Assorted links

by Jon

Too many interesting things in the last couple of weeks, too little time to blog. So here are some assorted links that may be of interest.

– For those campaigning against changes to higher education funding in the UK, Alex Tabbarok and Tyler Cowen have some posts at Marginal Revolution that make challenging reading. This one on puppetry is particularly good. Statistics of the type quoted make the economic case for an arts education a tough sell. Other arguments are much stronger, as Tabbarok suggests, and his new book on Innovation will be one to read.

– Proof that there is value in an artistic education, albeit only for a given definition of value… Should we be surprised that the biggest gains accrue to men?

– Artsblog have been doing one of their periodic blog salons on arts and business. As ever, the content is mixed, but there is some good stuff in there. Repeat after me, though – Creativity does not equal Innovation.

– The Jack of Kent blog is written by David Allen Green, one of the UK’s best and highest profile skeptics and here he writes about art, art exhibitions and the value of thinking for yourself. As ever the comments are extremely high quality.

– Robin Hanson writing that the psychic value of an artwork depends on the direct physical connection to the artist.

– Public subsidy for solar power is causing controversy. I’m not entirely clear on the balance of funding for this scheme, but it is a fascinating way to wean an arts organisation off public money.

– Mitt Romney made headlines when he pledged to cut arts funding by 50%. This is a compelling read on what the pledge says about him and why it is likely to fail. I would ask: why 50%? What is so special about 50% that it’s become the percentage of choice for attention-seeking right wing politicians?

– Finally, an interview with me in Swedish in a Swedish newspaper. We talked about cultural policy, arts funding and the impact the recession has had on both. I have no idea what it says, so I’m choosing to believe I come across very well.

The strategy for NPOs? Grow

By Jon

This is a bit more esoteric than other posts you’ll find on BC. Normal service will be resumed when I post next on the value of books, but prompted by Dawn’s post on KPIs a couple of days ago, I thought I’d write something myself.

FYI ACE NPO KPI

The funding agreements for Arts Council England’s new National Portfolio Organisations (NPO) contain a number of KPIs, and one in particular has been attracting attention:

Achieve an increase in the proportion of your income generated from non-Arts Council funding of x% in 2011/12 to x% in 2012/13, X% in 2013/14 and x% in 2014/15

I think there are two reasons this KPI is attracting attention.

What does it all mean?

First, the exact scope of the KPI isn’t clear, and NPOs want to understand what they are signing up for.

For example, does the % of funding received from ACE over the period have to decrease year on year, or across the period as a whole? This is important to festivals, organisations with cyclical programmes, and anyone whose three-year plans include a period of increased activity, such as an anniversary year.

Does the % refer only to NPO grants or will it apply to all Arts Council funding? NPOs can no longer apply to Gfta, but many orgs are likely to receive large capital awards or strategic funds at some point over the next few years. If these monies are included in Arts Council funding, you’ll see large spikes in the % in some years. If they are excluded, then receiving a non-NPO award from ACE would actually reduce the % in the relevant year, which would be very odd.

There is a related point to make about grants made to orgs working in partnership, which are increasingly common. Dawn blogged a week or so ago about Common Practice, a group of several small London visual arts organisations. Common Practice has been supported by ACE funds in the past couple of years, but for practical and legal purposes, the money is channelled through the Chisenhale Gallery. As I read the KPI, the grant would greatly distort Chisenhale’s %. Perversely, it will probably making it easier for them to achieve the objective, since their % will drop significantly when Common Practice’s current funding runs out.

I’m also interested in how the %s are to be measured. In all other KPIs, ACE has left the basis for calculation to organisations to suggest, and one might assume that is the case here. But with other KPIs the wording is open to negotiation, so with a KPI mandatory ACE may have a fixed basis in mind. Yet nothing is set out, so while the obvious basis is to take a calculator to the financial statements, I think it’s open to interpretation whether management accounts or ACE’s own annual submission can be used.

Bigger is better?

A lack of detail is one thing – it can and probably will be tidied up in discussions and supplementary guidance. But a second and more significant issue is the message that the KPI sends & the potentially distorting incentive it provides. As Dawn hinted, there is only one strategy NPOs can adopt if they want to achieve the KPI – growth.

Its easy to see why with some numbers.

