Dear NEA: Art Is a Bad Investment

Donald Trump's proposal to scrap federal funding for the National Endowment for the Arts (NEA) and the Corporation for Public Broadcasting has again put him in the cross-hairs of liberal ire.

His opponents point out that arts funding represents but a tiny fraction of the federal budget – just one-tenth of one percent – and that cutting it would have a big impact on local communities, without meaningfully reducing America's deficit.

They also argue that funding the arts makes economic sense.  In fact, Patricia Harrison, the president and CEO of the Corporation for Public Broadcasting, goes so far as to claim that "public media is one of America's best investments."  Still others argue that investing in non-profit art makes economic sense because it makes America's workforce more creative, and creativity drives economic growth.

But is any of this true?  Does it really make economic sense for the federal government to invest in the arts?

No.  Gargoyles and Corinthian columns may be great aesthetic investments, but saying they make financial sense is simply untrue.  The claim is based on bad economics and even worse psychology.

The first argument supporters of the NEA or Public Broadcasting inevitably bring up is that non-profit art has a stellar return on investment.  Artist David Byrne, who led the charge condemning Trump, argues that the $741 million provided to the NEA is leveraged into $135 billion in spin-off economic activity.  No, he did not make this number up; it actually comes from a study conducted by the non-profit America for the Arts.  All told, Byrne argues that every $1 invested in non-profit art turns into $182, as if by magic.

If true, it appears that non-profit art is one of the most lucrative investments one could make.  In fact, it is a miracle that Wall Street has not already snapped up every local theater and art gallery in America.  Get in while you can, folks.

Sadly, this is all nonsense, just bad economics dressed up to fool the American public.  How?  The calculation is based on the broken windows fallacy.

Here is how the broken windows fallacy works: pretend someone smashes your window with a baseball (hopefully accidentally).  Now what?  You have to buy a new window pane.  It costs you $500, which you pay to the hardware store owner.  Unlucky you, lucky him; now he is $500 richer.  He takes this money and buys an expensive jacket for $500.  This enriches the tailor, who in turn buys a $500 pair of shoes, and so on and so forth.  On the surface, it looks as though the broken window was actually good for the economy: it forced you to spend, which ended up generating subsequent economic activity.  Your $500 purchase generated at least $1,000 in subsequent spending.

This is exactly how America for the Arts calculated the spillover effects of government funding for the NEA.  They said a $10,000 investment in a theater would attract theater-goers, who would then spend money on local restaurants, and these local restaurants would hire more cooks, etc.  On the surface, it looks like a good investment.  But it is not.  Why?

This line of reasoning looks at only one half of the equation: the spending.  We often forget that the initial money came from somewhere.  In our first example, you bought the window because you had to – but this also prevented you from spending the $500 on your own jacket or shoes.  The economic activity was simply redirected, not created.  This is what the broken windows fallacy is all about.  The same is true of funding the arts: the government acquired the money via taxation, which means that it came from someone else, who is unable to spend his money on a meal at a restaurant or a night at the theater.

Funding the NEA redistributes wealth to artists.  It does not create it.

It is also worth noting that the same ripple effect could be calculated for government welfare payments, or the funding of balloon factories.  Yet very few would argue that we should buy billions of balloons to expand the economy.

Moving on to the second point, liberals often claim that the NEA, and Public Broadcasting, make Americans more creative, and this makes us richer.  While it is unquestionably the case that creativity drives long-term economic growth, it is not the case that art installations, whether they be theaters or art galleries, make people more creative.  Why not?  Because of something called domain-specificity.

Domain-specificity it is the notion that people compartmentalize their skills and reasoning, to a degree.  For example, chess masters have amazing memories when it comes to chess – they can often remember the setup, sequence, and outcome of particular games for decades.  However, many are also absent-minded in their personal lives.  Likewise, they may be good at chess but horrible at other abstract strategy games, like go or pente.  The same thing happens with creativity: engineers who go to the theater are not more creative than those who enjoy solving Sudoku puzzles in their spare time.  Therefore, investments in art are unlikely to make America more creative as a whole.

If it is found that art does increase general creativity, then this would be a valid argument.  However, it would still not support funding the NEA, which provides grants to local artists.  A much more efficient way of distributing said funds would be through some sort of public Netflix-like program, or expanding the scope and content of PBS.  Either way, the NEA would not be a good investment.

From an economic standpoint, arguments in favor of federal funding for the arts are doomed to failure.  But that is not to say that there are not compelling reasons to invest in public art.  For example, many Americans would prefer to spend extra to decorate public buildings, lest we end up constructing more brutalist monstrosities, like Boston's City Hall.

So there is a case to be made for federal arts funding – just not an economic one.

Spencer P Morrison is a J.D. candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics.  He is the author of America Betrayed and editor-in-chief of the National Economics Editorial.

