CC/CSP/CP/12

APPLICATIONS AND LIMITATIONS OF

COST-BENEFIT ANALYSIS
AS APPLIED TO CULTURAL DEVELOPMENT

by

Xavier DUPUIS

1985

This study has been prepared by

Mr Xavier DUPUIS at the request of
Unesco. The opinions expressed
therein are those of its author and
do not necessarily reflect the
viewpoint of the Organization.
 (i)

CONTENTS

Page

FOREWORD iii

PART I: THE BASIC THEORY AND METHODOLOGY OF COST-BENEFIT ANALYSIS 1

k

PART II: APPLICATIONS OF COST-BENEFIT ANALYSIS IN THE FIELD OF

CULTURAL DEVELOPMENT 7

PART III: IMPACT STUDIES, A NEW EVALUATION TECHNIQUE FOR CULTURE 19

OTHER POSSIBILITIES 27

ANNEXES 35

BIBLIOGRAPHY 45

INDEX 49

Í
 (iü)

FOREWORD

It is only recently that economists have begun to interest themselves in

the cultural sector, the first serious studies not having appeared until the
mid-sixties.-'- For nearly 15 years research focused on specific problems:
the chronic shortage of live shows because of the productivity gap and
alternative sources of finance (subsidies/patronage). It was only towards the
end of the last decade that new developments were envisaged using the tools
provided by micro-economics.2 The desire to determine the economic weight
of cultural activities derives from that line of thinking and the explanation
is simple.

In 1978 budget austerity in the United States generated the gloomiest

forebodings about the future. In September a conference attended by the
mayors of several American cities found that all too often in times of
budgetary restraint money allocated to the arts was considered an unnecessary
luxury whereas in reality it was an investment and not pointless spending that
could easily be dispensed with.3 Thus it was that the idea of a strategy of
self-defence vis-à-vis the authorities that would express the impact of
spending in favour of culture in economic terms took stronger and stronger
root.

Within that strategy the application of cost-benefit analysis seemed a

natural consequence: it is a favoured tool of public sector decision-makers
and is based on strict economic mathematics. It is a sophisticated method
presenting, for all to see, the criteria of scientific truth, coherence and
objectivity that lend conviction to a pragmatic approach carrying the weight
that is necessary in negotiations with authorities operating a policy of
budgetary restraint.

Yet, as we shall see, using cost-benefit analysis to evaluate a cultural

project poses many questions, all - or practically all - of which are serious
obstacles so that it even has to be questioned whether the very principle on
which it is based (that of monetary value) is not an insuperable obstacle.

This explains why economists have now moved on from cost-benefit analysis
to another form of evaluation - the impact study. In spite of its qualities,
however, this technique does not solve all the problems either and so other,
longer-term, approaches have to be considered: cost-effectiveness analysis,
tables of indicators, models, etc.

1. Authors regularly refer to William BAUMÖL and William BOWEN, Performing

Arts: The Economic Dilemma. Twentieth Century Fund, M.I.T. Press, New
York, 1966.
2. Mainly the following:
Gary S. BECKER, Human Capitalf N.B.E.R. 2nd ed., 1975
Gary S. BECKER, A Theory of Allocation of Time, The Economic Journal,
Vol. 75, 1965, pp. 494-517.
Kelvin LANCASTER, Consumer Demand: A New Approach. New York: Columbia
University Press, 1971.
3. The Taxpayer's Revolt and the Arts, a United States Conference of Mayors
Position Paper, Washington, September 1978.
 - 1 -

PART I

THE BASIC THEORY AND METHODOLOGY OF COST-BENEFIT ANALYSIS

Cost-benefit analysis is the application of neo-classical economic

calculus to the fields of public decision-making. It is therefore based on
micro-economic analysis theory and on the general principle of expressing
costs and benefits in monetary terms. It therefore implies the inclusion not
only of all the financial factors but also of monetary equivalents (by
monetary simulation) of all the other features of the project being evaluated.

Its purpose is to assist public decision-making, not in terms of

producing the ideal project but simply by proposing the optimum solution for
the community out of the spectrum of possibilities. The objective, therefore,
is to determine optimum quantities as a contribution to decision-making or to
evaluate the effectiveness of decisions already taken. Because of its
paradigms and systematic use of monetary units, cost-benefit analysis holds a
priviledged position in the 'rationalization of budgetary choices' technique
where it represents the end-point of orthodox public sector economics in
direct line of descent from the work of SAMUELSON1 and MUSGRAVE2.

The validity of cost-benefit analysis is therefore grounded on bold and

restrictive assumptions making for a normative approach to public
decision-making. The government is assumed to do what the theory says it
should and to comply with the rules of economic behaviour so defined, acting
as a rational agent maximizing utility functions under various constraints -
which is why it is important to begin with an explanation of the basic theory
of cost-benefit analysis.

I. THE PURSUIT OF OPTIMIZATION: THE SURPLUS THEORY

The large majority of economists have always been against government

intervention. From Adam SMITH who used the word irresponsibility to John
Maynard KEYNES who took cover behind the 'general interest' concept, they all
had misgivings about the State and it is no exaggeration that there is a
veritable tradition on the subject, expressed in most cases by censure and
condemnation in the name of market optimality.

Economic thinking generally, therefore, only allows the government the

right to intervene in cases where the market fails to secure the optimum as
given by PARETO,3 i.e. the best theoretical definition of the maximization
of welfare. There are four such cases:

monopoly situations;

those where marginal costs tend to fall;

those where there are external effects; and

the production of public goods.

Even then, the action of the State must continue to obey the criteria of
market efficiency, it has to lead to the optimum.

1. SAMUELSON, The Theory of Public Expenditurer The Review of Economics and

Statistics, 1954.
2. MUSGRAVE, A Theory of Public Finance. MacGraw Hill, New York, 1967.
3. Vilfredo PARETO, Manuale di Economia Politica, 1906.
 - 2 -

To achieve this result, economists first attempted to work out a general

rule for decision-making that would enable this Paretian optimum to be
achieved regardless of the problem at issue. This approach however, known as
the 'theory of constitutions', came up against an impasse with the work of
Kenneth ARROW1 and today the only object is to propose the optimum solution
to public decision-makers on a case by case basis2. From this concern arose
'rationalization of budgetary choices' and first and foremost cost-benefit
analysis which is based, at the theoretical level, on the concept of surplus.

The surplus theory is a way of defining positive and/or negative

variations in welfare in each individual case as a result of putting a
decision into effect. The surpluses of all the agents concerned are then
aggregated in order to find out whether the net benefit from the decision is
positive or negative. If the decision-maker has to choose among several
projects, the one recommended will be that which maximizes the net bottom line
at the collective level.

In a free market situation the collective surplus (equal to the sum of

the producer's surplus and the consumer's surplus) is maximized by the
equilibrium price. In graph No. 1:

0 = supply curve

D = demand curve

Q = quantity supplied to the market

P = price of product

triangle ADC = producer's surplus

triangle BDC = consumer's surplus

triangle ABC = collective surplus

P *

optimum Q

Graph No. 1

The existence of the consumer's surplus is explained by the general law

of diminishing marginal utility. Up to the Pareto-optimal level, the utility

1. Kenneth ARROW, The Theory of competitive equilibrium. Lectures at

Northwestern University, 1962.
2. MUSGRAVE, Cost-Benefit Analysis and the Theory of Public Finance, Journal
of Economic Literature. Vol. 7, No. 3, 1969, pp. 797-806.
 - 3 -

of one unit of the product is higher than the price actually paid since the
market price only represents the utility of the last unit put on the market.
The surplus for each individual is therefore defined as the difference between
what that individual is prepared to pay (i.e. utility expressed in money
terms) to acquire a given quantity and what he actually does pay. Expressing
utility in terms of money is therefore the logical consequence of applying the
surplus concept.

So cost-benefit analysis means working out the surpluses for all the
agents involved, making an exhaustive list of these surpluses and then
calculating the net collective surplus - representing the evaluation in money
terms of the project on which a decision has to be made. This is the strict
application of the theory. But the latter is based on extremely restrictive
assumptions which constitute so many limitations. There are three of these
assumptions:

The first is that all the factors to be taken into account have to be
quantifiable.

The second is that costs and benefits have to be evaluated by the same
system of quantification.

The third and last is that it must be possible to aggregate, In other

words the quantification system has to be the same for all individuals.

As can be seen, these assumptions are highly restrictive and adopting

them implies various kinds of bias that need to be pointed out from the start.

The principle of aggregation, for instance, implies highly significant

indigenous limitations because it will apply to:

values: a real or fictitious monetary value is attributed regardless of

the nature of the effect (quantitative or qualitative, negative or
positive);

groups: regardless of the social group concerned the hierarchy of values

is assumed to be the same for all;

time: the discounting process assumes that the time horizon can be known,
in other words that it is possible to determine the duration of the
effects and to place a value on that duration. So, by applying a rate of
discount for that purpose the preferences of future generations are
assumed to be the same as those of today's.

This explains why, in spite of its formal coherence, the basic theory of
cost-benefit analysis prompts certain reservations and these, which we have
looked at here in the general context, become even more serious as soon as
cost-benefit analysis is applied to specific fields; as we shall see, the
cultural sector is no doubt one of those where the problems that arise prove
to be the most difficult to get round.

II. METHODOLOGY OF COST-BENEFIT ANALYSIS

Monetary valuation techniques vary but they all take the market as their
yardstick, i.e. referring constantly and directly to market price, or else
determine a fictitious price using various indirect methods.
\

- 4 -

There are three methods for the direct valuation of a cost or benefit:

the value may be based on that of an alternative good or service

available on the market;

it may be deduced from the value of the complementary private good or

service, which enables the intensity of demand for the public good to be
measured in terms of the amount of the cash costs relating to its
consumption;

it may be inferred from that of an associated product that exists on the

market.

