risk; empirical testability; long-run equilibrium
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Social interdependence in taste formation has already been admitted in the previously considered contributions without being formalised
Social effects have long been central to sociology and social psychology
Overall, economists have been at best ambivalent as to whether social interactions constitute a proper domain in the discipline
Notable exceptions : Duesenberry (1949), Leibenstein (1950),
Arrow (1974), Stigler and Becker (1977), Schelling (1978), Akerlof
(1984), Frank (1985)
Toward a formal incorporation of social interactions in modelling preferences formation
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“By social interactions , we refer to the idea that the utility or payoff that an individual receives from a given action depends directly on the choices of others in the individual's reference group , as opposed to the sort of dependence which occurs through the intermediation of markets .” (Brock and Durlauf 2001: 235)
Influence: others’ past & current consumption patterns in a shared environment of common tradition, information & social norms, reference group
Effects: social interactions, social pressure, peer and neighbourhood effects
Results: contagion, conformity, learning, imitation, bandwagons, herd behaviour
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1) Individuals' choices and payoffs are influenced directly by other individuals' actions through: imitation, learning, social pressure, information sharing, other forms of non-market externalities
2) These interactions are supposed to take place within some socially and/or spatially determined distances, that define the relevant reference group : family, household, relatives, friends, school mates, co-workers, neighbours, etc.
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“ Neighbourhoods effects ”, “ peer effects ” or “ household effects ” are been increasingly applied to many different domains, such as:
• school choice and school achievement
• working patterns
• participation in welfare programs
• smoking & drinking behaviour
• crime rates
• residential segregation
• fertility rates
Bauman et al. (1990); Case and Katz (1991);
• savings behaviour
• computer ability
• asset market volatility
• ….
Evans et al. (1992); Brock (1993); Glaeser et al. (1996); Katz et al. (2001); Jackson et al. (1997); Farkas et al. (1999); Topa (2000);
Gaviria and Raphael (2001); Sacerdote
(2001); Cipollone and Rosolia (2003);
Miniaci-Parisi (2004)
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So far, the existing theoretical and empirical economic literature focused on the effects of economic , educational , and other individual characteristics, paying scarce attention to the analysis the impact of social interactions
Nevertheless, the characteristics of most cultural goods and services provide strong justifications for taking into account social effects :
• they take place publicly (Becker and Murphy, 1988)
• they are experience goods (Nelson, 1970) informational asymmetries and uncertainty on the expected utility screening behaviour, imitation or replication of the choices of friends, peers, relatives or neighbours
• factors or “ class reproduction ”
(Bourdieu & Di Maggio)
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 OBJECT
Cultural diversity: expression, origin, creation
 MODALITY
Cultural participation: public’s access and fruition
Cultural diversity and the need to reach the broadest audiences
Necessity of a market?
Cultural diversity originates from a previous exposure of its creators, i.e. from their previous cultural fruition
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 Object of the fruition:
Broadening the field of cultural economic analysis:
• “ high brow ” vs. “ low brow ” culture
• inclusion of entertainment/divertissement (e.g. TV, cinema ...) in the public’s cultural practices
• consideration of cultural non-partecipation/ consumption and of those factors which impede potential or latent demand to become effective
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 Modality of fruition:
• building of perceptions, tastes and preference
• public’s choices and behaviour not only on a rational, homogeneous, individual and indipendent basis
In particular, importance of the social dimension : interactions and social cohesion
Impact on cultural policies
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Strong need to test available consumer choice theories against empirical evidence in the cultural sector
Relatively long tradition of studies applied to the demand for the performing arts (e.g. theatre, music, cinema, etc.), much more than the demand for museums, cultural heritage, works of art.
Issues : available, regular and disaggregated data; selectivity bias; endogeneity; special gathering of qualitative data (interviews, focus groups, …)
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Main strategy: to infer their presence from observations of the outcomes experienced in a population of interest
Problem: presence of many different interaction processes or, perhaps, processes acting on individuals in isolation
In particular, outcome data do not generally allow us to separate between endogenous interactions, contextual interactions and correlated effects
“ Reflection problem ” (Manski, 1993): mean behavior in the group is itself determined by the behavior of group members
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An individual’s museum/temporary exhibitions attendance at least once (possibly)* together in the last 12 months (*: Upright, 2004) explained by among other factors, her/his spouse’s education
Pre-Hp: Education has a positive effect on arts attendance
(DiMaggio & Useem, 1978; Blau, 1988, DiMaggio & Ostrower, 1990;
Peterson & Sherkat, 1992; Robinson, 1993)
Data: ISTAT 2000: 13,000+ married couples in Italy
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Individual’s museum “social” attendance explained by (also) education
Education of
Husband alone
Husband & wife
Wife alone
Wife & husband
Respondent 0.277**** 0.261**** 0.283**** 0.226****
Spouse -0.443
0.273**** -0.009
0.282****
Conclusions:
After having controlled for an individual’s education,
• spouse’s education slightly stronger effect;
• though, when both attended only (reinforcement of similar characteristics and attitudes)
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