Friday, June 12, 2009

Publicly Traded Patronage

So on the way to work today I was thinking over a series of posts by Isaac Bulter at Parabasis on the fate of the writer. The title of the post is How Are We To Pay Playwrights? (Or For That Matter, Anybody?).

Well this morning in the car, I had an idea. It's not a new idea. In fact, it's an old idea... a really, really old idea. And a slightly less old idea.

Follow my logic:
  1. In the Renaissance, artists were not expected to support themselves. They were supported by wealthy patrons, such as the Medici family that supported Da Vinci.

  2. In the current world, art organizations are not expected to support themselves--but artists still are. If we came up with a system of patronage, artists could life off of the donations of others the way that art organizations (who support many individuals).

  3. What would a system of patronage look like if we instituted it today?

  4. A single wealthy person supporting an artist is difficult to imagine. Medici might have had a personal painter/inventor/sculptor, but the idea of the Hiltons supporting Tony Kushner is ridiculous on the face of it.

  5. Corporations, originally, were started by a single wealthy backer, but that system didn't last very long. Rather than a single owner, today most organizations are owned en masse. Ownership is broken up into little fragments: stock.

  6. Rather than having a single individual be a patron to an artist, the responsibility can be broken up into little fragments, which I'm going to call obligations.

  7. An obligation is a stake in a playright or artist. There's an upfront price, and that upfront price defines the degree to your obligation -- like a subscription. If you purchase an obligation at $10, you're agreeing to pay $10/year (or $10/month -- I haven't worked everything out) to help support the artist.

  8. If you want to back out of the obligation, you sell the obligation, and other people place bids. If they are willing to support the artist more, then the obligation price goes up--just like a stock price. If they don't want to support the artist as much, the obligation price goes down. But the seller doesn't get the money, the money is still going to the artist, so there's no point in speculation.

  9. In other words, it's a stock market of obligations: the "value" of a share in the artist is driven by demand. It's not classical demand, because it's not self-interest (people aren't expecting anything in return). Instead, it's a method of valuing and exchanging obligations.

  10. Supply is harder to quantify, but it is not impossible.

  11. The "invisible hand of the market" should set the prices and drive them, but speculation isn't necessary because these aren't self-interested investments, because there's no return--these are the stock equivalent of donations.

  12. The Thriving Arts report I've been discussing mentions that arts are structured like social movements, and are irrational from an economic perspective. Similarly, the PTP Exchange will conform to things like game theory, but classical economics aren't going to predict it accurately.

I look forward to your questions. This is a very complicated schemes with a lot of variables, and I think it'd take the dedicated effort of a trained economist (which I am not) to sort out how to build the incentive structure to work correctly.

By the way, it might be possible to use a PTP Exchange on a local-level to examine the arts in a given region. It's not an index by itself, but it's a good indicator -- the way that the stock market is an indicator of the economy, but not the only one.


Tom said...

This is an interesting idea, but I think you're trying to apply free-market economics to something drastically different.

The way (vastly simplified) that a capital investment works is:

1. INVESTOR gives money to PRODUCER
2. PRODUCER uses money to create a product (this involves creation of added value)
3. PRODUCER sells product to CUSTOMER
4. PRODUCER returns profit (realization of added value) to INVESTOR

The reason that investments are worth a dollar amount in the classical sense is that they pay dividends, and that is possible because the producer actively creates value. The “invisible hand” is the upward/downward pressure on price when it is clear that the stock is under/overvalued relative to current dividends and future earnings growth. It is *not* a wisdom-of-crowds guess at the inherent social value of the goods and services the company provides.

The main problem with your scheme is that the “investor” sees no return of any kind from his investment, and in most cases will not even know for what works his money is being used. This means that nearly all undistinguished art is equally valued, which I assume will drive its value generally toward zero, since there will always be more artists of dubious talents wanting free room and board than investors willing to support them.

Imagine the burden on the investor to come up with a valuation when there are no P/E ratios, no earnings reports, and no feedback mechanism whatsoever.

Ultimately, I don't see any benefit to investing in individual artists as opposed to grants programs. If you want to support an artist directly, buy his artwork.

CultureFuture said...

Right, but what I'm saying is that this uses the exchange model, but isn't a capital investment. It actually is only superficially related to the capital-investment exchange. In really, it's more of a stock market game.

Without any opportunity for profit, nobody will participate except those who actually want to donate and get nothing in return. So in this scenario, "demand" is set by how much people want to donate to an institution.

The thing is, it's not that because there's no profit incentive the value will trend toward zero. Because those driven by the profit-motive simply won't be in the system. There's no point. So the system isn't using a profit-system to drive prices. It's using a different sort of demand -- demand to donate.

Ryan G said...

I love this (old) idea, though I agree, it can't behave according to traditional free market economics.

The artist has to be selling work consistantly, e.g. producing the work constantly, which is completely impossible to count on.

But it's a risk venture, like stocks, that could pay off or could be a waste.

A playwright friend of mine was just patronized by another friend's family for a couple of months or so of housing and food in exchange for her to begin work. Maybe money isn't the only thing people could pledge, sort of like a community of resources to be provided for the artist.

And the Medici's got alot out of their artists, too, personal works and things. This could be a nice incentive, mandatory even. People always want publicity.

Tom said...

Even if it is a *game*, by all standard definitions of games there has to be some way to win and some way to lose. You're not just taking people's money - you're asking people to participate. It's enough for most people to give their hard-earned money without being forced to invest their time as well determining exactly where it goes. The whole existence of arts endowments is based on giving money while delegating the actual disbursement to someone else.

At the very least, you need to assign some kind of points system to reward those people who get behind someone who then makes it big or creates something of lasting value. Then they will identify with the artists they support, and have some incentive to be choosy about who they donate to.