In some cases, no direct valuation method works. Then recourse is had to

expedients such as the values established by the courts for certain types of
damages. It should be noted here that the courts also refer to the market
because judges always implicitly use market yardsticks to determine the amount
of compensation to award. In most cases where reference to the market is not
possible or unsuitable the 'willingness to pay' method is used.

Willingness to pay is a particularly useful method for measuring effects

with no market value. Benefits are valued in terms of the sum that users
would be prepared to pay in order to continue to have the use of the good or
service concerned. Negative effects are valued in terms of the sum that
individuals would be prepared to pay to do away with the good or service
causing them.

Lastly economists use another device - 'price equivalent measure' - which

may be regarded as the opposite of the willingness to pay. This consists in
valuing a benefit as the sum that the users of a good or service feel would
compensate for its disappearance and a 'cost* by the amount that would
compensate for its continuance.

These two methods are based on statistical techniques for sounding the
opinion of target populations. The problems they raise are considerable:
over-evaluation with the 'price equivalent measure' method, under-estimation
with the 'willingness to pay' method, and so on. What is more the results
clearly depend very much on the distribution of income. All other things
being equal, it is certain that individuals do not all react in the same way
faced with a possible compensation or payment. In the present case, the
supposition of the same marginal utility of money for all is completely
unrealistic.

By way of illustration and to provide a summarized picture of the various

methods of valuation that have been used, the following table lists a number
of fields of government intervention where cost-benefit analysis has been
applied.1 The headings to the columns are various market references and the
figures in the columns relate to the notes that follow giving a brief
description of the ways most frequently used by economists to arrive at money
values.

1. For further details the reader is referred to Xavier DUPUIS & Xavier
GREFFE, Rapport technique sur les méthodes de quantification du
non-marchand avec une application au cas des associations
d'environnement, Centre 'Travail et Société', Université de Paris IX
Dauphine, 1979,
 - 5 -

^~v. Footnote
^~\Number Substitute Complementary Associated Other
Field ^ > . products products products

I-I
Education 2

Health 3 4

Housing 6 7 8 5

Natural Resources 9 10 11

Transport 12 13 14

Recreation 15 16 17

Education

1. Value of the equivalent service on the private education market.

2. Value of the capitalization of the average annual variations in benefit

due to the variation in the level of knowledge.

Value of the reduction in crime expressed in terms of the reduction in

policing costs.

Value of the reduction in the amount of subsidy because of the reduced

inequality in wages.

Health

3. Value of the equivalent service on the health market.

4. Value of the capitalization of the benefits due to higher productivity or

to the possibility of performing an activity. Reduction in later health
spending that would have been necessary if the possibility of certain
diseases had not been anticipated.

Value of the increase in consumption due to improved physical condition.

Housing

5. Value of tax surplus due to the improvement in housing and higher rents.

6. Value of the corresponding service on the private housing market.

7. Value of the related costs people are prepared to pay to be able to

benefit from the improvement in housing conditions (transport costs, for
example).

8. Value of the increase in income from rent or land in the neighbourhood of

the improved area.

Value of the reduction in staff costs because of the reduced fire risk.

Value of the reduction in police costs because of the reduced need for
policing associated with the reduced risk or rate of crime.
 - 6 -

Natural resources

9. Price of energy, if there is a private market, or marginal cost pricing.

10. Costs people are prepared to pay in order to settle in areas improved by
the building of the dam.

11. Value of the capitalization of the variation in harvest yield due to the
control or elimination of flooding.

Value of the variation in land prices.

Value of the variation in economic activity in the area concerned.

Value of the saving made through not having periodically to destroy

public works structures.

Value of savings made because of the lower risk of epidemics.

Transport

12. Value of the equivalent service on the private market.

13. Value of what people are prepared to pay to get to or to live near a new
transport system.

14. Value of the savings in time, safety and comfort due to the introduction
of a new transport system in a given area.

Recreation

15. Cost of the equivalent recreation facility on the private market

(theatre, park, zoo, etc.).

16. Value of the costs that people would be prepared to meet to use a given
recreation facility (cost of transport, time, etc.).

17. Value of the cost involved in reconstituting the human resource from the
viewpoints of health, education, reduction of crime.

Examples of the application of cost-benefit analysis to transport and

public health are given in an annex.

Cost-benefit analysis is, without any doubt, an extremely powerful

weapon. Because of its indiscriminate application to all the groups concerned
and the standard nature of its mathematical method, the money indicator is an
extremely simple synthetic criterion for decision-making. In addition, the
surplus theory gives the method the attributes of objectivity and scientific
truth, surplus in this case acting as an appropriate measure of the
satisfaction of the collectivity and of variations in that satisfaction.

It has to be admitted, however, that cost-benefit analysis does not rule

out value judgements because of the arbitrary features of its valuation
methods. Clearly, too, it is based on highly restrictive assumptions. This
being so, its application to the cultural sector must inevitably be
difficult. A major problem is the complex and varied nature of the field of
analysis.
 - 7 -

PART II

APPLICATIONS OF COST-BENEFIT ANALYSIS IN THE FIELD

OF CULTURAL DEVELOPMENT

Applying cost-benefit analysis to the field of cultural development

proves to be very difficult which is why no in-depth applications are to be
found. Before examining the practical aspects of the technique to see what
its real use in the cultural sector might be let us first take a look at the
various types of cost and benefit.

I. TYPES OF COST AND BENEFIT

The different kinds of cost and benefit can be defined by almost as many
different criteria as there are authors. The list we give below is based on
MUSGRAVE's work! with some departures at the conceptual level. The main
typse of cost and benefit are as follows:

Cost and benefits may be real or monetary.

Real costs and benefits may be:

tangible or intangible;

internal or external;

final or intermediate.

1. Monetary and real costs and benefits

This is the first and most important distinction. Monetary costs and
benefits are easy to pinpoint and measure. Expressed directly in money terms
they pose no quantification problems and are the basis of all economic
calculations. They cover all the money invested in the cultural project being
evaluated and all the monetary benefits generated by the implementation of the
project. However, they give no idea of the net costs and benefits to the
community; they are simply financial quantities and do not therefore represent
real costs and benefits.

Real costs and benefits, for their part, are not expressed in money
terms. They are real in the sense that it is they that affect the general
level of satisfaction of society. Since they relate to the development of
individual and social values their nature is complex. Sometimes impossible to
quantify they are, in most cases, difficult at the very least even to identify
clearly. In the environmental field, for example, real costs and benefits are
those related to ecological potential (destruction, reconstitution,
development, and so on), whilst in the field of cultural development they are
related to the intellectual development of the individual and so on. This
explains why a second distinction has to be drawn - that between tangible and
intangible real costs and benefits.

2. Tangible and intangible real costs and benefits

Tangible costs and benefits refer to those to which a market value can be
assigned, either directly or indirectly, by the various methods we have

1. Here we refer to the nomenclature defined in R.A. MUSGRAVE & P. MUSGRAVE,

Public Finance in Theory and Practicef MacGraw Hill, 3rd edition, New
York, 1980.
 - 8 -

described. Intangible costs and benefits are those for which a market
valuation proves impossible or is completely meaningless. Unfortunately most
real costs and benefits fall into this category. Whereas intangible costs are
frequent in environmental matters for example (the most important being cases
of irreversibility, e.g. the destruction of part of the ecological heritage
with no reconstitution), intangible benefits are most frequent in the cultural
field (intellectual enrichment, aesthetic value, the historic heritage aspect,
etc.).

Even though these real intangible costs and benefits are fundamentally
important, no cost-benefit analysis will include them because there is no way
of giving them a money value. Bound by the money value rule, the economist is
powerless in the face of this problem.

3. Internal and external real costs and benefits

The concept of externality (one of the most important in public sector

economics) enables another distinction to be drawn: that between internal and
external real costs and benefits. It is a concept that reigns over all
economic theory concerned with welfare and it is central to the argument about
how to handle the fields where the qualitative aspect is paramount (culture,
health, environment, etc.).

There is no precise definition of the concept of externality but normal

practice is to use William BAUMÖL's approach1 according to which an
externality is considered to exist where there is interdependence but no
compensation.

A (positive or negative) external effect may then be expressed as a

(positive or negative) variation in the level of utility enjoyed by an agent
as a result of an action by another agent without this effect being assigned a
market value.

Internal costs and benefits are those directly related to the

implementation of the project whereas external costs and benefits are all
those inferred by the project. Their exhaustive identification obviously
poses vast problems. In actual fact a kind of boundary has to be set; every
economic system consists of a set of interrelationships and no action at
whatever level is neutral upstream or downstream.

Identifying external effects is extremely difficult. It is not always

easy to make due allowance within the economic structures of production but
the analysis has to be contained within specific space and time boundaries.
The fact is that the implications of projects in practically every case
concern far larger areas and populations than those under the direct
responsibility of the authorities concerned. This ripple effect raises
another boundary problem.

The same applies to the time factor. The various implications of a

project may vary in the time they take to appear or disappear. A number of
graphs showing how, in space research, the effects do not all develop at the
same pace are given in an annex.2 For cost-benefit analysis, therefore, it
is important to define a time boundary and to know how to allow for differing
rates of propagation for the effects of the project. This will be
increasingly difficult the more one is dealing with final costs and/or
benefits.

