Nonprofit Enterprise in The Arts - Dimaggio

NONPROFIT ENTERPRISE
IN THE ARTS
YALE STUDIES ON NONPROFIT ORGANIZATIONS

Program on Non-Profit Organizations
Institution for Social and Policy Studies
Yale University
JOHN G. SIMON, CHAIRMAN
PAUL DiMAGGIO, DIRECTOR
DANIEL C. LEVY
Private Education: Studies in Choice and Public Policy
SUSAN ROSE-ACKERMAN
The Economics of Nonprofit Institutions: Studies in Structure and Policy
PAUL J. DiMAGGIO
Nonprofit Organizations in the Arts: Studies in Mission and Constraint
Other titles to be announced
Nonprofit Enterprise
in the Arts
Studies in Mission and Constraint
PAUL J. DiMAGGIO
New York Oxford

OXFORD UNIVERSITY PRESS
1986
Oxford University Press

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Copyright 1986 by Yale University

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Library of Congress Cataloging-in-Publication Data
Nonprofit enterprise in the arts.
Includes index.
1. ArtsUnited StatesFinanceAddresses, essays, lectures.
2. Corporations, NonprofitUnited StatesFinanceAddresses, essays, lectures.
3. Art patronageUnited StatesAddresses, essays, lectures.
I. DiMaggio, Paul.
NX711.U5N66 1986 700'.68'1 86-670
ISBN 0-19-504063-5
Printing (last digit): 9 8 7 6 5 4 3 2 1

Printed in the United States of America
on acid-free paper
Series Foreword
This volume and its siblings, comprising the Yale Studies on Nonprofit
Organizations, were produced by an interdisciplinary research enterprise,
the Program on Non-Profit Organizations, located within Yale University's
Institution for Social and Policy Studies.1 The Program had its origins in a
series of discussions initiated by the present author in the mid-1970s while
serving as president of Yale. These discussions began with a number of
Yale colleagues, especially Professor Charles E. Lindblom, Director of the
Institution, and Professor John G. Simon of the Law School faculty. We
later enlisted a number of other helpful counselors in and out of academic
life.
These conversations reflected widespread agreement that there was a serious and somewhat surprising gap in American scholarship. The United
States relies more heavily than any other country on the voluntary nonprofit sector to conduct the nation's social, cultural, and economic businessto bring us into the world, to educate and entertain us, even to bury
us. Indeed, the United States can be distinguished from all other societies
by virtue of the work load it assigns to its "third sector," as compared to
business firms or government agencies. Yet this nonprofit universe had been
the least well studied, the least well understood aspect of our national life.
And the nonprofit institutions themselves were lacking any connective theory of their governance and function. As just one result, public and private
bodies were forced to make policy and management decisions, large and
small, affecting the nonprofit sector from a position of relative ignorance.
To redress this startling imbalance, and with the initial assistance of the
late John D. Rockefeller III (soon joined by a few foundation donors), the
Program on Non-Profit Organizations was launched in 1977. It seeks to
achieve three principal goals:
1
The sharp-eyed editors at Oxford University Press requested that we explain the presence
of an intrusive hyphen in the word "Non-Profit" in the Program's title, and suggested that
the explanation might be of interest to this volume's readers. The explanation is simple: At
the Program's inception, it adopted the convention, in wider currency than it is today but
even at that time incorrect, of hyphenating "non-profit." Since then the Program has mended
its ways wherever the term "nonprofit" is not used as part of the Program's title. But in the
Program's title, for reasons both sentimental and pragmatic, the hyphen remains, as a kind
of trademark.
vi
Foreword
1. to build a substantial body of information, analysis, and theory relating to nonprofit organizations;
2. to enlist the energies and enthusiasms of the scholarly community in research
and teaching related to the world of nonprofit organizations; and
3. to assist decision makers, in and out of the voluntary sector, to address major
policy and management dilemmas confronting the sector.
Toward the first and second of these goals the Program has employed
a range of strategies: research grants to senior and junior scholars at Yale
and at forty-one other institutions; provision of space and amenities to
visiting scholars pursuing their research in the Program's offices; supervision of graduate and professional students working on topics germane to
the Program's mission; and a summer graduate fellowship program for
students from universities around the country.
The Program's participants represent a wide spectrum of academic disciplinesthe social sciences, the humanities, law, medicine, and management. Moreover, they have used a variety of research strategies, ranging
from theoretical economic modeling to field studies in African villages.
These efforts, supported by fifty foundation, corporate, government, and
individual donors to the Program, have gradually generated a mountain of
research on virtually every nonprofit speciesfor example, day-care centers and private foundations, symphony orchestras and wildlife advocacy
groupsand on voluntary institutions in twenty other countries. At this
writing the Program has published 100 working papers and has sponsored,
in whole or in part, research resulting in no fewer than 175 journal articles
and book chapters. Thirty-two books have been either published or accepted for publication. Moreover, as the work has progressed and as Program-affiliated scholars (of whom, by now, there have been approximately
150) establish links to one another and to students of the nonprofit sector
not associated with the Program, previously isolated researchers are forging themselves into an impressive and lively international network.
The Program has approached the third goal, that of assisting those who
confront policy and management dilemmas, in many ways. Researchers
have tried to design their projects in a way that would bring these dilemmas to the fore. Program participants have met with literally hundreds of
nonprofit organizations, either individually or at conferences, to present
and discuss the implications of research being conducted by the Program.
Data and analyses have been presented to federal, state, and local legislative and executive branch officials and to journalists from print and electronic media throughout the United States to assist them in their efforts to
learn more about the third sector and the problems it faces.
Crucial to the accomplishment of all three goals is the wide sharing of
the Program's intellectual output not only with academicians but also with
nonprofit practitioners and policy makers. This dissemination task has been
an increasing preoccupation of the Program in recent years. More vigorous
promotion of its working paper series, cooperation with a variety of nonacademic organizations, the forthcoming publication of a handbook of research on nonprofit organizations, and the establishment of a newsletter
Foreword
vii
(published with increasing regularity for a broad and predominantly nonacademic list of subscribers) have all helped to disseminate the Program's
research results.
These efforts, however, needed supplementation. Thus, the program's
working papers, although circulated relatively widely, have been for the
most part drafts rather than finished papers, produced in a humble format
that renders them unsuitable for the relative immortality of library shelves.
Moreover, many of the publications resulting from the Program's work
have never found their way into working paper form. Indeed, the multidisciplinary products of Program-sponsored research have displayed a disconcerting tendency upon publication to fly off to separate disciplinary
corners of the scholarly globe, unlikely to be reassembled by any but the
most dogged, diligent denizens of the most comprehensive of university
libraries.
Sensitive to these problems, the Lilly Endowment made a generous grant
to the Program to enable it to overcome this tendency toward centrifugality. The Yale Studies on Nonprofit Organizations represent a particularly
important part of this endeavor. Each book features the work of scholars
from several disciplines. Each contains a variety of papers, many unpublished, others available only in small-circulation specialized periodicals, on
a theme of general interest to readers in many regions of the nonprofit
universe. Most of these papers are products of Program-sponsored research, although each volume contains a few other contributions selected
in the interest of thematic consistency and breadth.
Thus, the present volume, edited by Paul J. DiMaggio, Associate Professor in the Yale Department of Sociology and School of Organization and
Management, and the Executive Director of the Program on Non-Profit
Organizations, deals with the artswith the role, behavior, management,
and financing of private nonprofit cultural institutions, in comparison with
government and for-profit organizations.
As the reader will already have observed, I do not write this foreword
as a stranger. I am very much a member of the family, someone who was
present at the creation of the Program of Non-Profit Organizations and
continues to chair its Advisory Committee, and who also serves Oxford as
Master of University College. What this extended family is doing to advance knowledge about the third sector is a source of considerable satisfaction. From its birth at a luncheon chat more than a decade ago, the
Program on Non-Profit Organizations has occupied an increasingly important role as the leading academic center for research on voluntary institutions both in America and abroad. And now the publication by Oxford
University Press of this volume and the other Yale Studies on Nonprofit
Organizations enlarges the reach of the Yale Program by making its research more widely available within the scholarly community and to the
larger world beyond.
London
October 1985
Kingman Brewster
This page intentionally left blank
Preface
The primary purpose of this volume is to initiate a process of inquiry into

the production and distribution of art in the United States. This effort
requires that we raise questions about something that most Americans take
for granted: the performance or display of "high culture" (painting, sculpture, symphonic and chamber music, serious theatre, opera, and the dance)
under the auspices of nonprofit firms, as opposed to proprietary firms (which
dominate other kinds of cultural production in the United States) or government agencies (which sponsor serious artistic activities in much of the
rest of the world).
Given the crucial role that nonprofit organizations play in the artistic
life of the United States, it is essential that we begin to to understand more
thoroughly the implications of their predominance. The articles in this book
examine the ways in which it may matter that certain artistic enterprises
are organized as nonprofit firms rather than as for-profits or public agencies. They also cast light on some of the special tensions that beset arts
management and policy, the ways cultural institutions are changing, or are
likely to change, and the policy alternatives that we all face.
A second purpose of this book is the same as that of the series of which
it is a part: to make more widely available the products of research sponsored over the past decade by Yale University's Program on Non-Profit
Organizations. Eleven of this volume's 15 contributions represent such
products, and the research reported on in 2 others was presented in preliminary form at the Program's seminars. Almost half of the papers are
published here for the first time; the others have appeared in divers specialinterest publications, for the most part of narrow circulation. Few of the
papers are likely to be familiar to any but the most dedicated specialists.
Because they are all of substantial interest both to students of the arts and
to practitioners concerned with the welfare of contemporary cultural institutions, their appearance together provides a new resource for scholars,
managers, and policy makers alike.
AKNOWLEDGMENTS
I am indebted to the Lilly Endowment, Inc. for a grant to the Program on

Non-Profit Organizations in support of the production of this volume. The
Preface
Andrew W. Mellon Foundation contributed greatly to the work, first with

a grant to the Program on Non-Profit Organizations in support of my
research on the social organization of the arts, and second, with a grant
to the Center for Advanced Study in the Behavioral Sciences in partial
support of a fellowship year during which much of the manuscript was
readied for publication. Sabbatical support from Yale University and institutional support from the Program on Non-Profit Organizations and the
Center for Adavnced Study is gratefully acknowledged, as is the administrative aid of Ella Sandor of the Program and the clerical assistance of
Leslie Lindsey of the Center. I have been extremely fortunate in colleagues,
and whatever virtues this volume possesses undoubtedly reflect the influence of my colleagues at the Yale Program on Non-Profit Organizations
and Institution for Social and Policy Studies. Of these threeDaniel Levy,
Walter W. Powell, and John G. Simondeserve special mention for their
unstinting intellectual generosity and for all they have taught me about the
matters that this volume addresses. (John Simon deserves additional thanks
for applying his unparalleled editorial skills to the introduction and to
Chapter 4.) More specific debts, of which there are many, are acknowledged in the notes to specific chapters or, alas, are not adequately acknowledged at all.
New Haven, Connecticut
June 1986
P.J.D.
Contents
Contributors
xiii
Introduction
3
Paul J. DiMaggio
I.
Why Are So Many Arts Organizations Nonprofit?

1. Nonprofit Enterprise in the Performing Arts
Henry Hansmann
15
17
2. Cultural Entrepreneurship in Nineteenth-Century Boston

Paul J. DiMaggio
II. Between the Market and the Public Purse
63
3. Can Culture Survive the Marketplace?

Paul J. DiMaggio
65
41
4. Corporate Contributions to Culture and the Arts:

The Organization of Giving and the Influence of the Chief
Executive Officer and of Other Firms on Company Contributions
in Massachusetts
93
Michael Useem and Stephen I. Kutner
5. Support for the Arts from Independent Foundations
Paul J. DiMaggio
113
6. Public Provision of the Performing Arts: A Case Study of the

Federal Theatre Project in Connecticut
140
Elizabeth A. Cavendish
III. Management and Mission
159
7. From Impresario to Arts Administrator: Formal Accountability in

Nonprofit Cultural Organizations
161
Richard A. Peterson
xii
Contents
8. Tensions of Mission in American Art Museums

Vera L. Zolberg
184
9. The Elusive Promise of Management Cooperation in the Performing Arts

199
Marc R. Freedman
10. Financially Troubled Museums and the Law
Nancy L. Thompson
214
IV. Nonprofit Enterprise in Commercial Cultural Industries
243
11. Politics and Programs: Organizational Factors in Public

Television Decision Making
245
Walter W. Powell and Rebecca Jo Friedkin
12. Should University Presses Compete with Commercial Scholarly
Publishers?
270
Walter W. Powell
13. Should the News Be Sold for Profit?
Christopher Jencks
V. European Perspectives
279
285
14. Public Support for the Performing Arts in Europe and the United
States
287
John Michael Montias
15. Tax Incentives as Arts Policy in Western Europe
/. Mark Davidson Schuster
Index
361
320
Contributors
Elizabeth A. Cavendish graduated summa cum laude from Yale University

in 1982, with a major in American Studies, and is currently enrolled in the
Yale Law School.
Paul J. DiMaggio is Associate Professor at Yale University in the Institution for Social and Policy Studies, Department of Sociology, School of Organization and Management, and is executive Director of Yale's Program
on Non-Profit Organizations. He has written widely on cultural policy and
the social organization of the arts in the United States.
Marc R. Freedman is Program Officer at Public/Private Ventures, a Philadelphia nonprofit research and development organization focusing on education and job-training programs for disadvantaged youths. A graduate
of the Yale School of Organization and Management, he has been Managing Director of the South Street Dance Company and a consultant in
arts administration to the Cleveland Foundation. He is currently at work
on a study of mergers in the nonprofit sector.
Rebecca Jo Friedkin is a doctoral candidate in sociology at Yale University. Her research areas include the study of complex organizations and
social stratification.
Henry Hansmann is Professor of Law at Yale, where he also undertook
his graduate training, receiving both a law degree and a doctorate in economics. He taught Law, Economics, and Public Policy at the University of
Pennsylvania from 1975 until 1983, when he returned to Yale to join its
law faculty. He is the author of a number of articles on the law and economics of nonprofit and cooperative organizations and is interested in the
economic analysis of legal rules and institutions.
Christopher Jencks is Professor of Sociology and Urban Affairs at Northwestern University. He has been investigating recent social trends for some
years, with special emphasis on changes in the form and level of individuals' concern for others, and has written widely on social policy.
Stephen I. Kutner is an economist in the Deaprtment of Finance and Economics, School of Management at Boston University. He has prepared re-
xiv
Contributors
search studies on education and arts policy for public and private agencies,
including the Museum of Contemporary Art in Los Angeles, the National
Institute of Education, and the Ford Foundation. He is currently conducting research on designing voluntary early retirement programs for college
and university faculty.
John Michael Montias is Professor of Economics in the Department of
Economics and in the Institution for Social and Policy Studies at Yale University. He combines specialization in comparative economics with a strong
interest in the economics of the arts, both in contemporary and historical
perspective. He is presently engaged in a study of trade in artworks in the
seventeenth century in the Netherlands.
Richard A. Peterson is Chair of the Department of Sociology and Anthropology at Vanderbilt University, on leave in 1985-86 as Director of the
Vanderbilt-in-England program at Leeds University. Peterson has written
widely on the music industry, the arts, and the production of culture. He
is currently completing a monograph on the commercialization and cornmodification of folk culture, focusing on country music.
Walter W. Powell is Associate Professor of Organization and Management
and Sociology at Yale University. His most recent book is Getting Into
Print: The Decision Making Process in Scholarly Publishing, published by
the University of Chicago Press along with the paperback edition of Books:
The Culture and Commerce of Publishing (written with Lewis Coser and
Charles Kadushin).
/. Mark Davidson Schuster is Assistant Professor and Assistant Department Head in the Department of Urban Studies and Planning, Massachusetts Institute of Technology. His research has been focused on the analysis
of tax incentives and other forms of indirect aid to the arts. He has served
as a postdoctoral research fellow in the Research Division of the French
Ministry of Culture and is coauthor of Patrons Despite Themselves: Taxpayers and Arts Policy, a Twentieth Century Fund Report. Recently, he
completed Supporting the Arts: An International Comparative Study, which
looks at the arts funding policies of eight countries, for the National Endowment for the Arts.
Nancy L. Thompson is an attorney and has been associated with the New
York office of LeBoeuf, Lamb, Leiby & MacRae since October 1984. She
graduated from Yale Law School in 1983 and subsequently served as a
law clerk to the Hon. Herbert J. Stern of the U.S. District Court in New
Jersey. Ms. Thompson has had a life-long interest in art and its related
policy concerns. She minored in art history at Oberlin College and spent a
summer working as a student intern at Oberlin's Allen Memorial Art Museum.
Michael Useem is Director of the Center for Applied Social Science and
Associate Dean of the College of Liberal Arts at Boston University. His
Contributors
xv
recent research has focused on the social and political activities of corporations and their managers, and his articles have appeared in Administrative Science Quarterly, American Sociological Review, and Sloan Management Review. He is the coauthor, with Paul J. DiMaggio, of a report
on arts audiences in the United States, published by the National Endowment for the Arts, and he is the author of The Inner Circle: Large Corporations and the Rise of Business Political Activity in the U.S. and U.K.
(Oxford University Press, 1984).
Vera L. Zolberg is Senior Lecturer in Sociology in the Masters of Arts in
Liberal Studies Program of the New School for Social Research Graduate
Faculty. She did her doctoral work at the University of Chicago in the
sociology of culture and the arts and the sociology of education. She has
written and published on the sociology of the avant-garde, bohemianism,
cultural institutions, and cultural policy. She is currently writing a book
on the rise of the turn-of-the-century avant-garde art movements, as well
as doing research on the interactions of markets and the state in cultural
policy in the United States and France.
NONPROFIT ENTERPRISE
IN THE ARTS
Introduction
PAUL J. DiMAGGIO
I must confess that when I agreed to edit this volume, I feared that its two
objectivesaddressing a specific set of substantive concerns and increasing
the availability of work sponsored by a specific research program (The
Yale Program on Non-Profit Organizations)might at some point collide.
If the purpose of a collection of this kind is, to borrow the official language of the National Endowment for the Arts during the Carter years, to
increase "access to the best," is it not provincial to rely so heavily on work
generated in and around one academic institution?
As plans for the volume developed, my anxieties on this score subsided,
for several reasons. First, it became clear that the volume would fill a special niche that reflects the focus of the Program on Non-Profit Organizations and of the Yale environment of which the Program is a part, on the
relationship between industrial organization and social purpose. Students
of the arts have spent relatively little time addressing this concern; to some
extent, therefore, the Program possessed a commanding position in a small
oligopolistic market. Second, the volume is intentionally interdisciplinary,
including papers by seven sociologists, three economists, two students of
management, and two lawyers. This catholicity of approach also reflects
one of the special assets of the Yale Program, which is still the only multidisciplinary center for the study of the nonprofit sector. Third, it has been
the program's good fortune to be associated with some of the best work
in the economics and sociology of cultural organizations. Finally, where a
narrow construction of the volume's second purpose would have led to
significant omissions or provincialism, I have exercised my editorial prerogative to recruit papers from outside the Program's orbit and to write
one entirely new one myself.
This volume, then, is not a study in the sociology of art (although it is
certainly influenced by the "production-of-culture" approach developed by
Richard Peterson and his colleagues); it is not a reader in cultural economics (although it includes three exceptional expressions of this subdiscipline); nor is it a handbook on arts management (although several of the
contributions deal explicitly with management issues and all are relevant
Introduction
to policy and management). Rather it is an effort to bring together some

of the best work from several disciplines that focuses on the significance
of the nonprofit form for our cultural industries, the ways in which nonprofit cultural enterprise is financed, and the constraints that patterns of
funding place on the missions that artists and trustees may wish to pursue.
It is no accident that interest in the industrial organization of the arts
has emerged at this point in our history. The past 30 years have been a
period of dramatic flux in the organization of U.S. art, music, drama, and
dance, as well as in the way we think about them.
For one thing, the postwar years have been marked by growth in the
number and scale of high-cultural institutions. Whereas in 1955 the dance
and the professional stage were dominated by a few for-profit institutions,
opera was monopolized by an even smaller number of nonprofit companies, and community and neighborhood arts organizations barely existed,
today each represents a national nonprofit industry consisting of hundreds
of firms. The established nonprofit cultural agenciesthe art museums and
the symphony orchestrashave grown mightily as well. The past 30 years
have also witnessed a more modest increase in high-cultural consumption
by middle-class Americans, propelled by the supply-side revolution, by
heightened levels of higher education, and by the pump-priming activities
of private foundations, corporations, and, especially, federal and state government.
These institutional ventures in patronage constitute an important transformation in the sources of arts organizations' revenues since the mid1950s. This transformation was effected, first, by the Ford Foundation's
massive efforts in the performing arts during the late 1950s and the 1960s,
then by the creation of the National Endowment for the Arts in 1965 and
the state arts agencies shortly before and after 1965, and, more recently,
by the increase in corporate arts philanthropy. None of these institutions
the private foundations, governments, or the corporationsplayed an important aggregate role in nurturing the nonprofit arts before 1955. Now
they represent an institutional tripod on which our nation's artistic enterprises rest.
The growth of the nonprofit arts sector and the substitution, to a great
extent, of large institutions for private patrons as the source of its contributed revenues, have also changed the way in which arts organizations
are administered, the balance of interests within them, and the goals that
they pursue. In earlier years, our established nonprofit arts, the symphonies and art museums, were run (the word "managed" may imply more
systematic procedures than were often applied) by coalitions of wealthy
trustees, artists or (in the case of museums) art historians, and poorly paid
administrators. Of this triumvirate, the trustees were ordinarily the dominant partner, at least so long as they could pay the bills. (When financial
crisis struck, as it did with special force during the 1930s, and the patrons
could no longer meet deficits, our museums and symphonies frequently
lurched towards local government funding with outreach or education
Introduction
programs. But their hopeful advances towards the public purse were usually repelled and the shift in mission short-lived.)
In the symphony orchestras, trustees favored decorum and exclusivity,
with enough catering to middle-class taste (which they shared) to maintain
satisfactory levels of earned income. And despite the foothold of scholarship in the leading museums and the significant educational reforms of
such progressive popularizers as John Cotton Dana, most art-museum
trustees enjoyed the exclusive character of museums, upon whose staff they
relied for advice in building and disposing of their own collections. By
contrast, the emerging nonprofit arts, then a few nonprofit theatres and
dance companies, lacking powerful boards, usually reflected the intensely
held artistic visions of their artist-founders. In any case, what the established and emerging nonprofit arts organizations had in common was that
they were casually administered and usually content, in practice, to serve
a limited and exclusive public (the former because their trustees preferred
it, the latter because their artistic directors had little time to devote to
expanding audiences).
The advent of institutional funding has tended to change all that. For
obvious reasons, large foundations and public agencies have wanted arts
organizations to be able to account for the money they are granted and,
increasingly, have required evidence of sound fiscal management in advance of making a grant. Moreover, the major national foundations and
the public agencies, believing that art is a good thing and that it should be
spread around, have encouraged cultural institutions to evince some interest in expanding their publics and serving their communities. These two
imperatives, administrative efficiency and concern for expansion, are united
in the preference of institutional funders for supporting cultural organizations that can boast high levels of earned income, as evidence both that
they enjoy community support and that they will not become embarrassingly dependent upon their patrons for their survival. Nonprofit arts organizations have responded to such demands with a proliferation of administrative staff in such areas as finance and marketing and with a gradual
shift in the balance of internal power from trustees or artists to professional managers.
The ascendancy of the managers, both in the agencies that fund the arts
and in cultural organizations themselves, has marked a change in rhetoric,
perhaps more marked than changes in practice, from the romantic oratory
of the nineteenth century to the rational, businesslike cadence of contemporary arts administration and policy. The creation of our first museums
and symphony orchestras represented an antimarket social movement by
wealthy entrepreneurs attempting to seal off their own adoptive culture
(and with it their own status group) from the ravages of the national market economy that they were themselves instrumental in constructing. The
aversion of the romantic artist, and sometimes even the arts manager, to
the language of efficiency and the marketplace, and the absence of management courses in most fine-arts, music, and drama schools (at least until
Introduction
the 1960s), reflected the patrons' antimarket ethos as much as it mirrored

the ideology of the artists themselves. Indeed, the notion of "the arts" as
an institutional entity (as opposed to an abstract realm of spirit) was remote from the experience of most musicians, actors, or curators until well
into this century. It only became established once the rise of public funding
welded the disparate nonprofit cultural enterprises into a single, increasingly unified constituency.
And if it might seem odd to speak of "the arts" as an economic sector,
the notion that they constitute an "industry" would have positively repelled most cultural leaders before the 1960s. With the advent of public
funding, however, advocates of government aid lost no time in gathering
industry statistics useful for constructing reports on the "economic impact
of the arts" and other instruments of political suasion. If many in the
established arts still find distasteful the notion of "the arts-service-deliverysystem," which attained some currency in government circles during the
1970s, the concept of arts as "industry" now seems increasingly natural
and suggestive of an almost corporate gravity of purpose.
The publication of this volume, which treats the "arts industry" as a
whole, thus both reflects a gradual transformation in the social conception
of cultural enterprise and provides an opportunity to increase our understanding of the trends that it reflects. The links between organizational
form and financial sustenance, and between revenues and mission, dominate the first three parts of this volume. In parts IV and V, we return to
these questions from different perspectives that focus, first, on nonprofit
enterprises in cultural industries that are by-and-large commercial and then
on systems of arts support that prevail in Europe.
Part I consists of two papers that set out in stark contrast very different
ways of addressing the question, "Why is so much of our artistic production and distribution organized into nonprofit organizations?" Henry
Hansmann, who is an economist as well as a legal scholar, approaches this
question inductively, arguing that the nonprofit form offers a natural solution to the technical and financial problems of the live performing arts.
He begins with Baumol and Bowen's contentions that, because performing-arts organizations cannot boost productivity sufficiently to meet inflationary pressures, they require subsidy to survive. Hansmann demonstrates
that, given this imperative, the nonprofit form enables cultural enterprises
to maximize a combination of earned and contributed income. His argument is compelling and suggests that if the nonprofit form had not already
existed, performing-arts organizations would have had to invent it.1
By contrast, my own contribution takes an historical tack, asking what
groups were involved in and what interests were served by the creation of
the United States' first modern nonprofit art museums and orchestras in
the late nineteenth century. If Hansmann's theory is notable for its elegance as an effort to account for a great many phenomena with just a few
theoretical propositions, my paper has the virtue, such as it is, of muddying the theoretical waters by treating the social definition of "art," or at
Introduction
least of serious culture, as problematic, historically changing, and a matter

over which social groups have contended. Based on a study of nineteenthcentury Boston, I argue that the difference between "culture" and mass
entertainment was poorly understood until nonprofit cultural organizations were created to clarify and embody that distinction, and that the
incorporation of certain kinds of art into these organizations, far from
reflecting the working of the marketplace, represented a concerted effort
by the champions of such art to avoid the marketplace and its laws.
The difference between these two methods of explaining the prevalence
of nonprofit enterprise in the production and distribution of certain kinds
of art reflects a common divergence in explanatory style between economists and sociologists. The former tend to regard market efficiency (or the
absence thereof) as the driving force in the choice of organizational form,
and the latter, especially in their treatment of nonprofit organizations, emphasize institutional patterns and the sometimes noneconomic interests of
social collectivities.
The difference also reflects a persistent tension in the arts themselves,
however. From the beginning, the governors of our nonprofit cultural institutions have subscribed to purposeswhether popular betterment, the
cultivation of the finest expressions of certain forms of art, or the maintenance of social boundariesthat could not be advanced by proprietary
entrepreneurs whose gaze focused on the bottom line. Yet, at the same
time, U.S. performing-arts organizations have always been enmeshed to
some degree in the market, dependent upon admissions or ticket sales for
their survival. In the early years, the private patrons who supported the
arts traded exclusivity for middle-class dollars in order to keep the orchestras afloat. Throughout our history, artist-entrepreneurs have been forced
to compromise their aesthetic convictions or face penury, insolvency, or
both. More recently, the preference of institutional funders for an expansion of the audience's social base has run up against the need for earned
income, which can best be obtained by subscription sales to conventional
arts attenders.
The aesthetic goals of many artists and curators, the status concerns of
many trustees, the educational visions of institutional funders, and the
realities of the economic marketplace, from which nonprofit arts organizations are buffered but not exempt, frequently clash. The resulting tensions have shaped the development of cultural institutions in the United
States to a greater extent than in other countries, where the public sector
has played a larger role. In Part II, we consider the financial context within
which struggles over mission take place: the sources of nonprofit cultural
organizations revenues, the purposes that motivate the arts' various patrons, and the constraints that the search for revenues imposes.
The first chapter in this section, which I have revised and updated to
reflect the state of events as this book goes to press, describes the range of
playersfoundations, government, corporations, and private patrons and
the marketin the pluralistic U.S. system of cultural support.2 The virtues
Introduction
of a system that gives privately governed arts organizations many doors

