Transcript Slide 1

Calculating a measure of
intra-generational equity for art
museums
Written for Association for Cultural Economics
International Conference 2010
Cameron M. Weber
PhD Student in Economics and Historical Studies
New School for Social Research, New York
[email protected]
intra-generational equity for art museums
The yearning for new things and ideas is the
source of all progress, all civilization; to ignore
it as a source of satisfaction is surely wrong –
Tibor Scitovsky (1976)
intra-generational equity for art museums
Motivation:
Interest in Austrian School of Econ timepreference theory
Debate on global warming (oops I mean ‘climate
change’) and discount rate
Good excuse to look at scholarship on museums
and to see what can add to literature
Attempt to apply positive economics to what
seems like irresolvable normative issues
intra-generational equity for art museums
outline of presentation
I. Relevant political economy issues related to our
research
II. The difficulty in measuring performance of art
museums
III. Inter- and intra-generational equity
IV. Consumer theory and art as ‘novelty’ good
V. Methodology for choosing “Top” museums, and
problems with same
VI. Findings
VII. Further Research
intra-generational equity for art museums
Definition of Equity* used in this research:
1) Given a set-off resources, museums can spend for current or
future generations, these spending decisions might be seen as
‘equity’ decisions between current and future generations, or,
inter-generational equity trade-off decisions
2) Given a set-off resources for current generation spending,
museums can spend on programs for those whose tastes for
art are already realized or on education for those whose
tastes for art are as of yet realized. These are intragenerational equity trade-off decisions
*Note different definition than Paulus 2003 and we treat ‘merit goods’
equity argument positively
intra-generational equity for art museums
relevant political economy issues
The exempt purposes set forth in section 501(c)(3) are charitable,
religious, educational, scientific, literary, testing for public safety,
fostering national or international amateur sports competition, and
preventing cruelty to children or animals. The term charitable is
used in its generally accepted legal sense and includes relief of the
poor, the distressed, or the underprivileged; advancement of
religion; advancement of education or science; erecting or
maintaining public buildings, monuments, or works; lessening the
burdens of government; lessening neighborhood tensions;
eliminating prejudice and discrimination; defending human and civil
rights secured by law; and combating community deterioration and
juvenile delinquency.
Taken from
http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html
, accessed 4 April 2010.
intra-generational equity for art museums
relevant political economy issues
O’Hagan (2003) finds order of importance for
indirect subsidies to not-for-profits (NFPs):
1) Deduction for charitable giving
2) Real estate property tax exemption
3) Capital gains benefits for donations
“Most of the tax measures in the United States have
particular relevance for art museums and as a result
they appear to be the most favoured arts institutions in
this regard” (O’Hagan 2003)
intra-generational equity for art museums
relevant political economy issues
Example of ‘market’ incentives created by NFP tax-breaks
for museums:
Museum Mile on 5th Avenue in New York City along
Central Park (prime real estate indeed) where one can
find the Museum of Modern Art, the Metropolitan
Museum of Art, the Jewish Museum, the Guggenheim
Museum, the Museum of the City of New York, the
Museum of Arts and Design and the Frick Collection,
amongst others, all not-for-profits and all but the Met
and the Jewish Museum founded after the permanent
introduction of the income tax in the US in 1913.
intra-generational equity for art museums
relevant political economy issues
Johnson (2003) finds museums visitors in USA “tend
to be drawn disproportionately from higherincome and better educated groups” and that
many museums rely on 80 to 90 per cent of their
visits as repeat visits.
Goetzmann et al (2010) find that historical
increases in inequality correlate with increases in
at-market prices for museum-quality art, that
“indeed it is the wealth of the wealthy that drive
art prices.”
intra-generational equity for art museums
relevant political economy issues
Findings imply that the tax exemptions for not-forprofit museums are a transfer to the wealthy, and
that therefore any educational programs a museum
sponsors which reduces this reverse-subsidy is
clearly an increase in intra-generational equity.
However, this finding has been disputed (albeit just for
the taste for abstract art and for consumption in the
home, not for consumption at the museum) by Halle
(1993).
intra-generational equity for art museums
relevant political economy issues
In this paper we avoid the debate as to whether or
not museums are for the rich and view art as an
experience good, with the exercising of a taste for
art being a good into itself.