1. W.J. BAUMÖL, Welfare Economics and the Theory of the State. 2nd edition,
Bell and Sons, London, 1965.
2. Pages 65-70.
 - 9 -

4. Final and intermediate real costs and benefits

At the methodological level this distinction is important. A cost or

benefit is 'final' if it is borne by or directly benefits the end consumer.
An intermediate cost or benefit arises at the level of the production of other
goods or services and will therefore affect the welfare of consumers (measured
in terms of surplus) only in an indirect manner. The difficulties of
identification and quantification are not so great in this latter case because
there are no doubt fewer intangible elements but they are nevertheless
considerable. For final costs and benefits they are in most cases
insurmountable.

This catalogue of the various types of cost and benefit shows that
cost-benefit analysis must inevitably be incomplete. The existence of
intangible factors and boundary problems irremediably route cost-benefit
analysis towards a truncated and biassed conclusion. At each stage it is a
question of making the best of things, i.e. isolating what is quantifiable
from what is not. Then monetary values have to be worked out for each cost
and benefit. Aggregating these will make it possible to calculate the surplus
for the agents affected by the project first at the individual level and
finally, after further aggregation, at the collective level.

The following chart gives the essential steps in this process in summary
form. The limitations, for each type of cost and benefit, appear clearly at
each stage and answer the question why examples of the direct application of
cost-benefit analysis are so rare in the field of cultural development.

II. EXAMPLES OF THE APPLICATION OF COST-BENEFIT ANALYSIS IN

THE FIELD OF CULTURAL DEVELOPMENT

It is not surprising therefore that so few attempts at using this

sophisticated method of evaluation are to be found. As we have seen, it is
very difficult to use cost-benefit analysis in fields in which intangible
costs and benefits figure so largely. The complexity and reductionism that it
involves are, in many respects, irremediable defects. The only examples we
have been able to find of any value and credibility are those for:

recreation facilities (natural and amusement parks, etc.),-'-

educational projects, and

exhibitions of the plastic arts.2

New applications, more particularly concerned with art facilities^ and

historic monuments^ have been reported in recent research.

1. Cf. M. CLAWSON & J.L. KNETSCH, Economics of Outdoor Recreation, John

Hopkins Press for Resources for the Future, 1966 and: R. KALTER, The
Economics of Water-based Outdoor Recreation: A Survey and Critiquef
United States Army Engineer Institute for Water Resources, Report
No. 71-78, National Technical Information Service of the United States
Department of Commerce, Washington, D.C., 1971.
2. E.W. HANTON & W.S. HENDON, The Akron Art Institute Study, Akron, Center
for Urban Studies, The University of Akron, 1973, Volume III.
3. C D . THROSBY, Social and Economic Benefits from Regional Investment in
Art Facilities: Theory and Application, Journal of Cultural Economics.
Vol. 6, No. 1, June 1982, pp. 1-14.
4. William S. HENDON, Benefits and Costs of Historic Preservation, The
University of Akron, 1983.
 - 10 -

COSTS AND BENEFITS

MONETARY REAL

j TANGIBLE INTANGIBLE

INTERNAL OR EXTERNAL

FINAL OR INTERMEDIATE

>\ MONETARY VALUATION |<-

*-l AGGREGATION

CALCULATION OF SURPLUS
FOR EVERY AGENT

AGGREGATION

CALCULATION OF NET
COLLECTIVE SURPLUS
 - 11 -

The educational sector provides a very good illustration of what can be

done. With no claim to exhaustivity, the main costs and benefits of a project
may be listed in the form of a simple table:

Benefits Costs

Tangible Future increase in Loss of present

income income

Reduction in Cost of
crime facilities

Reduced prevention Operating costs

costs (wages, etc.)

Intangible Intellectual Opportunity cost

enrichment of leisure

Various studies have used the method for surplus calculation but many
aspects have still not got beyond the research stage (the 'rate of return1
question in particular).

The methodology developed for outdoor recreation facilities and youth

centres^ also provides pointers for the application of cost-benefit analysis
to cultural development projects. Their results, however, seem greatly
dependent on the assumptions made with regard to duration and rate of
discount.2

To take one of these examples, Maragret 0'SHEA's analysis of the Mildura

art centre in Australia suggests that, at an annual rate of return of 8.5 per
cent, the running of the centre is generating a net surplus of 150,000
Australian dollars a year. However, this study, though unique from many
points of view, should be read with great caution. The analysis is incomplete
since the nature of the costs and benefits used is very limited at the level
of their definition and valuation. Though without doubt a stimulating and
highly interesting stylistic exercise this cost-benefit analysis is not in
conformity with the underlying micro-economic theory.

In the field of historic heritage, cost-benefit analysis is still in the

research stage rather than that of direct application. Consumer surplus can
be calculated using a demand curve derived from the CLAWSON and KNETSCH model
(so the methodology would stem from the work down on the environment and local
development). A distinction is made between primary and secondary benefits, a
large number of the latter being intangible. The following list is based on
that proposed by W.S. HENDON:3

Primary benefits:

induced personal income;

consumer surplus;

J.M. KANANAGH, Programmatic Benefit-Cost Analysis of Local Youth

Recreation Programmesr Institute of Government and Public Affairs,
U.C.L.A., 1968.
2. W.S. HENDON, Evaluation of Urban Parks and Recreation. Praeger, New York,
1981.
3. Taken from the article already mentioned.
 - 12 -

value of free admissions;

donations and subsidies .

Secondary benefits:

social value of the public good;

induced economic effects (tourism);

increase in tax revenue;

stimulation of private investment;

reduction in crime costs;

reduction in opportunity costs.

As for costs, these obviously include all the expenditures involved

(purchase, catering, development, maintenance, administration, etc.) but they
have to be considered at the level of their adjustment and valuation in the
light of the risk factors (for which games theory could be used), opportunity
costs and long-term social costs. Here again we come up against the question
of knowing what time horizon and, consequently, what rates of discount to
apply.

The obstacles are therefore manifold and the applications not very
convincing - good reasons for questionning the soundness of cost-benefit
analysis as applied to cultural development and to look at it again in the
framework of 'rationalization of budgetary choices*.

III. THE VALIDITY OF THE APPLICATION OF COST-BENEFIT ANALYSIS

TO CULTURAL DEVELOPMENT

The first question that needs addressing is the definition of cultural

development itself. This is an old issue to which there is no satisfactory
answer. Cultural development is a collective function whose links with the
education and recreation functions are evident but difficult to define. As
the French Commissariat General du Plan recognized in 1970i1

'Those who try to define the cultural development function oscillate

between a very restrictive conception of culture as a heritage to be
preserved and a very wide conception according to which everything which
is not strictly economic and utilitarian is called cultural. In both
cases the search for indicators of results cannot fail to be affected
because it becomes either extremely easy but not very meaningful or else
discouragingly complex.

The search for a middle way could lead to the adoption of four
purposes for the cultural development function:

the defence and portrayal of the existing cultural heritage,

additions to this heritage by new aesthetic creations,

the practice of cultural activities by individuals, and

the consumption of culture by individuals,

1. Note sur l'utilisation du mode d'approche R.C/B. dans l'analyse des

fonctions collectives oummissariat Général du Plan, Paris, January 1970.
 - 13 -

it being understood that there may be some overlapping: achievements

under the second heading, for example, will extend the field of
action of the first (...)•

It should be noted that cultural is here defined by reference to the

notion of 'beautiful', thus leaving aside everything involved in the
socialization process of the members of the community which is more the
task of the education function. But one could perfectly well conceive of
a single function embracing both cognitive and aesthetic aspects of the
development of the personality.'

Though written 15 years ago these lucid judgements, pessimistic though

they are with regard to practical applications, are still relevant. At the
conceptual level, no noteworthy progress has been made. This being so, the
use of cost-benefit analysis appears more doubtful than at first it seemed
reasonable to hope.

1. The limitations of cost-benefit analysis as applied to

cultural development

The main limitation resides in the very principle of the method, i.e.
monetary evaluation. As we have seen, the economist has to convert everything
to money values which, directly or indirectly, means using market prices.
But, in fact, not all costs and benefits can be estimated in terms of market
prices and in such cases indirect simulation methods are used in which
arbitrary treatment and therefore varyingly explicit value judgements are
inevitable.

Monetary valuation also implies complete homogenization. All costs and

benefits, once expressed in money terms, are comparable and at the conclusion
of the analysis the surplus arrived at conceals its real components: there is
no going back. This means that specificity of any kind is erased. No
trade-off is possible except in favour of the project showing the maximum
collective net surplus. No qualitative dividing line can be drawn between the
surplus produced by a cultural project and that produced by an industrial
project.

Apart from this chronic eclipse of the qualitative dimension to the sole
advantage of the quantitative dimension many 'intangible' costs and benefits
cannot be taken into account even though they are probably the most
important. Thus cost-benefit analysis gives no more than a truncated view of
the real implementation of a project

In addition to these intangible elements, other essential factors are

either neglected or even omitted in the economic evaluation. It is clear for
example that - aside from any quantification or money value problems - no
cost-benefit analysis can claim to identify all costs and benefits. Then
there are 'boundary' problems: the economic boundary to determining positive
and negative external effects in all their complexity, the geographical
boundary and lastly the time boundary. The assumption of stability of
preference over time is very rigid in this respect and there can be no
scientific criterion for the choice of rate of discount (5, 7, 10 per cent,
etc.) or period covered (15, 20, 30 years, etc.).

