By Michael Rushton,
Associate Professor, School of Public and Environmental Affairs, Indiana University

        Many people throughout the State of Indiana are aware of how the Jacobs School of Music enriches their lives, through the participation of faculty, students and alumni in the musical life of Indiana, through performances, education, and community-based activities. The tremendous value of the School for Indianans quality of life is beyond dispute.

        While always keeping in mind the important intrinsic benefits of the Jacobs School, for our ability to enjoy performances of the world’s greatest music, and to better understand and appreciate the complex and subtle nature of music, we ask what might at first seem like an odd question: “Does the Jacobs School of Music help generate economic prosperity in Indiana?” Actually, to those economists who specialize in the study of regional economic growth, it is not an odd question at all. The cultural life of a state matters a great deal for its economic prospects.

         Perhaps contrary to their stereotypical image, economists have long understood that music, and the arts generally, are not quite the same as ordinary goods and services bought and sold in the marketplace, and have advanced rationales for public support of music, both through government and through private, voluntary donations.

        First, for music other than the most commercially popular, there are benefits to the community from thriving performing groups, concerts and operas, lessons and scholarship, extending beyond the values implied by the market. Indeed, many individuals in a city could well benefit from their local orchestra even if they do not attend performances themselves. For example, I might value the success of my local orchestra even if I do not attend concerts now, because I would like to know that, because of the success of the orchestra, my children and I will have the option of attending at some time in the future; current attendance at concerts by others is enhancing our future cultural opportunities. As another example, I might get positive feelings of pride in my local or regional community because of the renown of its musical life and heritage, even if I do not get much opportunity to listen to live performances myself. In each of these cases some of the benefits from musical performances and other outreach activities are not reflected in the market – I might get benefits from other people attending concerts, but I don’t pay anything for those benefits. Economists refer to this sort of benefit – received but not paid for – as an externality, and externalities present a case where the free market alone will not provide an adequate amount of the good. Because musical performances and activities generate externalities, but will be underprovided by the market, there is a role for government and voluntary support.

        Second, economists have made the case for public and voluntary support of music on the basis of equity. Simply put, there ought to be special efforts to bring music and the arts to those who would otherwise be deprived of them, for economic, social, or geographical reasons. In the first place, it is an important social value that we try as far as possible to provide young people, regardless of initial circumstances, with equal opportunity to earn a decent income. If knowledge of the arts and a familiarity with the great works of our cultural heritage are necessary in being able to succeed in a labor market that places increased importance on creativity, communication and inter-personal skills, then individuals without some stock of “cultural capital” will be at a distinct disadvantage. As the eminent cultural economist William Baumol wrote: “Unfamiliarity with the world’s culture is an economic handicap for the individual, for cultural illiteracy has much in common with linguistic illiteracy.” But beyond getting ahead in the world, economists also recognize that an ability to enjoy the arts is a part of the good life, and those who are disadvantaged by economics or geography from learning to understand and appreciate classical music, the theater of ancient Greece, or the great works and traditions in the visual arts, will lead lives that are diminished, having cultural consumption limited to only the most easily absorbed popular culture.

        Until recently, the above discussion captured the main ideas economists had to put forward about the benefits of public support of music and art. But in the past ten years or so, the ground has been shifting. Not that the case for non-market and equitable benefits of music and art have diminished, but there is an additional, and vitally important, aspect of musical life for economists to consider. It is to this new understanding of the importance of music to economic performance that I want to devote the remainder of this analysis. 

        But before we proceed further, in order to understand the economic impact of the Jacobs School on the state, it helps if we first take a step back and look at the early development of the Indiana economy.

        When the state developed through the nineteenth and early twentieth centuries, business and industry located according to geography. Manufacturing needed to be close to the sources of coal and minerals, and also to be either on navigable rivers or the Great Lakes, since it took time for rail transportation to become fully operational. Geography made it sensible to produce steel on the shores of Lake Michigan, to grow corn in the fields of the northern part of the state, but with dairy and other specialty crops to serve metropolitan Chicago, to excavate limestone around Bloomington, to make furniture around the forests in the southern part of the state, and in the early twentieth century to become a part of the regional automobile industry.  Workers seeking jobs followed the location of industry – think of the great migration from the American South to the manufacturing centers of the Mid-West in the first half of the twentieth century, for example.