Implies expenditures for taste-formation
(education) versus those for the exercising of
already-existing tastes (exhibitions) increase
equity when we view art as a good, whether or
not these tastes are held by any member of any
socio-economic category.
intra-generational equity for art museums
relevant political economy issues
Grampp (1989) states that the museums are by
their nature opposed to market forces, “the
aversion of museum people to the market shows
itself in various ways”, including that the people
who staff and run museums are scholars and art
experts and wish to pursue their craft as opposed
to run programs for the public
Implies endogenous incentives for prioritizing
future generations over current generations
intra-generational equity for art museums
relevant political economy issues
Towse (2003) finds:
“This [direct government subsidy of arts organizations]
can easily mitigate against artistic [or in our case
bureaucratic] innovation, especially when the
organization is publically owned and staffed by state
employees who favour old routines. The durability and
size of an organization also determine the amount of
attention it receives and the political pressure it can
deploy when threatened with a reduction in public
subsidy”.
intra-generational equity for art museums
relevant political economy issues
To address Paulus (2003), Grampp (1989) and
Towse (2003) we propose that NFP museums,
with need for on-going voluntary funding and
thus requiring a market sensitivity, might
provide a better indicator of how society
views equity trade-offs decisions for art
museums rather than government-run
museums with an on-going centralized
appropriation
intra-generational equity for art museums
difficulty in performance measurement
Paulus (2003) states, “a museum cannot be reduced
to one function; its three basic functions are
research, preservation and communication.”
There are resource allocation choices to be made
between these competing goals.
Expenditures for each could be reported,
expenditure relative to revenue giving a measure
of performance, but what is to determine the
right trade-off between them given world of
limited resources?
intra-generational equity for art museums
difficulty in performance measurement
Grampp (1989, 1996) known for lamenting that
collections costs not capitalized thus not possible to
generate a return on equity
As noted how can attendance be a measure if most
attendance is repeat? (Is a de facto performance
measure per the American Association of Museums)
Darnell (1998) highlights difficulty (and cost)of priceelasticity of demand market-segmented pricing
strategies. If attendance is goal just charge nothing
Paulus (2003)recommends ‘equity’ measure of ability to
attract funds that don’t offer direct benefit to giver
(What does this do for market feedback for museums?)
intra-generational equity for art museums
difficulty in performance measurement
American Association of Museums reports 35 financial ratios in
periodic survey of museums, examples:
• museum-related activities as percent of total operating
expense
• $ spent per museum visitor
• $ raised per visitor
• income from private sources as percent of total operating
income
• building operations cost per sq. ft of interior space
But how to prioritize expenditures?
intra-generational equity for art museums
difficulty in performance measurement
Pignataro (2003) states the dilemma and the ‘problem’ with
performance measurement, which includes problems of both
comprehensiveness and the distortion of governance incentives.
“There is no such thing as ‘the performance’ of cultural institutions, or
of the whole sector. There are different aspects of performance
that can be evaluated also with the help of numerical indicators,
but none that can provide an exhaustive representation of the
functioning of arts organizations.
Performance indicators need to be used with great caution….Once
used, indicators are not merely a computation exercise, since they
tend to affect the behavior of institutions according to the
incentives arising from the prediction about their possible
utilization.”
intra-generational equity for art museums
difficulty in performance measurement
Towse (2010) states that ultimately the
measurement of performance is a cost unto
itself, “Policies have to be costed directly by
the responsible authority or, ultimately by
their opportunity costs.”
intra-generational equity for art museums
difficulty in performance measurement
In our paper we take these problems with performance
measurement to heart.
Not-for-profits in the USA ultimately have to conform to their
chartered public purpose under the tax code and our
measure of intra-generational equity (of reported
‘performance’ if you will) are stated as is in the Financial
Statements for each museum studied under generallyaccepted accounting standards.
