CULTURAL ECONOMICS AND CREATIVE CITIES. NEW PARADIGMS FOR INNOVATION AND GROWTH LUIS PALMA MARTOS. lpalma@us.es DEPARTMENT OF ECONOMICS AND ECONOMIC HISTORY. UNIVERSITY OF SEVILLE. MIEMBRO DE OIKOS ABSTRACT: The paper presents from the cultural economics perspective the shift that this area of economic analysis has experimented in the last years from “cultural economics” to “economics of creativity”. In this framework we analyze the role of cultural industries and the proper concept of creativity from three axes. The first one is focused in the study of creative industries in the light of the new paradigm of “cultural capitalism”. The second one tries to place cultural industries in a new organizational paradigm: the so called “liver model”, in order to confront this with the former “ovarian model”. Finally we integrate these entire concepts in the urban development field taking as referential one the “creative city”. We are mainly interested in the capacity of public policies in order to generate innovation processes based on culture and creativity. KEY WORDS: Cultural Economics, Economics of creativity; Creative cities; innovation based on culture and creativity 1 1. INTRODUCTION The present work explores new paradigms in the analysis of innovation and considers both culture and creativity as its very basis. The territorial context we use as framework for the analysis has the urban environment as boundary, the creative city – as a concept – is at the core of our work. The structure of this work has six main points –other than the introduction and conclusions; we also included a list of references. In the first point we approach the concept of culture from the point of view of cultural economics, emerging subdiscipline we deal with in the third point. We will sketch a concept and its realm, the increasing relevance of the discipline and – something crucial to our work – we will show the shift in the conceptual core with the result that the alternative idea of creative economy is gaining momentum. Within this conceptual framework we will incorporate, in point four, the analysis of creative industries and their basic features. We will try to go beyond the traditional concept of cultural industries even if both have common features and characteristics, and both are cases in point of innovation. We pointed out that the aim of our work is to explore new paradigms in the domain of innovation. With this purpose in point five we will carry out a comparative analysis between classical industrial and commercial capitalism and new cultural capitalism; this new approach will enable us to integrate the new paradigm that can be appreciated in the cultural or creative sector. We mean what Rausell (2009) call “liver model”, one that substitute the so called “ovary model”. We will do it in point six. Last point integrates the above conceptual elements in the analysis of the linkages between creativity and urban development; in this analysis is relevant the concept of creative city which we will approach making a comment on the notion of creativity. Also, we will deal with the concept of cultural district and its critical elements if we take into account the new technological reality. With the help of Towse (2005) we will eventually attest a certain conceptual immaturity on creativity and the environments in which it is generated. We will give support to the strength-idea of deepening in the analysis of creativity and its causal connection with economic activity, the one generating urban development. 2 2. AN APPROACH TO THE CONCEPT OF CULTURE David Throsby (2001), in his now classical “Economics and Culture”, points out the difficulty of approaching the concept of culture. Among other reasons because of the very wide range of notions, from a number of perspectives, and also because it is a concept that has been evolving throughout the time. However, Throsby, trying to contribute to the construction of the intellectual corpus of cultural economics as a discipline, pointed at two wide approaches. Firstly, what he calls anthropological or sociological, conceptualizes culture as the group of activities, beliefs, convictions, customs, values and practices common to any human group. However, in operative terms and as a reference concept for cultural economics, he made an approach that he called functional: activities carried out by the people and their derivative products about intellectual, moral and artistic features of life. Culture, from this functional point of view, has according to Throsby (2001) a series of interesting characteristics given the nature of our work. Firstly, the production of culture involves some kind of creativity. So, the concept of creativity underlies as well as determinates the one of culture. Secondly, the production of culture generates and conveys a symbolic content; the cultural good or service goes beyond the good or service in itself, something UNESCO has pointed out in several major documents on cultural policies and development1. Finally, Throsby says that the outcome of those activities represents, at least potentially, a kind of intellectual property. UNESCO (2002), in the preamble of the Universal Declaration on Cultural Diversity, defines culture as a set of distinctive spiritual, material, intellectual and emotional features of society or a social group, and that it encompasses, in addition to art and literature, lifestyles, ways of living together, value systems, traditions and beliefs 3. SOME ELEMENTS OF CULTURAL ECONOMICS AS A DISCIPLINE 