        But over the past fifty years, the location of economic activity in America has become much more fluid. Although agriculture and manufacturing remain important, massive improvements in transportation, communications, and labor-saving technology have meant that the physical features of the land – rivers and oceans, mountains, natural resources, climate – matter much less for the location of economic activity.

        In the contemporary world, economic activity – businesses and the people who make them work – locate according to those things that affect the quality of people’s lives. While some of these things are given by nature – a pleasant climate and landscape, for example – for the most part the amenities that improve how we live are made by human hands: effective, accountable government; infrastructure; good schools and hospitals; parks and recreational facilities; low crime; friendly neighborhoods; community and voluntary organizations; and, not least, intellectual and cultural offerings, including higher education, galleries and museums, interesting restaurants and bookshops, and music.               

        And it is to the last point that the Jacobs School is so important across the state.

        It is not surprising that the impact is felt most strongly around Bloomington, where the contribution of the Jacobs School to cultural life is truly immeasurable – concerts, opera, ballet, music festivals, community participation and lessons for students. It is important for us to consider that the Living Music of the Jacobs School is not just a pleasant feature of residing in Bloomington, but is a crucial element in the more comprehensive strategy of economic development, helping to attract talented individuals, entrepreneurs and businesses to locate in the surrounding area.

         But as survey results show, the impact of the Jacobs School is state-wide. Students and alumni are playing in orchestras from Lafayette to Richmond, from Evansville to Fort Wayne, and are performing with schools, churches and community groups throughout the state. And so the cities like Columbus or Terre Haute, for example, are in a much stronger position for economic development as a direct result of the participation of current and past Jacobs School students in their orchestra. The presence of an orchestra, of quality music programs in schools, and of lively community-based music societies is a key input in the location decisions of families and companies.

        A question that might arise in considering the effects of the Jacobs School on economic development is “do we have any real evidence”? The answer is that while no one has yet done an empirical study of a single school of music and economic growth, there is significant and growing evidence that cultural life matters for development.

        Without wanting to delve too deeply into the econometric modeling of regional economic development, let me try to briefly summarize what we know.
Although he is not the first person to think deeply about the impact of musicians and other artists on economic growth, the person most associated with bringing a fresh case for support of music and the arts is Richard Florida, whose book The Rise of the Creative Class has provided so much inspiration for urban planners and for arts advocates. Here I try to shed further light on Florida’s claims that a city that attracts artists will also attract the highly skilled and talented individuals, and so bring economic growth. 

        Why would a concentration of musicians and artists in a region or city attract talent – what Florida has dubbed the creative class – and more generally be a spur to economic growth? We can answer the question from two perspectives: consumption and production.
On the consumption side, a concentration of musicians and artists leads to better leisure options for individuals, especially those more educated knowledge workers open to hearing new music, attending performances, visiting galleries, attending the theatre, and so on. Urban amenities and quality of life issues, both natural and developed, become relatively more important in location choice. Harvard University economist Edward Glaeser has found that high amenity cities have been enjoying faster economic growth than low amenity cities. Furthermore, as University of Chicago sociologist Terry Clark has noted, even the choices in amenities have changed: “The important local amenities are no longer schools, churches, and neighborhood associations…A residential population of young professionals with more education and fewer children creates a social profile geared toward recreation and consumption concerns.” Through interviews with highly-educated, and mobile, individuals, Florida has found that they want “to ‘live the life’ – a creative life packed full of intense, high-quality, multidimensional experiences. And the kinds of experiences they crave reflect and reinforce their identities as creative people.”

        A concentration of musicians and artists is also predicted to have a positive impact on the productivity of knowledge workers. First, there may be positive “spillovers” from artists to other creative workers; the presence of artists serves to increase productivity in other creative sectors, as they provide a stimulus for new ideas. As Richard Florida put it: “technological and economic creativity are nurtured by and interact with artistic and cultural creativity.” The idea here is that a region with a culture that values music and the arts, and in particular which is open to learning about and listening to new or unfamiliar musical styles or works, will also tend to have a more widespread culture of openness to new ideas. And that in turn has economic effects, as entrepreneurs and businesses become more likely to produce innovative products and designs.

