Archive for January, 2017

Cultural Diversity

January 28, 2017

Does protection promote cultural diversity?

In 1997, I was invited to be a member of the Cultural SAGIT (Sectoral Advisory Group for International Trade for the Canadian government). Mostly the members were drawn from the different cultural sectors such as print, audio-visual and live performing arts. Lawyers advising these groups were members as well those representing industry and employee organizations. Each represented a lobby group and did so forcefully. In addition bureaucrats, mainly from Heritage Canada, were in attendance to record the views of the members.

As the lone academic unassociated with any cultural sector, unless you count education, but with an interest in public policy, I found the expressed viewpoints interesting, but almost unanimously concerned with either continuing or increasing financial support and protection for the cultural industries. Subsidies and protection should be maintained or increased was the general tone of the discussion. In international fora France and Canada were strong supporters for continued protection while the US opposed it. I questioned the protectionist viewpoint.

All this took place while two events were occurring. One was a series of trade negotiations where cultural protectionist policies were being challenged by some countries, especially the US, as in the case of subsidies and content policies for the audiovisual sector, especially for film and TV.

The second was the influence of technology on both the production and distribution of cultural content. Audiences for over-the-air programs distributed by established public and private radio and TV networks were declining as new online delivery services were being created. The latter expanded viewer choice, and with the internet allowed audiences to select content from all over the world. At the same time print newspaper distribution and associated advertising were declining and have continued to do so.

In the case of public broadcasting, for example, while financial support was maintained audiences were shrinking. Thus on a per viewer basis the subsidy was actually increasing. For example the federal government has maintained its subsidy to the public broadcaster at around a billion dollars per annum while with declining audiences, especially for English language television, it means that on a per viewer basis the subsidy has increased. It costs more to service Canadian TV audiences. Meanwhile those in favour of public broadcasting still argue for either maintaining or increasing the subsidy. CRTC Annual Monitoring Reports (available online) show the CBC’s share of the English language television market fell from 13.2 percent in 1994 to 7.5 percent in 2000 and to 5.1 percent in 2012.

Technological change has also affected the print media with a sharp decline in the distribution of hard copies of books, newspapers and magazines and the ability of consumers to obtain content from an expanding array of online content providers from around the world.

Within the past two decades, the developments have been so major that the ability to protect the cultural industries in the traditional ways – a combination of public ownership, restrictions on foreign ownership, Canadian content requirements and subsidies to Canadian producers – has lessened. Protectionist policies no longer work. Technology has undermined them.

The Cultural SAGIT members were presented with these changes, which became more pronounced with time, but chose to ignore their impact arguing that it would, or might, be possible to perpetuate the protectionist policies by negotiating in UNESCO an International Agreement on Cultural Diversity. This came about in 2005 with the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions.

How the Convention has worked out will be the subject of a future posting. Much is posted on the UNESCO website, but often outsiders are unable to open certain pages related to this Convention.

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Security versus Abundance

January 9, 2017

Economics is a discipline often introduced by focussing on scarcity, the scarcity of resources to satisfy human and animal wants, although the latter are usually ignored. An alternative approach is to focus on underutilized resources as illustrated by Uber and Airbnb. Both illustrate the absence of scarcity. Cars spend much of their lives parked and not providing transportation services, except as an option good for people to use when it suits them. Uber arose as owners decided that they could use their cars to make money when they were not needed to provide the owners transportation. The cars were underutilized resources and a way was found to make use of them. Scarcity was not the issue underutilization was.

The same could be argued for Airbnb where owners had space in their homes for others to use. Scarcity of living space could be reduced if not overcome in many societies if a process of sharing was organized. Bed and breakfast arrangements have been around for years and Airbnb is just a way of extending these hotel-like activities.

Anything which is a public good tends to be underutilized such as the text of a book, an empty park, road or beach. At home, wardrobes and chests of drawers hold clothing which is not being used. A surplus rather than scarcity is the issue because people want choice and are prepared to use their incomes to create options, but these require creating access to a surplus of clothing on hand.

Other examples illustrate not-scarcity, a surplus or underutilized resources include:

Cars being driven with no passengers, only the driver.

Truck owners try to avoid dead-heading by arranging full loads for their lorries travelling in both directions between two points.

Shops with unsold goods, especially when expensive and held for a long time. Annual sales are one way of disposing of surplus goods.

Buildings such as schools and universities which are only used for part of each day, and part of each year. Accommodation and lecture rooms are often hired out for other uses.

Empty warehouses and buildings of all kinds.

Trained workers unable to find paid work. OK, scarcity of jobs is the flip side to unemployment.

Underutilized resources occur with the sun in terms of both heat, light and energy as well as with wind, tides and waterfalls.

Recycling is a way of reducing scarcity by making more intensive use of resources.

This is not to suggest that scarcity is unimportant in examining economic issues, but to note that especially in high income societies, the issues are also often those of coping with underutilization not scarcity. If the focus is switched to developing countries, then there is obvious scarcity related to items like health, education, housing, safety, food, and water. And in developed countries examples of scarcity can be found. It just seems misleading to initiate the study of economics without noting that scarcity is not the only issue to address. Where scarcity is paramount is in the finite number of hours in the day, but these too can be underutilized.

Meeting with remarkable men – one occasion

January 3, 2017

In July 1966, I was fortunate enough to be introduced to and have lunch with Ronald Coase, the 1991 Nobel prize winner in economics. His citation included two articles, The Nature of the Firm and the Problem of Social Cost. Coase was a close friend of Basil Yamey his colleague at LSE and my PhD supervisor.

Coase and Yamey had undergraduate degrees in accounting and business before pursuing academic careers as economists. Both were interested in how firms worked and how and why transactions took place. For Coase, theory was derived from observation, and while he was not averse to mathematics, he felt it should come after studying actual agreements and how conditions and obligations were established.

In 2003, at age 93, Coase gave the Coase Lecture at the University of Chicago Law School. He said that he found it odd to be giving the Coase Lecture as every time he spoke it was a Coase lecture. What is of interest to economists today is his description of how the Nature of the Firm evolved, first as an undergraduate essay in 1929 which was turned into a published article in Economica in 1934, but which in 2003 he considered an undergraduate essay. At the time, he said the article drew no attention unlike his second famous article The Problem of Social Cost.

As a student while studying business and accounting at LSE Coase was awarded a travelling scholarship to the US where he visited a number of firms observing how production was organized at the plant level as well as at head office. A combination of lectures, onsite visits and interaction with other students, Coase viewed as a recipe for the development of both theories and policy alternatives. One implication today is the importance of both the school you attend and the calibre of fellow students. The two are probably related.
The lecture is posted on the University of Chicago Law School website under 2003 Coase Lecture.