Let’s assume org x gets 100k NPO grant and 100k from non-NPO funds. The following year it receives 105k in NPO funding (a 5% increase). The organisation needs to raise at least 106k (a 6% increase) from non-NPO sources in year 2 in order to achieve the KPI. Overall, the NPO has to grow by 11k (5.5%)

ACE has awarded a significant majority of NPOs year-on-year uplifts, meaning NPOs must adopt a strategy of increasing non-ACE funding sources by a higher % year on year.

Why bother?

By making this and only this KPI mandatory, ACE have signalled that they attach special significance to growth in NPOs over the next 4 years. This is causing comment for several reasons.

First, it marks a policy shift for ACE. I’m happy to be proved wrong, but I think the KPI represents a greater level of direction for funded organisations than at any time in the past. Yet, NPOs are independent from ACE and both sides rightly cherish this about the relationship. An NPO is run (in most cases) by a Boards of Trustees whose role is to set strategy and secure the organisation’s future. These Trustees may well disagree with strategy the KPI requires.

Second, again as Dawn suggests, growth is very difficult for nations, supermarkets and investment banks at the moment, let alone arts organsiations. Standing still is a significant achievement in the current economic climate, and a contraction may be an organisation’s best strategy. So, it seems odd to include a requirement for all NPOs to grow at this time.

Third, while the KPI reflects the Secretary of State’s priorities and the goals set out in ACE’s 10 year strategy, the wording used means this is not simply a case of ACE passing on requirements from DCMS. The wording of DCMS’s own indicator (see #2) shows this, as it clearly refers only to charitable giving. The assumption is, therefore, that the KPI reflects ACE’s own focus or policy.

Finally, if you play with the numbers a bit more (which I won’t try to do here), it is likely to be harder to achieve for organisations who depend on income from a limited number of sources. Small organisations more often fall into this category, and a drop in (say) local authority funding will require a disproportionately high increase in funding from other sources in order to hit the target.

So, all in all, it’s hard to know what conclusions to draw.

Where once I would have asked for answers on a postcard, do write any thoughts you have in the comments. We have received some private correspondence from readers since Dawn’s post, but it would be nice to share them more widely.

Size Matters – Matters of Value

By Dawn

Apples & Pears?

Is it possible that in the current economic environment smaller cultural institutions face the most uncertain futures?

There certainly seem to be a number of smaller arts organisations (turnover under £1m) that will have their public funding significantly or completely cut next financial year.

These tend to be organisations that have limited capacity to generate alternative funding streams. They do not have the tangible assets of their larger counterparts and are often unacknowledged for the research and development role they play.

‘Size Matters,’ the recent report by Common Practice and Sarah Thelwall of MyCake fame, attempts to surface some of these issues. I found it a good read. It is a well-considered and thoughtful piece that genuinely surfaces the concerns I have heard many smaller scale organisations raise. Issues that it seems to me are generally ignored.

There is a lot packed into its 41 pages, probably too much to do it justice in a single blog. It touches on:

• The inability of many of the standard metrics around visitors, costs per head and earned income to capture the true value of these organisations
• The misleading mismatch these metrics create in comparing large with small organisations
• The lack of recognition of intangible assets
• The lack of scope for development and growth
• The poverty trap that many arts-workers in smaller organisations become caught in, and so on

Two things in particular caught my attention:

•  The need to build a more sophisticated understanding of the concept of value
• The notion of lifecycle assessment/investment

In developing a more nuanced understanding of value Size Matters suggests the need to consider: artistic; social; societal; and fiscal value. Opening up notions of value and measurement is something I very much support, as evidenced in my previous blog on Valuing Culture.

I do have a slight concern over the clarity of social as compared to societal value. I would offer sectoral rather than social, as it seems to refer to value created within the arts system itself. The report refers to this as an ecosystem but I find this metaphor can also be problematic, something for a later blog!

A number of examples are offered from Studio Voltaire, Chisenhale Gallery and Mute Publishing that illuminate the four interlinked values in practice.

“What we immediately see from these descriptions is that value accrues over the lifetime of an object or idea and that it does so in the four areas of artistic, social, societal and fiscal value in ways which are hard to separate out; indeed it is the fact that they are intertwined that is key to understanding how value accrues in an artwork.” (Size Matters: 26)

In laying out this approach to attributing value what follows is the challenging proposition (primarily for traditional funding sources) of deferred value. My understanding of this is that the four elements of value may be realised over different timescales, if at all in the case of fiscal value.