Cost-benefit analysis, derived directly from micro-economic theory, is

therefore dependent on its postulates and assumptions. Having to use a strict
economic calculus it has to be restrictive and standardizing - features not
always offset by perfect objectivity. The theoretical and methodological
difficulties soon become serious and even insoluble when attempting to apply
the technique to fields as specific, complex and heterogeneous as cultural
development. This explains the relative paucity of research in this area.
 - 14 -

Whilst there is no intention of promoting the idea that cost-benefit

analysis is not applicable in this case, it has to be recognized that the
method needs many refinements before it can be operational. This is a
question of research but, over and above that requirement, cost-benefit
analysis needs to be returned to its proper place in 'rationalization of
budgetary choices'. It is only in this general context that the question of
its validity can be addressed.

2. 'Rationalization of budgetary choices' and cultural

development

The French 'rationalization of budgetary choices' concept may be defined

as scientific and extensive research into all procedures and methods designed
to improve the suitability, coherence and effectiveness of public decisions
for which budgetary resources are provided or whose effects have an impact on
the budget. Similar systems elsewhere are PPBS (programme, planning and
budgeting system), output budgeting, program budgeting, PAR (program analysis
and review), etc. Thus rationalization of budgetary choices is an
all-embracing process in which cost-benefit analysis is just one tool among
others.

In theory, analysis in the rationalization of resource allocation implies

several successive phases of research:

analysis of the structure of the objectives of cultural development,

description of the various actions in the cultural development field,

choice of priorities among the various actions in the light of the

objectives and the cost and effectiveness of each,

choice of ways and means of implementing the selected actions,

definition of the level of déconcentration in the setting of objectives,

and

verification of the effectiveness of the actions undertaken at the

central level and at the level of the various establishments and bodies
concerned.

The process involved in rationalization of budgetary choices is not,

therefore, simply integrative but also iterative as the two block charts that
follow show. Alongside the sequence at the level of concepts there is a
corresponding sequence in terms of the techniques that can be used. That
being so, the importance of cost-benefit analysis is automatically relativised
and a far broader field of possibilities emerges.

But between theory and practice there is a wide gap. What is more,
returning cost-benefit analysis to its more general context of rationalization
of budgetary choices makes clear its real scope. Rationalization of budgetary
choices is a process with its own logic and its own purpose and cost-benefit
analysis stems from that logic and that purpose. Trying to use it to measure
the impact of cultural projects puts the economist in a difficult position.

There are two fundamental differences between rationalization practice

and evaluation studies. Firstly rationalization of budgetary choices is an
ex ante process whereas most evaluations are ex post. Secondly
rationalization methodology gives precedence to the normative approach which
is based, as we have seen, on the principles of econometrics whereas
evaluation uses a deliberately empirical approach aimed at measuring and
explaining the effects of decisions that have been taken.
 - 15 -

THE SEQUENCE IN TERMS OF CONCEPTS

End-purpose Means, Action

Objectives Product

Structure of Structure of

objectives programmes

Indicators of Indicators of

objectives objectives

Benefit

Cost-effects

Target groups or

groups concerned

Structure of programme

objectives

Effectiveness
 - 16 -

THE SEQUENCE IN TERMS OF TECHNIQUES

Formulation

Description techniques:

Modelling techniques: - Morphological analysis

- Delphi method
- Cost-benefit
- Graph method
- Simulation

Comparision of objectives
and programmes

Evaluation techniques:

- Cost-effectiveness analysis
- Cost-benefit analysis
- Multi-criteria analysis
- Discounting

Choice of programmes
and budgetary impact

Management techniques:

- Authorization
- Analytical
accounting
- Management review

Management
 - 17 -

Today it is an unquestionable fact that rationalization of budgetary

choices is used very little if at all (like the American PPBS). The reasons
are simple. For one thing, it has become cruelly clear that there is little
understanding of the real processes by which the authorities take their
decisions and act upon them. For another, trying to impose the normative
economic model on government has led to many deadlocks in which bureaucratic
logic has won the day over alleged rationality. Events show that
rationalization of budgetary choices is not a winner.

This explains why there can be little surprise that cost-benefit analysis
should not be the method that economists prefer to apply to the cultural
sector. Taking a more pragmatic, or at least less ambitious, tack they have
turned for some years now to a method of assessment known as the 'impact
study'. Although this technique takes the opposite logic to that of
cost-benefit analysis the two are obviously related. So here we again find
many of the limitations we found with cost-benefit analysis. Nevertheless,
developments with impact studies deserve consideration even though, as might
be imagined, other methods of evaluation also need to be envisaged.
 - 19 -

PART III

IMPACT STUDIES, A NEW EVALUATION TECHNIQUE

FOR CULTURE

Whilst cost-benefit analysis is a micro-economic approach, impact studies

are based on the multiplier concept and address cultural development from the
macro-economic angle. It is no longer a matter of calculating the various
economic implications at the level of each individual but of bringing out the
main factors and flows generated at the level of a local economy.

By comparison with cost-benefit analysis, impact studies are a

simplification: the objective is more limited because here the aim is to
assess the impact of one or more cultural activities over a given geographical
area, generally for a period of one year and leaving costs out of account. An
impact study may therefore be likened to a pseudo cost-benefit analysis only
concerned with the benefits. But the analogy should not be taken too far; that
would be a serious theoretical and methodological mistake. What we have here
is a genuine method of evaluation which is far less costly to carry out than a
cost-benefit analysis but has the advantage of producing results that are no
less relevant.

I. THE IMPACT STUDY PROBLEM

What is meant by impact? Here, of course, we find the same distinctions

as we found in cost-benefit analysis and our classification divides impacts
into two types, each of these subdivided into two subtypes.

The first type of impact corresponds to a restricted perception of the

idea and relates to the monetary contribution (the 'dollars and cents' to use
the American expression) that culture makes to economic development. This type
of impact consists of:

the direct impact: i.e. all the economic flows generated by the cultural
activity concerned, and

the indirect impact: i.e. all the induced effects. This is where a number
of multipliers are introduced whose choice is, obviously, a matter of
strategy (we shall return to this question when discussing methodology).

The second type of impact is defined by the extension of the concept and
covers all the repercussions on society of putting a cultural project into
effect. The subdivision here is between the impact on the economic system in
the strict sense (improvement in knowledge, capacity to innovate, pro-
ductivity, etc.) and that on the social system (intellectual enrichment,
conservation and development of the historic and cultural heritage, the
stimulus to creativity, improvement in the quality of life, less crime, etc.).

It is clear that, whereas the former type of impact - with varying

degrees of difficulty - is quantifiable, the latter is not for it comprises
the intangible components already referred to in the discussion of cost-
benefit analysis.^ Impact studies therefore are confined to measuring direct
and indirect impacts, i.e. the monetary contribution of culture to the economy.

II. IMPACT STUDY METHODOLOGY

Quantifying the amounts directly invested in the cultural field presents

no special problem apart from that of access to sources of information.

1. On this point see: S. GLOBERMAN, Cultural Regulation in Canada. The

Institute for Research on Public Policy, Montreal, 1984.
 - 20 -

Quantifying induced monetary flows, however, does pose a problem and for this
economists fall back on the multiplier principle.

The idea of the multiplier is simple: every franc or dollar put into any
kind of economic activity produces a multiplier effect, i.e. one induced by
that economic activity on the 'snowball' principle. There remains the problem
of getting the multipliers right. This is done by surveys and monographs on
which general factors or 'multipliers' are based. Simplifying, these may be
reduced to two:

The employment multiplier - i.e. the number of jobs induced.

The income multiplier - i.e. the cumulative effect on the income in

circulation, not only personal earnings but also tax revenue accruing to
the local authority. This multiplier depends largely on local income
distribution patterns, consumption standards and tax systems but it also
depends on market structures in terms of local versus imported products.

Multipliers can be calculated at local, regional and national level but

their validity is by no means beyond question. Unfortunately the impact
studies in our possession show that they are difficult to calculate and that
many approximations are required, the problem being at order of magnitude
level rather than in the figures as such this explains the current tendency to
use 'short-hand' methodologies.1

Also called 'abridged* methods, these were developed because the full
impact study, using statistical surveys and monographs, is very costly and
yet, for all that, not very reliable. There is nevertheless a real need for
the economic assessment of cultural development and this type of method is
fairly easy to apply, even for strangers to economics and, above all, makes
minimal demands as regards data input requirements.

For the moment the method has only been applied to one-off cases of
non-profit live performance activities and its restrictive nature is clear
from the outset. It uses simple data and is only concerned with the costs
associated with the 'consumption' of live performances as a way of quantifying
the induced economic activity.

The following data have to be collected:

the resources of the establishments themselves;

the costs of these same establishments; and

the population of the community in the geographical area concerned.

Three 'income' multipliers are then used:

The 'audience's related costs' multiplier, i.e. the costs that spectators
have to meet to go to the performance (eating out, transport,
baby-sitting, etc.).

The local multiplier, i.e. the cumulative effect on income in circulation

(spending by the establishments producing the show plus spectators'
related costs). This is assumed to increase with the size of the
population.

1. Cf. W. BAUMÖL, The impact of the Broadway Theater on the Economy of New
York CitvT Mathtech, Princeton, New Jersey, 1977.
 - 21 -

The national multiplier (the same as the local multiplier but at the
national level).

If

R = resources of the establishments in proceeds from ticket sales

C = audience's related costs obtained by multiplying spectators'

primary costs R (tickets) by Mc

Ml = local multiplier

Mn = national multiplier

we can define the following sequence:

Step 1: ticket sales - R

Step 2: related costs, C = Mc x R

Step 3: total costs involved, R + C = R(l + Mc)

Step 4: economic impact at local level, Ml (R + C)

Step 5: economic impact at national level, Mn (R + C ) .