on which to knock are considerable. Yet, at the same time, we see that
there are some kinds of organizations, purposes, and definitions of art for
which few, if any, doors will open, and for which the marketplace holds
no promise. If there is one moral to this brief overview, it is that revenue
sources are not fungible and that shifts, for example, from public to private grants, are likely to sacrifice some organizations or purposes in favor
of others.
The subsequent chapters in this section focus in more detail on three
important forms of financing the arts: corporate philanthropy, grants from
private foundations, and direct provision by agencies of government. Michael Useem and Stephen Kutner emphasize two results of their own survey of Massachusetts corporations. The first is that, although many firms,
especially larger ones, have "professionalized" their giving operations with
clear statements of purpose, the addition of professional staff, and, in some
cases, the creation of company foundations, nevertheless chief executive
officers still set the tone for even the most professional corporate philanthropies, in many cases maintaining close oversight even over specific grants.
Moreover, and in contrast to the pronouncements of government agencies
that public grants represent the most significant "seals of approval," corporate philanthropists report that they are much more influenced by the
policies of companies like their own than by the gifts of federal or state
agencies. In short, company foundations appear to operate in much the
same way as private patronage, through networks of CEOs and giving
professionals who rally one another to support the arts in general and
specific causes in particular.
The next chapter, which I wrote for this volume, deals with the private
foundation, a source of contributed income that has, in recent years, received less attention than companies and government, despite the fact that
foundations give roughly as much to the arts as corporations or the public
sector. One purpose of the chapter is simply to document trends in foundation support for the arts over the past 50 years. A second is to explore
a paradox. Private foundations are relatively unconstrained by law or external dependence (for example, they have no stockholders, customers, public
donors, or political constituents). Nonetheless, as a group (and admitting
some important exceptions) they have been both conservative and rather
uniform in their patterns of giving. Although a few of the better known
foundations have launched innovative and groundbreaking programs of
philanthropy, the vast bulk of foundation arts support goes quietly to established local institutions, often for building or endowment campaigns.
The explanation, I suggest, may be found in the social pressures to which
trustees of locally oriented foundations are subject and, more generally, in
the uncertainty and high cost of information attendant upon cultural philanthropy.
Finally, Elizabeth Cavendish's chapter describes part of this country's
one great experiment with direct government cultural provision, the WPA
Introduction
arts projects of the New Deal. Focusing on the Federal Theatre Project in
Connecticut, Cavendish reveals a saga that may disappoint both enthusiasts and detractors of public cultural enterprises. In contrast to the better
known New York project, the Connecticut Federal Theatre was anything
but a hive of subversion; nor was its administration particularly autocratic, wasteful, or inept. Rather the agency was so dependent on popular
favor, so vulnerable to politically motivated attacks by conservatives in the
press, and so reliant upon the support of community notables that it quickly
abandoned much of the social and artistic mission that distinguished it
from the popular stage. Although the achievements of the Connecticut Project
in children's theatre and in the provision of opportunities for minority
actors were substantial, Cavendish's account reminds us that even public
enterprises are not exempt from the market's demands when they are
embedded in a market society.
The combination of tensions and constraints peculiar to our mixed system of public subsidy, private patronage, and earned income and the impact of these factors on the missions of arts organizations is the topic of
Part III. It is never easy to determine what an organization's mission is,
especially when, as in the case of nonprofit cultural institutions, there are
several legitimate purposes, each of which has its own sets of internal and
external constituents. Indeed, nothing is more dangerous than personalizing the arts organization and attributing to it the motives of innovation
and artistic virtuosity long associated with romantic notions of art. For
one thing, the extent to which the artists (or curators) who work in our
nonprofit orchestras, museums, opera companies, or theatres hold to such
values is an empirical question. More important, artists are rarely the most
powerful or influential participants in cultural organizations, so their own
values are rarely the ones that the nonprofit firms attempt to maximize. Be
that as it may, the leaders of most cultural organizations do espouse certain aims of an aesthetic and educational character, and most of them are
relatively sincere. From the standpoint of policy and practice, then, it is
important to consider to what extent the organization's fiscal environment
enables it to pursue its core artistic or educational missions and to assess
the constraints that the environment imposes.
Richard Peterson's chapter traces the change in the character of management of the more prominent arts organizations from the nineteenth
century to the present. The early managers were often flamboyant impresarios who, in many cases, used their positions as the hubs of larger financial empires. Although they often mastered a great many technical details
(in touring orchestras, managers literally had to make the trains run on
time), their most important skills were social, enabling them to maintain
close informal relationships with patrons, trustees, and leading artists. Since
the 1960s, writes Peterson, the impresario has been replaced by the professional administrator, versed in financial management, personnel relations,
and labor law, less entrepreneurial and more formal in administrative orientation. The rise of the administrator, he argues, is less a product of the
10
Introduction
growth or increased complexity of the arts organization itself than of the

rationalization of the environment in which arts organizations operate
the emergence, to which I have already alluded, of institutional patrons
such as corporations and government agencies, which require of grant recipients a degree of bureaucratization and administrative rationality similar to their own. As Peterson points out, the trend towards administrative
professionalism has been more marked in the larger and more stable cultural institutions; and even here the extent to and precise ways in which it
represents a substantive change, as opposed to an alteration of style or
rhetoric, remains to be seen.
Although the trend towards managerial professionalism spans all the
arts, the tension between the aesthetic and educational mission has always
been especially acute in the art museum. In a paper based on her detailed
historical study of the Chicago Art Institute, Vera Zolberg details the conflict between these aims, demonstrating that for all the rhetorical attention
education has received in public accounts of museum objectives, it has
traditionally garnered fewer resources and received a lower priority than
many of the museum's less publicized concerns.
If the traditional museum or symphony orchestra was insular in perspective, with authority closely guarded by trustees and staff, one sign of
the increasing rationalization of the environment of nonprofit cultural organizations is the vogue (especially on the part of public and private institutional patrons) for administrative coordination, which requires that arts
organizations begin to surrender some of their autonomy. Marc Freedman
reports on one of the most widespread instruments of coordination, the
performing-arts center, which integrates business functions for a community's primary theatre, music, and dance organizations. As Freedman demonstrates, the rationale for administrative coordination as a means of enhancing efficiency is unassailable. Yet, in practice, coordination rarely if
ever works out the way it is planned. The programs of the performing-arts
centers he studied in most cases reflected the aspirations of corporate patrons rather than of the members themselves, and they were endemically
bogged down in controversy among their constituents, who cooperated
reluctantly if at all. Freedman is not prepared to give up on administrative
coordination, instead noting the special conditions under which it is likely
to succeed. But his study points to the chimerical quality of efficiency as a
policy goal in the nonprofit cultural arena, to the inevitable intrusion of
politics into administrative matters, and to the danger of importing into
the arts models from other sectors (for example, from the social services,
where cooperation and coordination have been bywords for at least two
decades).
Finally, Nancy Thompson's chapter highlights the legal problems facing
museums (and other nonprofit cultural organizations) that attempt explicitly to change their missions. Her comprehensive overview of the statutory
and court-made law that bears on the power of trustees to change direc-
Introduction
11
tion, including the doctrines of cy pres and deviation, points both to jurisprudential anomalies and to suggestions for the law's reform.
To this point, we have taken for granted the conventional definition of
"the arts" and emphasized organizationsorchestras, theatre companies,
art museumsin fields that are predominantly nonprofit in charter. Yet
the problems of the traditional nonprofit cultural sectors may be illuminated by investigating the nonprofit regions of predominantly proprietary
cultural industries. Organizations that do not hew to the organizational
form prevalent in the industry to which they belong are often institutionally invisible. There is a dearth of research on nonprofit fiction presses,
nonprofit record companies, or nonprofit magazines (or on proprietary
museums or orchestras). Yet such organizations do exist and, by virtue of
their very deviance, may tell us much about the limits and possibilities of
the nonprofit form.
Part IV addresses nonprofit enterprise in for-profit cultural industries. It
begins with a chapter by Walter Powell and Rebecca Jo Friedkin on public
television stations, based on case studies of New York's WNET and the
Connecticut public television network. The problems of acquiring resources and charting a coherent course that Powell and Friedkin document
will be familiar to students of the more conventional nonprofit arts organizations. But in television they are made more complex by the need of
public stations to establish that they are different from their commercial
counterparts. Ironically, the broad audiences and community support demanded by funders of public stations can be gained most easily if stations
offer schedules that resemble those of commercial television. In appealing
to viewer preferences, however, public stations run the risk of eliminating
the rationale for their very existence.
Similarly, Powell's chapter on the nonprofit university press portrays an
island of nonprofit activity in a proprietary sea. Driven by tight university
budgets to compete with commercial publishing houses, the university presses
must maintain a role that is distinctive enough to justify continuation of
subsidies and tax advantages and, at the same time, earn enough money
to survive.
Christopher Jencks' essay questions whether the profit motive is consistent with the obligations of the press in a democratic society and offers a
modest proposal: Government, he argues, should purchase the newspapers
and turn them over to local private nonprofit corporations. Although the
particulars of his proposal are ingenious, it is unlikely to set our representatives to penning legislation. Yet it raises important questions about the
distribution of the nonprofit form across our cultural landscape, all the
more so because, since Jencks wrote his essay, a number of leading magazines of opinion, from the National Review to Harper's to the Nation,
have switched from the proprietary to the nonprofit form.
The final part of this volume offers a different kind of comparison, with
papers by John Michael Montias and J. Mark Davidson Schuster on, re-
12
Introduction
spectively, direct and indirect public support for the arts in Europe. Based
on a fastidious mining of often obscure reports and government documents, these papers permit us to assess the degree of U.S. exceptionalism
in cultural policy. Montias' study indicates that, with respect to direct aid,
it is substantial: No European government gives so little to the arts as does
our own. Schuster's chapter indicates that, with respect to indirect support, the United States is less exceptional than we like to think: European
governments have a wide array of tax mechanisms, including the charitable deduction, that assist public and nonprofit arts organizations (and in
the case of special value added tax rates, some for-profit cultural industries, as well).
Taken together, the contributions to this volume require a reassessment
of the role of nonprofit cultural enterprise that has implications for practice and policy as well as for theory. They demonstrate that the lines between nonprofit and proprietary cultural enterprise are neither so rigid as
is often supposed nor so natural as we often assume. Many of the kinds
of organizations that are now nonprofit (e.g., theatres, orchestras, and art
museums) were once proprietary, and many of the industries that are still
predominantly proprietary (small presses, magazines of opinion, jazz ensembles) may become increasingly nonprofit. Many legally nonprofit enterprises operate in a manner calculated to optimize revenues or are at least
pressed to do so by significant parts of their business environments.
If the boundary between high culture and mass culture is growing less
sacrosanctas a variety of aesthetic developments such as pop art and
performance art suggestso our assumptions about the boundary between
proprietary and nonprofit cultural enterprise are also being called into
question by the developments in the economic and political realms that the
contributions to this volume describe. These latter developments require
that nonprofit arts organizations take stock of their missions, decide what
business they want to be in, and consider whether their legal charters still
match their aspirations. They also suggest that a nonprofit charter, by itself, provides little protection from the rigors of the competitive marketplace. If nonprofit cultural organizations are to continue to provide alternatives to mass media in the face of economic constraint, cultural policy
makers must nurture fiscal environments that enable such organizations to
pursue missions that are distinctive in substance as well as in rhetoric.
Finally, such changes pose the possibility that the ends of cultural policy
might be pursued in predominantly for-profit as well as nonprofit cultural
industries, either through subsidy of nonprofit oases within those industries or through tax incentives to risk-taking proprietary firms.
Such notions take us beyond the descriptive and analytical intent of the
contributions that follow and toward the considerations of value that inevitably inform discussions of policy and mission. If the reader is encouraged to confront such discussions with an awareness that the range of
options may be broader than it often appears, this volume will have achieved
its purpose.
Introduction
13
NOTES
1. I place Hansmann's paper, which is the most technical in this volume, at the fore despite
some concern that a casual perusal might frighten off the less technically oriented. Such
readers should take heart, first, in the fact that of all the contributions, only twoHansmann's and Montias'scontain so much as an equation; and, second, in the recognition that
both Hansmann and Montias write so clearly as to make their arguments thoroughly accessible to even the most mathematiphobic reader.
2. Lest the reader fear that this volume is dominated by the editor's handiwork, I should
point out that my own contributions are restricted to Parts I and II.
I
WHY ARE SO MANY
ARTS ORGANIZATIONS
NONPROFIT?
1
Nonprofit Enterprise in
the Performing Arts
HENRY HANSMANN
The live performing artsincluding orchestral music, opera, theatre, and

balletare today in large part the product of nonprofit institutions. At the
same time, there remain some segments of the performing arts, such as
Broadway theatre, that are vigorously for-profit (and profitable 1 ). Moreover, in the past profit-seeking institutions were apparently the rule rather
than the exception in the performing arts; not only serious theatre but
even symphony orchestras were commonly proprietary. The dominance of
nonprofit institutions in this industry is largely the product of recent decades and is still far from complete.2
The existing literature offers no satisfying analysis of the factors that
have caused this industry to become so heavily nonprofit, nor does it offer
much in the way of a positive or normative perspective on the behavior of
the nonprofit firms involved. Perhaps as a consequence, there also exists
no well-articulated rationale for public subsidies to the performing arts,
much less a coherent set of criteria by which to determine the appropriate
amount and structure of such subsidies. This chapter addresses each of
these issues.
WHY ARE THE PERFORMING ARTS NONPROFIT?
Donative funding
Nearly all nonprofit performing arts groups depend upon donations for a
substantial fractioncommonly between one-third and one-halfof their
From Bell journal of Economics 12, 2: 341-361, copyright 1981. Reprinted by permission
of The Rand journal of Economics. The author acknowledges particular debts to Alvin Klevorick, Richard Nelson, Oliver Williamson, Sidney Winter, and the referees of the Bell journal
for helpful comments. Preparation of this paper was supported by a grant from the Program
on Non-Profit Organizations at the Institution for Social and Policy Studies, Yale University.
18
income.3 Because, for reasons that I shall return to below, an organization

that is dependent upon donations must generally be organized as a nonprofit, this pattern of financing provides a preliminary explanation for the
predominance of the nonprofit form in this industry. But why are the performing arts so heavily financed by donations?
In other sectors such donative financing for nonprofits sometimes serves
as a means for supporting the private production of public goods.4 Consistent with this notion, it has frequently been argued that the performing
arts exhibit substantial beneficial externalities, and that this in turn provides a rationale for both public and private subsidies.5 For example,
prominent cultural institutions bring prestige and tourism to both the city
and the nation. Likewise, such institutions may, through indirect processes
of cultural stimulus and transmission, ultimately contribute to the cultural
experience even of people who do not attend their performances. But the
ratio of such external benefits to the private benefits (that is, those enjoyed
by members of the audience) for any performance is doubtless rather small
much smaller than the ratio of contributions to ticket receipts for the organizations involved.6 In any case, it does not appear that such external
benefits are a major stimulus for the donations received by performing arts
groups. Indeed, the evidence is strongly to the contrary, for it appears that
the great bulk of the donations received by performing arts groups comes
from people who actually attend the groups' performances, and not from
the other members of the public who partake only of the prestige and
other external benefits that the performances confer upon them.7
Another explanation commonly encountered is that donations are a private subsidy that enables ticket prices to be kept down to levels at which
they can be purchased by people who could not otherwise afford them.
Undoubtedly this is part of the motivation of at least some who contribute.
Yet the vast majority of people who attend the performing arts are quite
well-heeled.8 Surely it is doubtful that the performing arts are organized
on a nonprofit basis primarily to provide a vehicle whereby the rich can
subsidize the merely prosperous.
The situation, then, is at first appearance rather paradoxical. Here we
have a service, essentially private in character, financed partly by donations and partly by revenue from ticket sales. Yet the people who donate
are also the people who attend the performancesthat is, who buy tickets.
Moreover, it appears that performing arts organizations commonly price
their tickets so low that they operate well within the inelastic portion of
their demand curve, thus failing to maximize receipts from ticket sales.9
Why do these organizations seek to extract part of their revenues from the
audience through donations, rather than simply by raising their ticket prices?
Price Discrimination
These phenomena all become understandable if we simply recognize contributions in the performing arts as a form of voluntary price discrimination. 10
Nonprofit Enterprise in the Performing Arts
19
The considerable costs of organizing, directing, rehearsing, and providing scenery and costumes for a performing arts production are essentially
fixed costs, unrelated to audience size. Marginal costs are correspondingly
low: once one performance has been staged, the cost of an additional performance is relatively small, and, as long as the theatre is unfilled, the cost
of admitting another individual to a given performance is close to zero. At
the same time, the potential audience for high-culture live entertainment is
limited even in large cities; consequently, for any given production there
are typically only a few performances over which to spread the fixed costs
often three or fewer for an orchestral program and only several times that
for opera, ballet, and many theatrical productions. Thus, fixed costs represent a large fraction of total costs for each production.11
The result is that if ticket prices are set close to marginal cost, admissions receipts will fail to cover total costs. Indeed, it appears likely that for
most productions staged by nonprofit performing arts groups the demand
curve lies below the average cost curve at all points, so that there exists
no ticket price at which total admission receipts will cover total costs.
If the organizations involved could engage in price discrimination, they
might be able to capture enough of the potential consumer surplus to enable them to cover their costs.12 In the performing arts, however, the effectiveness of discriminatory ticket pricing is limited by the difficulty of
identifying individuals or groups with unusually inelastic demand, and by
the difficulty of making admission tickets nontransferable. To be sure, a
degree of price discrimination can be, and often is, effected by charging
higher prices for more desirable seats: if those patrons whose demand for
a given performance is most inelastic also have the strongest relative preference for good seats over bad seats, then it may well be possible to establish a price schedule that will channel those with inelastic demand into the
good seats at high prices, and those with more elastic demand into the
inferior seats at lower prices.13 This device is limited, however, by the
strength of the preference for good seats over bad that is exhibited by
patrons whose demand for performing arts productions is relatively inelastic.14
Yet, even if it is difficult to establish effective price discrimination via
ticket pricing, it is still possible to ask individuals simply to volunteer to
pay an additional amount if the value they place upon attendance exceeds
the price charged for admission. And this, in effect, is the approach taken
by nonprofit organizations in the performing arts.
Of course, the services paid for by a voluntary contribution to a performing arts group are public goods for all individuals who attend the
group's performances,15 and there is a clear incentive to be a free rider. As
a consequence, many people contribute nothing, and presumably most of
those who do contribute give something less than their full potential consumer surplus. Nevertheless, many individuals do contribute when confronted with solicitations pointing out that, in the absence of contributions, the organizations on which they depend for entertainment may
20
disappear. Indeed, it appears that roughly 40 percent of those who attend

the live performing arts contribute at least occasionally.16
The fact that contributions to nonprofit performing arts groups are deductible under the federal income tax is undoubtedly important in reducing the incentive to be a free rider (discussed later). Donors' committees
and other organizational strategies are also presumably important in creating incentives and social pressure to help overcome free-rider behavior 17
though here, as in the case of many other private nonprofits providing
public goods (such as those devoted to political causes, environmental protection, and medical research), a surprisingly large number of individuals
seem willing to respond even to impersonal solicitations received by mail.
Those areas of the performing arts that are organized on a profit-seeking
basis typically differ from the areas that are nonprofit in having a much
larger audience over which to spread the fixed costs of a production, so
that the ratio of fixed to variable costs is relatively small, and there is
consequently little difference between marginal and average cost. Broadway shows, for example, typically run for several hundred performances. 18
Similarly, although the cost of producing a movie commonly runs into
many millions of dollars, the audience over which that cost can be spread
is enormous; consequently, only about 15 percent of movie theatre receipts
is devoted to covering production costs.19 Therefore, substantial price discriminationand, in particular, voluntary price discriminationis not
necessary for survival, and thus the nonprofit form loses its special comparative advantage. Since, in the absence of such a comparative advantage,
nonprofit firms seem, for a number of reasons, to be less efficient producers than for-profit firms,20 it is to be expected that competition should
favor for-profit firms in these areas.
Note that this analysis also suggests an explanation for the observed
tendency, noted above, of nonprofit performing arts organizations to price
their tickets below the level that maximizes total admissions receipts
much less the level that maximizes receipts in excess of variable costs. It
seems likely that an increase in ticket prices will generally lead to a decrease in donations, since the total reservoir of consumer surplus from
which those donations derive will decrease.21 Consequently, total revenuewhich includes both ticket sales receipts and donationswill be
maximized at a lower ticket price than that which maximizes admissions
receipts alone.
Some Historical Evidence
The analysis offered here may also help to explain why nonprofit organizations have become increasingly prominent in the performing arts through
the years. Because productivity in the live performing arts has not grown
at the same pace as in the economy at large, the cost of performing arts
productions has increased disproportionately to that of most other goods.22
As a consequenceand also, undoubtedly, because of competition from
new entertainment media such as movies, radio, and televisiondemand
21
for the live performing arts has remained small, and even, by some measures, declined.23 Beyond this, however, it appears that fixed costs have
consistently risen at a faster rate than have variable costs and thus have
come to represent an increasingly large share of total costs.24 These developments have presumably given nonprofit organizations, with their access
to the form of price discrimination described above, an increasing advantage over their profit-seeking counterparts, which are dependent upon ticket
sales alone to cover both fixed and variable costs.
The Nonprofit Form
Thus far I have been assuming that even if an individual is willing to donate money to a performing arts group above and beyond the amount he
must pay for a ticket, he will do so only if the organization involved is
nonprofit, and not if it is profit-seeking. That is, only nonprofits will have
access to the form of voluntary price discrimination I have been describing.
Although the reason that this is so may seem obvious, it is perhaps worth
being somewhat more explicit.25
When a contributor gives money to, say, an opera company, he is actually trying to "buy" somethingnamely more and better opera. Such
contributions differ from ordinary prices paid for goods and services in
that the latter are clearly and directly conditioned upon specific, identifiable activity on the part of the person to whom the price is paid, such as
delivering certain goods to the purchaser or permitting him to occupy a
given seat at a given performance in a given theatre. That is, when one
pays what we usually term a "price," one commonly knows whether the
services offered in exchange were performed satisfactorily and can seek
redress if they were not. But with those payments that we term "donations," things are more difficult.
Suppose that an opera company solicits donations and asserts that it will
devote all funds received to the production of opera. And suppose that an
individual, in reliance on that representation, contributes. How does he
know that his money was in fact devoted to opera productions? His only
meaningful assurance lies in the opera company's nonprofit form of organization. For a nonprofit organization is in essence an organization that is
barred by law from distributing net earningsthat is, anything beyond
reasonable remunerationto persons who exercise control over it, such as
its directors, officers, or members. Consequently, one can make contributions to such an organization with some assurance that they will be devoted to production of the organization's services. With a profit-seeking
organization it is difficult to obtain such assurance where, as with the performing arts, the connection between an individual contribution and increased production of services is not directly observable.
Summary
In sum, it appears that nonprofit firms in the performing arts, like their
for-profit counterparts, serve primarily to sell entertainment to an audi-
22
ence. The difference between the two types of firms lies simply in the way
in which payment is received. But the difference has significant consequences. The nonprofit firm, through its access to voluntary price discrimination, is viable in segments of the performing arts market where forprofit firms cannot survive.26
THE ECONOMIC BEHAVIOR OF PERFORMING ARTS

ORGANIZATIONS
The Firm's Objectives
Presumably profit maximization is excluded as an objective for any legitimate nonprofit; consequently, the organization must select other goals. This
choice of goals may be in the hands of any one or more of several individuals or groups, including performers, directors, producers, professional
managers, substantial donors, and donors' committees.
One likely possibilityparticularly if control over the organization lies
with professionals who have devoted their careers to a particular art form
is that the organization will place special emphasis upon the quality of its
performances. Such a pursuit of quality might take either of two forms.
First, the organization could seek to make its production of any given
work as impressive as possible, for example by hiring exceptionally skilled
performers, constructing lavish stage sets, and so forth. Second, the organization could choose to produce works that appeal only to the most refined tastes, avoiding the more popular items in the repertoire.
Alternatively, a performing arts group might feel a mission to spread
culture to as broad a segment of the populace as possible, and consequently seek to maximize attendance for any given production. Or, as yet
another possibility, control might lie in the hands of managers who are
organizational empire-builders, and who seek simply to maximize the total
budget they administer.
In what follows I shall develop a simple model of a performing arts
organization, based on my earlier analysis of why the performing arts are
nonprofit, that permits exploration of the consequences of pursuing each
of the alternative objectives just described. The exercise is of interest not
just as a matter of positive theory but for normative purposes as well. At
present there is considerable debate concerning the way in which the management of performing arts organizations should exercise the substantial
degree of discretion they enjoy. A recurrent theme in this debate is the
choice between quality of production and refinement of taste on the one
hand, and outreach to broader audiencesvia lower prices and appeal to
more popular tasteson the other.27
In the discussion of the model the term "quality" will generally be used
in the first of the two senses described here (lavishness of production). As
23
noted below, however, the model can be interpreted in terms of the second
form of quality (appeal to refined tastes) as well.
The Basic Model of the Firm
The size of the audience that the organization attracts for all performances
of a given production (or, alternatively, for all of its productions combined) will be denoted by n,28 while q represents the quality of the work(s)
performed. The ticket price P charged for admission to a performance is
expressed by the inverse demand function P = P(n, q), Pn<0, Pq>0. Total
donations received by the firm are taken to be inversely related to P and
directly related to q, D = D(P, q), Dp<0, Dq>0. Expressed in terms of
and q, D = D[P(n, q), q] = D(n, q), Dn>0, Dq 0. A special case is
This is the donation function that would result if all donations were to
come from individuals who attend performances, and if such individuals
were to donate, on average, a given fraction, 8, of the consumer surplus
that they would otherwise enjoy at price P and quantity q.29
Total costs are given by C=C(n, q), Cn>0, C 9 >0. Since the firm is
nonprofit, net revenue, NR, is constrained to be zero:
The firm's objective function is given by U=U(n, q), Un 0, Uq 0,

Unn<0, U qq <0. For the pure quality maximizer U(n, q) = q; for the pure
audience maximizer U(n, q) = n; and for the budget maximizer U(n, q) = C(n,
q).
The firm maximizes U(n, q) subject to (2).30 The Lagrangian is
Assuming an interior solution,31 the first-order conditions are (2) and
where NRq = NR/ q, etc., and is a Lagrange multiplier.