3.1. Background. A definition Although the interest of economists for the world of culture is not new, as Goodwin (2006) has pointed out, it can be said that since the seventies the approach of economists to art and culture as a matter of study has been done with a higher analytical rigor and a wide use of the tools of economics as a science. We can point the existence of a sub-discipline or specialized field, cultural economics (Ginsburg, 2001; Seaman, 2009). This sub-discipline has a seminal book, an international association and a specialized journal (Throsby, 2001). The seminal book “Performing Arts: The Economic Dilemma”, authored by William Baumol and William Bowen, dates back to 1966. The authors observed an economic dilemma in the scenic arts, later know as “the cost illness”, that suggested an economic policy prescription: the Government must subsidized those activities2. 1 2 UNESCO (2002) and UNESCO (2005). V. Palma and Aguado (2010) for a detailed analysis of the “cost illness” related to the scenic arts. 3 In 1973 was established the Association for Cultural Economics, whose charter was modified later in 1993, adopting its current name: Association for Cultural Economics International (ACEI)3. Since 1978 ACEI organizes a biannual international conference on cultural economics. Up to date there have been 16 editions. The first issue of the Journal of Cultural Economics (JCE) was published in 19774. In 1976 Mark Blaug made the first compilation of articles on the subject: “The Economics of the Art: Selected Readings”. These readings focused on public funding for the arts and its justification. The first states of the art were published by Throsby (1994) in the Journal of Economic Literature (JEL) and Blaug (2001), in the Journal of Economic Surveys. In 1991 JEL classification put intellectual production into category Z – other especial topics – in category Z1: intellectual economy, and in 2001 was established Z11: economics of arts and literature (Towse, 2003). In 2003 Towse published “A Handbook of Cultural Economics” and in 2006, within the series handbooks in economics edited by K. Arrow and M. Intriligator was published the “Handbook of The Economics of Arts and Culture”, edited by V. Ginsburg and D. Throsby. After showing the background that supports the existence of this discipline of the economic science we are able to choose a definition among those proposed. We have chosen Towse’s (2003): “the application of economics to the production, distribution and consumption of all goods and cultural services”. 3.2. Analytical framework and domain of cultural economics. From cultural economics to creative economics. Table 1 shows the domains of cultural economics although we have also incorporated essential elements of creative economics with the aim to sketch both disciplines simultaneously and better gauge the shift from primitive cultural economics to new creative economics. 3 http://culturaleconomics.org In 1979 the index of the Journal of Economic Literature made an exception to its no indexing newly established journals policy and thus included the JCE. 4 4 Table 1. Analytical framework and domain of cultural economics Economic analysis applied to culture Activities/ topics Scenic arts Visual arts Topics of particular interest Attendance, demand Demand for scenic arts Demand for arts on aesthetic grounds and demand as an asset or financial tool Auction and art work prices Demand of arts on aesthetic grounds and demand as an asset or financial tool Cultural economics Cultural built heritage Contingent valuation, Valuation, economics of conservation museums and cultural festivals Industrial Cultural organization, Book economics, industries localization, film economics, cluster, art cities cultural district Cultural policies Why cultural policies? Is it necessary the government intervention in artistic and cultural markets? In case it is necessary which is the best way? Transversal topics “The cost illness” (Baumol and Bowen 1966; Baumol, 1987), gust formation (McCain, 1979), rational addiction (Stigler and Becker 1977; Becker and Murphy, 1988), consumption learning (Lévy-Garboua and Montmarquette, 1996), cultural capital (Throsby, 1999), cultural value (Throsby, 2001), organizational and management patterns of artistic institutions (Netzer, 2003), artist job markets (Throsby, 1994; Menger, 1999; Benhamou, 2003; NEA, 2008), studies on the economic impact of culture, (Seaman, 1987; Snowball, 2008), economic valuation of heritage (Mourato and Mazzanti, 2002; Throsby, 2003), statistics of the cultural sector (UNESCO, 1986 and 2008; KEA, 2006) Public funding for culture (Robbins, 1963; Baumol and Bowen 1965; Peacock, 1969; Cwi, 1979; Van den Haag, 1979; Banfield, 1984; Frey, 1999), fixed book pricing (Appelman, 2003; Palma and Palma, 2008), copyrights 5 (Towse, 2006, 2008) Creative economics Advertising, Creative Culture as an graphic design, fashion, industries innovation architecture, video factor games, software, R+D Creative industries (DCMS, 1998; Caves, 2000 and 2003), creative cities (Cooke and Lazzeretti, 2008), creative class (Florida, 2002) Places of high cultural density Innovation, foster the creativity How creativity is produced productivity, shown in greater Creativity and fostered? (Lazzeretti, economic innovation, 2009; KEA, 2009) growth increased business activity and higher economic growth Source: adapted from Herrero (2002) First column shows the five traditional domains of cultural economics, from the restricted notion of arts (visual, scenic); heritage, both sites and immaterial heritage (festivals, traditions); cultural industries and also the analysis of cultural policies with a mention to the role of Government in the world of culture from an economic perspective. Second column includes some topics of interest and the effort deployed with the aim of applying economic analysis to culture, something that noticeably contributed to literature extension in this sub-discipline. We can point out the increasing application of valuation economics, such as contingent valuation, to the economic analysis of museums, historic sites and festivals of a varied nature. In the domain of cultural industries those of the books and films have a decisive role in the principle of cultural industries. In the domain of cultural industries, those of books and movies play a prominent role due to their relevance in the mass cultural consumption. Third column offers a wide array of transversal topics that in our opinion constitute a major contribution of the sub-discipline and enable a better understanding of the working of the cultural sector. Among other we have “the cost illness” and its implications for cultural policy; the modelling of gust formation by cultural goods and services; the concepts of cultural capital and values; the analysis of organizational and management forms in cultural concerns or the crucial issue of the building of parameters and statistics that enable a more rigorous approach – from the point of view of modern economic analysis – to the cultural sector. As it can be seen, second segment shows that the interrelation between economics and culture has been extended (Lazzeretti, 2009). At the core of cultural activities is creative work. The connexion between creativity, new technologies, production 6 structures and more flexible job markets establishes a new panorama. This approach considers innovation as the main engine for growth and creativity the key input in the processes of innovation. Also, they could be linked cultural education since childhood with creative activities that foster innovative entrepreneurship (Lasuén and Aranzadi, 2002). Creativity could be considered as well as a way of innovation that promotes entrepreneurship, increases productivity and is a source of economic growth (UNCTAD, 2008, 3); in addition, creativity generates an area of economic activity itself: the creative industries (Pratt, 2004). Summarising, the appearance of creative economics and its inter-relationships with cultural economics as traditionally considered has left a series of subjects for further research, among them: culture as a source of innovation; culture as an input of creative processes; human capital and the generation of the creative class; culture and creativity in the innovation processes; creative districts; or the merging of the territorial dimension with the concept of creative city as a paradigm of urban development; we will come back to this subject. 3.3. Circumstances that foster the increasing importance of the cultural sector and its analysis. We want to finish this point – intended to offer some elements of cultural economics as a discipline – with an inquiry on the circumstances that are making that – from the academy, the business world, politics, or the society itself – an increasing attention is being paid to the sector of culture and leisure for its role in the building of better societies. It cannot be understood the steady growth of the cultural sector without taking into account the shift to service economy that has extensively happened in most world economies. This economy transformation could be put into relationship with the development processes that have provided the population with higher levels of income that enable the expenditure in non-peremptory goods5. Other factors that have enabled an increasing demand for culture and leisure, also related to the development processes, are the higher educational levels of the population and the higher availability of free time due to the sustained reduction in working time. Also, we have the fact of the increasing health levels in the elderly population at the age of retirement that enable them to enjoy a richer older age insofar as the consumption of goods and services is concerned. This demand, with its particulars needs, should not be ignored in the setting up of the offer of culture and leisure in developed societies. 5 According to the economic theory, luxury goods with an income elasticity higher than one. 7 From other point of view, as above said, the sector of culture and leisure – or the creative sector – emerges as potential segments of activity and jobs and are considered crucial as levers for the creation of wealth or as key elements for endogenous development. Finally, it could be said that the interest in this sector has been enabled by the fact of being an important domain for public intervention even if the ongoing debate is not exempt of controversy (Palma, 2008). 