Beyond penning - for healthy fees - countless reports on whether or not various arts projects should be subsidised from the public purse, economists have paid little attention to the creative industries. This gap has now been filled by Harvard University's Richard Caves. Creative Industries explores the economics of the arts in exacting detail. With great skill and originality, Caves has analysed the economic forces operating in music, book publishing, painting, the theatre and movies. Less is said on other industries such as fashion, architecture, advertising and design.
The concept of an entity known as "the creative industries" - one much loved by the present government - is relatively new. This is because the creative industries are, in many ways, quite unlike each other. Almost nobody would say they are employed in "the creative industry". Instead they say they work in a creative industry - or more commonly, in the fashion or the music business. And nobody who works in fashion thinks it bears much similarity to book publishing or to classical music. Caves is well aware of this and is at pains to highlight the differences. But, more importantly, he delineates the similarities, the features that make it meaningful to categorise and analyse them as a group.
In economic terms, the most significant unifying feature is the massive over-supply of creative output. In chapters dealing with the different industries, Caves provides mind-numbing detail. Some 14,000 students with performance degrees graduate from American music schools each year, though only 250 to 350 jobs await them. Twentieth Century Fox receives about 10,000 screenplays annually, of which they film a dozen. Doubleday publishes one in 15,000 of the unsolicited novels it receives - and so it goes on. For would-be creative people, the statistics are profoundly discouraging. Worse still, of the tiny handful that are selected, an even tinier handful succeed in the market. This results in immense pain for the creators and immense, but apparently unavoidable economic waste, an issue Caves regrettably fails to confront.
It generates many of the special characteristics of the industry. While the superstars become super-rich, the average creative person earns a pittance. A study of 2,000 visual artists in the United States showed their median earnings from art to be $3,000 a year, while the costs of their artists' materials exceeded $9,500. They met the shortfall by working long hours at what Caves calls humdrum jobs - humdrum being one of his favourite words, used to describe almost any job that is not innately creative.
The over-supply also begets a network of agents, managers, readers, experts and organisations that exist to pick the creative winners and to sell them hard. They constantly get things wrong. Caves points out that there is still no reliable way to research the probable success of artistic endeavours before they are produced. Advertising and the movies have got closest to evaluating their efforts before they are launched (the situation in both cases being particularly critical because of the money involved). But pre-launch tests are far from infallible. The recorded music and book industries have sought to solve the problem by launching myriad records and books and seeing which fly. This was possible in the past because production costs were relatively small, so the few blockbuster successes could fund the losses. But, as Caves shows, this too is changing. Today, major new books and recordings can be frighteningly expensive to bring to the launch pad, and in consequence they cannot so easily subsidise the small fry.
Economics, as Des Lynam has never quite said, is a game of two halves: supply and demand. While Caves analyses the supply side of his chosen creative industries with immense perception, he is less good at making sense of the mechanisms of demand. Admittedly, this is much murkier terrain. Investigating taste and aesthetics, drawing workable lines between high culture and pop culture, defining why the public will pay for subtleties, many of which they are unaware of - these and many similar issues have defeated the world's most magisterial thinkers.
Nonetheless, to make sense of the creative industries, it is essential to try to evaluate why consumers want some of the things they buy to change constantly, while from others they demand consistency. We want our Coca-Cola to taste the same every time, we want the movies we watch to be endlessly different. The incessant creation and production of novel goods and services - artistic phenomena - is the antithesis of humdrum mass production. The costs of supply and the volume of demand are inherently hard to pin down. That is why the creative industries face complex economic problems.
Winston Fletcher is chairman, Royal Institution.
Creative Industries: Contracts Between Arts and Commerce
Author - Richard E. Caves
ISBN - 0 674 00164 8
Publisher - Harvard University Press
Price - £30.95
Pages - 368