The slope of the nonprofit constraint (2) at the point at which the firm
operates is, from (4) and (5):
24
Figure 1.1
Firm Behavior and Welfare Optimization
For the quality maximizer, for which Un = 0 and Uq= 1, this slope is zero;
for the audience maximizer, for which Un=l and Uq = 0, the slope is .
These points are shown, respectively, as a and b in Figure 1.1. If the firm
values both quality and audience size, so that Un > 0 and Uq > 0, then the
firm will operate at a point such as point c on the arc between points a
and b.
Consumer surplus, which I shall denote by S, and which I shall use as a
measure of welfare, is given by
This expression is at a maximum with respect to q and n when
Condition (8) says simply that price should be set equal to marginal cost.
Condition (9) says that quality should be at a level at which the marginal
25
cost of greater quality just equals the marginal valuation put upon quality
by the audience as a whole. There is no reason to believe, however, that
these marginal conditions are consistent with the financial constraints under which the nonprofit firm must operate. Thus, for example, price can
be set as low as marginal cost only if donations are sufficiently large to
cover fixed costs.
More relevant to evaluating the performance of the nonprofit firm is the
constrained social optimum determined by maximizing (7) subject to the
nonprofit constraint (2). The resulting Lagrangian is o = S + yNR, where y
is a Lagrange multiplier. The first-order conditions are
The slope of the constraint, NR = 0, at the constrained social optimum,

shown as d in Figure 1, is therefore
The nonprofit firm will be operating at the social optimum, given its
financing constraints, only if the slope given in (12) is equal to that in (6),
i.e., only if, at the (n, q) combination chosen by the firm,
Whether or not this condition is satisfied will depend upon the firm's objective function as well as upon the cost and demand functions that the
firm faces, as the following discussion shows.
The Quality-Maximizing Firm
For the quality-maximizing firm, for which Uq = 1 and Un = 0, condition
(13) will hold, and the firm will be operating at the constrained optimum,
only if P = Cn. From condition (5), however, it follows that for the quality
maximizer
That is, for any given quality level, q, the quality maximizer will choose
the audience size, n, that maximizes its net revenue, which it can in turn
26
use to purchase more quality. This is consistent with the condition that
P=Cn only if Dn = -nPn, which is to say that, at the margin, when audience size increases (because of a decrease in ticket price) members of the
audience increase their donations by precisely as much as their ticket prices
decrease.32 In terms of the donation function (1), for example, this will be
the case only if = 1that is, only if audience members donate 100% of
their consumer surplus to the firm. In the face of less generousbut more
plausiblecontribution levels, the firm will sacrifice audience size too heavily
for the sake of quality.
The Audience-Maximizing Firm
For the audience maximizer Uq = 0; it therefore follows from (4) that
That is, for any given audience size, the audience maximizer will choose
that level of quality that maximizes net revenues, since those revenues can
be used to reduce ticket prices, which will in turn attract a larger audience.
From (13), we see that the audience maximizer will operate at the constrained optimum only if Sq = 0 so that condition (9) holds. For (9) to
obtain when the firm is an audience maximizerand hence (15) holds
we must have:
If Dq = 0, then (16) is equivalent to the condition shown by Spence and

Sheshinski33 to be necessary for a profit-maximizing monopolist to select
the socially optimal level of quality for its product: the valuation put upon
increases in quality by the average member of the audience must equal the
valuation put upon such increases by marginal members of the audience.
The interesting fact established by (16), however, is that the responsiveness of donations to changes in quality, Dq, can serve to reduce the incentive for the firm to choose a nonoptimal level of q in those cases where
the average and marginal audience members value quality differently, because donations presumably reflect primarily the preferences of inframarginaland hence more typicalaudience members. This point appears
clearly if we rewrite condition (16) using the donation function (1):
Here we see that the firm's choice of quality moves closer to the optimum,
not only as marginal and average consumer valuations of quality converge,
but also as 8 > 1.
27
If donations respond as in (1), and if <1, it is easy to show that, as

with the profit-maximizing monopolists considered by Spence and Sheshinski, when marginal consumers value quality increases less than does
the average consumeri.e., when Pqn<0the audience maximizer will
choose a level of q below that which represents the constrained social optimum, while the reverse is true if Pqn>0. (In diagrammatic terms, if Pqn<0,
the locus Sq = 0 lies above the locus NRq = 0, as in Figure 1.1, while the
reverse is true if Pqn>0, as in Figure 1.2; the two loci coincide if Pqn = 0.)
The Budget Maximizing Firm
For the budget maximizer U(n, q) = C(n, q) and, as noted earlier, such a
firm will operate at a level of (n, q) such as that indicated by point c in
Figure 1.1, intermediate between the points chosen by the quality maximizer and the audience maximizer. From the preceding analysis of the audience maximizer, it follows that generally the budget maximizer will operate at or near the constrained social optimum only if consumer preferences
for quality are such that Pqn < 0.
Some Comparisons
Of the three types of firms analyzed above, which is likely to perform most
in accord with maximal social welfare? There is, interestingly, no simple
responsethe answer evidently depends heavily upon the nature of consumer demand and donative behavior.
If Pqn 0, the audience maximizer will unambiguously turn in the best
performanceat least if donations respond as modeled in (1). In the intuitively more plausible case where Pqn<0, however, the budget maximizer
or the quality maximizer might perform better; their higher emphasis on
quality compensates for the atypically low taste for quality that characterizes the marginal consumer, whose tastes dictate the prices at which tickets
can be sold.
Quality as Refinement of Taste
The discussion so far has proceeded largely on the assumption that the
variable q represents the first type of quality discussed earlier, namely the
lavishness with which any given work is produced. The model as developed above can, however, alternatively be interpreted with q representing
the degree to which the firm's productions appeal to highly refined tastes.
Viewing the model in these terms, one might assume that the amount to
be spent on performers, sets, costumes, the director's fee, etc., are fixed,
leaving the firm free to choose only among works that can be staged with
these given resources. A quality-maximizing firm would then be one that
chooses works that appeal to a highly cultured, but also small, audience.34
In terms of the model, this means that Cq = 0 and, beyond a certain minimal level of q, Pq<0.35
The preceding analysis and conclusions remain valid for this alternative
interpretation of q and the accompanying change of values for Cq and Pq.
28
Note, however, that with Cq = 0 the budget maximizer and the audience
maximizer are identical.
THE RATIONALE FOR SUBSIDIES
If the analysis offered earlier of why the performing arts are nonprofit is
correct, then the most compelling rationale for providing subsidies to performing arts organizations is not that they produce external benefits or
serve as a vehicle for redistribution of incomewhich are the rationales
that have been the primary focus of discussion to date 36 but rather that
the high fixed costs that such firms face will, in the absence of a subsidy,
force them to set prices too high to satisfy marginal criteria for efficiency,
and may well make them unviable. 37
As in the case of all such subsidies, there is a substantial conflict between
equity and efficiency. Although the subsidy may help establish efficient
pricing, the individuals who consume the services financed by the subsidies
are likely to constitute only a small fraction of the people who pay for
themat least if the source of the subsidy is the public fisc. Indeed, given
that the class of people who attend the performing arts is not only small
but unusually prosperous and geographically concentrated, the problem of
equity raised by subsidies is particularly acute.
WHEN IS A SUBSIDY EFFICIENT?
If a performing arts organization, in the absence of a subsidy, is setting its

ticket prices well above marginal cost to cover the fixed costs associated
with its productions, then it is possible that a subsidy will lead to more
efficient levels for price and output. But this need not be the case. As the
following discussion shows, a subsidy can in some cases lead to even greater
inefficiency, quite apart from its likely adverse distributional consequences.
The General Model
For the moment I shall confine the analysis to a lump-sum subsidy. Similar
results for other kinds of subsidies follow directly from the analysis in later
sections.
Consider the same firm modeled above, except that its revenue now includes a lump-sum subsidy, L. Thus the firm now seeks to maximize U(n,
q) subject to
Assuming an interior solution, the first order conditions for a constrained

maximum with respect to n and q are unchanged from (4) and (5) above;
29
Figure 1.2 The Effect of a Lump-Sum Subsidy
the constraint (18) becomes the third condition. In diagrammatic terms,

the consequence of increasing the subsidy, L, is to enlarge the closed curve
representing the nonprofit constraint, as shown in Figure 1.2. The loci
NRn = 0 and NRq = 0 remain unchanged. The quality maximizer, which
operated at point a without the subsidy, will operate with the subsidy at
point a, while the audience maximizer will shift from b to b.
To determine whether such shifts will lead to an increase in social welfare, we can differentiate (7) with respect to L,
and then evaluate (19) by using simple comparative statics to determine

dqldL and dnldL for the firm.
For simplicity, I shall confine the analysis to the polar cases of the
audience-maximizing firm and the quality-maximizing firm.
The Quality Maximizer
Consider first the quality maximizer. Setting Uq = 1 and Un = 0 in (4) and
(5), and totally differentiating (4), (5), and (18) with respect to L yield:
30
Since the quality maximizer operates where NRq<0, it follows from (21)
that dq/dL>0: increasing the subsidy, L, will, as expected, cause the quality maximizer to raise its quality level.
Whether an increase in the subsidy will also generally lead to an increase
in the size n of the audience that sees a given production is less certain.
Since NRq<0, and since, if the second-order condition holds, NRnn<0,
the sign of dnldL is the same as that of NRqn, which equals
P q - C q n + (1 )nPqn when the donation function is given by (1). Given
that Pq>0, Cqn>0 (if we are again speaking of quality in terms of lavishness of production 38 ) and Pqn 0, it follows that NRqn, and thus dnldL,
are indeterminate in sign. Conditions favorable to an audience increase
are: (1) a low value of Cqn (increasing the audience does not much increase
the cost of quality), and (2) Pqn>0 (the new [marginal] audience members
admitted have an unusually strong taste for quality).
Turning to the welfare implications of such behavior, we have Sn = P Cn,
and as discussed above this will always be nonnegative for the quality
maximizer. Thus, increases in audience size are unambiguously desirable
for the quality maximizer. On the other hand, the desirability of an increase in quality is less clear; using (1), we have
Since X > 0, this expression will be unambiguously negative whenever Pqn > 0.
Only where Pqn < 0 can Sq be positive.
The overall effect on welfare of increasing the subsidy, L, is therefore
indeterminate. The condition required for the first term in (19), Sq[dqldL],
to be positive, Pqn < 0, is simultaneously conducive to a low, and possibly
negative, value for the second term, Sn[dn/dL]. It is easy, however, to construct examples in which increasing L decreases welfare, even though the
quality maximizer's ticket price in the absence of a subsidy is well above
marginal cost.39 Such a case is illustrated in Figure 1.2 (which is drawn so
that Pqn>0), where a lies on a lower iso-social-welfare curve than does a.
The Audience Maximizer
Turning to the audience maximizer we have
31
By logic parallel to that employed in analyzing the quality maximizer, it

follows that dn/dL>0, while the sign of dqldL is the same as that of
NRqn, and therefore ambiguous.
From (19), an increase in n will be desirable as long as P>Cn. Using
(1), the Sq term in (19) becomes
Thus sgn Sq= -sgnPqn. If follows that Sq[dqldL], and hence (19), are ambiguous in sign: it is possible that a lump-sum grant to an audiencemaximizing firm, as to a quality maximizer, can lead to a reduction in
welfare, even when, in the absence of a subsidy, the firm is operating where
P>Cn.40 (Figure 1.2 illustrates a case where dS/dL>0.)
DONATION SUBSIDIES
In fact, subsidies to the performing arts are frequently not lump-sum in

nature, but rather take the form of matching grants for donationsthat
is, u dollars of subsidy are given for every dollar in individual donations
received by the organization. This is true, for example, of a substantial
portion of the performing arts grants provided by the National Endowment for the Arts (NEA), and of some foundation and corporate grants as
well. It is also the approach that characterizes what is by far the largest
public performing arts subsidy program of all, namely, the deductibility of
contributions under the federal personal income tax.41 Are such donation
subsidies superior to lump-sum subsidies?
The General Model
In making the comparison I shall assume, as seems empirically the case,42

that donations respond positively, if at all, to a matching subsidy. Thus, if
yu, is the rate at which donations are matched, then D = D(n, q, u), D/ u > 0.
In particular, I shall sometimes assume (as a special case of (1)) that
where ' ( u ) > 0 .

With a donation subsidy at a rate u,, the firm's nonprofit constraint becomes
If the firm maximizes u(n, q) subject to this constraint, the first-order conditions are, in addition to (27),
32
where X is a Lagrange multiplier.

Proceeding as in the case of the lump-sum subsidy, we can evaluate the
effect of an increase in the subsidy rate u on n, q, and S by differentiating
(27)-(29) with respect to u, solving for dn/du and dq/du, and then determining dS/du, by means of

For the quality maximizer we have
where dq/dL, dn/dL, and dS/dL are the effects upon q, n, and S of a onedollar lump-sum subsidy as given above by (21), (20), and (19), respectively.
Here Du = D/ u > 0 reflects the increase in private donations induced
by the increase in the matching rate u. (In the case of (26), Du= ( / )D.)
The expression D + uDu gives the dollar increase in expenditure on the
subsidy associated with a unit increase in it. The first term on the righthand side of (31)-(33) reflects the direct effect of the increase D + u D u in
expenditure on the subsidy; this effect has the same sign and magnitude as
would an equivalent expenditure on a lump-sum subsidy, as analyzed above.
The second term on the right-hand side of (31)-(33) reflects the additional
effect resulting from the increase in private donations induced by increasing u,.
Turning to the third term on the right-hand side of (32), we have, using
the donation function (26),
This expression is positive, and thus, since NRm<0 by virtue of the

second-order condition, the final term in (32) is positive. This term reflects
33
the incentive to increase n (and lower ?) given to the firm by virtue or the
fact that, with a higher u, the firm will effectively be able to capture a
larger fraction of the increase in consumer surplus created by such a move.
The final term in (33) derives from the increase in n reflected in the final
term in (32), and will be positive whenever P>Cn.
It follows from (33) that, in terms of our welfare measure S, a donation
subsidy will always be superior to an equivalent expenditure on a lumpsum subsidy in any case in which a lump-sum subsidy would itself be
justifiable (i.e., where dS/dL>0). The extent by which the donation
subsidy dominates an equivalent lump-sum subsidy is given by the second
and third terms on the right-hand side of (33), reflecting, respectively, the
increase in private donations and the increase in the donation matching
rate u.
For the audience maximizer we have
where dqldL, dn/dL, and dS/dL are the effects of a unit increase in the
lump-sum subsidy as given by (24), (23), and (19).
The interpretation of the first two terms on the right-hand side of (35)
(37) parallels that given for (31)-(33) above. Using the donation function
(26), the final term in (35) becomes
which has the same sign as Pqn (since NRqq<0 by virtue of the secondorder condition). This term reflects the increased incentive to adjust quality
to conform to the tastes of inframarginal donors that the firm faces owing
to the larger fraction of consumer surplus that it can (in effect) capture
with a higher value of u The final term in (37) reflects the same phenomenon. Using (26), that term becomes
34
This term will always be nonnegative, reflecting the fact that bringing quality
more into line with average, as opposed to marginal, audience members
will always enhance consumer welfare as measured by S.
It follows from (37), then, that whenever dS/dL>0, a lump-sum subsidy
is dominated by a donation subsidy of equivalent amountor, in other
words, for the audience maximizer as for the quality maximizer, a donation subsidy is to be preferred to a lump-sum subsidy whenever a subsidy
of either type is justifiable at all.
Summary
The advantages of the donation subsidy here are two-fold. First, by inducing further donations it yields to the firm a larger increase in revenue per
dollar of subsidy than does the lump-sum subsidy. Note, in this connection, that since part of the increased revenues due to a donation subsidy
come from donors who benefit fromand value highlythe performances
involved, donation subsidies also have stronger equitable appeal than do
lump-sum subsidies, at least where public funds are the source of the subsidy.43
Second, a subsidy geared to donations gives the firm an additional incentive to attract donations. Since we have been assuming that donations
are proportional to consumer surplus, this means that with a donation
subsidy the firm has an incentive to adjust its quality and price (or, equivalently here, audience size) closer to the levels that maximize consumer
welfare.
TICKET SUBSIDIES AND TAXES
Admissions subsidies for the performing arts might also seem attractive.44
Such subsidies might take either of two forms. First, the subsidy can be
offered on the basis of a fixed amount per admission, regardless of the
price charged for admission. Second, the subsidy can be designed to match
total admissions (ticket) receipts on a fixed percentage basis, similar to the
donation subsidy discussed above. In both cases incentives will be created
for the organization that are absent in the case of a lump-sum subsidy.
At present neither of these types of admission subsidies is common.
However, a negative subsidy applied to total ticket receipts, in the form of
a sales tax on theatre tickets, has commonly been applied to commercial
performing arts groups and sometimes to nonprofit organizations as well.
Since the effects of such a tax are precisely the reverse of those resulting
from a subsidy of the same type, analysis of the subsidy also yields an
analysis of the tax.
The Model
I shall confine myself here to analysis of a per-receipts subsidy. Rather

similar results follow from an analysis of a subsidy of a fixed amount per
admission.
35
Let a represent the rate at which ticket receipts are matched by the
ticket receipts subsidy, so that the total amount expended through this
subsidy is anP. The firm's nonprofit constraint becomes

Proceeding as in the analysis of the donation subsidy, the effects of increasing the ticket subsidy rate for the quality maximizer are:
The expression nP here represents the dollar increase in expenditure on

the ticket subsidy associated with a unit increase in . The first term on
the right-hand side in (41)-(43) gives the direct effect of the increase nP
in the amount of the subsidy; it is the same as the effect of an equivalent
expenditure on a lump-sum subsidy. The final term in (42) will be positive
if the firm is operating where demand is elastic (nPn/P> -1), and negative
otherwise, reflecting the fact that the net-revenue-maximizing value of n
(which is the value of n chosen by the quality maximizer) changes with a.
It follows from (42) that a ticket subsidy will actually lead to a smaller
increase in audience size (and thus, from (43), a smaller increase in welfare) than would an equivalent lump-sum subsidy if (as is possible) the
quality maximizer is operating in the inelastic portion of the demand curve.45
For the audience maximizer we have
Since nP q /NRqq <0, it follows from (44) that a ticket subsidy will lead to
a larger increase in quality than will an equivalent expenditure on a lumpsum subsidy. The reason for this is that increasing increases Pq, and
hence raises the level of q that maximizes net revenue. As the final term in
(46) indicates, this (additional) increase in q will raise, rather than lower,
welfare only if P qn <0.
36
Summary
Interestingly, for the audience-maximizing firm a ticket subsidy has no greater

effect on audience size than does a lump-sum subsidy, while for the quality
maximizer a ticket subsidy may actually lead to a smaller audience than
would a lump-sum subsidy. For both the audience maximizer and the quality
maximizer, there is a range of cases in which a ticket subsidy is dominated
by a lump-sum subsidy in terms of our welfare measure S. From the results
of the analyses of donation subsidies we can in turn conclude that there is
a much larger class of cases in which a ticket subsidy is dominated by a
donation subsidythough there may be instances in which a ticket subsidy
is superior to both donation and lump-sum subsidies.
CONCLUSION
The live performing arts are commonly characterized by fixed costs that
are high relative to marginal costs, and by overall demand that is relatively
small. As a consequence, performing arts groups often must engage in price
discrimination if they are to survive without subsidy. The opportunities
for effective discrimination through ticket pricing are limited, however.
Therefore, nonprofit firms, which can, in effect, employ a system of voluntary price discrimination, can often survive in areas of the performing
arts where for-profit firms cannot.
In many cases, free-rider incentives presumably keep donations below
the level necessary for efficient production. In such cases, public subsidies
can be justified on efficiency grounds, although such subsidies clearly present problems of equity.
As it is, the arts in the United States, including the performing arts,
receive public subsidies that compare favorably in amount with those provided in other industrialized democracies.46 The United States is unique,
however, in providing most of its public subsidies in the form of matching
grants for private donations. This policy has a great deal to recommend it.
Donation subsidies not only serve to increase the level of private contributions, but may also cause performing arts groups to pay greater attention to the desires of inframarginal consumers.
NOTES
1. See Thomas G. Moore, The Economics of the American Theater (Durham: University
of North Carolina Press, 1968), 12.
2. Among theatres, nonprofits are most commonly to be found off Broadway and in local
and regional stock and repertory companies; they are primarily a development of the period
since World War II. Moore, op. cit., 16-20, 100; William J. Baumol and William G. Bowen,
Performing Arts; The Economic. Dilemma (Cambridge: M.I.T. Press, 1968), 57-60. On the
institutional history of symphony orchestras, see M. Mayernik, "Rhapsody in Red: The Eco-
37
nomic Future of the Philadelphia Orchestra" (unpublished manuscript, Department of Economics, University of Pennsylvania, Spring 1976), 19.
3. Baumol and Bowen, op. cit, 147-157.
4. Henry Hansmann, "The Role of Nonprofit Enterprise," Yale Law Journal 89 (1980):
848-854; Burton A. Weisbrod, "Toward a Theory of the Voluntary Nonprofit Sector in a
Three-Sector Economy," in E. Phelps, ed., Altruism, Morality, and Economic Theory (New
York: Russell Sage Foundation, 1975).
5. Baumol and Bowen, op. cit., chapter 16; Dick Netzer, The Subsidized Muse (Cambridge: Cambridge University Press, 1978), Chapter 2.
6. Moore, op. cit., Chapter 8, and A. T. Peacock, "Welfare Economics and Public Subsidies to the Arts," in M. Blaug, ed., The Economics of the Arts (London: Westview, 1976),
are also skeptical about the magnitude of the public benefits involved.
As noted later, however, a performing arts production is to an important extent a public
good for those individuals who are among the audience. Thus, if someone who has already
purchased a subscription to the Metropolitan Opera makes a donation to that organization,
the improvement in the quality of the performances that the donation permits will be enjoyed
as a public good by all others who also hold subscriptions.
7. Direct data on the proportion of donations coming from audience members are apparently unavailable. Some indication is provided, however, by the evidence, discussed later in
the chapter, indicating that a substantial percentage of those who attend also contribute.
8. Baumol and Bowen, op. cit., Chapter 4.
9. Baumol and Bowen, op. cit., 272278.
10. Moore, op. cit., 120-121, also alludes briefly to contributions as a means of price
discrimination, though he does not pursue the issue.
11. It is difficult to obtain useful data comparing fixed costs with variable costs for productions by performing arts groups. Existing studies of economies of scale in the nonprofit
performing arts simply correlate cost per performance with the total number of performances
per year for different organizations (e.g., symphony orchestras or theatre groups) without
taking into account the number of different productions represented by those performances.
See Baumol and Bowen, op. cit., Chapter 8, and S. Globerman and S. H. Books, "Statistical
Cost Functions for Performing Arts Organizations," Southern Economic Journal 5 (1976):
126. Data on Broadway theatre assembled by Moore, op. cit., Chapter 3, are, however,
suggestive; they show that, for the 1960-1961 season, weekly operating costi.e., the (variable) cost of a week's performancesfor a show was, on average, less than one-fifth as large
as the (fixed) cost of producing the show.
12. Here and in what follows I assume that nonprofit performing arts firms have some
degree of monopoly power, and thus face downward-sloping demand curves. This is in keeping with the observation that demand is limited and fixed costs are high, thus presumably
making competition unworkable. It is also in keeping with the very limited competition that
in fact prevails among the nonprofit performing arts; even New York City supports only one
major symphony orchestra, two substantial opera companies, and a handful of (highly differentiated) dance groups.
13. See the analysis of essentially the same issue in a different context offered in Sidney
Winter, "A Problem" (unpublished manuscript, May 1968). It also follows from Winter's
analysis that, when constructing a new theatre, there may well be gains to be had from
creating a high ratio of bad seats to good seats, even if it would be as cheap or cheaper to
construct a larger proportion of good seats for the same total capacity.
14. Similarly, the performing arts are not well situated to take advantage of the type of
two-part tariffs described by Walter O1, "A Disneyland Dilemma: Two-Part Tariffs for a
Mickey Mouse Monopoly," Quarterly Journal of Economics 85 (1971): 77-96, because
many people wish to attend only one performance by a given organization and because it is
difficult to make tickets nontransferable.
15. See note 6.
16. Baumol and Bowen, op. cit., 307-308.
17. To some extent, contributions undoubtedly represent an effort to buy recognition and
38
status. Many organizations in the performing arts exploit this motivation quite consciously
by publicizing the names of donors and by arranging special social events for them. But the
development of the performing arts as a locus for such conspicuous giving seems most probably a consequence rather than a cause of their nonprofit, donatively financed status.
18. Moore, op. cit., Chapter 1 and Table A-6.
19. D. Gordon, "Why the Movie Majors Are Major," in T. Balio, ed., The American Film
Industry (Madison: University of Wisconsin Press, 1976).
20. Hansrnann, op. cit., 877-879.
21. Baumol and Bowen, op. cit., 277, report that their interviews with managerial personnel in fact revealed a fear that increased ticket prices would lead to reduced contributions.
Although Baumol and Bowen devote little attention to this relationship between contributions and ticket prices, they offer no alternative explanation for the tendency to set prices at
a level where demand is inelastic, other than the possibility that management feels that by
keeping prices low they are fulfilling a social obligation to make the performing arts available
to as much of the populace as possible. The behavior of a firm that has the latter objective,
yet is dependent upon donative financing, is explored later in this chapter.
22. Baumol and Bowen, op. cit., Chapters 8, 9.
23. Baumol and Bowen, op. cit., Chapter 3.
24. In terms of constant dollars, average productions costs for Broadway theatre increased
by 236 percent between 1927 and 1961, whereas weekly operating costs increased by only
80 percent. This relative increase in production costs was evidently responsible for the fact
that the length of run required for a Broadway show to make a profit roughly tripled over
this period. Moore, op. cit., 11-12, 34.
25. A more detailed discussion appears in Hansmann, op. cit.
26. There arc areas other than the performing arts in which similar factors seem to be at
work. For example, one of the most interesting and most obvious examples of the type of
voluntary price discrimination described here is provided by New York's Metropolitan Museum of Art, which requires that every visitor pay some amount to gain admission but leaves
each visitor entirely free to determine how much to pay. In this connection it should be noted
that museums are seemingly characterized by an even higher ratio of fixed costs to marginal
costs than are the performing arts, yet, like performing arts groups, are in a relatively poor
position to implement nonvoluntary price discrimination.
27. Robert Brustein, "The Metropolitan Opera The High Price of Being Best," The New
York Times February 12, 1978, sec. 2, p. 1, cols. 1 and 6.
28. In Broadway theatre each production is usually organized as a separate "firm." Baumol and Bowen, op. cit., 20. Most nonprofit performing arts organizations, in contrast, are
relatively permanent and produce a large number of productions. (This difference in structure
is presumably explainable at least in part by the need for nonprofit groups to develop strong
and stable reputations that will provide assurance to potential donors.) Because I shall not
be concerned with the effect that one production has upon demand for another, the number
of productions that a given organization undertakes will not be important here.
29. An important issue that will be avoided here is the degree to which an organization
can and will use some of its income to solicit further donations.
30. For other models of nonprofit firms (in particular, hospitals) with similar objective
functions, see Joseph Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic
Model of a Hospital," American Economic Review 60 (1970): 64-74; M. Feldstein, "Hospital Price Inflation: A Study of Nonprofit Price Dynamics," American Economic Review 61
(1971): 853-872.
31. The second-order condition, both here and for the altered models of the firm below,
is
32. This is a necessary but not a sufficient condition for the quality maximizer to operate
at the constrained social optimum. If, for example, the locus Sq = 0 lies below the locus
NRq = 0 the conditions for which are explored below it is possible that the constrained
39
social optimum will be at the quality-minimizing point f rather than the quality-maximizing
point a in Figure 1.1 when donative behavior is such that Dn= -nPn.
A similar qualification applies to the discussion of the audience maximizer below.
33. A. Michael Spence, "Monopoly, Quality and Regulation," Bell Journal of Economics
6 (1975): 417-429; E. Sheshinksi, "Price, Quality and Quantity Regulation in Monopoly
Situations," Economica 43 (1976): 127-137.
34. See Baumol and Bowen, op. cit., 253-257, for a discussion of the desire of performing
arts groups to perform contemporary works, and of the adverse consequences this has for
demand.
35. The level of q at which Pq(n, q) reaches zero should presumably depend on n. For
very low values of n, at which point one is dealing only with true enthusiasts, Pq might even
remain positive for all values of q.
36. Baumol and Bowen, op. cit., Chapter 16; Netzer, op. cit., Chapter 2.
37. Moore, op. cit., 120-121, 122, also makes a brief, though puzzlingly dismissive, reference to "price discrimination" as a possible rationale for performing arts subsidies, by
which he evidently means something like the declining-average-cost rationale suggested here.
I should emphasize that I am speaking here only of subsidies for the performance of existing works. Subsidies to authors and composers for the creation of new works are an entirely
different matter. It is often extremely difficult for artists to capture for themselves even a
small fraction of the benefits society derives from their work, and thus there is much to be
said for subsidizing them. The fact that public acceptance of new works often lags considerably behind their creation, and that it is probably helpful to artists to see their work performed when they produce it, may also lead to some justification for subsidies to performing
arts groups that are specifically earmarked for performance of new works. (The Ford Foundation, for example, has sometimes pursued this course. Ford Foundation, The Finances of
the Performing Arts [New York: The Ford Foundation, 1974].)
38. As in the discussion of the economic behavior of the basic model, the results here and
below can be reinterpreted for the case in which q represents quality of the second type by
assuming, instead, that Cq = 0 and that, beyond some level of q, Pq<0.
39. As an example, consider a quality-maximizing firm that faces a demand function
n = q [ A - P ] or equivalently the inverse demand function P = A-n/ q, so that P qn >0.
Assume also that the firm's cost function takes the simple form C = q + n and that the subsidy
level L is initially zero. Solving the first-order conditions for q and n and substituting these
values into (19) gives dSldL= -1/(2- ). Thus here dS/dL<0 for all values of between 0
and 1. (In this example dq/dL = 2>0, dn/dL = 2 / ( A - 1 ) > 0 . )
Note that here P-Cn = (A-1)[(1 - )1(2- )], and therefore P>Cn so long as A> 1, 0
1.
40. For example, assume that an audience maximizer faces the demand and cost functions
in the preceding note, and assume that initially L = 0. Then dS/dL = (2)/3(2- ), so that
dS/dL<0 for >2/5. Here P -Cn = ( A - l ) ( 2 - 3 )/3(2- ), so P>C n whenever <2/3 and
A>1.
In this case (assuming A>1),
dn/dL = 3 / ( A - 1 ) > 0 ,
dq/dL = 4/3>0,
S n = ( A - l ) ( 2 - 3 )/3(2- )>0 for <2/3 and Sn<0 for l>2/3, Sq = -(l)/(2- )<0 for
0
<1.
41. Netzer, op. cit., 44, 95, estimates the cost to the federal government of the deduction
for gifts to arts organizations as $400 million or more for 1975, whereas he estimates total
direct public support of the arts at all governmental levels as just under $300 million.
42. Martin Feldstein, "The Income Tax and Charitable Contributions: Part IAggregate
and Distributional Effects," National Tax Journal 28 (1975): 81-99; Feldstein, "The Income
Tax and Charitable Contributions: Part IIThe Impact on Religious, Educational, and Other
Organizations," National Tax Journal 28 (1975): 209-226; Martin Feldstein and C. Clotfelter, "Tax Incentives and Charitable Contributions in the United States," Journal of Public
Economics 5 (1976): 1-26.
43. The donation subsidy model here has a matching rate that does not vary from one
donor to anotheras would be the case with a uniform tax credit, and as is typically the
case with NEA grants. The subsidies channeled through the charitable deduction under the
personal income tax, in contrast, involve a matching rate that ranges from 0 to 70 percent,
40
depending upon the donor's tax bracket. Such a deduction may well be dominated, in terms
of both equity and efficiency, by a tax credit of equivalent amount. See H. Hochman and J.
Rodgers, "The Optimal Tax Treatment of Charitable Contributions," National Tax Journal
30 (1977): 1-18.
44. Netzer, op. cit., 32-33.
45. In the model developed here, the quality maximizer will operate where nPn/P< 1
when marginal cost (Cn) is low and the increase in donations (Dn) in response to lower ticket
prices is relatively large [see (5)].
46. Netzer, op. cit., 50-52.
2
Cultural Entrepreneurship in
Nineteenth-Century Boston
PAUL J. DIMAGGIO
Sociological and political discussions of culture have been predicated on a