4. The time for creative industries From now on we are going to focus on creativity and innovation processes in the new context of “cultural capitalism” and also in how these processes within the creative industries can help the development of territories, focusing in urban development through the generation of creative cities. We have closed the point above showing a series of arguments by which the cultural sector, generally considered, is being paid an increasing attention from different social domains. Deepening in this matter, and focusing on the European context, 2009 was European Year of Creativity and Innovation; by this statement it was emphasized the question of the keys for the future in a time of international economic crisis. Anyhow, several European documents, since the virtually mythic Delors White Paper (1993), have insisted in the need of strengthening the European Union both for economic and social reasons, the factors that put in relation knowledge, creativity and innovation with competitiveness, being this one the key element for European prosperity. This was present in the Lisbon Agenda for 2000 and it is again in the strategy for 2020, recently introduced as a case in point in the political development of the EU27. The main problem could be, in the context we are dealing with, the lack of a conceptual framework to understand the importance of creativity as a key input in the new production model. Rausell (2009) raised a number of questions on the basis of ascertaining the increasing attention currently paid to creative industries. These questions would be: What changes 21st century capitalism working model? How social processes can be coordinated to generate wealth and employment? What can be done from a collective point of view to maximize the positive effects of these processes and minimize their costs? It seems obvious how difficult is to answer all those questions. Rausell (2009) points at some lines of reasoning that he considers appropriate and that will help us in the points below. 5. Industrial capitalism vs. cultural capitalism 8 According to Rausell (2009) we should start from the following hypothesis on cultural capitalism: the wealth generating processes (and its distribution) are rather focusing in the production of symbolic goods (particularly cultural ones), as opposed to industrial/commercial capitalism model –geared to the production and or distribution of tangible goods. As Rifkin (2000 quoted in Rausell 2009) pointed out “the journey of capitalism is ending up in the commoditisation of human culture in itself”. Two main points for the characterization of an economic system or model would be the technology of the system and the definition it makes of the related property rights (Gravelle and Rees, 2006 pp. 9-10). So, from these elements we could deal with the parallelisms and divergences between industrial/commercial capitalism and cultural capitalism. In the current context of cultural capitalism it is not clear who has the right to the capital gains generated in the production of symbolic goods. Watching the events and debates it could be said that the system’s normative framework of intellectual property and copyright does not cover it own needs, that it has become obsolete. It could also be said that the final definition of symbolic goods property rights, something characteristic of cultural capitalism, will determinate the working of the model, as it happened with material goods and industrial/commercial capitalism. The technological model is of greatest interest to the aim of this work. The technological revolution that characterized industrial capitalism has its current outcome in two reference elements: firstly, the digitalization of symbolic goods; and secondly, the revolution in the transport of those goods epitomized by the Internet highways (Rausell, 2009). This technological revolution, as it happened in the Industrial Age, ends up affecting the markets of creation, production, distribution and consumption of cultural and symbolic goods. We wish to point out the fact that the technological revolution we have related to cultural capitalism affects the creative capacity –one of the main arguments of this work; firstly, because it lowers the barriers to entry for creation. As Rausell (2009) points out creative people get rid of the requirements of technical rigors and focus in the creative aspects; at the same time it sets out the problem of the disappearance of “creative-quality” certifying systems. Nevertheless, we should think about the consequences of this gap on the system aims, probably irrelevant. Secondly, creative workers enjoy a greater autonomy in the face of the industrial sector. It is not uncommon the self-edition of books or the home recording of visual or musical products, i.e.: cultural self-production. This reality has meant a shift of paradigm in cultural and creative industries as we analyze below. 9 6. The shift of paradigm in cultural industries In Figures 1 and 2 we show, on the basis of Rausell (2009) the main conceptual elements of the two analyzed paradigms of creative industries. The traditional model, called “OVARY” and the one derived from cultural capitalism, called “LIVER”. We do not consider necessary, for redundant, any additional explanation of the diagrams 6. FIGURE 1: OVARY MODEL Source: the author, adapted from Rausell (2009) INDUSTRY MANY CREATIVE PEOPLE - major investment in human capital - some techical capacity SCARCE BARGAINIG POWER - big investments in physical capital - enlargement of organizational, logistic and marketing structures CULTURAL PRODUCTS - scale economics?? retailing - Monopoly sales Two sources of income: 1) Price> production cost MASSIVE DEMAND 2) Customer services (advertising and other related activities: hotel industry, retail, transportation) Customer services (advertising and other related activities: hotel industry, retail, transportation) VALUE ADD: Capital gains of creative industries, return of investments and royalties 6 V. Rausell (2009) 10 FIGURE 2: LIVER MODEL (EMPOWERMENT OF CREATIVE PEOPLE AND CONSUMERS DUE TO THE TECHNOLOGICAL REVOLUTION) Source: the author, adapted from Rausell (2009) CREATIVE WORLD ADVANCED SERVICES OF INTELLIGENT MEDIATION INDUSTRIAL CONSUMPTION R +D in citizen relations 1) Information management for risk reduction in producers and consumers 2) Establishment of social web sites for particular consumers 3) Exploration of specific demand segments 4) Exploration of new retailing channels (mobiles, e- book…) VALUE ADDED: attention stock (advertising, bespoke payment services...) 