Culture As An Economic Engine

The benefits of cultural investments have long been touted in New York, Paris, London, Barcelona and many other locales that attract creative people. A new study from Munich shows how long-lived the investments that may have initially attracted such artists can be.

By Jack Ewing at the New York Times Economix blog:

"Modern Germans may still be harvesting significant economic benefits from extravagant opera houses built by spendthrift Baroque princes, according to a study published this month by the Ifo Institute for Economic Research in Munich.

The economists behind the study, Oliver Falck, Michael Fritsch and Stephan Heblich, argued that Baroque opera houses attract well-educated workers who prefer to live near cultural amenities. Proximity to an opera house can increase regional growth by as much as 2 percentage points, they wrote.

They concluded that political leaders should think twice before reducing culture spending.

The study by Mr. Falck and the other economists examined 29 opera houses built before 1800 or just afterward. By limiting themselves to venues constructed before the advent of the industrial revolution, the authors sought to eliminate the possibility that opera houses were a result, rather than a cause, of regional economic growth.

The study corrected for other factors that might explain higher growth, like the presence of a university or seaport. Some opera venues were in major cities like Berlin, Munich and Hamburg, but others were in smaller cities like Bautzen, Passau and Stralsund.

The authors also looked at regions with similar characteristics, minus the opera house.

Even accounting for those other variables, opera centers came out ahead, because they attracted people to the neighborhood with more training and education. “Proximity to a Baroque opera house is a strong predictor of the district’s share of employees with a tertiary degree,” the authors wrote.

Inadvertently anticipating Keynesian economics, Baroque nobles often borrowed heavily to finance their ornate musical palaces, according to the study’s authors.

Like Italy, Germany was a loose collection of independent fiefs until the middle of the 19th century. Music was a weapon in the aristocrats’ fierce competition for prestige, helping to account for the disproportionate number of Baroque operas from German and Italian composers as compared with France, which was more centralized.

“The theory that you can only spend what you have was not a popular one among the absolutist rulers of this era,” the authors wrote. “Indeed, it was not uncommon for rulers to incur huge debts and engage in deficit spending in their quest for grandeur.”

As Chancellor Angela Merkel’s government goes on an austerity drive to eliminate its budget deficit and set an example for spendthrift nations elsewhere in Europe, the authors suggest it might be a mistake to cut funds for culture, which is heavily subsidized in Germany.

“Our advice to local policy makers,” they wrote, “is to be aware of the value of cultural amenities when competing for high-human-capital individuals.”