This is a particular challenge for the smaller organisations as they often serve as the catalyst for an artist or artwork but it is others in the system that then gain the full range of value. It is suggested that smaller organisations most often ‘forfeit two of the most measurable types of value created – the realisation of social value through the development of audiences and of fiscal value through sales via the art market.’ (Size Matters: 29)

While in some ways this seems obvious it is really refreshing to have it spelt out so clearly at a time when it definitely needs saying. My experience is that many of these smaller organisations need to build their confidence in order to take more control of how they are measured and understood.

The proposition for a move away from annual comparisons towards lifecycle-based assessments and investments carries with it significant challenges but I do find it persuasive. I hope Common Practice will pursue it further.

Psychic value?

By Jon

Malcolm Gladwell has written an article about why otherwise sensible business people buy sports teams, and what they get out of it.

Almost in passing, he makes the following remarks:

The best illustration of psychic benefits is the art market. Art collectors buy paintings for two reasons. They are interested in the painting as an investment — the same way they would view buying stock in General Motors. And they are interested in the painting as a painting — as a beautiful object. In a recent paper in Economics Bulletin, the economists Erdal Atukeren and Aylin Seçkin used a variety of clever ways to figure out just how large the second psychic benefit is, and they put it at 28 percent.7 In other words, if you pay $100 million for a Van Gogh, $28 million of that is for the joy of looking at it every morning. If that seems like a lot, it shouldn’t. There aren’t many Van Goghs out there, and they are very beautiful. If you care passionately about art, paying that kind of premium makes perfect sense.

The paper is available here and is interesting throughout.

It reminds me of Bruce Hood’s SuperSense and (the accompanying blog) in which he has written about the physiological and psychological reasons why people come to believe objects have non-physical properties. As a result, the object’s value is often significantly enhanced.

Surviving Picasso – revisited

By Jon

A couple of weeks ago I posted about an economic impact assessment commissioned by the Virginia Museum of Fine Arts (VMFA). The report was produced by Chmura Economics and Analytics of Richmond into a Picasso exhibition run by the VMFA earlier this year. The report estimates the exhibition delivered benefits of $26.6m to Richmond, where the VMFA is based, and a further $3.4m to the rest of Virginia. These are seriously impressive numbers.

At the time, I wasn’t able to comment in detail on the report as I couldn’t locate it, but Geoffrey_Crayon was kind enough to provide me with a link.

So, here are some thoughts about the report and the analysis it contains.

1. Sample size – There were 230,373 visitors in total to the exhibition, although it isn’t clear how the VMFA calculated the figure (it’s likely to be based primarily on ticket sales). The Chmura analysis is heavily predicated on a survey they undertook showing that 94% of those attending the exhibition cite it as their primary reason for visiting Richmond. But this is based on a sample of just 404 visitors, or 0.176% of the population.  This simply cannot be considered representative and renders speculative any conclusions drawn.
2. Cost of the exhibition – Programmatic spend makes up around $4m of the total, but it is a weak measure of economic impact. You have to spend the money to put on the exhibition so even if no one visited or spent any money, there would be some sort of an economic impact. And the greater the cost of staging the exhibition, the greater the impact… The programme budget is an input – part of the cost of generating the outputs the analysis is trying to measure. The benefits to Richmond and Virginia will be greater if these costs can be minimised, since they free up resources to be spent elsewhere. Spend on employment is somewhat different, but it’s only really useful if jobs were created solely because the exhibition was on and for the period it ran. It’s also worth asking whether and where the fee for Chmura consultants’ services are included!
3. Attribution – It’s not possible to say that there was a wider economic boost to the area as a result of the exhibition without ruling out any other possible revenue generating events at the same time in the same area. And even accepting that the primary reason for visiting was attendance at the exhibition doesn’t mean that all of the economic benefits of a visit can be attributed to the exhibition. The exhibition may simply have dictated the timing of a trip that would have happened anyway, or been the primary factor among several.
4. Negative impact of the exhibition – This point is related to the second one, but any comprehensive assessment of the exhibition’s impact has to at least consider the possibility that there were negative effects. This might be reduced spend on the Richmond’s other amenities because residents bought tickets to the exhibition instead. Or the additional cost of cleaning up litter or mending the roads because of the number of visitors. Or take the comment, found deep in the appendix, that those whose primary reason for visiting Richmond was the exhibition spent less than those who had other motivations. It’s at least possible that the exhibition reduced the average amount visitors spent in the region.
5. Negative fiscal impact – Another possibility is that tax income to the local and state governments was negatively affected. The VMFA does not charge an admission tax, but the analysis includes tax revenue from  other venues where the attendees primary reason for visiting Richmond was the exhibition. Well, there is also likely to be lost tax revenue for those who attend the Picasso exhibition instead of alternative venues.
6. Opportunity cost – The initial Art Law blog reported that a fee paid to the Musee National Picasso for loaning the exhibit. One imagines it was sizeable, and such a fee could have been spent in myriad ways. Without knowing what alternative courses of action were considered, and what relative benefits they might have delivered, the $30m benefit quoted lacks real context.