Although this abridged method is obviously somewhat rough and ready and
highly simplified it has its advantages - foremost among which is its very
simplicity and therefore low cost, which explains the relatively large number
of applications, in the United States and in Canada.1

III. EXAMPLES OF IMPACT STUDIES IN THE CULTURAL SECTOR

Some impact studies have already achieved considerable distinction,

examples being the work done by David CWI and Kathryn LYALL2 and by
D.R. VAUGHAN,-* the studies already referred to and the research done
recently for the Port Authority of New York and New Jersey (see below). All of
these concern the narrow definition of cultural development since they all
focus solely on artistic activities.

On this subject see: Methode abrégée d'évaluation des répercussions

économiques des arts du spectacler Conseil des Arts du Canada, Note de
Recherche, March 1982, and:
H. CHARTRAND, An Economie Impact Assessment of the Canadian Fine Arts,
Third International Conference on Cultural Economics and Planning, Akron,
April 1984.
D. CWI and K. LYALL, Economic Impact of the Arts and Cultural
Institutions: A Model for Assessment and a Case-Study in Baltimore,
Research Division Report, National Endowment for the Arts, Washington
D.C., 1977, and
D. CWI, The Economic Impact of the Arts: A Study of 49 Institutions in
Six U.S. SMSA's, Research Division Report, National Endowment for the
Arts, Washington D.C., 1981.
D.R. VAUGHAN, Does a Festival Pav? in W.S. HENDON, J. SHANAHAN and
A.J. MacDONALD (eds), Economic Policy fo the Arts. Cambridge, Mass., Abt
Books, 1980.
 - 22 -

In a study of 49 cultural institutions in six United States towns, David

CWI finds that the total direct impact in one year is nearly 69 million
dollars. The indirect economic impact work out at:

129 million dollars of industrial and commercial income;

49 million dollars of personal income;

20 million dollars deposited with the banks; and

6,700 jobs.

Other, more detailed findings in the study are even more informative. One
is that the impact is highly dependent on local economic structures and that
there is no straightforward linear relationship between numbers of cultural
institutions and scale of impact. Over 3,000 jobs were generated in
Minneapolis Saint Paul compared with only 160 in Springfield though the number
of institutions - 10 - is the same (the other cities studied were Columbus,
San Antonio, Salt Lake City and Saint Louis). The scale and type of the
activity are decisive factors.

The input to the local economy from outside is also of considerable

importance. In Saint Louis, for example, the audiences at the eighth
institutions total two million local residents and 500,000 from elsewhere.
Whereas the former spend 3.31 dollars each, the latter spend 32 dollars when
the object of the visit is a cultural activity and 157 dollars each when they
come for some other reason.

A similar study on a small town (Aspen in Colorado) concludes that

spectators and visitors drawn there by the music festival spend 4.7 million
dollars a year.-'- if applied to such famous festivals as those at Salzburg,
Bayreuth, Verona, Aix en Provence, etc., the same kind of arithmetic would
presumably yield even more impressive figures as the research by D.P. VAUGHAN
on the Edinburgh festival (already referred to) suggests. The same is true of
all the big exhibitions (everyone remembers the extraordinary commercial
success of the Tutankhamen exhibition in the United States to quote just one
exammple).

The most interesting impact study that has been made so far is the recent
research commissioned by the Port Authority of New York and New Jersey.2
Some of its findings are as follows:

The direct economic impact of the arts in the region comes to 5.6 billion
dollars.

The arts generate over 2 billion dollars, of personal earnings and over
117,000 jobs.

The arts attract an input of some 1.6 billion dollars into the regional
economy from outside.

The arts bring in nearly 150 million dollars in duty and taxes.

Industry benefits to the tune of 5.6 billion dollars of additional

activity.

1. Peggy CUCITI, Economics of the Arts in the State of Colorado. Denver,

University of Colorado, Center for Public-Private Co-operation, 1983.
2. The Arts as an Industry: Their Economic Importance to the N.Y. and N.J.
Metropolitan Area, New York, The Port Authority, 1983.
 - 23 -

Other findings could also be quoted, because this is a very full study
identifying the impact for each activity, and in every case they prove that
the weight of the contribution made by the artistic sector is considerable.

Since these impact studies are confined solely to the arts it is easy to
imagine how much greater the contribution from the cultural sector in its
broader definition would be. In that connection, the Canadian studies - though
highly specific in their focus - show the importance in quantitative terms of
the impact of spending on cultural activities.

Using the abridged method we have already described, three applications

arrive at some particularly striking figures.

Rough estimate of the impact of the performing arts in Toronto

on the local and national economies

Step 1

Tickets sold by 35 companies in 1979:

8.8 million dollars

Step 2

Audiences' related costs:

8.8 million (step 1) x 1.06 = 9.3 million dollars

Step 3

Total spending in connection with performing arts:

costs of 35 companies, i.e. 21.6 million dollars plus 9.3 million dollars
(step 2) = 30.9 million dollars

Step 4

Impact on Toronto economy:

30.9 million dollars (step 3) x 1.6 = 49.4 million dollars

Step 5

Impact on Canadian economy:

30.9 million dollars (step 3) x 2.1 = 64.9 million dollars

Rough estimate of the impact of the performing arts in Ontario

on the national economy

Step 1

Tickets sold by 70 companies in 1979:

18.5 million dollars

Step 2

Audiences' related costs:

18.5 million (step 1) x 1.06 = 19.6 million dollars

Step 3

Total spending in connection with performing arts:

costs of 70 companies, i.e. 39.6 million dollars plus 19.6 million
dollars (step 2) = 59.2 million dollars
 - 24 -

Step 4

Impact on National economy:

59.2 million dollars (step 3) x 1.6 = 124.3 million dollars

Rough estimate of the impact of the performing arts in Canada

on the national economy

Step 1

Tickets sold by 184 companies in 1979:

37.4 million dollars

Step 2

Audiences' related costs:

37.4 million (step 1) x 1.06 = 39.6 million dollars

Step 3

Total spending in connection with performing arts:

costs of 184 companies, i.e. 90.3 million dollars plus 39.6 million

dollars (step 2) = 129.9 million dollars

Step 4

Impact on national economy:

129.9 million dollars (step 3) x 1.6 = 272.8 million dollars
On the basis of the above figures^ it can be argued that the arts
constitute the 11th largest sector in the Canadian economy in terms of money,
the fourth in terms of employment (146,000 jobs) and the sixth in terms of
wage-bill (2.3 billion dollars). In 1980 it is claimed that the arts'
contribution to the Canadian economy amounted to 2.4 per cent of Canada's
gross domestic product.
Whilst these impact studies with their glowing results are clearly
tempting and would appear suitable for general application it would be unwise
to grow too euphoric about the method. Impact studies are no miracle formula.
It must not be forgotten that they are no more than a second-best solution in
the absence of cost-benefit analysis. They also suffer from the same
distortions and shortcomings as cost-benefit analysis. They are equally
reductionist (if not more so) and in any case incapable of measuring the true
economic significance of cultural development. There are problems in carrying
them out and the result should not be allowed to hide the underlying
assumptions and the approximations that they are based upon (particularly in
the calculation of the multipliers).

Care must be taken therefore not to overestimate them, although it is

even more important not to underestimate their value. Though highly imperfect
tools and quite unsuitable for measuring cultural development in its full
dimensions, specific characteristics and complexity, impact studies - like
cost-benefit analysis - are none the less interesting initiatives which need
to be developed and enriched.

On the other hand it would be wrong to reduce the question of measuring

the cultural phenomenon to impact studies alone. There are other ways of

1. Taken from the paper already referred to: Methode abrégée d'évaluation
des répercussions économiques...
 - 25 -

organizing a strategy of defence against the budgetary restraint that the

cultural sector is faced with and today it is in their direction that research
and investment need to be steered.
 - 27 -

OTHER POSSIBILITIES

There are four other avenues to be explored:

cost-effectiveness analysis;
modelling;
indicators; and
policy assessment practice.
All have their strong and weak points of course but they all represent
many additional possibilities.

COST-EFFECTIVENESS ANALYSIS

This is another technique used in rationalization of budgetary choices

but it would appear better suited than cost-benefit analysis for application
to cultural development. It has been employed with some success in the health
sector, for example, which has many aspects in common with the cultural
sector, but its relevance has also been recognized in other sectors including
the rationalization of defence spending.

For one thing cost-effectieness analysis, in principle, avoids the

problems of aggregation and valuation on which cost-benefit analysis founders.
By leaving factors to be expressed in their own units and not using any system
of single yardstick comparison, cost-effectiveness offers the advantage of
avoiding any form of denaturization or standardization.

Its purpose is to examine the positive and negative aspects of each

programme and on that basis to help decide which is the best in terms of
either:

maximum positive effects for a given negative effect, or

minimum negative effects for a given positive effect.

Positive and negative effects are expressed in their own value system and
not converted to money values. To that extent cost-effectiveness analysis is
not simply a variant of cost-benefit analysis.

There are three essential steps in the method:

definition of the missions and of what effectiveness means in the

particular case;

operational definition of the system and of the effectiveness model;

the cost model.

The missions and the definition of effectiveness used in the analysis are
based on contextual variables, the object being to respect the specific
features of the field of study.

The cost assigned to each system has to meet four conditions:

it has to be a forecast;

it has to be financial;
 - 28 -

it has to be complete, in other words it has to include all the financial

implications in both space and time;

it has to be marginal in the sense that the cost has to be confined to

the financial implications of the particular programme to the exclusion
of all those arising out of programmes implemented earlier.

