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Municipal Financing of the U.S. Fine Arts Museum: A Historical Rationale

Published online by Cambridge University Press:  03 March 2009

Eugene Smolensky
Eugene Smolensky
Affiliation:
Professor of Economics, University of Wisconsin, Madison, Wisconsin 53706.
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Abstract

Municipal involvement in the finance of fine arts museums raises the question: Just which market failure serves to rationalize this public subsidy? Two contenders are prominent in the literature: decreasing costs and education externalities. The relationship of price to marginal cost provides an operational test to distinguish among the two rationales. Scattered data from the 1880s and 1890s as well as contemporary discussion indicate that, implausible as it may seem now, education externalities constituted the operational justification for the public subsidy.

Type
Articles
Information
The Journal of Economic History , Volume 46 , Issue 3 , September 1986 , pp. 757 - 768
Copyright
Copyright © The Economic History Association 1986

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References

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12 Even if all of Netzer's arguments were to hold they would be insufficient for his purposes. Establishing market failure may be a necessary condition for public intervention (at least to economists), but it is not a sufficient condition (especially to economists). If the argument is to rest on efficiency criteria, it must still be established that benefits exceed costs, including the efficiency costs of tax financing.Google Scholar

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26 It should also be pointed out that when the MFA moved to its current building at the beginning of the century, half the costs of that building were financed from the capital gain on the original gift parcel from the city. The museum's right to the proceeds of that sale were explicitly approved by the Boston City Council, so the difference in the early roles played by the Boston and New York City governments is somewhat overstated.Google Scholar

27 This entire discussion is drawn from Whitehill, Walter Muir, Museum of Fine Arts, Boston: A Centennial History (Cambridge, Mass., 1970), vol. 1, chapter 6.Google Scholar

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