strong dichotomy between high culturewhat goes on in museums, opera
houses, symphony halls and theatresand popular culture, of both the
folk and commercial varieties. Such culture critics as Dwight MacDonald
and Theodor Adorno have based on this dichotomy thorough-going critiques of popular culture and the mass media.1 Defenders of popular culture have questioned the normative aspect of the critique of popular culture, but have, for the most part, accepted the basic categories.2 The
distinction between high and popular culture has been implicit, as well, in
the discussion of public policy towards culture in both the United States
and Great Britain.3
Yet high and popular culture can be defined neither by qualities inherent
to the work of art, nor, as some have argued, by simple reference to the
class character of their publics. The distinction between high and popular
culture, in its American version, emerged in the period between 1850 and
1900 out of the efforts of urban elites to build organizational forms that,
first, isolated high culture and, second, differentiated it from popular culture. Americans did not merely adopt available European models. Instead
they groped their way to a workable distinction. Not until two distinct
organizational formsthe private or semiprivate, nonprofit cultural institution and the commercial popular-culture industrytook shape did the
This paper originally appeared in Media, Culture and Society 4 (1982): 33-50, Copyright
by Academic Press Inc. (London) Limited. For advice and encouragement, I am indebted to
Randall Collins, David Karen, Michael Schudson, Ann Swidler, and to the members of Professor Mary Douglas's "Mass Media and Mythology" seminar at the New York University
Institute for the Humanities, of Theda Skocpol's graduate research seminar at Harvard University, and of Paul Hirsch's production-of-culture session at the 1980 "Social Theory and the
Arts" conference in Chicago. Research and institutional support from the Andrew W. Mellon
Foundation and from Yale University's Program on Non-Profit Organizations is gratefully acknowledged.
42
high/popular-culture dichotomy emerge in its modern form. Once these

organizational models developed, the first in the bosom of elite urban status communities, the second in the relative impersonality of emerging regional and national markets, they shaped the role that cultural institutions
would play, the careers of artists, the nature of the works created and
performed, and the purposes and publics that cultural organizations would
serve.
In this paper I will address only one side of this process of classification,
the institutionalization of high culture and the creation of distinctly highcultural organizations. While high culture could be defined only in opposition to popular culture, it is the process by which urban elites forged an
institutional system embodying their ideas about the high arts that will
engage us here. In order to grasp the extent to which the creation of modern high-cultural institutions was a task that involved elites as an organic
group, we will focus on that process in one American city. Boston in the
nineteenth century was the most active center of American culture; and its
elitethe Boston Brahminsconstituted the most well defined status group
of any of the urban upper classes of this period. For this reason the processes with which I am concerned appear here in particularly clear relief.4
When we look at Boston before 1850 we see a culture defined by the
pulpit, the lectern and a collection of artistic efforts, amateurish by modern standards, in which effort rarely was made to distinguish between art
and entertainment, or between culture and commerce. The arts in Boston
were not self-conscious; they drew few boundaries. While intellectuals and
ministers distinguished culture that elevated the spirit from that which debased it, there was relatively little agreement on what works or genres
constituted which.5 Harvard's Pierian Sodality mixed popular songs with
student compositions and works by European fine-arts composers. The
Philharmonic Society played classical concerts, but also backed visiting
popular vocalists. Throughout this period, most of Boston music was in
the hands of commercial entrepreneurs. Gottlieb Graupner, the city's leading impresario in the 1830s, sold sheet music and instruments, published
songs and promoted concerts at which religious, classical and popular tunes
mingled freely. (One typical performance included a bit of Italian opera, a
devotional song by Mrs. Graupner, a piece of European fine-art music,
"Bluebell of Scotland" and "The Origin of Common Nails," recited by
Mr. Bernard, a comedian.) The two exceptions, the Handel and Haydn
Society and the Harvard Musical Association, founded in the 1840s and
1850s respectively, were associations of amateurs and professionals that
appealed only to a relatively narrow segment of the elite.
The visual arts were also organized on a largely commercial basis in this
era. In the 1840s, the American Art Union sold paintings by national lottery.6 These lotteries were succeeded, in Boston, New York and Philadelphia, by private galleries. Museums were modelled on Barnum's: fine art
was interspersed among such curiosities as bearded women and mutant
Cultural Entrepreneurship in Nineteenth-Century Boston
43
animals, and popular entertainments were offered for the price of admission to a clientele that included working people as well as the upper middle class.7 Founded as a commercial venture in 1841, Moses Kemball's
Boston Museum exhibited works by such painters as Sully and Peale
alongside Chinese curiosities, stuffed animals, mermaids and dwarves. For
the entrance fee visitors could also attend the Boston Museum Theatre,
which presented works by Dickens and Shakespeare as well as performances by gymnasts and contortionists, and brought to Boston the leading
players of the American and British stage.8 The promiscuous combination
of genres that later would be considered incompatible was not uncommon.
As late as the 1880s, American circuses employed Shakespearian clowns
who recited the bard's lines in full clown make-up.9
By 1910, high and popular culture were encountered far less frequently
in the same settings. The distinction toward which Boston's clerics and
critics had groped 50 years before had emerged in institutional form. The
Boston Symphony Orchestra was a permanent aggregation, wresting the
favor of Boston's upper class decisively from the commercial and cooperative ensembles with which it first competed. The Museum of Fine Arts,
founded in 1873, was at the center of the city's artistic life, its exhibitions
complemented by those of Harvard and the eccentric Mrs. Gardner. Music
and art critics might disagree on the merits of individual conductors or
painters; but they were united in an aesthetic ideology that distinguished
sharply between the nobility of art and the vulgarity of mere entertainment. The distinction between true art, distributed by not-for-profit corporations managed by artistic professionals and governed closely by prosperous and influential trustees, and popular entertainment, sponsored by
entrepreneurs and distributed via the market to whomever would buy it,
had taken a form that has persisted to the present. So, too, had the social
distinctions that would differentiate the publics for high and popular culture.
The sacralization of art, the definition of high culture and its opposite,
popular culture and the institutionalization of this classification, was the
work of men and women whom I refer to as cultural capitalists. I use the
term in two senses to describe the capitalists (and the professionals whose
wealth came from the participation of their families in the industrial venturestextiles, railroads and miningof the day) who founded the museums and the symphony orchestras that embodied and elaborated the highcultural ideal. They were capitalists in the sense that their wealth came
from the management of industrial enterprises from which they extracted
a profit, and cultural capitalists in that they invested some of these profits
in the foundation and maintenance of distinctly cultural enterprises. They
alsoand this is the second sense in which I use the termwere collectors
of what Bourdieu has called "cultural capital," knowledge and familiarity
with styles and genres that are socially valued and that confer prestige
upon those who have mastered them.10 It was the vision of the founders
44
of the institutions that have become, in effect, the treasuries of cultural

capital upon which their descendants have drawn that defined the nature
of cultural capital in American society.11
To create an institutional high culture, Boston's upper class had to accomplish three concurrent, but analytically distinct, projects: entrepreneurship, classification and framing. By entrepreneurship, I mean the creation
of an organizational form that members of the elite could control and
govern. By classification, I refer to the erection of strong and clearly defined boundaries between art and entertainment, the definition of a high
art that elites and segments of the middle class could appropriate as their
own cultural property; and the acknowledgment of that classification's legitimacy by other classes and the state. Finally, I use the term framing to
refer to the development of a new etiquette of appropriation, a new relationship between the audience and the work of art.12 The focus of this
paper will be on the first of these three processes.
THE PREDECESSORS: ORGANIZATIONAL MODELS BEFORE THE

GILDED AGE
By the close of the Civil War, Boston was in many ways the hub of America's cultural life. But, as Martin Green has illustrated, the unity of the
city's economic and cultural elite, the relative vibrancy of Harvard and the
vitality of the communal cultural associations of the elitethe Handel and
Haydn Society, the Athenaeum, the Dante Circle, the singing clubsmade
Boston unique among America's cities.13 Godkin called Boston "the one
place in America where wealth and the knowledge of how to use it are apt
to coincide."14
Yet at the close of the Civil War, Boston lacked the organizational arrangements that could sustain a public "high culture" distinct and insulated from more popular forms. As we have seen, the boundaries between
high art and mass art were poorly drawn; artists and performers had not
yet segmented elite and popular markets. It is not that the wealthy were
uninterested in art. Henry Lee Higginson, later head of the Lee, Higginson
brokerage house and founder of the Boston Symphony Orchestra, could
reminisce of his not atypical student days in Cambridge in the mid-1850s:
"We had been to the Italian opera, getting there seats for twenty-five cents
in the upper gallery enjoying it highly. I had an inborn taste for music,
which was nourished by a few concerts in Boston and by the opera."15
His wife recollected:
There were private theatricals, sometimes in German, there was a German class,
and there were readings which finished with a delightful social gathering in the
evening. He [Higginson] belonged to a private singing club in Boston, and often
went to James Savage's room in Holworthy, where there was much informal singing and music. 16
45
Many young Brahmins, like Higginson, spent time in Europe, studying art
or music.17 And many more learned and played music in or around Boston, or attended public lectures on the arts.18
Nor was there a lack of theories about the nature of good art. Although
aesthetic philosophies blossomed after the high-culture institutions were
established, even the mid-1850s nurtured aesthetic philosophers like Brook
Farmer John S. Dwight, editor of Dwight's Journal of Music. Some Bostonians were aware of the latest developments in European music and acquainted with classical standards in the visual arts.
High culture (and by this I mean a strongly classified, consensually defined body of art distinct from "popular" fare) failed to develop in Boston
prior to the 1870s because the organizational models through which art
was distributed were not equipped to define and sustain such a body and
a view of art. Each of the three major models for organizing the distribution of aesthetic experience before 1870the for-profit firm, the cooperative enterprise and the communal associationwas flawed in some important way.
The problems of the privately owned, for-profit firm are most obvious.
As Weber has argued, the market declassifies culture: presenters of cultural
events mix genres and cross boundaries to reach out to larger audiences.19
The Boston Museum, founded in the 1840s, mixed fine art and sideshow
oddities, Shakespeare and theatrical ephemera. For-profit galleries exhibited art as spectacle: when James Jackson Jarves showed his fine collection
of Italian primitives at Derby's Institute of Fine Arts in New York, "the
decor of this . . . dazzlingly ornate commercial emporium . . . caused
much more favorable comment than Jarves' queer old pictures."20
If anything, commerce was even less favorable to the insulation of high
art in the performance media. Fine-art theatre in Boston never seems to
have got off the ground. And the numerous commercial orchestras that
either resided in or toured Boston during this period mixed fine-arts and
light music indiscriminately. A memoir of the period recalls a concert of
the Germania Society (one of the better orchestras of this type): "One of
the numbers was the 'Railway Gallop,'composer forgottenduring the
playing of which a little mock steam-engine kept scooting about the floor
of the hall, with black cotton wool smoke coming out of the funnel." The
same writer describes the memorable "evening when a fantasia on themes
from Wallace's 'Maritana' was played as a duet for mouth harmonica and
the Great Organ; a combination as the program informed us, 'never before
attempted in the history of music!' "21
As with the visual arts, the commercial treatment of serious music tended
to the extravagant rather than to the sacred. In 1869, an entrepreneur
organized a Peace Jubilee to celebrate the end of the Civil War. A structure
large enough to accommodate 30,000 people was built (at what would
later be the first site of the Museum of Fine Arts) and "star" instrumentalists and vocalists were contracted to perform along with an orchestra of
1000 and a chorus of 10,000. As a finale, the orchestra (which included
46
330 strings, 75 drums and 83 tubas) played the anvil chorus with accompaniment from a squadron of firemen beating anvils, and the firing of live
cannon.22
An alternative form of organization, embraced by some musical societies, was the worker's cooperative, in which each member had a vote, shared
in the profits of the enterprise and elected a conductor from among their
number.23 The cooperative was vulnerable to market incentives. Perhaps
more important, however, it was (also like its privately owned counterpart) unable to secure the complete allegiance of its members, who supported themselves by playing many different kinds of music in a wide range
of settings. The early New York Philharmonic, for example, performed as
a group only monthly. Members anticipated the concert "as a pleasant
relief from more remunerative occupational duties, and the rehearsal periods were cluttered up with routine business matters, from which members could absent themselves with relative impunity." 24
The lines dividing nonprofit, cooperative, for-profit and public enterprise were not as strong in the nineteenth century as they would become
in the twentieth. Civic-minded guarantors might hold stock in commercial
ventures with no hope of gaining a profit (e.g., Symphony Hall at the end
of the century). The goals of the charitable corporation were usually defined into its charter, but otherwise it legally resembled its for-profit counterpart. Even less clearly defined was what I call the voluntary association:
closed associations of individuals (sometimes incorporated, sometimes not)
to further the aims of the participating members, rather than of the community as a whole. For associations like the Handel and Haydn Society,
which might give public concerts, or the Athenaeum, which took an active
role in public affairs, privateness was relative. But, ultimately, each was a
voluntary and exclusive instrument of its members.
Why were these communal associations ill-suited to serve as the organizational bases for high culture in Boston? Why could the Athenaeum, a
private library, or the Boston Art Club, which sponsored contemporary
art shows, not have developed continuous programs of public exhibitions? 25 Could not the Handel and Haydn Society, the Harvard Musical
Association (formed by Harvard graduates who wished to pursue after
graduation musical interests developed in the College's Pierian Sodality) or
one of the numerous singing circles have developed into a permanent orchestra? They faced no commercial temptations to study, exhibit or perform any but the highest art. (Indeed, the Harvard Musical Association's
performances were so austere as to give rise to the proverb "dull as a
symphony concert."26)
None of them, however, could, by the late nineteenth century, claim to
speak for the community as a whole, even if they chose to. Each represented only a fraction (although, in the case of Athenaeum, a very large
and potent fraction) of the elite; and, in the case of the musical associations and the Art Club, members of the middle class and artistic professionals were active as well. The culture of an elite status group must be
monopolized, it must be legitimate and it must be sacralized. Boston's cul-
47
tural capitalists would have to find a form able to achieve all these aims:
a single organizational base for each art form; institutions that could claim
to serve the community, even as they defined the community to include
only the elite and the upper-middle classes; and enough social distance
between artist and audience, between performer and public, to permit the
mystification necessary to define a body of artistic work as sacred.
This they did in the period between 1870 and 1900. By the end of the
century, in art and music (but not in theatre 27 ), the differences between
high- and popular-culture artists and performers were becoming distinct,
as were the physical settings in which high and popular art were presented.
The form that the distribution of high culture would take was the nonprofit corporation, governed by a self-perpetuating board of trustees who,
eventually, would delegate most artistic decisions to professional artists or
art historians.28 The charitable corporation was not designed to define a
high culture that elites could monopolize; nor are nonprofit organizations
by their nature exclusive. But the nonprofit corporation had five virtues
that enabled it to play a key role in this instance. First, the corporation
was a familiar and successful tool by which nineteenth-century elites organized their affairs. 29 In the economic realm it enabled them to raise capital for such profitable ventures as the Calumet and Hecla Mines, the Western
railroads and the telephone company. In the nonprofit arena, it had been
a useful instrument for elite communal governance at Harvard, the Massachusetts General Hospital and a host of charitable institutions.30 Second,
by entrusting governance decisions to trustees who were committed either
to providing financial support or to soliciting it from their peers, the nonprofit form effectively (if not completely) insulated museums and orchestras from the pressures of the market. Third, by vesting control in a wellintegrated social and financial elite, the charitable corporation enabled its
governors to rule without interference from the state or from other social
classes. Fourth, those organizations whose trustees were able to enlist the
support of the greater part of the elite could provide the stability needed
for a necessarily lengthy process of defining art and developing ancillary
institutions to insulate high-cultural from popular-cultural work, performance and careers. Finally, and less obviously, the goals of the charitable
corporation, unlike those of the profit seeking firm, are diffuse and ambiguous enough to accommodate a range of conflicting purposes and changing ends. The broad charters of Boston's major cultural organizations permitted their missions to be redefined with time, and enabled their governors
to claim (and to believe) that they pursued communitarian goals even as
they institutionalized a view and vision of art that made elite culture less
and less accessible to the vast majority of Boston's citizens.
THE CONTEXT OF CULTURAL CAPITALISM
In almost every literate society, dominant status groups or classes eventually have developed their own styles of art and the institutional means of
48
supporting them. It was predictable that this would happen in the United
States, despite the absence of an hereditary aristocracy. It is more difficult,
however, to explain the timing of this process. Dwight and others wished
(but failed) to start a permanent professional symphony orchestra from at
least the late 1840s. The Athenaeum's proprietors tried to raise a public
subscription to purchase the Jarves collection in the late 1850s, but they
failed. What had changed to enable later efforts to succeed?
Consider, first, the simple increase in scale and wealth between 1800
and 1870. At the time of the revolution, Boston's population was under
10,000. By 1800 it had risen to 25,000; by 1846 it was 120,000. By 1870,
over a quarter of a million people lived in Boston.31 The increase in the
size of the local cultural market facilitated a boom in theatre building in
the 1830s,32 a rise in the number and stability of book and music stores,33
and the growth of markets for theatre, music, opera, dancing and equestrian shows.34 The growth of population was accompanied by an increase
in wealth. Boston's first fortunes were mercantile, the fruits of the China
trade, large by local, but small by national standards. In 1840, Boston had
but a handful of millionaires. By 1890, after postCivil War booms in
railroads, mining, banking and communications, there were 400.35 Even
the physical scale of the city changed during this period: beginning in 1856,
developers began filling in the waters of the Back Bay, creating a huge tract
of publicly owned land, partially devoted to civic and cultural buildings.
As wealthy outlanders from Lawrence, Lynn and Lexington migrated to Beacon Hill and Cambridge, streetcars reduced the cost and the
difficulty of travel to Boston from its suburbs. 36 In short, Boston was
larger, wealthier and more compact in 1870 than it had been 50 years
before.
With growth came challenges to the stability of the community and to
the cultural authority of elites.37 Irish immigrants flowed into Boston from
the 1840s to work in the city's industrial enterprises; 38 industrial employment rolls doubled between 1845 and 1855.39 With industry and immigration came disease, pauperism, alcoholism, rising infant mortality and vice.
The Catholic Irish were, by provenance and religion, outside the consensus
that the Brahmins had established. By 1900, 30 percent of Boston's residents were foreign-born and 70 percent were of foreign parentage.40 By
the close of the Civil War, Boston's immigrants were organizing to challenge the native elite in the political arena. 41
If immigration and industrialization wrought traumatic changes in the
city's social fabric, the political assault on Brahmin institutions by native
populists proved even more frightening. The Know-Nothings who captured state government in the 1850s attacked the social exclusivity of Harvard College frontally, amending its charter and threatening state control
over its governance, hiring and admissions policies.42 Scalded by these attacks, Boston's leadership retreated from the public sector to found a system of nonprofit organizations that permitted them to maintain some control over the community even as they lost their command of its political
institutions. 43
49
Story argues persuasively that this political challenge, and the wave of
institution-building that followed it, transformed the Brahmins from an
elite into a social class.44 As a social class, the Brahmins built institutions
(schools, almshouses and charitable societies) aimed at securing control
over the city's social life.45 As a status group, they constructed organizations (clubs, prep schools and cultural institutions) to seal themselves off
from their increasingly unruly environment. Thus Vernon Parrington's only
partially accurate observation that "The Brahmins conceived the great
business of life to be the erection of barriers against the intrusion of the
unpleasant."46 The creation of a network of private institutions that could
define and monopolize high art was an essential part of this process of
building cultural boundaries.
The Brahmin class, however, was neither large enough to constitute a
public for large-scale arts organizations, nor was it content to keep its
cultural achievements solely to itself. Alongside of, and complicating, the
Brahmins' drive towards exclusivity was a conflicting desire, as they saw
it, to educate the community. The growth of the middle class during this
perioda class that was economically and socially closer to the working
class and thus in greater need of differentiating itself from it culturally
provided a natural clientele for Boston's inchoate high culture. While we
have all too little information about the nature of the visitors to Boston's
Museum or of the audiences for the Symphony, it seems certain from contemporary accounts (and sheer arithmetic) that many of them were middle
class. The same impulse that created the markets for etiquette and instruction books in the mid-nineteenth century helped populate the galleries and
concert halls of the century's last quarter.47
CULTURAL ENTREPRENEURSHIP: THE MUSEUM OF FINE ARTS AND

THE BOSTON SYMPHONY ORCHESTRA
The first step in the creation of a high culture was the centralization of
artistic activities within institutions controlled by Boston's cultural capitalists. This was accomplished with the foundings of the Museum of Fine
Arts and the Boston Symphony Orchestra. These institutions were to provide a framework, in the visual arts and music, respectively, for the definition of high art, for its segregation from popular forms and for the elaboration of an etiquette of appropriation.
Bostonians had sought to found a museum for some time before 1870.
In 1858, the state legislature, dominated by factions unfriendly to Boston's
elite, refused to provide Back Bay land for a similar venture.48 The immediate impetus for the Museum, however, was a bequest by Colonel
Timothy Bigelow Lawrence of an armor collection too large for the
Athenaeum's small gallery to accommodate. Three years earlier the
Athenaeum's Fine Arts Committee had suggested that the galleries be
expanded, but nothing had been done. With the Lawrence bequest, and his
widow's offer to contribute a wing to a new gallery, the trustees voted that
50
the present is a proper time for making an appeal to the public and especially to
the friends of the fine Arts, to raise the sum required to make available Mrs. Lawrence's proposed donation, and, if possible, to provide even larger means to carry
out so noble a design in the confident hope that it may be attended with success. . . .49
A new museum promised to solve problems for several of Boston's elite

institutions: Harvard had a collection of prints for which it sought a firesafe depository, and the Massachusetts Institute of Technology and the
American Social Science Association possessed collections of architectural
casts too large for them to store conveniently. After a series of meetings
between the Athenaeum trustees and other public and private decision
makers, it was decided to raise money for a museum on a tract of land in
the Back Bay. (The land, owned by the Boston Water Power Company,
was made available through the intervention of Mathias Denman Ross, a
local developer who was keenly aware of the effects of public and cultural
buildings on the value of nearby real estate.) In 1870 the state legislature
chartered the enterprise and, with the help of the Athenaeum, which sponsored exhibitions throughout this period, fund-raising began.50
The initial aspirations of the Museum founders were somewhat modest.
The key figure in the founding was Charles Callahan Perkins, a greatnephew of a China-trade magnate, kinsman of the chairman of the Athenaeum's Fine Arts Committee and himself President of the Boston Art
Club. Perkins wrote two books on Italian sculpture in the 1860s, championed arts education in Boston's public schools and served as head of the
American Social Science Association's arts-education panel in 1869. (He
had studied painting and sculpture in Europe for almost 10 years, before
concluding that he lacked the creativity to be a good artist.) Perkins, in a
report to the ASSA had asserted "the feasibility of establishing a regular
Museum of Art at moderate expense," with primarily educational aims.
Since Boston's collections had few originals, he recommended that the new
collection consist of reproductions, primarily plaster casts of sculpture and
architecture.
The breadth of response to the first appeal for funds for the museum is
striking. Although the economy was not robust, $261,425 was collected
for the building. Of this amount, the largest gift was $25,000, only two
were larger than $5000 and all but $100,000 came from over 1000 gifts
of less than $2000 from such sources as local newspapers, public-school
teachers and workers at a piano factory. (By contrast, when the Museum
sought to raise $400,000 for new galleries and an endowment 15 years
later, $218,000 of the initial $240,000 in contributions came from a mere
58 donors.51)
One reason for the breadth of early support was that the Museum, although in private hands, was to be a professedly communitarian and educational venture. The Board of Trustees contained a large segment of the
Brahmin class: All but one of the first 23 trustees were proprietors of the
Athenaeum; 11 were members of the Saturday Club, while many others
were members of the Somerset and St. Botolph's clubs; most were gradu-
51
ates of Harvard and many were active in its affairs. The public nature of
the Board was further emphasized by the inclusion on it of permanent and
ex officio appointments: from Harvard, MIT and the Athenaeum; the
Mayor, the Chairman of the Boston Public Library's board, the trustee of
the Lowell Institute, the Secretary of the State Board of Education and the
Superintendent of Boston's schools. The trustees dedicated the institution
to education; one hoped that the breadth of the board's membership would
ensure that the Museum's managers would be "prevented from squandering their funds upon the private fancies of would-be connoisseurs." Indeed, the articles of incorporation required that the Museum be open free
of charge at least four times a month. The public responded by flooding
the Museum on free weekend days in the early years.52
The centralization of the visual arts around a museum required only the
provision of a building and an institution controlled by a board of civicminded members of the elite. The Museum functioned on a relatively small
budget in its early years, under the direction of Charles Greely Loring, a
Harvard graduate and Civil War general, who had studied Egyptology when
his physician sent him to the banks of the Nile. The Museum's founders,
facing the need to raise substantial funds, organized both private and public support carefully, mobilizing a consensus in favor of their project from
the onset.
By contrast, the Boston Symphony Orchestra was, for its first years at
least, a one-man operation, forced to wrest hegemony over Boston's musical life from several contenders, each with its own coterie of elite support. That Henry Lee Higginson, a partner in the brokerage firm of Lee,
Higginson, was able to do so was a consequence of the soundness of his
organizational vision, the firmness of his commitment, and, equally important, his centrality to Boston's economic and social elite.
In a sense, Higginson began as a relative outsider. Although his father,
founder of the family firm, made a fortune in shipping, Henry was the first
of his line to matriculate at Harvard; but soon he dropped out (claiming
poor vision), visiting Europe and returning to private tutelage in Cambridge. Upon completing his education, he studied music in Europe for
several years, ultimately against the wishes of his father, as their tense and
sometimes acrimonious correspondence suggests.53 After an accident lamed
his arm, he returned to the United States for good, fought in the Civil War,
married a daughter of the Harvard scientist Louis Agassiz and, following
a disastrous venture in southern farming and a lucrative investment in the
Calumet and Hecla copper mines, finally joined his father's State Street
firm.54
Higginson was a knowledgeable student of music, and a follower of the
aesthetic doctrines of John S. Dwight. As early as 1840, Dwight had called
for the founding of a permanent orchestra in Boston. "This promises
something," he wrote of an amateur performance.
We could not but feel that the materials that evening collected might, if they could
be kept together through the year, and induced to practice, form an orchestra
worthy to execute the grand works of Haydn and Mozart. . . . To secure these
52
ends might not a plan of this kind be realized? Let a few of our most accomplished
and refined musicians institute a series of cheap instrumental concerts. . . . Let
them engage to perform quartettes, etc., occasionally a symphony, buy the best
masters and no others. Let them repeat the best and most characteristic pieces
enough to make them a study to the audiences. 55
A number of ensembles attempted to realize Dwight's ambitions. But it