Donald Trump's proposal to scrap federal funding for the National Endowment for the Arts (NEA) and the Corporation for Public Broadcasting has again put him in the cross-hairs of liberal ire.

His opponents point out that arts funding represents but a tiny fraction of the federal budget – just one-tenth of one percent – and that cutting it would have a big impact on local communities, without meaningfully reducing America's deficit.

They also argue that funding the arts makes economic sense.  In fact, Patricia Harrison, the president and CEO of the Corporation for Public Broadcasting, goes so far as to claim that "public media is one of America's best investments."  Still others argue that investing in non-profit art makes economic sense because it makes America's workforce more creative, and creativity drives economic growth.

But is any of this true?  Does it really make economic sense for the federal government to invest in the arts?

No.  Gargoyles and Corinthian columns may be great aesthetic investments, but saying they make financial sense is simply untrue.  The claim is based on bad economics and even worse psychology.

The first argument supporters of the NEA or Public Broadcasting inevitably bring up is that non-profit art has a stellar return on investment.  Artist David Byrne, who led the charge condemning Trump, argues that the $741 million provided to the NEA is leveraged into $135 billion in spin-off economic activity.  No, he did not make this number up; it actually comes from a study conducted by the non-profit America for the Arts.  All told, Byrne argues that every $1 invested in non-profit art turns into $182, as if by magic.

If true, it appears that non-profit art is one of the most lucrative investments one could make.  In fact, it is a miracle that Wall Street has not already snapped up every local theater and art gallery in America.  Get in while you can, folks.

Sadly, this is all nonsense, just bad economics dressed up to fool the American public.  How?  The calculation is based on the broken windows fallacy.

Here is how the broken windows fallacy works: pretend someone smashes your window with a baseball (hopefully accidentally).  Now what?  You have to buy a new window pane.  It costs you $500, which you pay to the hardware store owner.  Unlucky you, lucky him; now he is $500 richer.  He takes this money and buys an expensive jacket for $500.  This enriches the tailor, who in turn buys a $500 pair of shoes, and so on and so forth.  On the surface, it looks as though the broken window was actually good for the economy: it forced you to spend, which ended up generating subsequent economic activity.  Your $500 purchase generated at least $1,000 in subsequent spending.

This is exactly how America for the Arts calculated the spillover effects of government funding for the NEA.  They said a $10,000 investment in a theater would attract theater-goers, who would then spend money on local restaurants, and these local restaurants would hire more cooks, etc.  On the surface, it looks like a good investment.  But it is not.  Why?

This line of reasoning looks at only one half of the equation: the spending.  We often forget that the initial money came from somewhere.  In our first example, you bought the window because you had to – but this also prevented you from spending the $500 on your own jacket or shoes.  The economic activity was simply redirected, not created.  This is what the broken windows fallacy is all about.  The same is true of funding the arts: the government acquired the money via taxation, which means that it came from someone else, who is unable to spend his money on a meal at a restaurant or a night at the theater.

Funding the NEA redistributes wealth to artists.  It does not create it.

It is also worth noting that the same ripple effect could be calculated for government welfare payments, or the funding of balloon factories.  Yet very few would argue that we should buy billions of balloons to expand the economy.

Moving on to the second point, liberals often claim that the NEA, and Public Broadcasting, make Americans more creative, and this makes us richer.  While it is unquestionably the case that creativity drives long-term economic growth, it is not the case that art installations, whether they be theaters or art galleries, make people more creative.  Why not?  Because of something called domain-specificity.

Domain-specificity it is the notion that people compartmentalize their skills and reasoning, to a degree.  For example, chess masters have amazing memories when it comes to chess – they can often remember the setup, sequence, and outcome of particular games for decades.  However, many are also absent-minded in their personal lives.  Likewise, they may be good at chess but horrible at other abstract strategy games, like go or pente.  The same thing happens with creativity: engineers who go to the theater are not more creative than those who enjoy solving Sudoku puzzles in their spare time.  Therefore, investments in art are unlikely to make America more creative as a whole.

If it is found that art does increase general creativity, then this would be a valid argument.  However, it would still not support funding the NEA, which provides grants to local artists.  A much more efficient way of distributing said funds would be through some sort of public Netflix-like program, or expanding the scope and content of PBS.  Either way, the NEA would not be a good investment.

From an economic standpoint, arguments in favor of federal funding for the arts are doomed to failure.  But that is not to say that there are not compelling reasons to invest in public art.  For example, many Americans would prefer to spend extra to decorate public buildings, lest we end up constructing more brutalist monstrosities, like Boston's City Hall.

So there is a case to be made for federal arts funding – just not an economic one.

Spencer P Morrison is a J.D. candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics.  He is the author of America Betrayed and editor-in-chief of the National Economics Editorial.

RECENT VIDEOS