The problem associated with the cost-effectiveness analysis method is, of

course, the difficulty of comparing factors that are not directly comparable.
Not departing from the real significance of costs and benefits means, by
implication, that some kind of hierarchy of values must exist according to
which preference goes to the project that generates those categories of
benefits or minimizes those types of cost that are felt to be more important
than others. So the method is not wholly immune to criticism or difficulty in
application. It is nevertheless rich in potential. It is a fine-tuned analysis
that harmonizes its quantitative and qualitative components. It can also be
used for partial optimization and to apply it to cultural development would
therefore seem a legitimate option. All it needs is for the researchers to try
it out.

MODELLING

It would be wrong to expect too much of modelling, of course. Clearly

cultural development can never be expressed in terms of an equation - which is
reassuring, in a way. In certain specific fields, however, modelling based on
the vast progress that has been made in macro-economics can throw light on the
socio-economic prospects of cultural development in some highly interesting
ways.

Unfortunately this is as yet an extremely tentative, not to say

non-existent, research avenue. Experiments in this direction are extremely
rare, the most interesting being that made in 1978 to assess the demand for
Broadway Theater.1 The model tested on that occasion - NYREM (New York
regional econometric model) - took many different variables into account:
tourism, per capita income, price of tickets, crime rate, etc. The authors
themselves declared the results to be disappointing. Nevertheless this should
not deter economists from trying again with this method. At the methodology
level, modelling (like cost-effectiveness analysis) poses the problem of
indicators - possibly the most interesting of the various techniques.

INDICATORS

The lack of and disparity in the data available at the non-aggregated

level are constant difficulties for practitioners in the cultural field. Much
remains to be done before it will be possible to draw up tables of representa-
tive indicators whose periodical updating could be used to measure the impact
of cultural policies. A set of such indicators like an array of monitoring
instruments could also help in arriving at significant ratios and in drawing
up satellite accounts, and thus extending the coverage of national accounts.

The purpose of satellite accounts is to identify and quantify the

reciprocal effects between developments at the macro-economic level (and

1. Harry H. KELEJIAN and William J. LAWRENCE, Estimating the Demand for

Broadway Theater, in Economic Policy for the Arts, Abt Books, Cambridge,
Mass., 1980.
 - 29 -

therefore in production structures) and the organization of certain social

activities. Their best illustration is given by the public health account
drawn up by the Commission des Comptes Santé (public health audit board) in
France.I Along the same lines, the classification of data by sector carried
out at the request of the French Commissariat General du Plan^ also
represents a useful broadening of the national accounts, its purpose being to
bring together all the information available about a particular field
irrespective of its source or nature - monetary, physical or demographic -
whereas a satellite account is only concerned with monetary values. The method
has been applied to education^ but its relevance justifies similar work in
the cultural field.

These developments underline the importance of the definition of a wide

range of indicators - a familiar subject of debate in the social policy field,
the 'social indicators' movement having been the focus of considerable
activity throughout the last decade.^ In spite of the considerable research
effort it prompted however, it produced no tangible results - education
apart - in the cultural field, though this was less a question of failure than
the consequence, in effect, of not talcing cultural activities into account.5

A generally accepted definition of social indicators is that they are

numerical yardsticks of the State - and in particular the welfare - of
society. They are of five kinds:

situation indicators - which reflect the present situation in a given

social field;

indicators of ways and means which reflect action taken in the social
field;

product indicators which express the quantitative effect of action taken;

internal effectiveness indicators expressing the relation between product

indicators and ways and means indicators; and

external effectiveness indicators expressing the relation between

situation indicators and product indicators.

Social indicators bring out the basic distinction that exists between
functional and substantial rationality. While functional rationality is
concerned with decisions taken in the light of purely economic calculation,
substantial rationality takes the view that the value of the result achieved
depends to some extent on the way in which it is achieved; in other words it
implies that a qualitative dimension be introduced into decision-making - as
is essential when the decisions concern cultural development. The importance
of social indicators is therefore too obvious to need any proof. Defining them
is a difficult process but the possibilities they open up are such as to make
their exploration indispensable.

1. See Annex on page 43.

2. Cf. Catherine GIRARDEAU, Vers un système de statistiques sociales. INSEE,
Paris C.14, 1970.
3. See annex on page 43.
4. Cf. Jacques DELORS, Les indicateurs sociauxf SEDEIS, Paris, 1971 and
0. MANSON, Rapport Social, indicateurs sociaux, comptes sociaux. Analyse
et Prévision, April 1969.
5. See Annex on page 44.
 - 30 -

POLICY EVALUATION

It would be wrong to end without reference to the potential presented by

policy evaluation methods. In the cultural field, evaluation studies are in
most cases confined to the formulation of a descriptive balance sheet setting
out the results of programmes or activities: attendance at a community
facility for example, broken down by age group, socio-economic category,
educational level, place of residence, etc. This 'body-counting' is, of
course, the most elementary form of evaluation and in no case could this
method be held to offer any measurement of the effectiveness of a policy.
Today policy evaluation is increasingly taking the path of management review.
The French study on the Maisons de la Culture and Centres d'Animation
Culturelle is a very revealing case in point. 1 Its purpose was to bring
about more rational decision-making in the use of the resources provided for
these facilities and the five recommendations it made proposed that:

The unit costs of the different services should be worked out so that
high-cost activities could be reduced and preference given to the others.

The cost per unit of service provided should be worked out and a
classification drawn up.

The Maisons de la Culture should be set the minimum target of recovering

the variable costs of live performance activities out of their own
takings.

Own resources should be developed, in particular by renting out

unoccupied premises for outside activities.

An activity selection procedure should be introduced designed to meet two

objectives:

to optimize the number of performances within the limits of the

grant made to the establishment;

to maximize audiences, which should be measures by applying

socio-economic weightings.

Management review, though not to be confused with policy evaluation, is

none the less its central core. Management review can be envisaged at its true
value only by reference to the objectives of the policy concerned.

The prior statement of objectives in as operational a formulation as

possible is essential for any evaluation. The problem is that cultural
policies always refer to quantitative objectives. It is a matter of providing
facilities, creating jobs, developing practices, setting up institutions and
so on. But these are means rather than ends. The real objectives are at the
very general levels of cultural democracy or cultural development. So policy
evaluation requires clarification - ex ante (definition of objectives), during
(management review) and ex post (effectiveness and efficiency).

The evaluation process is complex because all levels of decision and

implementation have to be included in the analysis. This means that several
different theoretical approaches - normative and explanatory - are necessary,

1. J. DE CHALENDAR, Quelques remarques sur la question des Maisons de la

Culture et des Centres d'Animation Culturelle. Rapport de l'Inspection
des Finances, Paris, 1973.
 - 31 -

linked together to give an overall view of the policy being studied as the two
following flow charts show.l

The component parts of policy analysis

Examples of Explanatory
normative approaches approaches
'Policy Science' POLICY ANALYSIS
'Public Choice' school

PUBLIC

EX ANTE EVALUATION POLICY-MAKING

Cost-benefit (Sociology of
Cost-effectiveness decision making)

1'

POLICY-MAKERS

1f

ECONOMIC THEORY ADMINISTRATIVE POLICY

OF BUREAUCRACY SYSTEM IMPLEMENTATION
(process analysis)

^'

AXIOMATIC TARGET POLICY

POLICY GROUPS EVALUATION
EVALUATION ('Formative'
OTHER evaluation)
GROUPS

1. From Jean-Pierre NIOCHE, De l'évaluation à l'analyse des politiques

publiques, Revue Française de Science Politique, Vol. 32. No. 1, February
1982.
 - 32 -

Assessment of public organizations'

policies and instruments

Public action Public action

in terms of organization in terms of process of action

Normative Explanatory
approaches approaches

PUBLIC MARKETING PUBLIC

(Needs analysis phase)
l
l

RATIONALIZATION OF
BUDGETARY CHOICE STUDIES DECISION-
(Ex ante econometric MAKERS
evaluation)

PROGRAMME
BUDGETS

MANAGEMENT REVIEW
MONITORING SYSTEMS ADMINISTRATIVE
PROGRAMME SYSTEM

POLICY
EVALUATION

PUBLIC MARKETING TARGET

(Communication and GROUPS
distribution phase)

(Government- (Specific
citizen campaigns)
relations)
 - 33 -

What is at issue in policy evaluation is therefore far more than just the
evaluation of a specific project. All the analysis techniques we have reviewed
(cost-benefit analysis, impact studies, cost-effectiveness analysis, modelling
and indicators) contribute to policy research and it is with that purpose in
mind that they have to be considered. Cultural development is too abundant a
field for any one of these instruments to suffice to measure it.

In concrete terms, while researchers need to continue their efforts

(virtually nothing has yet been achieved), it is possible to put forward three
recommendations aimed at improving our knowledge of the economics of cultural
development.

A complete inventory should be made of the various actions that are under
way, their medium-term consequences and their effectiveness, assigning
all current costs to one or other of these actions.

All the information necessary for the preparation of new actions needs to
be gathered so that a real dialogue develops between all the economic
partners of those actually involved in cultural development at every
level.

A system of management review should be instituted based on strict

comparison between programme forecasts and implementation and not merely
on inspection of the nature of the way money is spent.

These conditions would ensure a constructive approach to cultural policy

and allow the development of a real evaluation capability.

The key questions that we have discussed, using the cultural field as an
example, are those at the centre of the discussion on evaluation for all
projects initiated by the public authorities and they come up again and again
in the history of rationalization of budgetary choices. The economist has no
miracle solution to offer the decision-maker. His tools are imperfect and very
difficult to apply to the field of cultural development. They should not for
all that be rejected but they do need to be used with discernment. The avenues
of research are fairly numerous and appear promising enough to hope that soon
it will be possible to analyse the economic dimension of culture with the help
of higher performance instruments than those that are at present available.