was Higginson's organizational skills (and his money) that gave Boston
the nation's first permanent, philanthropically supported and governed, fullseason symphony orchestra. In achieving the dream of a large permanent
orchestra devoted to fine-arts music, Higginson faced and overcame two
challenges: first, establishing control over fine-arts music in Boston as a
whole; and, second, enforcing internal discipline over the orchestra's members. Against him were arrayed the supporters of Boston's existing ensembles, principally the Philharmonia and the Harvard Musical Association,
and the city's musicians, jealous of their personal and professional autonomy.
Higginson published his plans for the orchestra in a column, headed "In
the Interest of Good Music," that appeared in several of Boston's newspapers:
Notwithstanding the development of musical taste in Boston, we have never yet
possessed a full and permanent orchestra, offering the best music at low prices,
such as may be found in all the large European cities. . . . The essential condition
of such orchestras is their stability, whereas ours are necessarily shifting and uncertain, because we are dependent upon musicians whose work and time are largely
pledged elsewhere. To obviate this difficulty the following plan is offered. It is an
effort made simply in the interest of good music, and though individual in as much
as it is independent of societies or clubs, it is in no way antagonistic to any previously existing musical organization. 56
In this last sentence, Higginson treads on delicate ground. He goes on

to praise, specifically, the Handel and Haydn Society and the Harvard Musical Association, the two musical societies with the closest Brahmin connections, while indicating implicitly that there will be no further need for
the services of the latter. To launch this new enterprise, Higginson proposes to spend, annually, $20,000 of his own money until the orchestra
becomes self-supporting.
Despite a measure of public incredulity, and some resentment at Higginson's choice of European conductor, George Henschel, over local candidates, the BSO opened in December 1881 to the enthusiastic response of
the musical public. (The demand for tickets was great; lines formed outside the box office the evening before they went on sale.) The social complexion of the first night's audience is indicated by a report in a Boston
newspaper that "the spirit of the music so affected the audience that when
the English national air was recognized in Weber's Festival Overture, the
people arose en masse and remained standing until the close." By employing local musicians and permitting them to play with the Philharmonic
53
Society and the Harvard Musical Association (both of which, like the BSO,
offered about 20 concerts that season), Higginson earned the gratitude of
the city's music lovers.
The trouble began in February 1882, when the players received Higginson's terms for the following season. To continue to work for the Symphony, they would be required to make themselves available for rehearsals
and performances from October through April, four days a week, and to
play for no other conductor or musical association. (The Handel and Haydn
Society, which had strong ties to the Athenaeum, was exempted from this
prohibition.) The implications of the contract, which the players resisted
unsuccessfully, were clear: Boston's other orchestras, lacking the salaries
that Higginson's subsidies permitted, would be unable to compete for the
services of Boston's musicians. (To make matters worse, a number of the
city's journeymen musicians received no offers form Higginson at all.)
The response of the press, particularly of the Brahmin Transcript, suggests that loyalists of the other ensembles responded to Higginson's actions
with outrage. The Transcript editorialized of Higginson
He thus "makes a corner" in orchestral players, and monopolizes these for his own
concerts and those of the Handel and Haydn Society. . . . Mr. Higginson's gift
becomes an imposition, it is something that we must receive, or else we look musical starvation in the face. It is as if a man should make a poor friend a present
of several baskets of champagne and, at the same time, cut off his whole water
supply.57
A more populist newspaper complained that the "monopoly of music"

was "an idea that could scarcely have emanated from any association except that of deluded wealth with arrant charlatanism." Even Music, a New
York publication originally friendly to Higginson's efforts, called his contract
a direct stab at the older organizations and rival conductors of Boston. It means
that one or two organizations may make efforts to place their concerts on the off
days which Mr. Henschel has been pleased to allow them, but some must be left
in the cold, orchestraless and forlorn. . . . The manner in which the proposal was
made was also one that forbodes tyranny. Some of the oldest members of the
Orchestra, men whose service to music in Boston have entitled them to deference
and respect, were omitted altogether, and will be left out of the new organization.
It was intimated strongly that in case the offer was rejected by the men, their places
would be filled from the ranks of European orchestras.58
Higginson and his orchestra weathered the storm. Attendance stayed up

and, within a year, his was the only orchestral association in Boston, coexisting peacefully with the smaller Handel and Haydn Society. In order
to achieve the kind of ensemble he desired, however, Higginson had to
ensure that his musicians would commit their time and their attention to
the BSO alone, and accept his (and his agent's, the conductor's) authority
as inviolate. Since, in the past, all musicians, whatever their affiliations,
were freelances upon whom no single obligation weighed supreme, accom-
54
plishing these aspirations required a fundamental change in the relationship between musicians and their employers.
In part, effecting this internal monopolization of attention was simply a
matter of gaining an external monopoly of classical-music performance.
With the surrender of the Philharmonic Society and the Harvard Musical
Association, two major competitors for the working time of Boston's musicians disappeared. Nonetheless, while his musicians were now more dependent upon the BSO for their livelihoods, and thus more amenable to
his demands, his control over the work force was still challenged by the
availability of light-music or dance engagements, teaching commitments
and the tradition of lax discipline to which the players were accustomed.
Throughout his life, Higginson fought to maintain control over the Orchestra's employees, and the issue of discipline was foremost in his mind
from the beginning. In an early plan for the Orchestra, he suggested engaging a conductor and eight to ten exceptionally good younger musicians
from outside Boston at a fixed salary, "who would be ready at my call to
play anywhere, and then to draw around them the best of our Boston
musicians, thus refreshing and renewing the present orchestra, and getting
more nearly possession of it . . ." At that time, exclusive employment
contracts were so rare that the more timid Henschel, after agreeing to
serve as conductor, tried to convince Higginson to abandon his insistence
on total commitment. "I assure you," he wrote as the first orchestra was
being assembled,
that is the best thing we can do, and if you have any confidence in my judgment,
pray drop all conditions in the contract except those relating to our own welfare.
I mean now the conditions of discipline, etc.59
Despite his frequent assertions that he yielded in all cases to his conductors' advice on orchestral matters, Higginson, as we have seen, insisted on
exclusive contracts in the orchestra's second year, threatening to break any
strike with the importation of European players. Although he won that
battle, he nonetheless replaced the locals gradually, over the course of the
next decade, with new men with few Boston ties, mostly European, of
greater technical accomplishment, upon whose loyalty he could count.60
In this, Higginson was not merely following a European model. "My
contracts," he wrote an associate in 1888, "are very strong, indeed much
stronger than European contracts usually are . . ."61 Characteristic of the
orchestra contract was section 12:
If said musician fails to play to the satisfaction of said Higginson, said Higginson
may dismiss said musician from the Orchestra, paying his salary to the time of
dismissal, and shall not be liable to pay him any compensation or damages for
such dismissal. 62
Higginson was undeniably an autocrat. In later years he rejected the

suggestions of friends to place the Orchestra under a board of trustees;
and he used the threat of discontinuing his annual subventions as a blud-
55
geon to forestall the unionization of the players. Yet Higginson accomplished what all orchestras would have to achieve if orchestral work was
to be separated permanently from the playing of popular music and Dwight's
dream of a permanent orchestra devoted to high-art music achieved: the
creation of a permanent musical work force, under exclusive contract, willing
to accept without question the authority of the conductor.
THE BRAHMINS AS AN ORGANIZATION-FORMING CLASS
The Museum of Fine Arts and the Boston Symphony Orchestra were both
organizations embedded in a social class, formal organizations whose official structure was draped around the ongoing life of the group that governed, patronized and staffed them.63 They were not separate products of
different segments of an elite; or of artists and critics who mobilized wealthy
men to bankroll their causes. Rather they were the creations of a densely
connected self-conscious social group intensely unified by multiple ties among
its members based in kinship, commerce, club life and participation in a
wide range of philanthropic associations. Indeed, if, as Stinchcombe has
argued, there are "organization-forming organizations"organizations that
spawn off other organizations in profusionthere are also organizationforming status groups, and the Brahmins were one of these.64 This they
could be not just because of their cultural or religious convictions (to which
Green, Baltzell and Hall have called attention 65 ), but because they were
integrated by their families' marriages, their Harvard educations, their joint
business ventures, their memberships in a web of social clubs and their
trusteeships of charitable and cultural organizations. This integration is
exemplified in the associations of Higginson, and in the ties between the
Museum and the Orchestra during the last 20 years of the nineteenth century.
It is likely that Higginson's keen instinct for brokerageand the obligations he accrued as principal in one of Boston's two major houses
served him well in his efforts to establish the Orchestra. At first glance,
Higginson's achievement in creating America's first elite-governed permanent symphony orchestra in Boston appears to be the work of a rugged
individualist. On closer inspection, we see that it was precisely Higginson's
centrality to the Brahmin social structure that enabled him to succeed.
Only a lone, centrally located entrepreneur could have done what Higginson did, because to do so ruffled so many feathers: a committee would
have compromised with the supporters of other musical associations and
with the patrons of the more established local musicians. Nonetheless, if
Higginson's youthful marginality permitted the attempt, it was his eventual centrality that enabled him to succeed. His career illustrates the importance of kinship, commerce, clubs and philanthropy in Boston elite life.
Ties in each of these areas reinforced those in the others; each facilitated
the success of the Orchestra, and each brought him into close connection
56
Nonprofit Enterprise in the Arts
with the cultural capitalists active in the MFA and led, eventually, to his
selection as a Museum trustee.
Higginson was born a cousin to some of the leading families in Boston:
the Cabots, the Lowells, the Perkins, the Morses, the Jacksons, the Channings and the Paines, among others.66 (The first four of these families produced trustees of the Museum of Fine Arts during Higginson's lifetime.
His kinsman Frances W. Higginson was also a Museum trustee.) In Cambridge, he was close to Charles Lowell and, after his first European adventure, he studied with Samuel Eliot, a cousin of Harvard President Charles
W. Eliot, and later a trustee of the Museum. During this period, he spent
a great deal of time in the salon-like household of Louis Agassiz, befriending the scientist's son and marrying his daughter. So close did Henry remain to his Harvard classmates that, despite his withdrawal after freshmen
year, they permitted him to take part in their class's Commencement exercises.
When Henry went into business, he brought his family and college ties
with him. A contemporary said of the Lee, Higginson firm, it "owed in
some measure to family alliances its well-advised connections with the best
financial enterprises of the day."67 Indeed, Higginson's first successful
speculation was his investment in the Calumet and Hecla mines, at the
behest of his in-laws Agassiz and Shaw (the latter an early donor of paintings to the Museum). The family firm was instrumental in the development
of the western railroads, through the efforts of cousin Charles Jackson
Paine. In this enterprise, Higginson associated with John M. Forbes and
with Charles H. Perkins (kinsman of the MFA founder). Higginson was so
intimate with the latter that he invested Perkins' money without consultation. Lee, Higginson made a fortune in the telephone company, and Higginson, in later years, was a director of General Electric. In some of these
ventures, the firm cooperated with other Boston financiers. Higginson was
on close terms with his competitors, Kidder of Kidder, Peabody (the Museum's first treasurer) and Endicott, President of the New England Trust
and Suffolk Savings (and the Museum's second Treasurer). Gardiner Martin Lane was a partner in Lee, Higginson when he resigned his position to
assume the Museum's presidency in 1907.
Higginson was also an active clubman, a member of the Tavern Club
(and its President for 20 years), the Wednesday Evening Club, the Wintersnight, Friday Night and Officers Clubs, New York's Knickerbocker Club
and, from 1893, the Saturday Club. Among his Tavern Club colleagues
were Harvard's Charles Eliot Norton (spiritual godfather of the Museum's
aesthetes), William Dean Howells and Henry Lee. At the Friday Club he
consorted with Howells, William James and Henry Adams. At the Saturday Club, his clubmates included the MFA's Thomas Gold Appleton and
Martin Brimmer.
In the 1890s, Higginson's career in Boston philanthropy blossomed. (By
now he was on the MFA's Board. Earlier, when the Museum's first Presi-
57
dent, Martin Brimmer, asked Charles Eliot Norton if Higginson should be

invited, Norton wrote back that "Higginson would be excellent, but he
never attends meetings."68) He lavished most of his attention (beyond that
devoted to the Orchestra) on Harvard, which elected him a Fellow in 1893.
He gave Harvard Soldiers Field and a new student union, was Treasurer
of Radcliffe College, played a key role in the founding of the Graduate
School of Business, patronized the medical school and gave anonymous
gifts to deserving faculties.69 Higginson's position as Fellow of Harvard
placed him at the summit of Boston's institutional life and undoubtedly
reinforced his contacts with the Museum's trustees and friends. His personal art collection, which included Turners, Corots and Rodins, encouraged such interactions as well. (In 1893, he donated a valuable Dutch
master to the MFA.)
Thus was the Orchestra's founder embedded in the Brahmin community. When Lee, Higginson furnished an emergency loan of $17,000 to the
Museum of Fine Arts in 1889, with little prospect of repayment, was this
because he was on the Board; was it a consequence of Higginson's kinship
ties with the Cabots, Perkinses or Lowells; his business alliances with Kidder or Endicott; his club friendship with Norton; Harvard ties to the Eliots?
The range of possibilities renders the question trivial and illustrates how
closely knit was Higginson's world.
In 1893, when Higginson demanded that Boston build him a new and
suitable Symphony Hall, lest he abandon the Orchestra to bankruptcy and
dissolution, the initial appeal for funds was signed by a broad cross section
of the city's elite: his friends and kinsmen Agassiz, Lodge, Lowell, Lee and
John Lowell Gardner; Harvard's Eliot, Norton, Longfellow, Shattuck and
Parkman; Peabody of Kidder Peabody, to name a few. Present on the list
were at least four of Higginson's fellow MFA trustees: the President (Martin Brimmer), the Treasurer (by now, John L. Gardner), Eliot and Norton.70 The group raised over $400,000, a substantial stake in that financially troubled year.
CONCLUSIONS
The Museum of Fine Arts and the Boston Symphony Orchestra were creations of the Brahmins, and the Brahmins alone. As such, their origins are
easier to understand than were British or Continental efforts in which aristocrats and bourgeoisie played complex and interrelated roles.71 The Brahmins were a status group, and as such they strove towards exclusivity,
towards the definition of a prestigious culture that they could monopolize
as their own. Yet they were also a social class, and they were concerned,
as is any dominant social class, with establishing hegemony over those
they dominated. Some Marxist students of culture have misinterpreted the
cultural institutions as efforts to dictate taste or to inculcate the masses
58
with the ideas of elites. Certainly, the cultural capitalists, consummate organizers and intelligent men and women, were wise enough to understand
the impossibility of socializing the masses in institutions from which they
effectively were barred. Their concern with education, however, was not
simply window-dressing or an effort at public relations. Higginson, for
example, devoted much of his fortune to American universities and secondary schools. He once wrote a kinsman, from whom he sought a donation of $100,000 for Harvard, "Educate, and save ourselves and our
families and our money from the mobs!"72 Moreover, a secret or thoroughly esoteric culture could not have served to legitimate the status of
American elites; it would be necessary to share it, at least partially. The
tension between monopolization and hegemony, between exclusivity and
legitimation, was a constant counterpoint to the efforts at classification of
American urban elites.
This explains, in part, the initial emphasis on education at the Museum
of Fine Arts. Yet, from the first, the Museum managers sought to educate
through distinguishing true from vulgar artat first, cautiously, later with
more confidence. In the years that followed they would place increased
emphasis on the original art that became available to them, until they
abandoned reproductions altogether and with them their emphasis on education. In a less dramatic way, the Orchestra, which began with an artistic mandate, would further classify the contents of its programs and frame
the aesthetic experience in the years to come.
In structure, however, the Museum and the Orchestra were similar innovations. Each was private, controlled by members of the Brahmin class,
and established on the corporate model, dependent on private philanthropy and relatively long-range financial planning; each was sparely staffed
and relied for much of its management on elite volunteers; and each counted
among its founders wealthy men with considerable scholarly or artistic
credentials who were centrally located in Boston's elite social structure.
The Museum was established under broad auspices for the education of
the community as a whole; the Orchestra was created by one man in the
service of art and of those in the community with the sophistication or
motivation to appreciate it. Within 40 years, the logic of cultural capitalism would moderate sharply, if not eliminate, these historically grounded
differences. The Symphony would come to resemble the Museum in charter
and governance, and the Museum would abandon its broad social mission
in favor of aestheticism and an elite clientele.
The creation of the MFA, the BSO and similar organizations throughout
the United States formed a base through which the ideal of high culture
could be given institutional flesh. The alliance between class and culture
that emerged was defined by, and thus inseparable from, its organizational
mediation. As a consequence, the classification "high culture/popular culture" is comprehensible only in its dual sense as characterizing both a
ritual classification and the organizational systems that give that classification meaning.
59
NOTES
1. Dwight MacDonald, "A Theory of Mass Culture," in Bernard Rosenberg and David
M. White, eds., Mass Culture: The Popular Arts in America (Glencoe, 111.: The Free Press,
1957); and T. W. Adorno, "On Popular Music," Studies in Philosophy and Social Science 9
(1941).
2. Herbert J. Gans, Popular Culture and High Culture (New York: Basic Books, 1974);
Leo Lowenthal, Literature, Popular Culture and Society (Englewood Cliffs, N.J.: PrenticeHall, 1961).
3. Paul DiMaggio and Michael Useem, "Cultural Property and Public Policy: Emerging
Tensions in Government Support for the Arts," Social Research 45 (1978): 356-389.
4. The process, in other U.S. cities, was to a large extent influenced by the Boston model.
A final, more mundane, consideration recommends Boston as the focus of this study: The
prolixity of nineteenth-century Boston's men and women of letters and the dedication and
quality of its local historians make Boston an ideal site for such an enterprise.
5. Christopher Hatch, "Music for America: A Cultural Controversy of the 1850s," American Quarterly 14 (1962): 578-586; and Neil Harris, The Artist in American Society: The
Formative Years, 1790-1860 (New York: Braziller, 1966).
6. Russell Lynnes, The Tastemakers (New York: Grosset and Dunlap, 1953).
7. P. T. Barnum, Struggles and Triumphs; Or Forty Years Recollections (Buffalo, N.Y.:
The Courier Company, 1879); Neil Harris, Humbug: The Art of P. T. Barnum (Boston:
Little, Brown, 1973).
8. C. McGlinchee, The First Decade of the Boston Museum (Boston: Bruce Humphries,
1940).
9. Dexter W. Fellows and A. A. Freeman, This Way to the Big Show: The Life of Dexter
Fellows (New York: Viking Press, 1936).
10. Pierre Bourdieu and Jean-Claude Passeron; Reproduction in Education, Society and
Culture (Beverly Hills, Calif.: Sage Publications, 1977); Pierre Bourdieu and Jean-Claude
Passeron, The Inheritors: French Students and Their Relation to Culture (Chicago: University
of Chicago Press, 1979).
11. In a third sense, "cultural capitalist" might refer to the entrepreneurs of popular culturethe Barnums, the Keiths, the Shuberts and otherswho turned culture into profits.
Although we will not consider this group at any length, we must remember that it was in
opposition to their activities that the former defined their own.
12. My debt to Basil Bernstein and to Mary Douglas is evident here. My use of the terms
"classification" and "framing" is similar to Bernstein's. See Basil Bernstein, "On the Classification and Framing of Educational Knowledge" and "Ritual in Education," both in Class,
Codes and Control, Vol. 3 (London: Routledge and Kegan Paul, 1975); and Mary Douglas,
Purity and Danger: An Analysis of Pollution and Taboo (London: Routledge and Kegan
Paul, 1966).
13. Martin Green, The Problem of Boston (New York: Norton, 1966).
14. Ibid., 41.
15. Bliss Perry, The Life and Letters of Henry Lee Higginson (Boston: Atlantic Monthly
Press, 1921), 29.
16. Ibid., 81.
17. See, e.g., Henry Adams, The Education of Henry Adams: An Autobiography (New
York: Book League of America, 1928).
18. G. M. Whipple, A Sketch of Musical Societies of Salem (Salem, Mass.: Essex Institute,
n. d.).
19. Max Weber, Economy and Society, Vol. 2 (New York: Bedminster Press: 1968), sec.
9.
20. Nathaniel Burt, Palaces for the People (Boston: Little, Brown, 1977), 57.
21. William F. Apthorp, quoted in Mark A. D. Howe, The Boston Symphony Orchestra:
An Historical Sketch (Boston: Houghton Mifflin, 1914).
22. W. A. Fisher, Notes on Music in Old Boston (Boston: Oliver Ditson, 1918), 45-46.
60
23. For more detailed descriptions of this form, see Stephen R. Couch, "Class, Politics,
and Symphony Orchestras," Society 14 (1976): 24-29; and John H. Mueller, The American
Symphony Orchestra: A Social History of Musical Taste (Bloomington, Ind.: Indiana University Press, 1951).
24. Mueller, ibid., 41.
25. Boston Art Club, Constitution and By-Laws of the Boston Art Club, with a Sketch of
Its History (Boston: E. H. Trulan, 1878).
26. Howe, op. cit., 8.
27. Twentieth Century Club, The Amusement Situation in Boston (Boston: Twentieth
Century Club, 1910); Jack Poggi, Theater in America: The Impact of Economic forces, 18701967 (Ithaca, N.Y.: Cornell University Press, 1968).
28. Vera L. Zolberg, "The Art Institute of Chicago: The Sociology of a Cultural Institution," (Ph.D. diss., Department of Sociology, University of Chicago, 1974); and "Conflicting
Visions of American Art Museums," Theory and Society 10 (1981): 103-125.
29. George M. Fredrickson, The Inner Civil War: Northern Intellectuals and the Crisis of
the Union (New York: Harper & Row, 1965); Ronald Story, The Forging of an Aristocracy:
Harvard and the Boston Upper Class, 1800-1870 (Middletown, Conn.: Wesleyan University
Press, 1980); Peter Dobkin Hall, The Organization of American Culture (New York: New
York University Press, 1982).
30. Story, ibid..
31. R. Lane, Policing the City: Boston, 1822-1885 (New York: Atheneum, 1975).
32. Russell B. Nye, The Cultural Life of the New Nation, 1776-1830 (New York: Harper
& Row, 1960), 264.
33. Fisher, op. cit., 30.
34. Nye, op. cit., 143.
35. Frederic C. Jaher, "The Boston Brahmins in the Age of Industrial Capitalism," in
Frederic C. Jaher, ed., The Age of Industrialism in America (New York: Oxford University
Press, 1968); Frederic C. Jaher, "Nineteenth-Century Elites in Boston and New York," Journal of Social History 6 (1972): 32-77; Story, op. cit.
36. Sam Bass Warner, Streetcar Suburbs: The Process of Growth in Boston, 1870-1900
(New York: Atheneum, 1970).
37. Paul Starr, The Social Transformation of American Medicine (New York: Basic Books,
1982).
38. Oscar Handlin, Boston's Immigrants, 1790-1880 (New York: Atheneum, 1972); Stephen Thernstrom, Poverty and Progress: Social Mobility in a Nineteenth-Century City (New
York: Atheneum, 1972).
39. Handlin, ibid.
40. Green, op. cit., 102.
41. Barbara M. Solomon, Ancestors and Immigrants (New York: John Wiley, 1956).
42. Story, op. cit.
43. Shiverick notes the contrast between the founding of the public library in the 1850s
and that of the private art museum 20 years later, both enterprises in which Athenaeum
members were central. See Nathan C. Shiverick, "The Social Reorganization of Boston," in
A. W. Williams, A Social History of the Greater Boston Clubs (New York: Barre Press,
1970).
44. I use the term "class" to refer to a self-conscious elite united by bonds of economic
interest, kinship and culture. For similar views of class, see E. P. Thompson, The Making of
the English Working Class (New York: Random House, 1966); and Story, op. cit., xi.
45. N. J. Huggins, Protestants Against Poverty: Boston's Charities, 1870-1900 (Westport,
Conn.: Greenwood, 1971); and Morris Vogel, The Invention of the Modern Hospital (Chicago: University of Chicago Press, 1981).
46. Quoted in Shiverick, op. cit., 129.
47. Nye, op. cit.; Ann Douglas, The Feminization of American Culture (New York: Avon,
1978).
61
48. Neil Harris, "The Gilded Age Revisited: Boston and the Museum Movement," American Quarterly 14 (1962): 548.
49. Walter Muir Whitehill, Museum of Fine Arts, Boston: A Centennial History (Cambridge, Harvard University Press, 1970), 6-8.
50. This section relies heavily upon Walter Muir Whitehill's classic two-volume history of
the Museum (ibid.) and, to a lesser extent, on Neil Harris' fine paper (1962, op. cit.) for its
facts, albeit not for their interpretation.
51. Whitehill, ibid., 42.
52. Harris, 1962, op. cit., 48-52.
53. Perry, op. cit., 121-135.
54. In Henry Adams's words, "Higginson, after a desperate struggle, was forced into State
Street." In later years, Higginson told a relative that "he never walked into 44 State Street
without wanting to sit down on the doorstep and cry." See Adams, op. cit., 210; and ibid.,
135.
55. Howe, op. cit., 45.
56. Ibid., 41.
57. Ibid., 67-69.
58. Ibid., 28.
59. Perry, op. cit., 299.
60. Howe, op. cit., 121-123.
62. Ibid.
63. In James Thompson's terms, they were organizations whose resource dependencies all
coincided. For their financial support, for their governance and for their clients, they looked
to a class whose members were "functionally interdependent and interact[ed] regularly with
respect to religious, economic, recreational, and governmental matters." See James D.
Thompson, Organizations in Action (New York: McGraw-Hill, 1967), 27.
64. Arthur L. Stinchcombe, "Social Structure and Organizations," in James G. March, ed.,
Handbook of Organizations (Chicago: Rand McNally, 1965).
65. Green, op. cit.; E. Digby Baltzell, Puritan Boston and Quaker Philadelphia (New York:
Free Press, 1979); Hall, op. cit.
67. Ibid., 272.
68. Harris, 1962, op. cit., 551.
69. Higginson, whose vision extended beyond Boston, also gave generously to Princeton,
Williams, the University of Virginia and Middlesex and sent the Orchestra to play, at his
expense, at Williams, Princeton and Yale.
70. Higginson's relationship with Gardner and his mildly scandalous wife Isabella Stewart
Gardner is revealing. When Isabella, a New Yorker, entered Boston society in the 1880s, she
was accorded a frosty reception. According to Morris Carter, her biographer and the first
director of her collection, she won social acceptance by employing the BSO to entertain at
one of her parties, an action that would have required Higginson's approval. After her palace
opened (more or less) to the public in 1909, Higginson presented her with a book compiled
by her admirers. See Morris Carter, Isabella Stewart Gardner and Fenway Court (Boston:
Houghton Mifflin, 1925); and Green, op. cit., 112.
71. Janet Wolff, "The Problem of Ideology in the Sociology of Art: A Case Study of
Manchester in the Nineteenth Century," Media, Culture and Society 4 (1982): 63-76.
72. Quoted in Perry, op. cit, 329.
II
BETWEEN THE MARKET AND
THE PUBLIC PURSE
3
Can Culture Survive the Marketplace?
PAUL J. DIMAGGIO
THE CHALLENGE OF THE 1980s
The inauguration of the Reagan administration in January 1981 brought

