The Price of Everything

When it comes to the arts, does price matter?

The name of this column is from Act III of Oscar Wilde’s Lady Windermere’s Fan.

Cecil Graham: What is a cynic? [sitting on the back of a sofa]

Lord Darlington: A man who knows the price of everything and the value of nothing.

Cecil Graham: And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.

This expression – “the price of everything and the value of nothing” – has found its way from Wilde’s definition of a cynic to the modern definition of an economist, which, symmetrically, is also the opposite of a sentimentalist.

The economist as cynic has little place in the world of arts, culture and creativity. At issue here is the problem of value: specifically who or what determines it?

Lord Darlington means value in the sense of intrinsic worth, or aesthetic or perhaps spiritual importance. The sort of deep value uncorrupted by grubby material considerations.

But what then is price, and what does it mean to know “the price of everything”? First, it’s not some kind of special knowledge of actual prices. Just to clear that up: that’s not what economists do, or know.

Rather, prices matter because they carry information about what other people know, and about the circumstances in which they know it. Prices, in other words, are a form of communication between many people, enabling them to coordinate their actions and decisions to produce this, invest in those, or consume that.

When economists are studying prices, what they are really studying is communication, knowledge and coordination. Cynics may not know about value, but economists do.

In agriculture or mining, markets are well defined and prices efficiently carry information. They coordinate production and consumption. But in the arts and cultural domains of creativity and imagination, for the most part these commodity-like conditions do not hold.

This is the world of subjective assessment, aesthetic preferences, critical value, of experts and elites, of externalities and market failure and public goods: all up, a world where prices carry less information, and maybe even the wrong information: they do not coordinate. So non-price mechanisms dominate coordination in this sector.

Yet the goal of this column is to try and make clear the economic way of thinking in this space of public funding of arts and culture, and more broadly of creativity and innovation, in the many ways this manifests.

I will adopt a particular line in this conversation that I believe reflects recent research in economics. This will be about the importance of information, search and discovery, and about different mechanisms and institutions we might try in order to improve the way we publically support arts, culture and creativity.