I don’t mean to sound overly critical as the report is no better or worse than similar pieces of analysis and there may be sensible responses to the issues highlighted above.

But the really disappointing thing is, I’m sure that the exhibition was a massive success & brought all kinds of benefits to the region and those lucky enough to see it. Certainly, I would have loved to visit, although I probably wouldn’t travel Virginia from the UK primarily for that purpose.

By attempting to do an analysis of this kind but not doing it comprehensively, the real value of the exhibition gets lost amid the noise.

(Thanks to Leila Davids for her input on some of the finer points)

Valuing Culture

By Dawn

“…as a discussion in Clarke (2006:62) exemplifies, the need to fit the cultural sector’s understanding of value into central government’s standard framework for evaluating decisions is simply unavoidable. It is especially unavoidable given the increasing demands on decreasing resources expected across the public sector for the foreseeable future (Selwood 2010).”

I have wrestled with ‘Measuring the value of Culture: a report to the Department for Culture Media and Sport’ for several weeks now and I confess almost any distraction has taken me elsewhere. Having hit the above paragraph at the end of Chapter 3 ‘Values and Valuation’ I remained stuck there, initially too depressed to stroll any further. That is not to say it is a bad report. I think it is exactly what it set out to be a rigorous, multi-disciplinary literature review of methods for measuring the value of culture set within the context of HMT’s Green Book.

This probably locates it within a relatively specific readership, which is a shame because the challenge of measuring the value of culture really ought to be a sector wide debate. There is recognition that ‘culture is an intangible good that is hard to define’ but the report goes on to suggest that economic techniques have been applied to other intangibles such as environmental and transport policy making. Still I fight to get past the notion that this kind of measurement is unavoidable.

 I should probably show my hand at this point, if you haven’t already guessed it. I am a qualitative researcher and evaluator, issues of meaning making and experience are important to me. There is no doubt I, like others, apply a particular lens in looking at the matter of value and I recognise it has an impact. It does not mean, however, that I do not appreciate there are other approaches, many of which involve particular forms of measurement. I hope it makes me a constructive critic rather than an outright detractor.

 There is no doubt that Dave O’Brien has done his legwork, there are probably enough references here to feed my blogging for months to come. I find it a bit of a shame that the consultees don’t include any of the culture SMEs or micros that any development in this field is most likely to have an effect on, if nothing else to bring them into the debate. I am not suggesting it should have been a representative sample, let’s not get hung up on that one, just that I know of many good smaller culture organisations who are wrestling with these issues right now. And they too might have a view on why the cultural sector ‘is hindered by its failure to clearly articulate its value in a cohesive and meaningful way.’ (Scott, 2009: 198)

 At the moment, and this may change with further readings, the bit I find most perplexing comes on the second page of the introduction. I was encouraged when I started to read that while techniques from economics are the most useful for government decision makers who have to make judgements about cultural value, i.e. distribution of scarce resources (probably fair comment), ‘they must not be used in isolation’ (great, couldn’t agree more). The next sentence starts robustly, ‘first’, I am now primed for a valuable list of reasons why mixed methods are relevant here. However, only two emerge.