a chill to the art world. For the President and his Office of Management
and the Budget recommended severe reductions in the federal government's support for the arts and humanities. Even worse, many feared that
the administration would eventually seek to eliminate altogether the National Endowments for the Arts and the Humanities.
To beneficiaries of the Endowments' support, it seemed as if the administration might roll back 15 years of progress in federal assistance to the
arts. During the 25 years between the demise of the New Deal WPA Arts
Projects in the early 1940s and the establishment of the National Endowments for the Arts and the Humanities in 1965, federal support for the
arts in the United States had been virtually limited to the indirect yield of
tax deductions for contributions to (and exemption from taxation of most
revenues of) nonprofit arts organizations. Between the agency's creation in
1965 and 1980, the budget of the National Endowment for the Arts (NEA)
grew from $2.5 million to over $150 million, as a wide range of other
programsthe Humanities Endowment, the Kennedy Center, the Corporation for Public Broadcasting, the Museum Services Institute, the Comprehensive Education and Training Act (CETA), Housing and Urban Development block grants, and otherssprang up to bring total direct federal
This paper is reprinted, with permission, in revised and updated form, from the Journal of Arts
Management and Law 13 (Spring 1983): 61-87. It was originally prepared as a background
document for the forum "Can Culture Survive the Marketplace?" which took place at the
Institute of Politics of the John F. Kennedy School of Government of Harvard University on
April 21,1983, under the sponsorship of the Kennedy School and the Massachusetts Council
on the Arts and Humanities. Jonathan Moore, Nancy Perkins, and Robert Solow provided
helpful reactions to a memorandum on which the paper was based. I am grateful to Anthony
Keller and John Simon for careful and astute editorial readings of an earlier draft; and to the
Andrew W. Mellon Foundation, the Ford Foundation, and the Yale Program on Non-Profit
Organizations for support of research on which the paper draws. Nonetheless, the analysis
and opinions expressed here are my responsibility alone and are not necessarily shared by
any of the persons or organizations to whom thanks are due.
66
Between the Market and the Public Purse
support for the arts to a level well above that. With the growth of federal
investment in the arts there emerged a concomitant and directly related
increase in state aid, from less than $3 million in 1968 to over $120 million in 1981. Municipal support for the arts, more difficult to measure,
also rose sharply during this period. Much of this public supportbetween $300 and $350 million by 1980was directed to private nonprofit
organizations: art museums, orchestras, theatre, dance, and opera companies, nonprofit local arts agencies, and neighborhood arts organizations.1
Partly in response to this infusion of public support, but also in response
to rises in disposable income, the coming of age of the baby-boom generation, and the huge increase in enrollments in colleges and universities in
the 1960s, arts organizations increased both in scale and in number between 1960 and 1980. According to the National Endowment for the Arts,
between 1965 and 1980, the number of professional orchestras increased
from 58 to 144; opera companies from 27 to 65; dance companies from
37 to 200; large theatre companies from 12 to 70; and community arts
agencies from 125 to nearly 2000.2 On top of the growth in numbers was
a growth in the budget and scale of existing organizations, with substantial
investment in new plant and in greater administrative intensity. By 1980,
according to Lester Salamon of the Urban Institute, nonprofit arts organizations had total revenues of some $2.6 billion.3 Although it is not clear
that these developments constituted a "boom"annual consumer spending levels for the arts had not, for example, increased dramatically as a
percentage of real income or kept pace with such truly booming items as
health carethe growth was real nonetheless.
The psychological impact of the Reagan budget proposals, then, must
be understood in terms of the orientation toward expansion during the
two previous, heady decades. The original administration budget plans would
have cut federal support to nonprofit cultural organizations (in 1980 dollars) by at least 60 percent from the level of the final year of the Carter
administration. Had they been enacted, the proposals would have hurt arts
organizations by reducing the federal funds they received. The Economic
Recovery Plan, as a whole, also threatened arts organizations in three other
ways. First, reductions in taxes of individuals in high brackets would increase the cost of giving, and many people believed that this would make
individual donations decline.4 Second, even deeper cuts in federal support
for other program areasin particular the social services, community development, and environmental programswould place strong pressure on
foundations and corporate patrons to transfer support to these fields. By
increasing the level of competition for private support, the administration's
program could reduce the share of private funds allocated to the arts and
increase the fund-seeking costs of nonprofit organizations operating in an
increasingly competitive funding environment. Third, cuts in federal support for the arts (and social services more generally) were believed likely
to trickle down to the states: Smaller federal budgets, it was thought, would
67
be reflected in reduced (or at least stagnant) levels of state and local cultural spending.
To arts supporters in an expansionist mood, such developments were
discouraging indeed. And to organizations suffering from liabilities of
newness or from expenses incurred by recent expansion, such cuts seemed
to pose critical threats. As we shall see below, however, a softening in the
administration's position on the arts and the President's inability to get all
of the budget cuts he wanted from Congress both rendered some (but not
all) of those fears exaggerated. Even in 1980, many such fears reflected a
lack of understanding of the place of the federal contribution in the total
mosaic of arts organizations' revenues.
The federal contribution to the arts, even in 1980, was small relative to
the federal share of support for nonprofit activity in other realms. The
Urban Institute estimated that federal programs provided 12 percent of the
revenues of nonprofit cultural organizations in fiscal year 1980 and that
reductions in federal support would lead to annual decreases in sector revenues of 8 percent.5 (By contrast, nonprofit organizations in the social services and community development fields stood to lose a quarter of their
total revenues as a result of the proposed federal cutbacks.) Other studies
indicated that nonprofit arts organizations received, on average, between
5 and 10 percent of their budgets from the federal government.6
These figures, however, failed to tell the whole story. Any reduction in
public support for the arts would not affect all organizations equally. While
public funds constitute between 10 and 20 percent of the budgets of traditional arts organizations, public monies account for almost 50 percent
of the revenues of local arts agencies. Experimental and neighborhood programs also were (and remain) particularly dependent upon public funds.
Among the traditional institutions, with the exception of orchestras, smaller
organizations are hardest hit by cuts in public monies. But declines in public support are most crippling for arts programs aimed at nontraditional
publics such as rural or minority people; federal assistance for these agencies came largely from those public social programs that suffered the deepest cuts. Thus, it is precisely that sector of the arts world that has done
the most to increase access to the artssmaller and nontraditional organizationsthat stand most at risk when public budgets fall.7
CULTURE, SURVIVAL, AND VALUES
The administration's efforts provided an occasion to address, more systematically than usual, the question of the responsibilities of the public and
private sectors to the arts. As administration spokespersons hailed "private
initiatives," sometimes as if they had invented them, called for increased
levels of individual and corporate giving, and pressed "earned-income enhancement" upon arts organizations as an antidote to smaller government
68
grants, critics wondered whether private and public dollars were as fungible as such exhortations implied. In other words, can private dollarsdonated or earned through sale of servicesbe substituted for public without fundamentally changing the composition of organizations, programs,
and activities that constitute the nonprofit arts sector in the United States?
Can culture survive the marketplace? In the pages that follow, I shall address the opportunities and challenges that arts organizations and their
supporters face in several funding arenas. I shall try, as well, to place these
questions in a broader policy perspective, since the issue of how decision
makers in a pluralistic society can best allocate responsibility for the support of its cultures is likely to remain with us long after the Economic
Recovery Plan has disappeared into the history texts.
In one respect, the answer to the question posed above is an easy one.
Culture not only can survive the marketplace; much of itour literary and
nonfiction book production, cinema, popular music, interior design, photography, and cuisine, to name but a few caseshas flourished in it, at
least quantitatively. Many other segments of U.S. culturefolk music and
dance, humor, language, styles of speech and popular expressionhave
done perfectly well by ignoring the economic marketplace. Religions have
prospered relying on the tithes of their members. An impressive edifice of
law has been built up by government, with the assistance of schools of law
and law firms. United States science has reached heights of discovery through
a partnership of government and universities, and is practiced successfully
(although the norms and goals are different) in profit-seeking corporations
as well.
Now many of the people reading this are likely to be interested in one
particular kind of culture, high culture, and by this they mean the familiar
areas of music, literature, drama, the dance, and the visual arts. I raise the
preceding examples not as an exercise in semantic troublemaking, but to
address three points. First of all, in our search for models for the organization and sustenance of culture we need not look very far. The production of popular culture, folk culture, religion, science, and law provide an
array of alternative approaches and offer some hints as to their advantages
and drawbacks. Second, high culture, by which I mean those art forms
primarily produced in or distributed by nonprofit organizations, accounts
for only a small part of our national culture (or cultures) and should be
viewed from the perspective of the whole.8 Third, we need not worry about
the survival of culture, because culture always survives. What we are really
concerned about is the sort of culture that will survive.
In order to talk about what kind of public policy can best contribute to
the growth and flourishing of the arts, we must first agree that the arts are
sufficiently important to warrant the attention of policy makers and the
expenditure of public dollars. 1 will not discuss fully here the reasons I
believe that there is a public interest in the well-being of the arts. But 1
will make explicit a few values that 1 think are important, because any
discussion of arts policy must proceed with reference to the values that
69
policy should maximize. I make no effort here to place priorities on these

values. There are probably others; different individuals will place different
weights on different ones; and, in practice, they quickly become tangled
up with one another. But the multiplicity of values that cultural policy
addresses is complicating, because one must consider trade-offs among them.
If there were only one goal of public support for the arts, policy making
would be much easier.
Excellence
Everyone talks about excellence, but few can define it. Suffice it to say
that, among those who create and criticize any art form, some work is
perceived as bettermore skilled, more sophisticated, more adventurous,
evocative of more profound responsesthan other work. Some quality differentials in both execution and presentation are apparent to almost everyone; discerning others is better left to experts. Nonetheless, nearly everyone agrees that support for the arts from any source should encourage
excellence, however defined, and discourage mediocrity. A common fallacy
is that some art forms or genres are intrinsically more excellent than others. This position tends to underlie discourse on the arts even though it is,
on the face of it, indefensible. There is, or could be, excellence in any
artistic genre, form, or medium.
Conservation
Another aim of cultural policy might be the conservation of great works

(and even merely good works, if they embody styles or ideas not elsewhere
available) of the past. First of all, great art still delights and inspires or
shocks and surprises. More important, we can think of art works as the
genes of culture: Progress in art depends, in part, on the availability to
contemporary artists of models from the whole of art history.
Access
In a democracy, most people agree that great works of culture should be

accessible to everyone. It has been argued that efforts to acquaint the poor
or ethnic minorities with high culture represent a patronizing form of cultural colonization; if such efforts are mishandled this may be the case. But
if we see culture as, in Kenneth Burke's words, "equipment for living," as
a kind of currency or capital, then acquaintance with a variety of cultural
forms makes people better equipped and richer than they otherwise would
be.
Innovation
We need not accept the analogy between progress in art and progress in
science to agree that most art forms require constant innovation and that
innovative art should be given the room it needs to survive and a chance
to make its mark.
70
Pluralism and Diversity
A commitment to pluralism has been a traditional part of the American

heritage. Justice Holmes called attention to the public interest in protecting
the free marketplace of ideas, and others have noted the importance of
protecting the multiple cultures that constitute our national culture. In
government-policy terms, a commitment to pluralism is a matter of equity:
Why should artists working in traditional European forms be given the
resources to create excellent work while artists who work in other forms
must respond to the dictates of the market? But there is a larger public
interest in supporting pluralism. For just as mainstream high-culture art
can be a resource for poor or minority people, so can ethnic or nonmainstream art be a resource for ethnic majorities and the well-to-do.
Participation
There may also be a public interest in developing the skills and inclinations
that people need to make art as well as to consume it. Participation in
cultural activities can give individuals opportunities to act on their environments, to stretch their imaginations, and to enhance their expressive
abilities. (Ironically, many of those who criticize public agencies most severely for supporting amateur or participatory programs are the same people who take seriously the work of mass-culture critics like Dwight
MacDonald and Ortega y Gasset, who warned that the mass media were
narcotizing the public into a passive lump, ill-suited to citizenship in a
democracy.)
I shall refer to this incomplete list from time to time to suggest that
different forms of support for the arts and different ways of organizing
artistic production and distribution are more or less supportive of different
values. In the section that follows, I shall discuss several models of the
ways in which supporters of the artsprivate patrons, foundations, corporations, and governmentmight divide up the philanthropic turf.
THE DIVISION OF LABOR AMONG FUNDING SOURCES
Let us start with two principles of cultural policy:

1. The uncertainty principle. (We can never be sure what is going to
work.) At the core of the evaluation of any work of art is an area of
uncertainty. What one generation or group of critics thinks has promise
may turn out to be sterile; what they think is barren may be hailed by
another generation as great art, or may lead to the creation of great art.
To see that this is the case, we need only to read art or music history. The
French Impressionists were roundly condemned until they developed their
own distribution system and inspired their own critics. When the music of
Brahms was first played in this country, concert halls emptied out and
critics called it atonal rubbish. This is not to say that one should be completely relativistic. What it does mean is that any system of cultural pa-
71
tronage should have some looseness in it, some play, some opportunity for
odd works to fall between the cracks. If the Brahmses and Impressionists
of our era are to survive, we need to foster a variety of patronage principles and a variety of relatively autonomous patronage sources.
While this may seem obvious, it is at odds with customary ways of
thinking about policy, and is one of the things that makes cultural policy
differ from social, military, or fiscal policy. Ordinarily we know what we
want to achieve (e.g., well-fed children, missiles that go where they are
aimed, taxes that are reliably collected) and we try to design an airtight
system to achieve it. By contrast, in supporting culture, maintaining a sizeable element of randomness is essential.
2. The constraint principle. (All organizations face constraints.) No one
can decide how or what culture should be funded and then instruct someone to follow his or her blueprint. Aside from private patrons, all funders
of the arts are organizations, and all organizations have their own agendas, their own traditions, and their own supporters to whom they are beholden. Governments must please voters, corporations must appease
shareholders, foundation staff must justify their actions to their trustees,
and the trustees must justify them to themselves and to their associates.
We can condemn such constraints and create master plans that ignore them;
or we can recognize the varying limits that different sectors face and try
to build them into our plans. The former is the rational engineering approach; the latter is more akin to Buddhism and Oriental methods of selfdefense.
There are currently at least four popular prescriptive models of how the
sectors that support the arts should interact with one another. The first
model is that government lead and others follow. The second is that corporations and private foundations lead, calling upon government when
they need its financial clout. The third model proposes a partnership among
government, business, and foundations to set policy collectively. A fourth
approach is to discern a natural division of labor among funding sectors
and to build policy upon that.
Government as Leader
Because the National Endowment for the Arts is this country's single largest arts funder, it is alleged that the NEA has, in effect, been setting the
priorities that foundation and corporate donors follow. The mechanisms
for this are said to be two: First, large challenge grants, requiring three-toone matches from private sources, permit recipient organizations to pressure other donors for support. Second, Endowment grants act as seals of
approval, signifying to nonexpert funders that an arts organization is worthy of patronage.
The principal defense of having government (in the form of the Arts
Endowment) set policy, while foundations and corporations follow, is that
the NEA has the resources to assemble the professional panels necessary
to give objective and knowledgeable reviews of competing proposals. The
72
costs of information are so high, so this argument goes, that the Endowment becomes a clearinghouse and a vehicle for the professional arts community, in effect, to make the decisionsmuch as scientists decide on the
relative merits of applicants to the National Science Foundation. Their decisions, it is argued, are fairer than less informed decisions by lay people
could be, and thus their examples warrant following.
There is some merit to this argument and much merit to the panel system itself. Yet, even if one dismisses accusations that certain panels are
"stacked" with advocates of one or another artistic position, there are
three things wrong with it. First, the most important allocational decisionsallocation of agency resources among artistic disciplines and Endowment programsare made by the agency director and staff (with the
advice and consent of the National Council), not by panelists. These allocations are in large part politicalas, in a broad sense, they should be,
given the impossibility of comparing the merits of different artistic disciplines. But if it is impossible for a government agency to avoid making
allocational decisions that are responsive to politics, this does not mean
that other funders should abide by them. Second, this model violates the
uncertainty principle, according to which even peer judgment cannot be
relied upon to select, in every case, the art that should be funded. While
we may agree that peer review is the best single decision-making strategy,
we would still want to preserve some areas in which decisions were eccentric, quirky, or perverse enough occasionally to aid the potentially important artist or organization whose merit no sane or fair-minded contemporary would recognize. Third, this model violates the constraint principle.
In practice, other agencies could not, for long, follow the lead of government, even if they wanted to. They are subject to different constraints and
could not get away with it. (Imagine, for example, Exxon supporting [as
the NEA did] the production of Erica Jong's Fear of flying.)
Private Sector as Leader
Angered by pressure from challenge-grant recipients, some foundation and
corporate arts supporters have countered that the private sector should call
the tune, enlisting government financial aid when this is necessary. According to this model, best articulated in a Heritage Foundation paper on arts
policy, private decision makers should generate projects, and government
agencies should help fund them. This approach appeals to those who distrust government; what is more, it acknowledges the uncertainty principle.
If funding decisions emerge from a variety of centers, each with its own
decision rules, they will, presumably, be more diverse than those that come
out of one or two public agencies.
Yet, ultimately, this model is as impractical as the government-leadership approach. First, one questions the wisdom of placing public money in
the hands of many of those who might generate plans and proposals. While
McNeil Lowry and the Ford Foundation of the 1960s originated programs
that government could have matched with equanimity, we can all think of
73
examples of private decision making less worthy of government endorsement. Second, this method also violates the constraint principle. A government agency that simply ratified private-sector funding decisions would
lack a broad constituency among either artists or legislators and would
probably perish. Third, the generation of initiatives from the private sector
would quickly outrun the ability of government to fund them: Decisions
would have to be made, peer review would be established, and the current
system would be restored.
Partnership
The Arts Endowment often describes its policies as based upon a partnership among government, business, foundations, and the arts. The partnership approach is rhetorically appealing; but the goal of genuinely shared
decision making at the national level is unattainable, and probably undesirable. First, any funding system that seeks consensus among all support
sectors violates the uncertainty principle. Second, the partnership idea violates the constraint principledifferent funding sources diverge not out
of perversity but because they face different incentives, different pressures,
and attract different kinds of people. One is tempted to suggest that any
cultural project that requires the enthusiastic support of people in each
funding sector is probably not worth funding (a suggestion to which the
recent history of public television lends some support).
Natural Division of Labor
A final model is to let each support sector do what it is inclined to do and

