Taking Note (Special Edition): What Would You Pay If It All Went Away?

Little over 10 years ago, RAND Corporation published Gifts of the Muse: Reframing the Debate about the Benefits of the Arts, a report commissioned by the Wallace Foundation. Among arts funders and cultural policy-makers, the RAND report popularized a distinction between the “instrumental” and “intrinsic” benefits of arts participation. Briefly, “instrumental” is meant to convey an “output-oriented, quantitative approach” to valuing art (e.g., its benefits for individual health, for academic achievement, for social cohesion, or for economic vitality), while “intrinsic” refers to the “communicative power” of the arts (e.g., emotional or cognitive responses, which, assuredly, can be measured and can lead to instrumental benefits). At the heart of the report was a plea to deepen the language of intrinsic impact—to devise metrics that would speak to such concepts as captivation, pleasure, empathy, and social bonding. A decade on, we can point to Theatre Bay Area and New World Symphony and other arts organizations that have adopted such surveys and measurement techniques, as profiled in the book Counting New Beans. (A few years ago, the NEA commissioned a literature review from Wolf Brown, the consultants who pioneered those survey tools. The review explored a similar construct we called audience "affect.") Now, from across the Atlantic, comes another innovative approach—one designed to measure the value not so much of cultural participation as of cultural institutions. And though it relies more heavily on economics than on cognitive psychology, the method could hold as much promise for cultural organizations as does “intrinsic impact” measurement. It shares with that other technique an attempt to quantify the more elusive and, traditionally, intangible effects of cultural engagement. Nesta, a UK-based charitable foundation that works with the country’s Arts and Humanities Research Council (AHRC), has just published a report called Measuring Economic Value in Cultural Institutions. The AHRC-commissioned report examines two econometric techniques that have long attracted interest from those who seek to monetize the value of cultural assets but who, in doing so, contemplate—nay, fantasize about—ways to transcend the limitations of standard economic-impact studies. One of the techniques tested here is well-being valuation, often described as subjective well-being (SWB) measurement. SWB surveys often ask people to recall their daily activities and to rate them in terms of the pleasure or meaning they bring to their lives. Alternatively, SWB surveys might ask people about their life satisfaction. In a previous blog post, I wrote about a couple of SWB studies that were funded by NEA research grants. (I may as well confess now that the “eminent econometrist” in the second paragraph of that post is Princeton University’s Angus Deaton, who has just won a Nobel Prize in economics.) I wrote about a third study, too. Backed by the UK’s Department for Culture, Media, and Sports (DCMS), this one showed that arts and sports participation had a positive relationship with Britons’ life satisfaction scores. The second measurement technique that Nesta explores is contingent valuation, often called “willingness-to-pay” studies. Contingent valuation surveys describe (in great detail) hypothetical scenarios involving changes to the provision of certain “non-market” goods or services. The surveys then ask people to indicate how much they would pay for the change. To elicit a specific monetary value, researchers might use open-ended or close-ended questions, or they might offer a payment card listing a range of monetary amounts from which respondents can choose.  As a technique, contingent valuation has been used widely in environmental economics, where such surveys have helped to appraise the non-market value component of natural resources. In a 2002 paper, Australian economist David Throsby lays claim to having undertaken in 1983 the first contingent valuation study of the arts. (Other significant forays in this area include a study by Eric Thompson, University of Nebraska-Lincoln, and this annotated bibliography by Doug Noonan, now at Indiana University, where he happens to be co-directing a NEA research grant.) Back to the new Nesta report. In it, researchers compare contingent valuation with SBW measures, among visitors at two UK cultural institutions: the Natural History Museum and the Tate Liverpool art gallery. In the case of contingent valuation, researchers tagged not only the monetary value that people assigned to visits per se, but also the value they associated with services not used directly—museum conservation work, for example, or community outreach.    So what did Nesta find? Contingent valuation emerged as "a viable approach for measuring economic values in the context of cultural institutions. The method produces realistic values that vary in ways that are consistent with economic theory." As for SWB, "in both institutions there is a strong positive association between activities at the institution and momentary well-being indicators, measured as how happy people feel and their sense of purpose." But Nesta's in the innovation business. The real takeaway from the report, at least for those seeking novel methodologies, is the success of a "hybrid approach"—one that merges contingent valuation with SBW. In this approach, researchers asked people how much they would be expected to be monetarily compensated if the cultural institution were to close for a year AND if their life satisfaction would remain unaffected. "Crucially," the report explains, "compensation is only offered to those who previously indicated that their life satisfaction would decrease if the institution were temporarily closed." To these respondents, a questionnaire asks: "Now imagine the following situation. Suppose that in order to compensate you for not being able to visit the [cultural institution] during one year, you were given a cash compensation. How much money would you have to receive, as a one-off payment, to give you the same life satisfaction that you have now (not better nor worse, but just the same) during this period until the [institution] re-opened? Think about this for a moment please." The researchers conclude that the hybrid contingent/well-being valuation approach "works well in eliciting plausible willingness to accept values. This method is useful where willingness to accept is a more appropriate measure of value than willingness to pay." "For instance," the report continues, there might be "sensitivities in asking visitors about their willingness to pay for entry or for a donation." In those cases, "our hybrid approach points to a sound new methodology that cultural institutions can use." What "sensitivities" are being acknowledged here? To ask people if they are willing to pay (or donate) to attend a cultural institution that is otherwise free may be problematic "when respondents come from very poor backgrounds," Nesta conjectures, "or when property rights are such that respondents believe they have some intrinsic right to the good or service in question (culture is arguably just such a case)." In these scenarios, the hybrid survey approach could be the way to go. At the same time, "the explicit reference to well-being—in the form of life satisfaction—seems to generate plausible values per visit" to cultural institutions. Hasan Bakhshi, the report's lead author, has previously co-developed empirical methods that have helped to overhaul Britain's definition of the creative economy. He's also contributed research that the NEA published in collaboration with the Brookings Institution. Most recently, he participated in a NEA/AHRC workshop on measuring cultural engagement. That event grew from the NEA's collaboration with AHRC's Cultural Value Project, led by Geoff Crossick. Geoff is now working on a full report (okay, a book) summing up the initiative's progress in defining new ways to capture cultural value. The Nesta report is a worthy contribution to that larger enterprise.