These instruments will then make it possible to put up an effective

defence against budget cuts that would be highly damaging not only for
cultural development but also for the economy as a whole. Now more than ever,
cultural development constitutes an investment and it is time to discard those
assumptions that cause it to be regarded as luxury spending and an ideal
target in the general trade-offs that all too often sacrifice qualitative
aspects for the purely quantitative aspects.
 - 35 -

ANNEXES

TYPICAL COST-BENEFIT TABLE FOR A SECTION OF THE R.E.R.

(Rapid transit system in the Paris region)

(Rate of discount: 10 per cent)

Date of entry into service of RER 1970 1975 1980 1985

INVESTMENT (F million)

Investment cost, RER 180 200 210 220

Cost at 1.1.1970 prices 180 124 81 53

Cost of alternative investment

(for reference) 40 40 40 40
Cost at 1.1.1970 prices 20 20 20 20

Extra investment cost at

1.1.1970 prices 160 104 61 33

II. RUNNING COSTS (F million)

Annual running costs for RER 3.5 4.2 5.0 5.8

Annual running costs for

alternative investment (train,
bus, car) 7 7.9 9 10.8

Annual saving in running costs 3.5 3.7 4 5

Annual saving at 1.1.70 prices 40 27 18 12

III SAVING IN TIME

Traffic (million passengers) 10.5 13.5 16 18.5

Saving in time (million hours/year) 1.3 1.7 2.1 2.4

Value of annual saving in

time (F million) 6.5 11 17 25

Value of saving at 1.1.1970

prices (F million) 136 111 85 60

IV TOTAL (II + III - I) (F million) 16 34 42* 39

Optimum date.

Source: Forecasting Directorate, Ministère de l'Economie et des Finance.

 - 36 -

Results of cost-benefit analysis carried out

by the United States Department of Healthf
Education and Welfare

Cost
from Saving or Cost per
1968 benefit Cost- Number death
Programme to in benefit of avoided
1972 million ratio deaths in
in dollars avoided million
million dollars
dollars

Use of seatbelts 2.2 2,728 1,351.4 22,930 87

Restricted programme 0.7 681 1,117.1 5,811 103

Reducing the number of

pedestrian casualties 1.1 153 144.3 1,650 666

Campaign on the wearing

of motorcycle helmets 8.0 413 55.6 2,398 3,336

Anti-arthritis campaign 37.6 1,489 42.5

Drunk driving campaign 31.1 613 21.5 5,340 5,824

Anti-syphilis campaign 55.0 2,993 16.7 11,590 22,252

Uterine cancer campaign 73.7 1,071 9.0 34,200 3,470

Lung cancer campaign 47.0 268 5.7 7,000 6,400

Breast cancer campaign 17.0 101 4.5 2,396 7,663

Tuberculosis campaign 130.0 573 4.4 5,700 22,807

Campaign for driving

licence revision 6.6 23 3.8 442 13,801

Head and neck cancer

campaign 8.1 1.1 268 29,100

Cancer of the spine

campaign 7.7 0.5 170 42,944

Source: Department of Health, Education and Welfare

Source: Marie-Christine L0DE0N, La R.C.B. dans le secteur sanitaire.

Analyse et Prévision, IX, 1970.
 - 37 -

Examples of technology transfer from the space sector to other sectors

Source: Futuribles, November 1980

after a study by the Bureau d'Economie Théorique et Appliquée,
University of Strasbourg

Recipient Space sector Nature of innovation

sector origin

Automobile satellite inertia wheel to reduce vehicle's

industry stabilization fuel consumption

welding of space ion bombardment welding of automobile

materials parts

space electronics data configuration table for tracing

faults

satellite and (future) manufacture of brake pads

launcher materials from carbon fibre

Robotics Opto-electronics Automated production control systems

in industry

Sea propulsion submarine propulsion systems

transport
space electronics visual display systems

ship-to-ship communications

propulsion submarine ballast expulsion systems

Air space electronics electronic flight recorders in

transport aircraft ('Black box')

Ariane future use - several years from now —

of liquid rocket fuel (used in Ariane)
as aviation fuel

space materials use of carbon fibres in aircraft

structures

New sources conversion of photovoltaic solar cells and power

of energy solar energy generators

space materials man-made fibre vanes for wind-powered

generators

project control of nuclear power station

management operation
 - 38 -

Computer space computer new components, computer cooling

technology science systems, computer coupling, bilingual
computers

Meteosat data archiving system

Banking space opto- automatic cash dispensers

electronics

Fishing space opto- Fish shoal finding

electronics

Traffic satellite urban traffic monitoring

control altitude monitoring

Storage of energy storage standby storage by kinetic wheels

electric
power batteries miniature batteries (in calculators)

Construction space opto- detection of thermal leakage in

industry electronics walls and roofs

Medicine space materials prostheses

space computer use of computers in examination of

science heart, lung, etc.

opto-electronics low-risk X-ray radiography

Road satellite thermal ice prevention on roads and bridges

engineering control by heat conductors

Telecom- space data development of data transmission

munications transmission networks

Oil industry space materials steel-aluminium alloy cylindrical

refinery structures

space electronics communications between offshore

platforms

Public satellite control simulation systems for automatic

transport underground railway operation

space materials materials for rolling stock

 - 39 -

urban space project management of large towns

management organization

Pollution space opto- monitoring of polluted areas of the

control electronics North Sea

Security space computer computer system for monitoring

science technological and chemical risks of
offshore fires

space opto- burglar alarm sensors

electronics

Sports space materials use of man-made fibres in ski and

industry tennis racket production

Instrument- space instruments ultrasonic flowmeters for metering

ation (oil) level in storage tanks

data display system

vibration dampers

Food satellite and stainless steel beer barrels

launcher materials

Television space electronics electronic components, cathode ray

tubes

Telephone satellite standby power systems for telephone

stabilization exchanges
 - 40

Productivity gains attributable to space research

Productivity
gains

IÎ «•--

10 •*--

Curves showing total economic impact and

total value of contracts awarded to industry
MUA
Total economic impact

»<K

Tota 1 value of contracts

awarded to industry
l<«

i«j" ivs: Year

MUA = million European units of a

 - 41 -

Curves showing trends in various types of

induced effect due to spending on space research
1 MUA
- Mí) /
Technological effect /

-im /

1964 1982
| MUA
-Tiii /

Effect on trade ,-——

-K«I /

__y
**
1964 1982
MUA
-;i«>

Effect on organization
and methods /^^^

-n».i s^

1964 1982
f MUA
- :<<'
Effect on labour force

""" / ^^^-^

1964 1982*
 - 42 -

Ratio of benefits to cost of participation

in the METEOSAT satellite
(weather forecasting satellite)

from Futuribles November 1980

Benefit/cost ratios for European countries

Country Assumed share Benefit/cost

of funding in ratio
per cent

Belgium 4.29 2.3

Denmark 2.29 3.3

Spain 4.73 7.8

France 21.07 3.4

Italy 12.19 4.3

Netherlands 5.60 1.1

Federal Republic of Germany 25.57 2.6

united Kingdom 15.35 1.6

Sweden 4.41 1.7
Switzerland 3.96 1.7

Overall benefit/cost ratio 2.9

 - 43 -

Public health satellite accounts

Products

Production Production of
Units health services

Ways of meeting
cost

Type of Financing of
Consumption of consumption of
household health services
health services

Medical
insurance Social transfers
institutions

Interconnections between the various poles of development

of a system of social statistics as applied to education

Production Vocational Famili es

system > -i training
Other fields

Health State of education

of the population
Socio-demographic
i Products of the system
! education system
Recreation
Culture School population
Education sector. System describing
physical patrimonies
Education system

System of satellite accounts

(costs, funding,
products, recipients)

\
Education statistics Education
and indicators satellite
account

From: Xavier GREFFE, Politique Sociale. Coll. Sup. Presses Universitaire

de France, Paris 1975.
 - 44 -

Types of social indicator and fields covered

Active population INSEE Demographic data

and activity French VIth and Data on structure of the active
Vllth Plan population, working hours and
Council of rates, accidents, disputes,
Europe remuneration, job security, career
prospects, etc.

Health and sickness INSEE Morbidity rates; incidence,

French VIth and prevention, quantity of resources
Vllth Plan for a given population, equality
OECD of access to care, invalidity
Council of rates, mortality rates by sex,
Europe SEC*, etc., stillbirths by SEC*,
Economic Com- average annual mortality quotients
mission for Europe by cause of death, structure of
care received by SEC*, etc.

Education and INSEE Characteristics of school system,

culture French VIth and school results by SEC*,
Vllth Plan qualifications of teachers,
OECD enrolment rates, opportunities
Council of for further training, adult
Europe education, etc.

Time and leisure INSEE Time budgets by SEC*, sex, etc.

milieu, French Vllth Plan
OECD Rates and duration of participation
Economic Com- in cultural activities, etc.
mission for Europe

Goods and services INSEE Income, guarantees against loss

available French Vllth Plan of earnings, patterns of
OECD consumption by SEC*, degrees of
accessibility to public services,
valuation of consumer prices per SEC*

Physical environ- INSEE Housing conditions, house equipment,

ment and housing French Vllth Plan overpopulation, distance from town
centre, participation democratic
life, etc.

* SEC = Socio-economic category.

From: X. GREFFE, Politique Sociale, op cit.

 - 45 -

BIBLIOGRAPHY

Though not claiming to be exhaustive, this bibliography sets out a number

of references in the field of the economic assessment of the cultural
sector. Thus it includes work on cost-benefit analysis, impact studies
and work concerned more generally with assessment. It is not therefore a
bibliography on the economics of culture.