what it does best. This approach acknowledges the uncertainty principle
in that it recognizes the value of multiple funding sources using a variety
of decision rules. It also acknowledges the constraint principle in that it
entails a patronage system designed around the constraints that differing
funders face. Its major flaw is that there may be some values that none of
the funding sectors are likely to address. One role of government in such
a system should be to identify the values (and organizations that embody
them) that are being served poorly; to encourage funders who can to support those values; and, when possible, to itself act as patron of the last
resort, in addition to its normal patronage functions.
Up to now, I have discussed the arts funding system as a mosaic whole.
If we accept the premises of the natural-division-of-labor modeland the
attentive reader will notice that I have stacked the rhetorical deck in this
directionthen our attention is focused on the pieces that compose this
mosaic. Designing strategies of arts support that can meet the challenges
described in this paper's first section requires an appreciation on the part
of foundations, corporations, or government agencies of the constraints on
other funding sectors, the resources that they command, and the preferences that are likely to guide their decisions. The next section provides
such an overview.
74
PATTERNS OF PRIVATE AND PUBLIC PATRONAGE
The post-World War II era has been one of ever-greater institutional complexity in the arts, as in most other regions of the voluntary sector. Organizations in every artistic discipline have grown, both in budget and staff
size and in the number of programs that they offer. Growth, and crises
brought on by overly rapid expansion, have increased the budgetary needs
of established institutions and have made the work of administering them
much more complex.
Even more important, the number of arts organizationsand the number of kinds of arts organizationsgrew exponentially during the 1960s
and 1970s. Cultural industries that barely existed during the 1950sthe
nonprofit resident theatre movement, dance, and chamber music, and
neighborhood and community artsspawned literally thousands of new
organizations. And even the older, more staid arts fields expanded as well.
(Fully one-third of the art museums active in 1980 had been founded in
the previous 20 years.) 9 This supply-side cultural explosion has brought
about new economies of scale and new levels of competition for audiences,
grants, and trustees.
A third kind of complexity has been the differentiation of the arts organization's funding environment. Where the private patron once reigned
supreme, the contemporary executive director or fund-raiser must know
how to raise money from three levels of government, private foundations,
and corporations as well as from the individual donor. Indeed, arts support has undergone an institutional revolution during the past 25 years, a
revolution with which we are still coming to terms.
The complex budgetary ecology of the arts thus consists of several interdependent dimensions. Let us consider, one at a time, the major factors in
the arts' funding environment: private patrons, corporate patrons, private
foundations, and government agencies. In each case, I shall attempt to
assess what the scale of giving has been to date and what it is likely to be
in the future. Second, based on information that is of necessity fragmentary and often anecdotal, I shall sketch the constraints that each of these
funding sources faces and the kinds of values that their giving programs
are likely to address.
Private Patrons
Private giving by living individuals has increased markedly, from approximately $7 billion in 1956 to more than $66 billion in 1985. Although
there are no reliable figures on the proportion of individual giving directed
to the arts, we know that it is relatively small. (The largest recipient, by
far, is organized religion.) Nonetheless, this amount still represents the
greatest share of private (unearned) support for arts organizations. (Even
if just 3 percent of individual contributions support the arts, the total, over
$1.8 billion, would greatly exceed the combined grants of private foundations, corporations, and all levels of government.) Donations as a percent-
75
age of real income declined between 1970 and 1980 but increased sharply
with the economic recovery of 1983, returning to early 1970s levels.10
What are the prospects for individual donations to arts organizations?
In part, this depends on the state of the economy, which influences donated funds from all sources. In part, it also depends on the effects of
changes in the federal tax laws, about which there are several opinions.
The conventional view, associated with economists Martin Feldstein and
Charles Clotfelder, is that individual givers respond to the price of giving;
that is, to the income forgone by making a deductible contribution. Donors in high tax brackets give up less money when they make a deductible
contribution than do individuals in lower tax brackets (because, had they
not donated the income, it would have been subject to a higher rate of
taxation). According to Clotfelder, tax cuts discourage donations (as would,
of course, elimination of the charitable contribution deduction) by making
it more expensive to give.11
By contrast, Yale economist Gabriel Rudney has argued that contributions are affected not only by the price of giving but also by the amount
of discretionary income that donors have available. In this view, tax reductions may have relatively small effect on individual donations because
they simultaneously raise the cost of charitable donations (which makes
giving decline) and increase taxpayers' discretionary income (which makes
giving increase).12 Note, however, that almost all economists would expect
changes in the cost of giving that do not increase discretionary income
(e.g., elimination of the charitable deduction) to make charitable donations
decline.
What does this mean for the arts? Too few years have passed since the
Reagan tax cuts, our theories are too speculative, and data on individual
donations are too poor in quality, to reach any confident conclusions. But
there are some reasons for concern.
For one thing, evidence is emerging that younger people of means (the
famous "Yuppies") have different and less favorable attitudes towards giving than do older individuals of comparable wealth.13 (Whether these attitudes will change as the Yuppies age is an open question.)
For another, changes in the tax laws may have the strongest negative
effect on the giving of precisely those donors who are most likely to contribute to arts organizations: people of wealth and upper-middle-class
professionals. Using a sample of IRS returns from the 1970s, Rudney and
two colleagues found that the dampening effect of the cost of giving on
donations was greatest for high-income donors, whereas the positive impact of discretionary income was most substantial for the less wealthy.14
The early returns from the first Reagan tax cut were consistent with their
findings. According to the American Association of Fund-Raising Counsel,
between 1981 and 1984 the average taxpayer with a family income of less
that $50,000 gave more to charity; whereas the average taxpayer with a
family income of grater than $50,000 gave less.15
Such dampening effects of taxes on giving may be counteracted by more
76
aggressive fund-raising by arts organizations large enough to afford it. Preliminary analyses by economist Richard Steinberg of data from the late
1970s suggest that the arts sector, especially in comparison to other nonprofit industries, was spending less than an optimal amount on fund-raising (i.e., the marginal return to organizations in the sector of an extra
dollar spent on fund-raising was substantially greater than $1.00).16 There
is some evidence that some arts organizations are investing more in fundraising than they used to, and that this investment may be paying off. The
Theatre Communications Group, for example, reports that individual contributions to its constituency of resident theatres more than doubled between the 1980-81 and 1983-84 seasons.17
What purposes and values do private donations sustain? Private patrons
are usually immersed in a dense and influential set of relationships with
other patrons. Most private giving, fund-raisers say, occurs when a person
is solicited for a cause by someone that he or she respects. Families develop
relationships with local institutionsthe leading museum or orchestra in
their community, in particularthat span generations. Families of newer
wealth may seek, consciously or unconsciously, to establish their social
positions through affiliation with institutions supported by established social elites. (Modern volunteers are able to rank a community's boards of
trustees and "women's committees" by prestige and to pursue "volunteer
careers" that take them from the less to the more prestigious of these
groups.) 18
The bulk of individual giving goes to large and prestigious organizations
(in big cities) and to more modest, but locally prestigious, ones in smaller
places. Art museums and symphony orchestras have the advantage here,
although groups excluded from traditional boards on social grounds have
often been among the leading constituents of resident theatres, museums
of modern art, dance companies, and chamber orchestras. Larger, older,
and more established arts organizations have the advantage as well, because they can afford to employ professional fund-raisers to pursue individual contributions.
Where the major institutions are of high quality, individual support furthers the values of excellence and of conservation. In smaller cities with
less professionally developed institutions, such support may further the aim
of geographic access by providing art for local citizens. Because private
patrons are often willing to support capital expansionwhich requires expanded programming to at least a broader middle-class audiencelimited
increase in access may occur in this way as well. Except for those cases in
which socially excluded donors have established experimental alternative
organizations, private patronage, as a rule, is less supportive of the value
of innovation and not supportive at all of pluralism, diversity, participation, or excellence outside of the established artistic disciplines. The recent
increase in private giving is unlikely to have helped the nontraditional,
experimental, or neighborhood-based organizations that were placed most
at risk by reductions in federal support for the arts.
77
Corporate Philanthropists
Between 1975 and 1985, business philanthrophy has been a rapidly growing area of private giving, more than tripling in just ten years.19 The levels
of corporations' charitable contributions are tied closely to their profits.
When profits rise, so do donations (but not as markedly as profits). When
profits fall, contributions follow them (but, again, less sharply).20
During the recession of the early 1980s, it was apparent that companies
had buffered their contributions programs from the short-term effects of
hard times. Although absolute growth slowed, donations as a percentage
of the declining pretax net income of firms increased more than 50 percent, to the unprecedented level of 1.76 percent in 1982. As good times
returned, the dollar amount of corporate donations resumed its rise, but
the percentage that this figure represented of company earnings declined.
(Preliminary estimates for 1985 show lower profits and a higher percentage of contributions.)21
When President Reagan announced his plans to reduce sharply the federal role in the arts, many arts organizations turned to business for help;
and many observers, believing that companies would have to give their
highest priority to the victims of the administration's elimination of federal
social programs, expected them to be rebuffed. In fact, neither the ambitions of arts advocates nor the fears of the doomsayers have proven correct. During the past four years, support for the arts has held more or less
steady at about 10.5 to 12 percent of company contributions, rising slightly
between 1980 and 1981, declining modestly in 1982, holding constant in
1983, and declining again in 1984. This means that the arts received about
$400 million in grants from business in 1984, approximately as much from
independent foundations as from all levels of government.22
This stability represents a setback for the arts in comparison to the heady
rise in both the arts' share of the corporate dollar and in absolute support
during the 1970s. The American Association of Fund-Raising Counsel reports that respondents to its 1982 survey of company foundations planned
to reduce arts spending in favor of more support for education, health,
and social services.23 The fact that the 1982 and 1984 declines in the percentage of corporate contributions going to the arts were mild ones may
simply represent a lag between intentions and action.
Indeed, a study of Massachusetts company contributions officers by Michael Useem and Stephen Kutner indicates that the honeymoon between
corporations and the arts may be nearing an end, albeit one more likely to
culminate in stable marriage than divorce. Useem and Kutner report that
of the companies they surveyed, the ones that gave the largest proportion
of their contributions to the arts were the ones with relatively "old-fashioned" approaches to philanthropy: those with smaller, less professionalized giving programs and those in which the chief executive officer played
a particularly active role in both setting policy and choosing recipients.24
Corporate support tends to be allocated according to three somewhat
different models. In the more traditional firms, it works much like private
78
patronage; aid is given to causes when friends of the CEO ask him or her
to assist. In other corporations, aid to the arts is, in effect, a public relations expense. (Indeed, in a few firms it has been part of the public relations budget.) In the more progressive companies, philanthropy is becoming professionalized: Philanthropic staff resist, as best they can, efforts by
executives to deploy corporate dollars to their favorite causes; and, to the
extent their usually stretched resources permit, attempt to plan coherent
giving strategies that address community or national needs by drawing on
the special strengths of their firms. Professional staff of corporate giving
departments and company foundations seem particularly oriented, first,
towards addressing community social and educational needs; and, second,
to devising giving programs that are related to the core activities of their
firms.25 This latter emphasis often discourages gifts to the arts.
Observers of corporate philanthropy are unanimous in believing that the
pace of professionalization has already begun to rise and will continue to
accelerate. If this is the case, and if Useem's and Kutner's findings prove
applicable beyond Massachusetts, company support for the arts may, at
best, hold steady at its current levels as a percentage of total giving. Whether
the absolute magnitude of corporate support rises will continue to depend
upon the state of the economy.
Probably no donors face more pressing constraints than do corporate
philanthropists. Company giving staff work in profit-making, usually publicly held, organizations that must justify their actions to directors and
shareholders. Grant decision makers themselves must justify their choices
to corporate superiors. Although corporate foundations often provide limited autonomy to staff and do serve to buffer donation levels from shortterm fluctuations in company net income, they are usually dependent on
year-to-year budgetary decisions by the parent company.
Despite some notable exceptions, corporate programs in the arts tend to
be either conservative or commercial. Both Useem, and Kutner in their
Massachusetts study, and sociologist Joseph Galaskiewicz, in a study of
corporate philanthropy in the Twin Cities, discovered that corporate giving staff exert a strong influence on one another's points of view, and that
a gift to an arts organization by a leading firm may serve as a more powerful imprimatur than an NEA or private foundation grant.26
What is more, even where company philanthropy is administratively
separated from public relations, business philanthropists must exercise
caution lest their gifts embarrass their firms. Company dollars tend to go
towards traditional arts organizations in cities where companies are headquartered or maintain plants; and to large, visible organizations that promise
to deliver large, visible things, like popular public television series and
blockbuster art exhibits. Corporate support for art that is controversial is
difficult for firms to justify.
Data collected by the Conference Board, a business group, on the 1982
arts and culture contributions of 534 major American companies illustrate
this point. Of those gifts the recipients of which were identified, over 45
79
percent were devoted to music (including opera) or museums, and 16 percent to public television and radio. Cultural centers and theatres each received about 9 percent of the total, arts councils or united arts funds approximately 8 percent, and dance companies a scant 3 percent of company
gifts.27 Moreover, according to a survey undertaken by Kenneth Goody
for the Rockefeller Foundation, when they do support arts organizations,
corporations are more likely to provide general support or administrative
aid than assistance to artistic projects.28
On balance, corporate funding may enhance the value of excellence as
traditionally defined. (On the other hand, some corporate-supported
blockbusters have been allegedly of substandard artistic quality, museum
directors complain that certain corporate funders meddle intolerably in
exhibit design, and curators bemoan the influence of traveling exhibitions
on the quality of their working lives.) Company donations undoubtedly
support the value of access, to the middle class at least. And, in some
instances (e.g., the Kool jazz festivals), they tend to aid certain kinds of
pluralism. Occasional corporate support for local arts councils and festivals may enhance participation as well. Corporations are generally ill
equipped and little inclined to support serious innovation or experimental
work, access beyond the middle class, or pluralism that extends beyond
already popular or commercial forms. Nontraditional or highly innovative
arts organizations, neighborhood arts groups, or arts organizations that
serve minorities and the poor can expect little assistance from the business
sector.
Private Foundations
The private foundation share of private philanthropy, which doubled between 1955 and 1970, fell to 5.7 percent in 1980, just ahead of the share
of corporations.29 Of all sources of philanthropy, private foundation grants
grew most slowly during the 1970s. Increased assets (associated with a
buoyant stock market) led to a substantial rise in foundation grant-making
between 1980 and 1985.30 In the long run, however, barring dramatic
change in the tax laws, the long-term rate of growth is likely to be modest.
Foundations have devoted approximately 14 to 15 percent of their outlays
to cultural activities (a broad classification of which roughly half to twothirds comprises the arts) in recent years.31 Foundations, like other donors,
have been pressed to address social welfare needs arising from federal budget cuts; but, through 1984 at least, they apparently have not reallocated
support from the arts to do so.
The passivity of many arts fund-raisers with regard to foundations has
been odd in comparison to the hope invested in corporate philanthropy,
since the two sectors disburse roughly similar quantities of funds to the
arts. Indeed, the constraints on foundations are probably less uniform than
are the constraints on private patrons, corporations, or government agencies. Every foundation must support activities that are consistent with the
laws that regulate foundations and with its own charter. Every founda-
80
tion's staff must support programs that are acceptable to its trustees. And
every foundation must solve certain problems of administration, including
the trade-off between gathering costly information in order to make informed decisions, on the one hand, and keeping administrative costs in
check, on the other.
Within the foundation community one can find programs of grant-making to the arts that support almost every conceivable value. Some private
foundations support fellowships for individual artists; others aid community arts activities; still others provide assistance for conservation in the
visual arts. Most private foundation arts support, however, is given with
little fanfare to major traditional organizations, especially art museums
and orchestras, in the foundation's home community.32 Thus, although the
potential for diversity in foundation grant programs is great, and often
evident in the programs of some of the larger or better known private
foundations, relatively few private foundations have exploited that potential to serve as sources of philanthropic "risk capital" for worthy but unpredictable experimental programs.
Government
The Reagan administration initially aimed to reduce the federal presence
in the arts dramatically, proposing to cut the budget of the NEA by almost
50 percent. Stymied by Congress in this effort, the administration has settled for a slow war of attrition, eliminating those social programs like
CETA that provided incidental support for the arts, attempting to terminate the National Institute for Museum Services, and seeking ever-smaller
reductions in the Arts Endowment budget.
The effects of these policies have been threefold. First, and most widely
appreciated, the budget of the National Endowment for the Arts, the afterinflation growth of which stalled during the Carter administration, has
continued to stagnate. (By fiscal year 1985, annual appropriations for the
NEA stood at approximately $163 million, in deflated dollars about where
they were in the middle 1970s.)33 The Hodsoll administration has, for the
most part, eschewed ideological appointments and bold innovations, carrying out the same kinds of policies as did its predecessors, albeit with a
slightly more conservative flavor. The decline in real dollars appears to
have been distributed relatively evenly among the Endowment's major programs.34
Second, the first half of the 1980s has witnessed a quiet change in the
center of gravity of public arts support from the federal government to the
states. Federal appropriations for the Arts Endowment, which in 1980 exceeded state appropriations for state arts agencies by approximately 50
percent, now roughly equal those of the states, which have been on the
rise.35 (For 1984, the states appropriated $137 million. According to the
National Assembly of State Arts Agencies, the figure for 1985 is over $160
million. 36 ) Because more than 20 percent of the Endowment budget is
81
passed to the states, state resources are now greater than those of the NEA.
State agencies are more likely than the Endowment to fund smaller, established organizations; and several states are moving towards more routine
general operating support for major (by state standards) established institutions. State agencies also provide more support than the federal government to local arts agencies and, although the amount is small, to neighborhood or participatory programs.37
Third, the widely publicized struggles over the budgets of the NEA and
the Museum Services Institute obscured a more dramatic elimination of
social programs that had provided special support for neighborhood and
community arts organizations, which receive little direct assistance form
the NEA. In particular, the elimination of CETA, which had paid salaries
of staff ranging from secretaries at neighborhood arts agencies to at least
one director of a small art museum, seems likely to have hurt disproportionately the smallest and most vulnerable organizations. Similarly, limits
on federal support for municipal social programs eliminated another source
of contracts for neighborhood, minority, and educational arts organizations.38
Hard data on the effects of the changing public role on the budgets of
arts organizations are few. According to the American Symphony Orchestra League and the Theatre Communications Group, public support, as a
proportion of total budgets, has declined somewhat for orchestras and theatres while, within the public sector, state support has come to play a
slightly greater role than federal.39 But the size of these changes is modest.
Studies of local nonprofit sectors by Lester Salamon and his associates at
the Urban Institute indicate that government support for the extremely
broad category of art, culture, and recreation declined slightly in some
cities, more in others (like Atlanta, which suffered an 18 percent decrease)
between 1980 and 1982, but that this decline may have slowed or halted
with the 1983 recovery.40 Although the situation varied from place to place,
in general changes were not marked.
Of course, such studies do not permit us to look at the effects of changes
in public funding on specific kinds of arts organizations. In general, cuts
in public support are more likely to hurt relatively small organizations in
a discipline than very large ones, and experimental rather than traditional
institutions (e.g., the 30 developmental theatres that the Theatre Communications Group reports have closed since 1980).41 In particular, it is likely
that cuts in social programs have taken their toll on neighborhood and
minority arts groups. But data of high quality are simply unavailable.
Public arts programs, by their nature, entail an emphasis on accountability and geographic access. It is also politically essential for them to court
the organized arts lobbies, which are dominated by the largest established
organizations: art museums, symphony orchestras, and, in some states,
resident theatres. These dual imperativesto support the wealthiest and
to provide accesscreate tension for public agencies when resources are
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not expanding. Some state agencies have resolved this tension by focusing
on support for the largest and most powerful institutions while maintaining some assistance for organizations in "underserved" parts of their states
and for organizations serving organized minority constituencies. In its fiveyear plan, the Endowment emphasized its support for the more established
experimental organizations, which have less access to corporate and individual contributions than their more conventional peers.42
The constraints under which public arts agencies operate generate certain dynamics that have been resistant to changes in administration. First,
public grants tend to be relatively widely dispersed, in a manner that enables agencies to hold together their constituencies. Second, relatedly, public agencies are more likely than other institutional donors to support organizations in arts-poor areas, thus increasing access to the arts among the
middle class. Third, partly because of pressures for their own accountability and partly because of limits on their own resources, public agencies,
like many corporations and private foundations, have been active in encouraging arts organizations to become more administratively efficient, to
stretch grant dollars further. Fourth, public arts agencies are more likely
than private foundations or corporations to support the development of
art forms in fields that, like jazz or folk arts, extend their appeal beyond
the upper-middle-class constituency of most traditional arts organizations.
In practice, the Endowment and many state arts agencies have acknowledged a special responsibility to the experimental and innovative. But this
is only one part of their collective mission. Because it is one that seems to
survive as a matter of conscience rather than as a political imperative, it
must be constantly defended.43
In short, then, the highly decentralized U.S. system of direct public assistance for the arts supports a wider range of values than most other
funding sectors: excellence in both traditional and, to some extent, nontraditional art forms; innovation; access for the broad middle class and, to a
lesser extent, others; diversity; at the federal level, conservation; and, at
the local level, participation. Because the Arts Endowment, with its system
of peer review, has been until now somewhat insulated from political pressures from outside the world of the arts; and because direct public support
in the United States is so decentralized (and thus public agencies are subject to different constraints from place to place), the public contribution is
potentially important beyond its size. On the other hand, because they
support so many purposes, public agencies can address no single one of
them as concertedly as can private foundations, at least at current levels
of funding.
Summary
This review of the sectors that share the role of funding the arts has made
two facts apparent. First, the financial outlook for the arts is neither particularly buoyant nor, for the arts in the aggregate, particularly grim. During the 1970s, support from private foundations declined relative to that
83
from other sources, but support from the federal government and corporations increased markedly. During the early 1980s, federal support has shrunk,
but continued increases in corporate and state support and in earned income have made up the difference. In the aggregate, the pluralistic U.S.
system of support for the arts is relatively stable and capable of maintaining the current level of artistic activity.
What we have seen is that there are natural markets in the funding community for some kinds of valuesthose of excellence (for which I presume
all funders strive), conservation (in the sense of the preservation, display
and performance of traditional great works), and access (for residents of
small cities and the broad middle class but not for minorities or the poor).
Other valuesdiversity, participation, and limited pluralismhave received public support but are now threatened by reductions in government
budgets. Still other valuesin particular, innovation, scholarship, and diversity in the strongest sensehave few natural allies. Scholarly endeavors,
like those of curators and recreators of medieval or nonwestern music,
tend to be insufficiently glamorous for corporate and many government
donors and have yet to engage the interest of many foundations. Few funders in any sector have considered seriously providing the infrastructure
necessary to support the artistic development of minority, uninstitutionalized, or folk cultural forms. Innovative art work is risky and usually unpopular; and innovative arts organizations tend to have troublesome management structures that fit poorly with (public and private) bureaucratic
requirements. What is more, artists, who are central to innovation, have
been seriously neglected. Notwithstanding the existence of a few excellent
foundations, Arts Endowment, and state arts agency programs that support creative artists, the bulk of arts-support activity in the United States
proceeds as if the arts can do perfectly well without them.
One challenge, then, both for the next several years and beyond, will be
for private and public cultural policy makers to devise systems for addressing some of the less marketable values of arts policy and to encourage
those donors who can afford to be different to resist the temptation to
follow the philanthropic crowd. In particular, I suspect that foundations
and government agencies are in a potentially strong position to influence
the arts-support system by example and by supporting programs that no
one else will fund.
ART IN THE MARKETPLACE
Up to now, I have taken the basic structure of the U.S. arts support system
as given. What are the alternatives to the system of artistic patronage that
has developed in the United States? The obvious ones, if we look at how
other advanced industrial societies of both the market and socialist varieties support the arts, involve a much larger government role. Yet the Rea-
84
gan administration has argued that government's participation in supporting the arts, already less central than in any of this country's friends or
foes around the world, should become smaller still. Government support
for the arts, according to a comparative study by Yale economist John
Michael Montias, accounts for 77 percent of revenues of nonprofit performing arts organizations in Austria, 73 percent in the Netherlands, 68
percent in France, 86 percent in Germany, and 90 percent in Sweden. By
comparison, the figure in the United States is closer to 15 percent. Even
the indirect support given through government tax deductions for gifts to
501(c)(3) (charitable) nonprofit organizations does not begin to compensate for this difference. 44
At this point, the possibility of a public role of European scale in the
U.S. arts-support system seems too remote to warrant a full-fledged discussion of its pros and cons. Instead, I shall consider the alternative to
which the arts and other nonprofit organizations have been urged: increased reliance on earned income and the economic marketplace.
Increased Earned Income
Arts organizations can pursue at least two kinds of earned income. The
first is nontaxable income from activities related to their core missions: for
example, museum admissions or membership fees, performing-arts subscription or single-ticket sales, orchestra recording contracts, and theatre
television productions. The second is taxable "unrelated business income"
of the sort accrued by museum stores that sell a broad range of gifts and
consumer goods, or by museums that buy and sell real estate. Arts administrators have become increasingly attuned to the first kind of earned income and are beginning to be more alert to opportunities for the second.
Related earned income plays a crucial role in the finances of most contemporary arts organizations. On average, large resident theatres earn 65
to 70 percent of their operating income (smaller, experimental theatres
earn between 35 and 45 percent); orchestras, 45 to 60 percent; opera companies, 45 to 55 percent; dance companies, 55 to 65 percent; presenting
organizations, about 65 percent; art museums, approximately 33 percent;
local arts agencies and service organizations, 30 to 40 percent; and neighborhood and minority arts organizations, approximately 20 percent.45
In recent years, the established arts organizations have become more
sophisticated in promotion, ticket pricing, and building a subscription base,
and the results have paid off handsomely with increased attendance and
income. Indeed, economist William Baumol notes that performing-arts organizations have suffered far less from the "inflation disease" over the past
decade than many had predicted. Part of the reason has to do with greater
sophistication with respect to marketing. (The rest has to do with declining
cast sizes, production standards, and performer salaries.) 46
Nonetheless, into the swelling chorus of advocates of earned income as
a solution to the arts' ills, it is important to contribute a few discordant
notes of skepticism. First of all, increasing earned income is not a viable
85
strategy for organizations whose purpose it is to serve low-income persons

who cannot afford to pay for their services. Increased earned income may
also be a poor solution for organizations seeking to lure potential audience
members into the arts; or for local arts agencies providing technical assistance for small, struggling producing groups. Earned income enhancement,
as it is sometimes called, also holds out little promise for organizations
choral societies, avant-garde musical ensembles or theatre companies, or
highly specialized art museumsthat deal in genuinely unpopular art forms.
Organizations whose potential audience is small and can be reached by
word of mouth have little to gain by investing in elaborate marketing
schemes. Thus, many organizations most severely affected by federal budget cuts do not have available to them a direct market option.
Second, earned income growth may be a mixed blessing for arts organizations concerned with achieving their core artistic missions. The nonprofit form exists precisely because the government and many of its citizens believed that some important social goals could not be achieved by
the market. Organizations that let conductors rehearse new works for hours,
curators who write books about obscure artists, fiction writers attempting
first novels, and actors who engage in time-consuming theatre games all
behave irrationally in economic terms: Their behavior costs more than its
results can contribute to revenues, even with the cleverest marketing director.47
Third, and perhaps most important, is the problem of what students of
management call goal displacement. When goals like artistic excellence or
the service of new publics are difficult to accomplish, they may be displaced by goals that can be achieved. New staff are needed to perform
new administrative functions; and such staff (except for the occasional
saint) very naturally become advocates for the importance of their functions, and for policies that make it easier for them to do their work.
Take, for example, the case of subscription campaigns in the performing
arts. Subscription audiences can enhance the stability of theatres by making it easier for them to plan full seasons and to maintain a constant cash
flow. When the match between the interests of subscribers and the artistic
goals of the theatre is a good one, they can be quite helpful.
But consider this only slightly overdrawn example of a theatre whose
artistic director and staff have avant-garde aspirations. An ingenious marketing plan recruits a sizeable subscription audience for two years. The
theatre uses the income to extend its season, to hire new administrative
staff, and to spearhead a capital campaign that enables it to move into a
larger house. At this point the trouble begins: The subscribers tire of the
theatre and its challenging repertoire, and few new subscribers can be
reached. By now, however, the company has accrued too many obligations
to do without them.The managing director (with the director of marketing
at his or her elbow) asks the artistic director to substitute a currently popular Broadway hit for an expensive production of a difficult new play about
growing up Portuguese in Northern Ireland. The artistic director accedes.
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The Broadway hit keeps the company afloat but does not revive its finances sufficiently. The next year a trustee asks the artistic director to do
A Christmas Carol (to charm subscribers and coax single-ticket buyers
away from the local ballet's production of The Nutcracker). The artistic
director and some of the actors resign. The next year the new artistic director introduces a Noel Coward play, a musical version of The Werewolf
of London, and, as a sop to the original subscribers, a new production of
That Championship Season. (In order to justify a hoped-for foundation
grant, the company may also do Othello and something by Ted Talley.)
The organization has survived, but its original purposes (and most of its
original personnel and audience) have been forsaken.
If this hypothetical case study seems too coarsely drawn, consider the
real implications of dependence upon recording contracts for one major
orchestra. (This example comes from a book by political scientist Edward
Arian, who played in the Philadelphia Orchestra before he wrote about it.)
In the period Arian describes, the orchestra, which surpassed all others in
income from recording contracts, programmed concerts with pieces scheduled for recording in order to economize on rehearsal time. According to
Arian, the need to cater to popular taste in selecting pieces to record created a "circle of conservatism" that "continues to feed upon itself."48
The point of these stories is not that arts organizations that devise exhibits and hold performances that appeal to large audiences cannot or should
not market their programs more effectively. They should. But only certain
kinds of organizations can benefit significantly from increases in earned
income. What is critical is that trustees and managers assess carefully the
implications for their organization's core goals before implementing techniques to enhance earned income, and that funders be sensitive to these
same considerations.
Enhancement of unrelated business income is more difficult, but for some
organizations it may be more promising since it is easier to insulate core
activities from unrelated business efforts. Art museums have earned money
from stores and restaurants; museums, performing-arts organizations, and
even neighborhood arts groups have received income from real estate investments. The potential for such entrepreneurship, even given the constraints of tax and nonprofit corporations law, is probably significant for
many organizations. Nonetheless, success in a business unrelated to one's
core activity is often elusive (as executives of expansive conglomerates will
attest), and the administrative costs are substantial. What is more, such
ventures are subject to the tax on unrelated business income and may also
attract IRS scrutiny of an organization's other activities.
More radical market solutions
The association of art, or at least "high culture," and the market may seem
strange or even horrifying to those of us who were raised on Matthew
Arnold and T. S. Eliot. Yet, if one looks at the origins of American high
culture, one finds that the nonprofit/for-profit division of labor that now
87
exists is neither as natural nor as hallowed by tradition as it seems. Our

first major museumsthose of the Peales and, a little later, of P. T. Barnum
and his many imitatorswere decisively for-profit. Yet they exhibited fine
art, produced theatre of high quality (including Shakespeare and Gilbert
and Sullivan, whose operettas were first seen in America at the for-profit
Boston Museum), and hosted touring European "classical" vocalists and
fine-arts dancers. The first American orchestras were for-profit, sometimes
musicians' cooperatives, sometimes established by entrepreneurs: Gottlieb
Graupner, whose Boston Philharmonic is said to be the first American
symphony orchestra, was also a popular-song publisher and singer. The
nonprofit form came to the arts relatively lateafter the Civil Warand
was not entirely dominant until much later. (A profit-making entrepreneur
toured 12 English-language opera companies in the first decade of this
century; and some commentators saw the Shubert organization as the hope
of classical music into the teens.)
And if we look at our high-culture industries today, we soon see that
nonprofit organization is not the only form. Indeed, in art, classical music,
and even theatre, our museums, symphonies, and resident stages are only
the nonprofit jewels in a for-profit crown. Museums are enmeshed in a
web of for-profit galleries and dealers, supported by the sales of art books
published by for-profit publishers and postcards manufactured by for-profit
cardmakers. Some symphony orchestras draw income from recording contracts (with for-profit record companies), play on instruments manufactured and sold in for-profit enterprises, and use sheet music produced by
for-profit publishers; and much classical music is played by small ensembles that are legally profit-seeking partnerships. Broadway theatres, many
summer theatres, and the rapidly proliferating dinner theatres are for-profit;
as are talent agencies, the theatrical press, and theatre-supply stores, what
is more, many theatre plants are still owned and operated, for a profit, by
real-estate entrepreneurs. How determinant are the obstacles (for they are
certainly formidable) either to backward integration of nonprofit arts organizations into profit-making related fields that could subsidize their activities or to forward integration by for-profit producers of materials into
presentation or exhibition?
The familiar explanations for the rise of nonprofit organizations do not
fit well in the case of nonprofit enterprise in the arts in the United States.
"Market failure," for example, is not a satisfactory account. The commercial orchestras of the nineteenth century can be said to have failed only in
retrospect. In their time, they made a profit. Not until nonprofit entrepreneurs like Henry Higginson (founder of the Boston Symphony Orchestra)
developed the permanent, first-rate, solely classical symphony orchestra,
which before had existed only in the imaginations of a few music-lovers,
could orchestras be said to be economically non-self-supporting (and then
only because Higginson's subsidized model drove its for-profit competitors
out of business).
The rise of nonprofits in the arts was, I suspect, the result of two coin-
88
ciding impulses: those of artists and critics for organizations that would
provide the maximum of freedom from market constraints and those of
emergent urban elites for a prestigious culture that they could dominate
and call their own. Although the demands of the former are stronger and
better articulated than ever, the existence of institutions devoted to purifying an exclusive high culture is probably of less importance to our current national upper class than to the local elites of the beginning of this
century, particularly now that the massive rise in higher education has
made the arts accessible to more and more Americans. So although the
professional apparatus of high culture has never been better institutionalized, the social constituency for the distinction between high and popular
culture, and between nonprofit and for-profit enterprise in the arts, may
be eroding.
Indeed, the for-profit sector already supports some values that we might
want arts policy to achieve. Augustin Girard, for many years a member of
the French Ministry of Culture and now "Minister de la Qualite de la Vie"
for France, has argued that, while French public agencies sought in vain
to increase the audience for that country's arts organizations, commercial
culture industries achieved that goal behind the back of public policy. According to Girard, we should reject "cultural policies (that) have borne on
classical dissemination methods and have aimed at democratizing the institutions reserved until now to an elite" and emphasize, instead, efforts
supporting and influencing the development of what he calls the cultural
industries, by subsidizing less profitable but meritorious products, providing tax relief and tax shelters in combination with regulations requiring
certain public-service investments, and increasing the availability of investment capital to cultural entrepreneurs.49
Lest one be carried away by Girard's euphoria, note that he addresses
only one goal of policy, that of increasing access; he writes of France,
which differs from the United States in numerous respects; and he ignores
the possibility that mass-communications approaches could drive out of
business small performing-arts organizations that provide much of the diversity and innovation in our culture. Moreover, his arguments are irrelevant to the concerns of neighborhood and community arts organizations
and many others, as well. Nonetheless, his point is worth taking seriously,
if skeptically.
I offer these remarks in order to provoke thought and discussion and
because the state of our knowledge about the intersectoral division of labor does not warrant very firm or scientific conclusions. We know rather
little about why some art forms do well on the market and some do poorly.
It is not enough to say that popular forms survive and unpopular ones
fail: What this assertion ignores is the power of market segmentation.
Markets are created by entrepreneurs; they do not exist in nature. Thus
American popular music became dramatically more innovative and diverse
when the radio industry began segmenting markets by age, ethnicity, region, and race.50 Where markets for an art form are highly segmented,
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pluralism and often innovation thrive. Where mass markets are sought,
pluralism, innovation, and, from the standpoint of many artists and consumers, excellence suffer. Yet little is known about the ways in which markets become segmented, or about the subtle but important relationship
between the evolution of markets and the evolution of artistic genres.
Neither do we understand the manner in which expectations about the
scale and quality of artistic performance develop. It is probably too late to
go back to the standards of nineteenth-century orchestras which, with their
slimmer staffing, uneven rehearsal schedules, and members who played in
several ensembles at once, could make a profit (so long as they did not
face subsidized competition); nor would we necessarily want to. But an
understanding of the factors that lead to norms of performance might suggest fruitful opportunities for experimentation.
By way of summary, consider the following six points:
1. The current allocation of cultural activities between the for-profit and nonprofit
sectors is neither natural nor incontrovertible.
2. Some arts organizations that are now nonprofit may be able to support themselves on the market (perhaps with a consequent loss of innovativeness).
3. In some cases, creative efforts to forge or segment profitable markets for currently unprofitable cultural products might work.
4. In other cases, creative recombinations of core and ancillary cultural activities
through backward vertical integration by nonprofits or forward integration by
for-profits might permit profitmaking activities to subsidize meritorious moneylosing ones.
5. Some plausible aims of cultural policy are assisted, to varying degrees, by the
market sector already.
6. Market solutions will do nothing to address problems of access for persons with
little discretionary income; problems of diversity and survival of art forms without large markets; or, indeed, most of the other values with which cultural
policy is concerned.
CONCLUSION
I began with a discussion of the Reagan administration's plans for the

federal arts budget in the 1980s, and with these I will conclude. We have
seen that the costs of the budget cuts originally proposed for arts organizations would have been substantial but not, in the aggregate, catastrophic. We have seen, as well, that, barring an unlikely conjuncture of
fortuitous developments, the revenue gap that would have resulted would
not have been filled by private philanthropy.
We have also seen that the natural division of labor among funding
sourcesthe varying constraints that hem in any person or organization
in the philanthropic fieldcombine to make new income least available to
precisely those organization most likely to be harmed deeply by sharp reductions in public assistance to the arts: those organizations that address,
primarily, the values of innovation, pluralism, diversity, and excellence in
90
unconventional kinds of art. Such organizations are likely to remain less