We are not recommending normatively that museums
prioritize one type of expenditure over another. We are
analyzing what current practices are, by analyzing how
these practices are reported under as-is conditions.
intra-generational equity for art museums
generational trade-offs
Inter-Generational Spending
preservation of heritage
(research and collections)
Intra-Generational Spending
consumption of heritage
(exhibitions and education)
intra-generational equity for art museums
taste-formation
Dutton (2009), following Hume (1757) proposes that all
human beings have a predisposition towards art and
it is only through lack of experience that this
appreciation for art is not prioritized in daily life
Scitovsky (1976) states consumption of art (“novel”
goods) is de-emphasized for consumption of the
known (“comfort” goods)
intra-generational equity for art museums
taste-formation
Consumption of novelty goods carries a cost
(risk through fear of the unknown)
Yet consumption of art has potential to increase
utility of consumption relative to consumption
of comfort goods over a person’s life-time
intra-generational equity for art museums
taste-formation
Grampp (1989):
“The preferences which people have among styles of art depend
on what they bring to it: their sensibility, understanding,
knowledge, what tolerance they have for the unusual and the
novel, how willing they are to risk disappointment, etc. These
properties come together to form taste, and they are the
product of intentional effort combined with the circumstances
in which the effort is made. It is what I have called investment
in taste. Taste governs the choices the individual makes, once
prices and his income are given. But investment in taste is
affected by income and prices, and taste changes when they
change.”
intra-generational equity for art museums
taste-formation
Educational programs by art museums can reduce the
price (lower the risk) of consuming novelty goods
In a consumer sovereignty framework for the current
generation, museum spending for education
programs as opposed to programs for those whose
tastes for art are already exercised can increase intragenerational equity by increasing the utility of those
yet consuming art
intra-generational equity for art museums
taste-formation
Consumer sovereignty theorizing about equity differs
from Gray (1989) who focuses on art lessons and art
classes as creating taste for museum visits, both for
children and adults.
Our research is concerned with creating demand for art
whether of not proxied by museum visits and is not
concerned with adults teaching children about art as
is study of intra-generational equity about changing
preferences toward ‘novelty goods’ in consumption
bundles.
intra-generational equity for art museums
taste-formation
average taste
and
utility of consumption
role for
taste-formation
through education
experience goods
normal goods
time
Adapted from Lévy-Garbona and
Montmarquette 2003
intra-generational equity for art museums
empirical analysis
“Top” art museums are those listed in either Art Newspaper
(2008),“Exhibition Attendance Figures 2007” or Foundation
Center (2008), “Top 50 Recipients of Foundation Grants for
Museums, circa 2006” or both
Museum must feature modern or contemporary art (excludes
museums of history, science museums, children’s museums,
collections of antiquity and libraries)
Have excluded government-owned museums under the
assumption that NFPs are more sensitive to market demand
intra-generational equity for art museums
empirical analysis
Problems with selection criteria:
Is it large museums in expensive tourist-oriented areas
that really reflect the day-to-day art experiences of
‘average’ Americans?
Isn’t it the smaller local museums which would better
reflect the market for museum services and the
cultivation of art-tastes in daily lives?
Excludes three of the most visited museums in the USA:
National Gallery of Art, the Freer and Sackler
Galleries and the Hirshorn Museum
intra-generational equity for art museums
empirical analysis
Given difficulty of asset (collections) measurement for museums
revenues are used to derive intra-general equity measure
Data from audited financial reports FY2007 “Combined
Statement of Activities and Change in Net Assets”
Revenues include both restricted and unrestricted funds, sales of
deaccessioned artwork and foundation income when
reported as current income
Educational expenditures are net of fees and only included when
listed as part of museum operations (not when separate
educational business accounting entity)
Combined education and library line item counted as
educational expenditures
Revenues ($ '000s)
Gov %
Educ %
of Rev.
of Rev.