7. Creativity and urban development This point is intended to incorporate the territorial dimension, and particularly the urban one, in the new conceptual and analytical context set out above. We are about to focus in the management of the cultural and symbolic domain as a factor of competitiveness; the territory should be considered thus as a container of meanings. The choice of the city as a reference unit is due to its undeniable advantages insofar as the concentration of meanings is concerned, that gives to this dimension an increasing importance and suggests as a strategic thing the making of management models regarding city’s cultural dimension (Rausell, 2009). 11 7.1. The creative city as a unit of analysis As Costa (2008) points out, the concept of creative city has come up as essential both in the academic analysis and the political agenda. He proposes five wide and different origins for the development of this interest in creativity, regarding urban revitalization and competitiveness. Firstly, the idea of “creative city” as it is developed by authors such as Landry (2000), Hall (2000) or Ebert et al. (1994) and the progressive coordination in the analysis of “creative industries” (via studies on cultural industries) and a number of political interventions such as the case of the Department of Culture and Sport in the UK. Secondly, the notion of “Creative Europe” (ERICArts, 2002), sponsored by the Council of Europe as well, or the one of “Network of Creative Cities”, promoted by UNESCO; approaches that contain a greater multi-disciplinary charge. The core of this turns around the ideas of governance and management of artistic creativity and the construction of an empirical approach based on European case studies that can be deemed a set of successful instances on the relationships between artistic creativity, cultural governance, innovation management and urban development. The approach has paid more attention to the mechanism of urban regeneration based on cultural activities. The third approach is based on the existence of a “creative class” (Florida, 2002; Florida and Trinagli, 2004) as a decisive factor in territorial competitiveness. This kind is deemed to be crucial for development and the processes of urban regeneration. By creative class we mean that one with capacity to master the technology, with talent and prone to tolerance. A key point of this approach is to raise awareness on the relationship between creativity, abilities and human capital. The forth approach quoted in Costa (2008), represents the recognition of creative industries within the economic analysis considered in a wide international context. This approach originated in the field of industrial economics and is related to creative economics through the key role of property rights. Cultural activities are analyzed from an economic point of view but stressing the creative element and the specificity of cultural goods and institutions, particularly regarding the relationships (contracts) established by the authors. Finally, we have to point out another way of influence on the valorisation of creative work and creativity in the field of analysis of artistic activities, even in mainstream theoretical cultural economics (Handke, 2004; Throsby, 2001; Towse, 2004). This major interpretation accepts the importance of studying the artistic creativity and its integration in cultural products. This means an increasing interest of cultural economics in the mechanisms of creative activity and links them with the analyses on innovation processes. In sum, the convergence of these five influence streams resulted in a central interest of the concept of creativity and the territorial dimension. We could summarise this increasing interest into five driving ideas: 1) It is an approximation that goes beyond the disciplinary approaches: it puts together, among other concepts, those of culture, territory and innovation. 12 2) The focus of attention shifts to topics related to creativity and creative activities, the first stage in the value chain of activities and cultural products. 3) An increasing interest in the supply logic and not just audiences’ (demand side). It is also assumed that institutions are not “black boxes” and that it is necessary to analyze their working. 4) A clear interest in the territorial dimension of cultural and creative activities, through the territorial systems of cultural production and consumption, paying an especial attention to its particular authors and systems of government. 5) The assumption of the essential relevance of immaterial topics (abilities at work, innovation, inter-institutional coordination) as authors in the intervention. Rausell (2009) criticises the use of the concept of creativity which he dubs rhetorical joker, advisor and reference of planning interventions. He considers it to be a quasi magic concept due to the sacralisation of the creative fact. Neither is exempt of Rausell (2009) critical tone the concept of creative city which he brands “reiterative slogan in any urban strategy”. Faced to the evidence that in certain urban spaces such as New York, Berlin or London is concentrated – even if diffusely – a bigger amount of creative people, Rausell (2009) wonders whether it exists a causal correlation between public action and the generation of creative cities. He finally concludes that in most cases the correlation is very weak and, anyhow, inverse. 