Azarchi, Lynne. Effects Resulting from the 1980 Metropolitan Opera Season
Postponement. New York: Lincoln Center for the Performing Arts,
Inc., 31 December 1980. Mimeographed.

Baird, Nini. The Arts in Vancouver: A Multi-Million-Dollar Industry. Vancouver:

Community Arts Council of Vancouver, March 1976.

Baumöl William J. Welfare Economics and the Theory of the State. Bell and Sons,
London, 1965.

Baumöl William J., and William G. Bowen. Performing Arts - The Economic
Dilemma. Cambridge, Mass: MIT Press, 1967.

Brown, Harris, Stevens, Inc. Updated Report on the Influence and Effect of the
Lincoln Center Complex on Manhattan Real Property Values. New York:
Lincoln Center for the Performing Arts, Inc., August 1978.
Mimeographed.

Chartrand Harry, An Economic Impact Assessment of the Canadian Fine Arts. Third
International Conference on Cultural Economics and Planning, Akron,
April 1984.

Citizens Union of the City of New York. Economic Implications of the Arts in
New York City Subcommittee Draft Report. New York: 1 October 1981.

Clawson M. and Knetsch J.L. Economics of Outdoor Recreation, John Hopkins Press
for Resources for the Future, 1966.

Council on Foundations Project in the Arts. 'Special Report II: Inflation,

Recession and the Arts'. Foundation News (January/February, 1976).

Cuciti Peggy. Economics of the Arts in the State of Colorado, Denver,

University of Colorado, Center for Public-Private Co-operation, 1983.

Cwi, David. 'Economic Studies with Impact'. Museum News (May/June 1981).

. Issues in Developing a Model to Assess the Community-wide Economic

Effects of Cultural Institutions. Baltimore: Johns Hopkins
University, November 1977. Mimeographed.

. Perspectives on the Economic Role of the Arts and the Impact of

Arts Impact Studies. Conference on the Economic Impact of the Arts,
Cornell University Graduate School of Business and Public
Administration, 27 May 1981. Mimeographed.

. The Role of the Arts in Urban Economic Development. U.S. Department

of Commerce, Economic Development Administration, Urban Consortium
Information Bulletin. September 1980.
 - 46 -

Cwi, David, and Katherine Lyall. Economic Impacts of Arts and Cultural
Institutions: A Model for Assessment and a Case Study in Baltimore.
U.S. National Endowment for the Arts, Research Division Report
No. 6, November 1977.

Cwi, David, and Susanne Moore. The Economic and Social Impact of the Proposed
Long Island Performing Arts Center. New York: The New York State
Urban Development Corporation, October 1981.

De Chalendar J. Quelques remarques sur la gestion des Maisons de la Culture et

des Centres d'Animation Culturelle, Rapport de l'Inspection des
Finances, Paris, 1973.

Dupuis Xavier and Greffe Xavier. Rapport technique sur les méthodes de
quantification du non-marchand. Centre 'Travail et Société' de
l'Université de Paris IX Dauphine, 1979.

Frost, Murray, and Garneth 0. Peterson. The Economic Impact of Non-Profit

Organizations in Nebraska. 1976-1977. Omaha: Nebraska Arts Council,
August 1978.

Globerman Steven. Cultural Regulation in Canada, The Institute for Research on

Public Policy, Montreal, 1984.

Greater Philadelphia Cultural Alliance. An Introduction to the Economics of

Philadelphia's Cultural Organizations. February 1975.

Hammer, Siler, George Associates. Economic Impact of Selected Arts Organiz-

ations on the Dallas Economy. City of Dallas: November 1977.

Hanten E.W. and Hendon W.S., The Akron Art Institute Study. Akron, Center for
Urban Studies, The University of Akron, 1973.

Hart, Krivatsy, Stubbee. Lincoln Square Community Action Planning Program.

New York: Lincoln Square Community Council and New York City
Department of City Planning, 1971.

Haworth, John. The Arts and New York City's Economy. New York: December 1979.
Mimeographed.

Hendon, Willaim S., James L. Shanahan, and Alice J. MacDonald, eds. Economic
Policy for the Arts. Cambridge, Mass: Abt Books, 1980.

Hendon William S. 'Benefits and Costs of Historic Preservation' in: Economics

and Historic Preservation, The University of Akron, 1983.

. Evaluation of Urban Parks and Recreation, Praeger, New York, 1981.

Jensen, Robert. Project Director/Curator. Devastation/Resurrection: The South

Bronx. Exhibition catalogue. Bronx, New York: Bronx Museum of the
Arts, 1979.

Kansas City Arts Council. Economic Impact of the Performing Arts on Kansas
City. Kansas City, Missouri: Hallmark Educational Foundation, June
1980.

Lawrence, William J. Economic Impacts of 'Leisure-Time' Activities: Modeling

the Cultural. Arts, Sports, and Tourist Industries in New York City.
New York: Sociometrics, Inc. Mimeographed.
 - 47 -

Mathtech. The Impact of the Broadway Theatre on the Economy of New York City.
New York: The League of New York Theatres and Producers, Inc.,
22 February 1977.

Metropolitan Arts Council. The Economic Impact of the Arts on Indianapolis.

Indianapolis.

Musgrave. 'Cost Benefit Analysis and the Theory of Public Finance', Journal of
Economic Literature. Vol. 7, No. 3, 1969.

Musgrave R.A. and Musgrave P. Public Finance in Theory and Practicer MacGraw
Hill, New York, 1980.

Netzer, Dick. The Subsidized Muse: Public Support for the Arts in the United
States. New York: Cambridge University Press, 1978.

New England Foundation for the Arts. The Arts and the New England Economy.
2nd ed. Cambridge, Mass: 1981.

New York Zoological Society. New York City Needs the Bronx Zoo: An Economic
Impact Statement from the New York Zoological Society. New York:
26 April 1977. Mimeographed.

Nioche Jean Pierre. 'De l'évaluation à l'analyse des politiques publiques',

Revue Française de Science Politique, Vol. 32, No. 1, February 1982.

Parham, Sidney F. 'States and the Arts: More than Meets the Eye'. State
Legislatures Magazine (February, 1979).

The Port Authority of New York and New Jersey, The Arts as an Industry; Their
Economic Importance to the N.Y. and N.J. Metropolitan Arear New York
1983.

Public Information Office, Lincoln Center for the Performing Arts, Inc. 'The
Economic Impact of Lincoln Center' (slide show). Revised,
18 February 1982.

Sullivan, John J., and Gregory H. Wassail. The Impact of the Arts on
Connecticut's Economy. Hartford: Connecticut Commission on the Arts,
March, 1977.

Throsby C D . 'Social and Economic Benefits from Regional Investment in Art

Facilities: Theory and Application', Journal of Cultural Economics,
Vol. 6, No. 1, June 1982, pp. 1-14.

U.S. National Endowment for the Arts, Research Division Report No. 15.
Economic Impact of Arts and Cultural Institutions: Case-Studies in
Columbus: Minneapolis/St. Paul; St. Louis: Salt Lake City; San
Antonio; Springfield. January 1981.

Vaughan D.R. 'Does a Festival pay?' in: Hendon W.S., Shanahan J. and MacDonald
A.J. (eds.), Economic Policy for the Arts. Cambridge, Mass, Abt
Books, 1980.

Violette, Caroline, and Rachelle Taqqu, eds. Issues in Supporting the Arts:
An Anthology based on the Economic Impact of the Arts Conference.
Ithaca, New York: Graduate School of Business and Public
Administration, Cornell University, 1982.
 - 48 -

Wiener, Louise W. Perspectives on the Economic Development Potential of

Cultural Resources. White House Conference on Balanced National
Growth and Economic Development, January 1978.

Worcester Cultural Commission. 1981 Economic Impact: A Study of the Impact of

Cultural Activity on the Economy of Worcester. Massachusetts. 1981.
 - 49 -

INDEX

Page

Foreword . iii

PART I: THE BASIC THEORY AND METHODOLOGY OF COST-BENEFIT

ANALYSIS 1

I. The pursuit of optimization; the surplus theory 1

II. Methodology of cost-benefit analysis 3

PART II: APPLICATIONS OF COST-BENEFIT ANALYSIS IN THE FIELD OF

CULTURAL DEVELOPMENT 7

I. Types of cost and benefit 7

1. Monetary and real costs and benefits 7

2. Tangible and intangible real costs and

benefits 7

3. Internal and external real costs and benefits ... 8

4. Final and intermediate real costs and benefits . . . 9

II. Examples of the application of cost-benefit
analysis in the field of cultural development 9

III. The validity of the application of cost-benefit

analysis to cultural development 12

1. The limitations of cost-benefit analysis

as applied to cultural development 13

2. 'Rationalization of budgetary choices' and

cultural developmet 14

PART III: IMPACT STUDIES, A NEW EVALUATION TECHNIQUE FOR CULTURE .... 19

I. The impact study problem 19

II. Impact study methodology 19

III. Examples of impact studies in the cultural sector . . . . 21

OTHER POSSIBILITIES 27

Cost-effectiveness analysis 27

Modelling 28

Indicators 28

Policy evaluation 30
 - 50 -

Page

ANNEXES 35

Typical cost-benefit table for a section of the R.E.R. . 35

Results of cost-benefit analysis in the health sector . . 36

Examples of technology transfer 37

Benefit/cost ratios of a space programme 42

Structure of a public health satellite account 43

Classification by field: the example of education . . . . 43

Types of social indicator and fields covered 44

BIBLIOGRAPHY 45

INDEX 49