From intuition to evidence: measuring externalities from cultural human capital for better cultural-policy decisions

Abstract Cultural economics can provide a stronger rationale for government support of the arts. An economic justification for public funding for cultural institutions typically invokes positive externalities, yet the empirical base for cultural spillovers remains weak. We outline the challenges in quantifying social returns to cultural participation and propose a framework and an empirical research agenda to improve the policy relevance of cultural economics. We develop recent theoretical work on the concept of cultural human-capital externalities—benefits to third parties that arise through audiences’ accumulation of cultural human- capital. Unlike heritage‑oriented public-goods values attached to the mere existence of cultural assets, these spillovers scale with participation and challenge prevailing valuation techniques. We critically review contingent valuation as a tool for generating evidence on the democratization of culture and related cultural human-capital externalities, and show the challenges stated-preference surveys face in providing policy-relevant evidence because the scenarios embed unidentified causal pathways or lack policy consequentiality. Policy-relevant evidence needs a methodology that leverages natural experiments to obtain unbiased treatment effects of cultural attendance on measurable outcomes (e.g., crime, prosocial behavior) and connects that to incentive-compatible valuation techniques to measure the economic value of these externalities. The conclusion identifies trends that elevate the urgency for this research agenda in policy-relevant economic evidence. Like David Throsby’s many contributions, this approach can help bridge cultural economics and public policy.