7.2. Creative capacity and urban planning The above conclusions pointed by Rausell (2009) allow us to state several ideas. Firstly, the empirical evidence on the behaviour of the creative class and the making of indexes on creative capacity in urban environment is in progress and has, as Towse said, a clear intellectual immaturity; in sum, in her own words: “we know very little how to create creative people” (quoted in Rausell 2009). Faced with a lack of knowledge, there is the possibility, from the point of view of urban planning, of considering creative capacity as a stock asset for which it is needed to compete with other territories and cities. This competition for attracting the creative class will become a zero sum game, in which the gains of some equal the loss of others, not a virtuous strategy of the kind win-win in which several agents, in this case cities, could get benefited. From this strategy it is about to create “pleasant environments” from an environmental, aesthetic, ideological or cultural point of view that might result attractive for the creative class and help its localization in. Anyhow, research in this field should focus on showing the clear connexion between creativity as an attribute and the capacity of generating economic activity in a given territory. One interesting line of academic research and political attention is the one that focuses on the study and generation of cultural districts, in the sense of spaces for cultural production, sometimes linked with cities. It is about the concentration in time and space of economic 13 activities linked with a given group of cultural goods and services that shows and special connexion with the territory7. It could be possible as Rausell (2009) says to identify creative component cultural districts that would present some particular characteristics: creativity as a relevant input, the existence of a productive fabric of highly specialized SMEs in continuous innovation; the practice of flexible models of industrial relations and several professional characters; the existence of very dense flux of information and knowledge transmission, or formal and informal spaces of relationships between the agents. From the point of view of urban policies and faced with the difficulty of controlling other process variables as above explained we can observe a public action aimed at signalling certain urban spaces and promoting, as we pointed out, the settling of the creative class in. According to Rausell (2009) this strategy could turn out to be irrelevant if we take into consideration the increase in connectivity that creative people can achieve between them with the help of new Information and Communication Technologies (ICT). Also, as we have seen in Figure 2, new business models – particularly the liver one – could put into question the need to promote those models if what we are looking for is the emergence of a creative capacity, acknowledging of course, that it has a clear connexion with the generation of economic activities in any given territory. 8. CONCLUSIONS The ultimate aim of this work has been to explore some concepts that can contribute to a better knowledge of innovation processes in the new context of cultural capitalism. The analytical framework of cultural economics, sub-discipline come out of the economic analysis, provides us with some interesting elements in this regard. We have noticed a turnaround from the traditional conception of culture and cultural industries towards a new approach in which creativity came out as an essential element of the processes we are analysing. Thus, culture becomes a crucial input of creativity and this is the key trigger in innovation processes. The contextual analysis of cultural capitalism has enabled us to visualize the features of creative industries, being the most relevant the empowerment of creative people and consumers due to the technological revolution –something inherent to this new profile of capitalism. Finally, we focused on the concept of creative city, insofar as we understood that constitutes an innovative way in the field of cultural capitalism. The debate on cultural and urban development policies, on the generation of creative cities is far from being closed. Among other reasons because we know very little about the generation of creativity, key in all this conceptual fabric. The search for causal relations between public policies and the emergence of creative cities has resulted in few indisputable findings. They can even be found correlations in both ways. 7 V. Cooke and Lazzaretti, eds. 2008. 14 The most fruitful research line has probably been the analysis of creative districts and its insertion in certain cities, districts that constitute attraction points for industries and creative classes. However, new technological paradigm also makes us to think in a critical stance about the reality of this territorial configuration, as the proximity it implies does not look relevant to get the benefits derived from the district making process. 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