1.       There is a need to gain the support of the cultural sector

2.       The debate over economic valuation techniques being able to capture all dimensions of cultural value is on-going

 It seems to me these two issues are the crux of the matter, and they have been around for some time, it is good that they have been highlighted in the report though. It would have been even better to have them drawn out more in the recommendations.

 Overall, it is hard not to hear a message that suggests, ‘we’ve given you lot plenty of time to come up with your own methods and measures and you’ve failed to convince anybody, now let the grown-ups who can count take over.’ Or am I being too harsh/paranoid/cross/fluffy…?

$17 to $1 – economic benefits in Toronto

By Jon

The first of an occasional series highlighting the varying claims about how much every £ or $ spent on cultural activity is said to be worth in economic activity / income / other benefits generated.

In Toronto, the benefit reported is $17 is to every $ spent, according to cultural advisor Jeff Malenson.

No source for the figure is presented.

Surviving Picasso

By Jon

Virginia Museum of Fine Arts is reporting that it’s Picasso exhibition earlier in the year generated an economic impact for the state of a whopping $30m. This is according to a study undertaken by local firm Chmura Economics and Analytics. There are good reasons to be skeptical of this kind of analysis, but I can’t comment on this report as I haven’t been able to locate a copy anywhere.

However, I would point readers to the excellent Art Law blog which highlights that the benefits did not come for free, as the VMFA paid fees to bring work on loan. The blog notes that some find commercial arrangements of this type repulsive – possibly to do with the violation of intent, possibly because of the signals it sends. Either way, such an attitude is difficult to defend if the numbers in the study and reports are accurate, and in the current climate, one imagines that there will be more holding of noses than in the past.

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Update – Geoffrey_Crayon kindly pointed me in the direction of the full report in the comments, which I have now written about.

What we can’t learn from the US (yet)…

By Tina

It is rather common and understandable that people, businesses and governments see a success story elsewhere and want to replicate it closer to home. Perhaps this explains the recent public discourse according to which the UK should be aiming to reach the levels of individual charitable giving in the US.

There are subtle signs of this in the Giving White Paper, which references the US three times, as well as more overt discussions in countless reports and articles arguing both for and against using the US as the benchmark for future levels of giving in the UK. In theory, there would be nothing wrong with that – if anything, it’s good to be aspirational and to set high targets, especially when they underline a ‘worthy’ cause (namely increasing levels of charitable giving). In practice, however, any superficial exercise of comparing the levels of giving in the UK and theUS is unhelpful at best and demoralising at worst.

First the figures:

Just over half (56%) of the adult population were philanthropically active in the UK in 2010 (CAF/NCVO), as opposed to more than 80% in the US in 2002 (The Future of Philanthropy). Though even here we don’t have directly comparable figures, we clearly see a big difference relating to the penetration rates of philanthropy.

Furthermore, with some quick comparisons between the different sources, we find that per capita giving to culture in the UK stands at around £9, in contrast to approximately £22 in the US.* This is more than twice as much giving to the arts per person in the US than in the UK.

Next the caveats:

As this is in-line with the gap between US and UK giving overall, it exemplifies that the lower levels of giving in the UK are not specific to the arts, but rather a result of an overarching issue most likely related to the culture, ability or incentives for giving (or lack of). And then there are further questions relating to the culture (and necessity) of asking in both countries.

Finally, the questions:

Such questions are likely to shed more light into why the differences in levels of giving are so stark and why it is so difficult to compare:

How many cultural organisations are there in the UK and the US?

• How much is received on average per organisation?
• How many fundraisers on average do they employ?
• How much is invested in fundraising (directly and indirectly)?
• What percentage of US cultural organisations receive public funding?
• What proportion of their overall income does public funding account for?
• What proportion of the population engages with culture as audiences?
• What proportion of the population gives to cultural causes?

Only when we start answering these questions (and more) will we be in a position to begin to understand why this massive gap of giving between the two countries exists and more importantly, how it can be bridged.

The latest figures on cultural giving in the US are now available here – please note this includes individual giving as well as funding from businesses and trusts and foundations.

*Calculations are based on the following figures/sources:

• UK adult population: 39m (Office for National Statistics)
• US adult population: 248m (US Census Bureau)
• UK individual giving to culture: £363m (Arts & Business)
• US individual giving to culture: £5.6b (Calculations on Giving USA Foundation)