Source
290,648
1
Met, New York
9.37%
4.82%
Both attendance and grant lists
258,346
2
Getty Museum, LA
0.00%
3.58%
Attendance list only
228,379
3
MFA, Houston, TX
0.43%
4.22%
Both attendance and grant lists
215,817
4
Art Institute Chicago
3.15%
-5.30%
Both attendance and grant lists
147,651
5
MoMA, New York
0.17%
0.00%
Both attendance and grant lists
76,248
6
Carnegie Museum, Pittsburgh
11.67%
0.81%
Both attendance and grant lists
72,216
7
Cleveland Museum of Art
0.00%
6.19%
Both attendance and grant lists
67,266
8
Guggenheim (NY, LA, Vénice, LV)
0.00%
4.02%
Attendance list only
66,956
9
LA County Museum of Arts
28.65%
5.41%
Both attendance and grant lists
53,031
10
Philadelphia MA
4.24%
8.88%
Both attendance and grant lists
52,681
11
Detroit Inst. Of Arts
12.19%
0.00%
Both attendance and grant lists
50,262
12
Fine Arts Museums, SF
19.53%
0.00%
Attendance list only
44,306
13
Indianapolis Museum of Art
0.72%
23.00%
Grant list only
39,834
14
Asian Art Museum, SF
16.89%
3.29%
Attendance list only
40,012
15
SFMOMA
0.00%
0.00%
Both attendance and grant lists
30,917
16
Denver Art Museum
7.15%
4.74%
Grant list only
30,903
17
High, Atlanta
0.00%
2.28%
Attendance list only
30,387
18
Brooklyn Museum
30.18%
0.00%
Attendance list only
19,539
19
Walker Art Center, MN
0.00%
8.06%
Attendance list only
18,894
20
MCA Chicago
4.96%
0.00%
Both attendance and grant lists
18,651
21
Seattle Art Museum
0.00%
5.47%
Grant list only
17,329
22
Joslyn, Omaha, NE
0.00%
4.70%
Attendance list only
13,413
23
Frist Center, TN
0.00%
14.52%
Grant list only
13,406
24
Phillips Collection DC
0.00%
0.00%
Both attendance and grant lists
11,010
25
Amon Carter, Ft. Worth
2.89%
7.27%
Grant list only
4,495
26
St. Louis AM
0.00%
36.54%
Attendance list only
4,439
27
Barnes Foundation, PA
0.00%
0.00%
Grant list only
intra-generational equity for art museums
empirical analysis
19 of 27 (70%) museums report educational
expenditures
LACMA is outlier with almost 30% of revenues from
government sources
Leaves 18 museums to evaluate intra-generational
trade-offs between educational and exhibition
expenditures
Revenues ($ '000s)
290,648
258,346
228,379
215,817
76,248
72,216
67,266
53,031
44,306
39,834
30,917
30,903
19,539
18,651
17,329
13,413
11,010
4,495
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Met, New York
Getty Museum, LA
MFA, Houston, TX
Art Institute Chicago
Carnegie Museum, Pittsburgh
Cleveland Museum of Art
Guggenheim (NY, LA, Vénice, LV)
Philadelphia MA
Indianapolis Museum of Art
Asian Art Museum, SF
Denver Art Museum
High, Atlanta
Walker Art Center, MN
Seattle Art Museum
Joslyn, Omaha, NE
Frist Center, TN
Amon Carter, Ft. Worth
Education Exp.
($ 000s)
13,998
9,246
9,635
-11,428
617
4,472
2,705
4,709
10,190
1,312
1,466
705
1,574
1,021
814
1,947
800
18
St. Louis AM
2,524
36.54%
56,307
7.62%
1,492,348
Total education expenditures as % of total revenues (weighted ave.)
Educ %
of Rev.
4.82%
3.58%
4.22%
-5.30%
0.81%
6.19%
4.02%
8.88%
23.00%
3.29%
4.74%
2.28%
8.06%
5.47%
4.70%
14.52%
7.27%
3.71%
intra-generational equity for art museums
empirical analysis
Chicago Art Institute is outlier with $11 million
in revenues from educational programs
classified in Financial Statements as ‘normal’
museum operations, this lowers weighted
average (Total Education Expenditures for the
18 museums/Total Revenues for 18 museums)
to 3.71% whereas as a straight average
percentage (Total education percentages/18)
is 7.62%
intra-generational equity for art museums
summary of findings
Not-for-profit status of museums might mean that a focus of museum
spending should be education
Education spending might be seen as equity transfer from those whose tastes
for art are yet to be realized from those who are already consuming art
Art (novelty) consumption might bring greater lifetime utility than
consumption for comfort
Due to competing goals, measuring performance of art museums is difficult
Research has shown that 70% of the USA’s top museums report spending on
education in 2007
These museums reported $1.492 billion in revenues and $56 million spent on
education for an average 3.71% of revenues on education
The average pay-out for education was 7.62% of revenues
intra-generational equity for art museums
further research
Evaluate spending priorities in equity framework
for smaller, more local museums
Evaluate spending priorities of ‘top’ museums
post-financial crisis (e.g., under liquidity
constraints) and compare spending priorities
with 2007 pre-crash data