Are politicians right when they say that there is "excess fat" in public support for art and culture? And was the Tour de France, which this summer coloured the streets of Denmark yellow, worth taxpayers’ money? We can and should be better to answer such questions in a more objective manner, if we are to ensure a balanced prioritisation of the scarce resources of society. The key is to measure cultural value on a monetary scale.
During summertime I read in the newspaper that “the value of Tour de France in Denmark cannot be measured in monetary terms”. But this is not quite right. We economists have methods to value all sorts of things, including public goods and externalities like pollution and safety. It just requires that one accepts a broader definition of value.
By measuring economic, social, and environmental impacts on the same monetary scale, we can optimise returns on investment in a societal perspective. This is particularly useful in decision-making processes, where our scarce resources must be prioritized across sectors.
The lockdowns caused by the pandemic taught many of us that we do not thrive without access to cultural institutions and events. We miss the joy, stimulus, and food for thought that we all seek when going to a museum, a concert, or a book event. Public access to cultural life was historically limited during the lockdowns, as politicians and authorities prioritized reopening business life and public institutions such as day care and schools. This has ignited the well-known debate of how to assess the value of cultural activities and the impact of such on society.
Unless we agree on what value is, we will not be able to reach consensus about that question. To some, it is purely monetary, while others emphasise the existence and use value of a cultural activity. In my view, concerning especially cultural life, we ought to consider social value in addition to economic value.
As I have reflected on in a previous blog post, we are in the midst of an “Impact Revolution” where the concept of value is expanded to encompass economic, social, and environmental values. As a chief economist, I strive to embrace this paradigm.
I believe that a reconceptualization of value is a critical component of ultimately making our society more sustainable and to increase welfare for all citizens.
A great illustrative case of this argument is the Flavian amphitheater, known as the Colosseum, in Rome. Recently, Deloitte gauged the Colosseum’s true worth to Italy based on an analysis and quantification of the economic and social value of the Colosseum. This study showcases how we can in fact assess the total value of such a cultural heritage site. As illustrated below, the report attaches a value to the economic contribution, the indirect use value, and the social asset value.
The result is very exciting: while the estimated economic contribution (direct and indirect plus tourism) adds up to 1,390 million Euro, the social asset value amounts to no less than 76,776 million Euros – which is significantly more! And to that number the indirect use value of 406 million Euro must also be included to assess the total value.
How does the report reach these numbers? The economic contribution is the amount of material and immaterial welfare that the Colosseum generates for society. This includes the direct use value from operation being a major tourist attraction, but also income attributed to additional tourist activity in the local economy and the related employment generated. Also part of the direct use value is indirect and induced effects. Indirect effects are the results of business-to-business activities and concern intermediate consumption for the production of goods and services in the related tourism sector, while induced effects mainly stem from the consumption of the companies and their employees that have benefited directly or indirectly from initial expenditure in the tourism sector.
The second component of the Colosseum’s economic contribution is the indirect use value, which occurs from indirect use of Colosseum such as welfare to people passing by or living in the neighbourhood.
The final element of truly assessing the Colosseum’s value is the social asset value defined as the value given by the visitor and the pure existence of the Colosseum. It is comprised of both transaction value and non-use value (also called existence value). Transaction value is calculated by using the market or social value given by the transaction value (the revenue from the sale of goods and services), while non-use value arises when an individual is willing to pay for the Colosseum even though one makes no direct use of it, may not benefit even indirectly from it, and may not plan any future use.
Consequently, the case of the Colosseum illustrates why we must rethink how we define value.
By placing a monetary value on social impact it becomes evident that culture cannot be assessed in economic terms only if we want to capture the real value of culture.
The social value to citizens and society greatly exceeds the economic contribution in the case of the Colosseum, and I’m sure that is true for most other cultural assets or activities. My sincere hope is that this insight can broaden the discussion on the value of culture in society and that stakeholders will do the calculations – I believe we all should.
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Majbritt Skov
Spørg mig om: Samfundsøkonomi, økonomisk modellering og ESG i et kommercielt perspektiv Majbritt er partner i Deloitte og leder af Deloitte Economics. Hun har mere end 15 års erfaring med udarbejdelse af mikro- og makroøkonomiske analyser for både den private og offentlige sektor. Majbritt er en efterspurgt økonomisk rådgiver i strategiske beslutningsprocesser om optimering og effektivisering. Majbritt er ekspert i at beregne organisationers impact og kan sætte kroner og ører på bæredygtighed. Ydermere bistår hun virksomheder og investorer med at værdisætte ESG-relaterede risici og muligheder i både et kommercielt og samfundsøkonomisk perspektiv - blandt andet i relation til M&A. Besøg Majbritts blog her Ask me about: Socio-economic impact, economic modelling and ESG Majbritt is a partner in Deloitte and Head of Deloitte Economics. She has more than 15 years of experience with conducting micro and microeconomic analyses for both private and public sector clients. Majbritt is an experienced economic advisor in strategic decision-making processes focusing on optimization and effectivization. She is an expert in the valuation of non-market goods and supports companies and investors in assessing their impact and the value of sustainability and ESG-related risks and opportunities from both a commercial and societal perspective - in relation to M&A amongst others. Visit Majbritt's blog here