        This is not a small matter. In today’s economy, and for the foreseeable future, economic growth, meaning the year-to-year increase in incomes and living standards for Indiana households, will arise not so much from investments in physical capital as it will come from investments in knowledge and new ideas. Successful companies and organizations are those that can innovate, that can discover better designs for products, or ways of production that conserve on the use of resources, or new ways of delivering services to consumers and other businesses, at home and abroad. This is well-understood by economists as well as by those leaders of organizations who know they must compete with innovative firms from elsewhere.
Through these channels, the impact of the Jacobs School of Music on Indiana’s economy is much larger than meets the eye. A successful economy must be one that can attract talented individuals to live in the state, first because economic strength is more so than ever before based on talent rather than on natural resources, and second because talent is typically mobile, and has many choices available regarding where to live. Furthermore, a successful economy is one where there is a milieu that encourages innovation, new thinking about old problems. The Jacobs School, as recent surveys have shown, reaches all corners of Indiana with its talented students, faculty and alumni. This makes Indiana an attractive location, a place where music plays a key role in the lives of communities. But it also does something else: the Jacobs School and its musical talent, past and present, present music that is new, challenging, exciting, and in so doing create an environment fertile for new ideas. And in the long run, that is how our state’s economy grows and its households prosper.

        There is one further aspect of the new economy that deserves our attention. Given that musicians and artists are able to attract talented people from other sectors of the economy, it turns out that a virtuous circle arises. For sectors of the economy that rely on innovation, talented individuals find it productive and profitable to cluster in particular locations. A bio-mechanical engineer may be attracted to Indianapolis by its arts and music scene, but she will also be attracted to Indianapolis because of all the other bio-mechanical engineers who are already there, and will serve to make her more productive at her work, through the sharing of ideas, often in very informal ways. Put simply, smart people want to be around other smart people so that they can become even smarter, and this is true even if the other smart people are working for rival companies. That is why we see in any creative field, whether music, visual arts, film-making, advertising, software design, or the life sciences, creative people are not spread evenly across the country but cluster in certain key locations. This means that when it comes to attracting talent to live in Indiana, success will beget success. That is very good news, if Indiana is able to use its cultural resources to attract a “critical mass” of talented individuals, say in the life sciences, for example. But it also serves as a warning – lose the initial race for attracting talented individuals, and catching up with the nation’s successful regions and states will become very challenging.

        Now, these arguments might seem plausible enough. But what is the evidence? It is not possible to isolate the effects of the Jacobs School on Indiana’s ability to attract talented individuals to live in the state, and to generate economic growth. But we can point to some more general results. My own research, meant to update and expand upon Richard Florida’s initial work on the subject of economic development, has generated results quite consistent with the analysis we have given above. I collected data for US cities using the Census from the year 2000, and looked at (1) the number of musicians and artists (of all types) as a proportion of the total number of workers in the city, (2) the prevalence of college educated individuals in the city, and (3) recent growth in income per person in the city. I found significant correlation between the three variables. Musicians and artists in a city are strongly correlated with the proportion of the adult population having at least a bachelor’s degree. And each of these is strongly correlated with growth in income per person. Note that this last correlation is interesting. We expect that any place with a more educated population would have higher average incomes – this is hardly a surprise. But we have found something more: musicians, artists and a highly educated population do not just lead to high incomes, but in addition lead to rapidly growing incomes. This provides some evidence of what I referred to above as a “virtuous circle”: landing a talented population helps to attract an even greater number of talented people.

        The economic impact of the Jacobs School is both significant and subtle. The orchestral and choral groups that rely on Jacobs’ students and alumni, classroom and individual teachers, administrators, volunteers and audiences that are touched by the School’s current activities and its long legacy, all have a substantial effect on the cultural state of Indiana. And empirical research shows that this cultural impact has a major effect on the decisions of talented individuals, entrepreneurs, and established firms to choose to locate in Indiana and to make the decision to stay. Without the Living Music of the Indiana University Jacobs School of Music, Indiana would be a dull state in both senses of the term – lacking cultural vitality, and in turn lacking the sparks that light the fuel of invention, innovation, and economic growth.
               

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