attractive than traditional institutions to private patrons and corporate donors. And they are particularly unlikely to find much salvation in pursuit
of earned income.
In nurturing innovation, pluralism, and diversity, private foundations
and government are best equipped to play a central role. As Kingman
Brewster has written, "Let the government take its place as a full partner
along with other angels; but let it be willing to march in when other angels
fear to tread alone."51
In the long run, the welfare of the arts may depend on the emergence of
a new intersectoral division of labor among nonprofit, for-profit, and public enterprise in the production and distribution of culture, broadly defined, and on the craftsmanship with which this new order is wrought. In
this longer process, corporate and private foundations may play an important and constructive role if they display the daring necessary to provide
risk capital to both nonprofit and for-profit enterpreneurs. And government must have the courage and wisdom to take fuller responsibility for
the pursuit of those purposes that neither the market nor private philanthropy can be expected to support.
NOTES
1. Paul J. DiMaggio, "The Impact of Public Funding on Organizations in the Arts," (Yale
Program on Non-Profit Organizations Working Paper 31, New Haven, Conn. July 1981), 3
7.
2. Livingston Biddle, "America for the arts," Cultural Post 6, 3 (Sept./Oct. 1980): 1ff.
These figures ride on a fairly restrictive definition of "professional" and probably underestimate considerably the number of organizations with paid artistic staff in both periods.
3. Lester M. Salamon and Alan J. Abramson, The Federal Budget and the Nonprofit Sector (Washington, D.C.: The Urban Institute, 1982), 32. These figures do not include the
impact of the demise of CETA and other programs that, though not cultural in orientation,
to some degree supported arts organizations.
4. Charles Clotfelder and Lester Salamon, The Federal Government and the Nonprofit
Sector: Impact of the 1981 Tax Act on Individual Charitable Giving (Washington, D.C.: The
Urban Institute, 1981).
5. Salamon and Abramson, op. cit., 44.
6. DiMaggio, op. cit., 8-11.
7. Ibid.
8. Throughout this paper I used the term "high culture" loosely to refer to those artistic
efforts supported by private philanthropy and government. As I explain below, history shows
us that the designation "high" refers not to intrinsic features of an art form or genre but to
its social status and to the manner in which artistic work is organized and distributed. One
of the distinctive aspects of our current cultural landscape is the increased ambiguity, to
which both public arts support and broader social trends have contributed, surrounding the
classifications "high versus low" or "high versus popular" culture. For a broader discussion
of this topic, see my chapter, "Cultural Entreprcneurship in Nineteenth-Century Boston"
(chapter 2, this volume).
9. Paul ). DiMaggio, "The Nonprofit Instrument and the Influence of the Marrketplace on
Policies in the Arts," in W. McNeil Lowry, ed., The Arts and Public Policy in the United
States (Englcwood Cliffs, N.J.: Prentice-Hall, 1984), 71. (The data come from the author's
91
analysis of the data from the National Center for Educational Statistics' Museum Program
Survey 1979).
10. American Association of Fund-Raising Counsel, Giving USA: Annual Report 1986
(New York: American Association of Fund-Raising Counsel, 1986), 10-17.
11. See, e.g., Clotfelder and Salamon, op. cit.
12. Barry Dennis, Gabriel Rudney, and Roy Wyscarver, "Charitable Contributions: The
Discretionary Income Hypothesis" (Yale Program on Non-Profit Organizations Working Paper 63, New Haven, Conn., January 1983).
13. Arthur H. White, The Charitable Behavior of Americans (Washington, D.C.: Independent Sector, 1986). 14. Dennis, Rudney, and Wyscarver, op. cit.
15. American Association of Fund-Raising Counsel, op. cit., 13.
16. Richard Steinberg, "Economic and Empiric Analysis of Fundraising Behavior by Nonprofit Firms" (Yale Program on Non-Profit Organizations Working Paper 76, New Haven,
Conn., September 1983).
17. Theatre Communications Group, Theatre Facts 1984, insert to American Theatre 1
(March 1985): 7.
18. Based on conversations with managers of and volunteers for arts organizations in
several northeastern and California cities.
19. American Association of Fund-Raising Counsel, op. cit., 33.
20. Ibid., 33.
21. Ibid.
22. Ibid., 38.
(New York: American Association of Fund-Raising Counsel, 1984), 34.
24. Michael Useem and Stephen I. Kutner, "Corporate Contributions to Culture and the
Arts" (Chapter 4, this volume).
25. Joseph Galaskiewicz, Social Organization of an Urban Grants Economy: A Study of
Business Philanthropy and Nonprofit Organizations (Orlando, Florida: Academic Press, 1985).
26. Ibid.
(New York: American Association of Fund-Raising Counsel, 1985), 37. Similarly, a detailed
study of corporate arts support in Chicago found that more than 50 percent of all company
arts dollars went directly to museums, symphony orchestras, or opera. By comparison, theatre, the dance, individual artists, arts education, and arts fairs received a combined total of
only 10 percent. See Chicago Council on Fine Arts, Corporate Support of the Arts 1977
(Chicago: Chicago Council on Fine Arts, 1977).
28. Kenneth Goody, "The Funding of the Arts and Artists, Humanities and Humanists in
the United States" (Report to the Rockefeller Foundation, November 1983, mimeographed).
(New York: American Association of Fund-Raising Counsel, 1982), 8. For a more comprehensive treatment of the role of private foundations in support of the arts, see Paul J. DiMaggio, "Support for the Arts from Independent Foundations" (Chapter 5, this volume).
30. American Association of Fund-Raising Counsel, 1986, op. cit., 42.
31. Ibid., 30-31.
32. See DiMaggio, "Support for the Arts," op. cit.
33. Robert Holley, "1985 NEA Pie Divided," American Theatre 1 (March 1985): 18.
34. Ibid.
35. Robert Holley, "An '85 Leap for State Arts Funding," American Theatre 1 (March
1985): 17.
36. "Update," Insert in National Assembly of State Arts Agencies News 5 (May 1985).
37. See, e.g., James Backas, "The State Arts Council Movement" (Background paper prepared for the National Partnership Meeting sponsored by the National Endowment for the
Arts and the National Assembly of State Arts Agencies, June 23-25, 1980, Washington,
D.C.), 23-34.
38. Regrettably, precise data on these effects are unavailable. CETA's administrative pro-
92
cedures were so decentralized and poorly monitored that estimates of its contribution to the
arts vary by an order of magnitude. And no one has studied rigorously the plight of neighborhood and minority arts organizationswhich, unlike more established groups, have no
collective data-gathering capacity.
39. Theatre Communications Group, op. cit., 10.
40. See the following reports, all published by the Urban Institute Press, Washington, D.C.,
in 1984: Paul G. Lippert, Michael Gutowski, and Lester M. Salamon, The Atlanta Nonprofit
Sector in a Time of Government Retrenchment; Michael Gutowski, Lester M. Salamon, and
Karen Pitman, The Pittsburgh Nonprofit Sector in a Time of Government Retrenchment;
Paul Harder, James C. Musselwhite, Jr., and Lester M. Salamon, Government Spending and
the Nonprofit Sector in San Francisco; Kristen A. Gronbjerg, James C. Musselwhite, Jr., and
Lester M. Salamon, Government Spending and the Nonprofit Sector in Cook County /Chicago;
and Diane M. Disney, Madeleine H. Kimmich, and James C. Musselwhite, Jr., Partners in
Public Service: Government and the Nonprofit Sector in Rhode Island.
41. Theatre Communications Group, op. cit., 1.
42. National Endowment for the Arts, Five-Year Planning Document, 19861990 (Washington, D.C.: National Endowment for the Arts, 1984).
43. In 1985, the House of Representatives, stimulated by objections to grants made to
several poets whose work was identified as "obscene," considered but rejected an amendment
to the reauthorization bill for the National Endowment for the Arts that would have prohibited that agency's funding of work that (in the American Association of Museums' paraphrase) "might be judged offensive to a large segment of the population"a standard that,
if rigidly applied, would limit drastically the federal government's ability to support experimental artwork. See Ruth Hargraves, AAM Legislative Service Bulletin, August 27, 1985.
44. J. Michael Montias, "Public Support for the Performing Arts in Europe and the United
States" (Chapter 14, this volume).
45. DiMaggio, 1984, op. cit., 63.
46. Hilda Baumol and William J. Baumol, "The Family of the Arts," in Baumol and Baumol, eds., Inflation and the Performing Arts (New York: New York University Press, 1984),
4-13. One suspects that there is room for continued growth in these areas, and that many
arts organizations that have not yet employed modern marketing methods can benefit from
doing so. See Paul M. Hirsch and Harry L. Davis, "Art Arts Administrators Really Serious
About Marketing?" in Michael Mokwa and William Dawson, eds., Marketing and the Arts
(New York: Praeger, 1979).
47. See DiMaggio, 1984, op. cit. for a more thorough discussion of these issues.
48. Edward A. Arian, Brahms, Beethoven and Bureaucracy (University, Ala.: University
of Alabama Press, 1971), 23.
49. Augustin Girard, "Policy and the Arts: The Forgotten Cultural Industries," journal of
Cultural Economics 5 (1981): 61-68.
50. Richard A. Peterson and David Berger, "Cycles in Symbol Production: The Case of
Popular Music," American Sociological Review 40 (1975): 158-173.
51. Kingman Brewster, "Paternalism, Populism, and Patronage" (Sotheby Lecture, Victoria and Albert Museum, London, 1978).
4
Corporate Contributions
to Culture and the Arts:
The Organization of Giving and the
Influence of the Chief Executive Officer
and of Other Firms on Company
Contributions in Massachusetts
MICHAEL USEEM and STEPHEN I. KUTNER
Corporate contributions to the nonprofit sector have been on a nearly continuous rise since World War II. Business philanthropic gifts totalled $38
million in 1940 but multiplied more than tenfold within the next two decades, reaching $482 million by 1960. By 1980 annual corporate contributions topped $2.6 billion, and by 1982 corporate giving exceeded $3
billion. In recent years, the growth rate in corporate philanthropy has
outstripped that of all other forms of private giving.1
Despite the increase, corporate largesse remains a comparatively small
source of income for most nonprofit organizations. Of the $116 billion in
revenues received in fiscal 1980 by nonprofit organizations other than religious organizations, only 22 percent came from all types of private giving, with corporate support providing a mere 2 percent. A survey conducted in 1982-83 of 3400 nonprofit organizations found that whereas
government funds constituted 39 percent of revenues, direct company gifts
supplied only 3 percent. In the case of colleges and universities, major
beneficiaries of corporate philanthropy, company support accounted for
only 1.3 percent of higher education's total expenditures in 1982-83. SimThe study on which this chapter is based has been supported by a grant from the Graduate
School of Boston University, and research assistance has been rendered by Mary E. Beasley,
Sandra J. Soslowsky, and Molly Zane. Helpful suggestions in preparing this chapter were
provided by Paul DiMaggio, Meryl Louis, and Christine Rossell.
94
ilar patterns prevail among the nation's cultural organizations: In 197879, only 2.8 percent of the income of 18 major theatres derived from corporate gifts, and among 31 major orchestras the proportion was a scant
0.7 percent.2
Spread evenly, corporate contributions would be of relatively small moment for many nonprofit organizations. Yet most cultural, educational,
and other nonprofit organizations receive no business underwriting at all,
while a relatively small number receive much. For the favored few, the
value of expanded corporate sponsorship can occupy a large place in development planning. But for nearly all, the potential value of company
backing has acquired a new importance in an era of government austerity
for the nonprofit sector.
The value of corporate money has become all the more significant because there is simply more of it. The rate of corporate giving is driven by
the level of company income, and corporate earnings are on the rise. When
a company's profits increase by $1 million over the previous year's income,
for instance, the firm's giving can be expected to rise by nearly $10,000.
Though the recession of the late 1970s and early 1980s retarded the rate
of growth in the income of many companies, by 1984 most major firms
were basking in multimillion dollar earnings increases. During a period in
which government funding was down and corporate income up, the importance of business gifts to the nonprofit sector loomed greater than ever.3
For cultural and educational organizations, corporate giving was of particular salience, since they received more than half (52.1 percent in 1982)
of the donated money. Moreover, culture and the arts were the area of
greatest relative expansion during the 1970s, growing from 5.3 percent of
total company contributions in 1970 to 11.4 percent in 1982. Education's
share, which stood at 40.2 percent in 1970, had dropped to a low of 34.9
percent in 1973; but since the mid-1970s education has also been on an
upward slope, reaching 40.7 percent of total corporate giving in 1982. By
1982, a commitment to contributing at least some funds to education and
culture had spread to more large companies than had commitments to any
other type of giving. Among 255 major firms participating in a 1981-82
national survey, 70 percent gave to culture and the arts, and 84 percent to
education.4
The nonprofit sector thus intensified its courting of the profit sector during the early 1980s and, by fortuitous coincidence, corporations were
themselves discovering new value in a strengthened relationship. For their
own reasons, many companies came to view universities, ballet companies,
art museums, and other nonprofit organizations as agencies with which
association could further company goals. A philosophy of corporate social
responsibility, accepted by growing numbers of senior managers, imbued
giving with noble purpose. For the more narrowly oriented company pragmatists, the invention of the business-nonprofit partnership provided a selfinterested rationale for increased giving as well. The giving spirit of both
Corporate Contributions to Culture and the Arts
95
groups of managers was fueled in any case by the economic recovery, which
had placed far more disposable cash in the hands of most corporations.
The intensifying importance of corporate philanthropy for both the suppliers and the demanders has been accompanied by a quiet but profound
transformation in the organization of corporate giving. As company giving
has grown, it has been accompanied by a gradual process of routinization
and professionalization. Although this could lead to a reduction in the
direct role of senior management in giving programs, we shall argue that
it does not. The contributions process becomes more systematized as it
becomes larger, but it does not become more insulated from top direction.
Moreover, we also shall argue that as programs grow and become professionalized, they become more, not less, responsive to influences from outside the corporation, primarily from other corporations. The general expansion of corporate contributions has been accompanied by the emergence
of a shared management culture that stresses giving, and companies whose
programs do not measure up to the norm are encouraged to give more.
This chapter focuses on three central features of the evolving internal
organization of corporate giving: the bureaucratization of the contributions process, the critical role of the chief executive in guiding the giving
program, and the mutually reinforcing influence of firms on one another's
contributions levels. These are the major organizational elements shaping
both the level of a company's giving and the kinds of applicants on which
its generosity is bestowed. They are the organizational filters through which
successful applications from nonprofit organizations must ultimately pass.
This chapter evaluates their influence on overall giving practices, practices
that generally characterize corporate giving whether it be to education,
culture, or other nonprofit areas. The chapter also directs attention to several distinctive features of corporate giving to culture and the arts.
To offer a more detailed appraisal of these organizational elements, we
have chosen to focus on company giving in the Commonwealth of Massachusetts. We concentrate on a single state for both pragmatic and conceptual reasons. The organizational elements could not be adequately examined without the acquisition of information directly from the companies
themselves, and focusing on firms in a single state considerably reduced
our research costs. The limited geographic focus also permitted more direct analysis of the relative influence of outside organizations on company
giving programs. The kinds of companies active in Massachusetts and their
record of philanthropy are not precise replicas of the national patterns.
Generalizations to other states and to the nation are necessarily tentative.
Still, most of the organizational issues that are the subject of this analysis
are applicable to major companies throughout the country.5
Our analysis is based on a direct survey that we conducted of 62 of the
major Massachusetts companies in 1984. An initial list of the major firms
was compiled from a roster of corporations in the state that had at least
1000 employees, and from the membership rosters of two of the state's
96
major business associations, the Massachusetts High Technology Council

(MHTC) and the Massachusetts Business Roundtable. The former includes
most of the Commonwealth's manufacturers of high technology products,
a key sector in the state, and the latter includes most of the state's largest
firms.
With a consolidated list of corporations from these three sources, we
contacted each by telephone in an attempt to identify an individual responsible for or knowledgeable about its giving program. The 126 companies for which we succeeded constitute the study population. Of these,
62 firms returned usable survey forms, for a response rate of just under 50
percent. Larger companies were moderately more likely to respond than
smaller firms. Of the 39 companies that were members of the MHTC but
were neither members of the Roundtable nor large employers, for instance,
36 percent responded, below the overall rate. There is thus a small upward
bias in size, but the participating companies constitute a reasonably representative cross-section of the state's leading firms.
THE GROWTH AND PROFESSIONALIZATION OF COMPANY GIVING

PROGRAMS
Companies making small contributions to the nonprofit sector generally

allocate money on a relatively ad hoc basis, with few fixed rules and procedures for setting priorities and selecting recipients. A common pattern is
for a lump sum to be set aside for parceling out by the company's chief
executive or senior managers. Gifts are usually made in response to requests received directly by top managers, and largely in accord with their
personal preferences.
As a company's giving program reaches a level in which ad hoc decisions by top management are no longer feasible, it typically introduces
new procedures and organizational units designed to systematize the contributions process. Four elements are commonly found in highly developed
giving programs. First, staff specialists are appointed to manage the contributions program. Second, the criteria for selecting recipients and the
procedures for deciding among competing requests are encoded in written
statements. Third, matching-gift programs are established to incorporate
employee preferences into company allocations. Finally, a company foundation is established to partially insulate the giving program against the
annual vagaries of company income.
The proportion of major Massachusetts companies studied that had
adopted each of these elements is shown in Table 4.1. Half of the state's
companies had one or more full-time professional contributions staff members; half had programs guided by written policy and procedure statements; half maintained matching-gift programs; and about a third operated a company foundation. Of the matching-gift programs, employee gifts
to college and university were the favored form, matched by company gifts
97
Table 4.1 The Number and Percentage of Massachusetts

Companies Maintaining a Professional Staff, Written Statement,
Company Foundation, and Matching-Gift Program to Guide Their
Allocation of Gifts to Nonprofit Organizations
Organizational Element
Professional Contributions Staff
None
One part-time
One full-time
More than one full-time
Written Contributions Statement
Yes
No
Company Foundation
Yes
No
Matching-Gift Program
Yes
No
Number
of Firms
Percentage
of Firms
19
10
12
21
30.7%
16.2
19.4
33.9
30
32
48.4
51.6
21
41
33.9
66.1
31
31
50.0
50.0
in the case of 27 of the 31 companies with such programs. Gifts to cultural

organizations were matched by 10 of the 31 companies, and gifts to other
nonprofit institutions were matched by 8 firms.
The larger the contributions program, the more likely are companies to
have incorporated each of these elements. This can be seen if we divide
the companies into three groupsthe third whose 1983 contributions were
less than $75,000, the third whose contributions ranged from $75,000 to
less than $500,000, and the third with contributions exceeding $500,000
(nine companies gave more than $1 million). The proportion of the firms
in these ranked groups possessing each of the organizational elements is
displayed in Table 4.2.6
Virtually none of the firms with small annual contributions budgets had
incorporated any of the major organizational elements into their programs. By contrast, most of the companies with large programs had incorporated all four. As the magnitude of company giving programs increases,
so too does the degree of organizational professionalization.
The magnitude of company giving is a direct function of the company's
pretax net income. The "1-percent rule" has prevailed for the past three
decades, and it provides a convenient way to estimate a firm's contribution
budget: Major companies have on average allocated one percent of their
pretax income to philanthropic purposes. Thus, as a company's income
pushes above the $50 million level, for instance, a contributions budget
rising above the $500,000 level can also be expected.
The findings here imply that as a company's annual earnings begin to
98
Table 4.2 Percentage of Companies with Small, Medium, and Large

Contributions Programs That Have Incorporated Major Organizational Elements
into the Giving Process
Size of Contribution
Program
Staff Size
over 1.5
Under $75,000
(10 to 12 companies)
$75,000-$500,000
Over $500,000
10.0%
Statistical Significance
of Relationship
Organizational Elements
Written
Matching-Gift
Statement
Program
8.3%
8.3%
Company
Foundation
8.3%
41.7
38.5
38.5
41.7
69.2
84.6
66.7
84.6
p = .03
p = .0005
p = .03
p = .002
exceed $50 million, it is highly likely that it will have moved to appoint a
full-time staff professional, set forth its giving procedures in writing, and
establish matching-gift and foundation programs to facilitate the giving. In
contrast, for a company whose pretax annual income falls below $7.5 million, and whose contributions budget is thus likely to fall below $75,000,
the probability is high that it will have adopted none of these organizational elements to guide its giving. For a company whose pretax income
lies between $7.5 million and $50 million, it is likely that the giving program will be in transition, moving from the largely ad hoc procedures
characteristic of small firms toward the organized procedures instituted by
most large firms.7
The expansion and professionalization of company programs contains
implications as well for the composition of giving. In professionalized
companies, policies are more subject to the norms prevailing within the
corporate community. Thus, as giving programs develop, a convergence
toward the corporate mean can be expected. National surveys of major
corporations by the Conference Board reveal that there is less variability
in the overall percentage giving levels among the largest U.S. corporations.
Our survey of Massachusetts firms reveals that there is also less dispersion
in the amounts allocated to the major fields of activity among corporations
with the largest programs.
Again dividing the Massachusetts firms into three groups according to
the size of their contributions program, we find, as anticipated, that large
programs distribute their monies more conventionally than do small programs. Among firms with small programs (under $75,000 annually), the
typical firm allocated approximately 10 percent to education, far below
the prevailing national norm for major companies of 31 percent. The typical (median) figure for middle-sized programs ($75,000 to $500,000) was
22 percent. For large programs (over $500,000) it was 29 percent, just
short of the 31-percent national norm. Conversely, the typical firm with a
99
small contributions program gave 20 percent of its gift money to culture

and the arts, far above the norm. The characteristic firm with a middlesized program gave 12 percent of its budget to culture and the arts. For
firms with large programs, the median figure was 10 percent, nearly the
same as the national norm for major companies of 9 percent.
The growth and professionalization of company giving, then, is accompanied by greater conformity to the conventions of the profession. Among
our Massachusetts firms, growth and professionalization translate into a
smaller share of company gifts to culture and the arts, and a larger share
to education. Once a company program reaches about $500,000 annually,
however, further growth is no longer associated with diminishing proportions for culture and the arts. A survey of 534 firms in 1982 by the Conference Board reveals that the median percentage of the gifts budget allocated to culture and the arts is about the samearound 9 percentfor
firms whose contributions budgets are $0.5 million to $1 million, $1 million to $5 million, or over $5 million.8
Growth and professionalization of corporate giving is also accompanied
by declining variability in the recipients selected for largesse. As we shall
see, companies whose annual program budgets exceed $500,000 are nearly
twice as likely as companies with budgets under $75,000 to report that
other companies influence their own decisions in setting giving levels and
in selecting grant recipients in culture and the arts. Companies with small
programs are thus more likely to follow their own guidance, whereas firms
with large programs are more prone to listen to the counsel of their corporate brethren. An unanticipated consequence of the growth and professionalization of company giving may be more channeling of corporate gifts
to recognized cultural organizations, and less to experimental groups.
THE INFLUENCE OF THE CHIEF EXECUTIVE ON COMPANY GIVING

PROGRAMS
The systematization of corporate giving practices as firms grow large may

well reduce opportunity for executive discretion. When philanthropic programs are small and ad hoc, the funds and thus most decisions remain in
the hands of top management. When programs become large and routinized, senior management's discretion may be limited by the very rules it
has prescribed. It may be limited as a matter of managerial priorities, as
well. A contribution budget constitutes a tiny fraction of any company's
spending plans. As a percentage of the firm's total annual budget, the gifts
budget typically averages less than one-tenth of 1 percent. If sheer relative
scale is a portent of senior management attention, a giving program should
receive scant top attention at best. As a company's contributions budget
grows, then, the converse side of increasing organizational routinization
may be decreasing senior management guidance.
Among Massachusetts companies studied, however, this is not the case.
100
Table 4.3 Relative Influence of Company Personnel and Units in Setting

Company Giving Policies and in Selecting Gift Recipients
Individual or
Unit
Chief Executive Officer
Contributions Office
Committee of Executives
Board of Directors
Public Affairs Office
Nonexempt Employees
Advertising Office
Percentage of Companies Reporting Modest or Strong

Influence on *
Gift Program Policies
Selection of Recipients
69.3%
48.4
30.6
29.1
17.7
9.7
1.6
61.2%
48.3
30.6
19.4
24.2
14.5
1.6
NOTE: Companies were asked, "How important or influential are the following units and individuals in
the contribution decision-making process? Distinguish between decisions that (1) set general program policies, and (2) select specific recipients for program support." Three levels of potential influence were designated as strong, modest, and little or none.
*Number of companies on which percentages are based = 62.
Despite the relatively small place of contributions budgets in all of the

companies' spending plans, top management continues nonetheless to exercise a strong hand. The chief executive officers (CEOs) of three-fifths of
the firms, for instance, still review recommendations for specific contributions if they exceed a minimum amount. In the case of half of these firms,
the minimum amount is a mere $500.
Similarly, most firms report that the single most important influence in
the setting of company giving policiesand even in selecting recipients
is the chief executive. Companies were asked to identify the influence of
the contributions staff, the chief executive, the board of directors, and other
units on their giving programs. The chief executive emerges as the central
figure, as can be seen in Table 4.3.
In two-thirds of the companies, the chief executives exercised significant
influence on both the policies of the giving program and the distribution
of its monies. The contributions offices had a strong voice in only half of
the firms, and all other organizational units and groups, including other
executives, the board of directors, and non-exempt employees, exercised
still less voice.
Still, it is arguable that the chief executive's influence will be comparatively less on the largest gift programs, as contributions offices create formal procedures to guide the giving process. Here, too, the evidence is contrary. Again dividing the companies into three groups according to the size
of their contributions budget, we see that the chief executive is as involved
in gift decisions among the largest as among the smallest contributors (Table 4.4).
Most of the companies with programs of all three sizes report that their
chief executive is centrally involved in setting policies and selecting recipients. The involvement of the chief executive is not a diminishing function
101
Table 4.4 The Influence of the Chief Executive and Contributions Office on
Contributions Decisions in Firms with Small, Medium, and Large
Contributions Programs
Size of
Contribution
Program
Under $75,000
(12 companies)
$75,000-$500,000
(13 companies)
Over $500,000
(13 companies)
of Relationship
Percentage of Companies Reporting Strong or Modest

Influence of
Contributions Office on
Chief Executive on
Selection
Program
Program
Selection
of Recipients
Policies
of Recipients
Policies
58.3%
16.7%
16.7%
100.0
84.6
76.9
76.9
84.6
76.9
61.5
61.5
p = .008
p = .008
75.0%
n.s.
n.s.
NOTE: n.s. signifies that the differences are not statistically significant.
of program size. The influence of the contributions office, on the other

hand, is an increasing function of the annual giving, at least as it enters
the range of $75,000 to $500,000. The chief executive comes to share
power over the company's giving with the contributions office, but it is
not a power that is significantly diminished by the rise of a professional
contributions staff and office. Routinization of giving as a company grows
large is not accompanied by any withdrawal of top managerial guidance.
Not only is the chief executive active in the life of most giving programs,
but the top manager's level of interest can have a decisive bearing on the
scale of the giving programs. This should be anticipated from the findings
of research on corporate innovation in a range of social programs. In one
investigation, for instance, researcher Michael Merenda studied exemplary
efforts in corporate social responsibility among five companies or divisions
of companies based in Massachusetts. The programs included an effort by
General Electric to increase minority representation among its managerial
ranks, Raytheon's establishment of an inner-city job training center, Cabot
Corporation's expansion of its corporate contributions, Eastern Gas and
Fuel's evolution of a system of social audit and reporting, and Hancock's
program to assist the Boston School System through a troubled period of
court-ordered desegregation. To explain why the companies chose to start
the new social programs at the time each did, the researcher located the
final cause in each instance not in predisposing company characteristics
but in the personal interest taken by top management. In all five cases,
concludes Merenda, "the chief executive is the pivotal figure when it comes
to the initiation of voluntary social programs." 9
If top leadership is critical to starting contribution programs, continuing
commitment from the chief executive may be equally important for sus-
102
Table 4.5 Percentage of Companies with More Active Chief Executive That
Have Increased Their Contributions Budget During the Past Two Years
Level of Involvement of
Chief Executive in
Contribution Program
Role of CEO in Setting
Contributions Policies
More active
(17 companies)
No change or less active
(45 companies)
Attitude of CEO toward
Contributions Budget
Encourages larger budget
(28 companies)
No change
(34 companies)
Rate of Annual Increase of Contribution Budget,

Past Two Years
Zero or
Decrease
1 to 12
Percent
More than
12 Percent
29.4%
23.5%
47.1%
51.1
28,9
20.0
25.0
32.1
42.9
61.8
23.5
14.7
Statistical
Significance
p = .09
= .009
taining their growth. This is evident in our study of Massachusetts company giving. To identify whether its chief executive had become more active, we asked each company the question, "During the past two years,
has the chief executive officer taken a more or less active role in setting
contribution policies?" We also asked each company whether, during that
time period, its contribution budget had increased or decreased. For the
sake of comparison, we divide firms into three groups according to trends
in their contribution budgets: 28 companies whose budgets had decreased
or remained constant, 21 companies whose budgets had increased by a
modest 1 to 12 percent per year, and 17 companies whose budgets had
grown by more than 12 percent annually.
Table 4.5 reveals that companies led by chief executive officers with
deepening engagement in the giving programs during the past two years
also tend to be companies with sharply rising contributions budgets. Of
those companies with accelerating involvement of the chief executive, nearly
half had annual budget growth rates exceeding 12 percent; of those firms
whose chief executive had not become more active, only one in five had
such high rates of expansion. If we compare two companies, one with an
increasingly interested chief executive and the other without, the evidence
implies that the first company is more than twice as likely as the second
firm to make pronounced increases in its gifts program.
The differences are even greater when we compare firms whose CEO
has been explicitly encouraging enhanced contributions with those whose
CEO has favored no growth. Companies were asked, "During the past
two fiscal years, has the chief executive encouraged or discouraged larger
contributions budgets?" The lower half of Table 4.5 reveals that, if a company was led by an executive pushing for increases, it was three times
103
Table 4.6 Percentage of Companies Placing Importance on Culture and the Arts
for Business, by Support of Chief Executive for Increased Contributions to
Culture and the Arts
Level of CEO Encouragement
for Company Expansion
of Culture and Arts
Contributions
Percentage of Companies Reporting Strong or Modest

Importance of Culture and the Arts in the Region to
Improve
Improve
Make Managers
Help
Quality
More
Business
Recruit
of Life
Climate
Effective
Managers
CEO Encourages More Gifts

(17 companies)
CEO Does Not Encourage More
(45 companies)
76.4%
94.1%
88.3%
76.5%
35.6
60.0
51.1
24.3
of Relationship
p = .01
p = .02
p = .02
p = .003
more likely than a company with a more passive executive to be operating

a rapidly expanding gifts program.
The role of the chief executive is also critical in determining the allocations of gift monies among the major fields of activity. Paralleling the above
question, companies were also asked if the chief executive had encouraged
greater spending for culture and the arts during the two preceding years.
Of the 45 companies reporting no special encouragement by the firm's top
officer, 22 percent allocated a larger share of their contributions to culture
and the arts in 1983 than in 1981. By contrast, of the 17 companies whose
chief executive had pushed for increases, 47 percent gave a larger percentage of their 1983 gifts to culture and the arts. Enterprises with a chief
executive who backed more spending on culture and the arts were more
than twice as likely to have enlarged the proportion of the gifts budget
bestowed on the same.
The rationale for enhanced cultural giving is not an arbitrary expression
of executive preference but is rooted in an encompassing belief system concerning the value of the arts to the contributing firm. A flourishing cultural
climate is viewed as valuable for both employee morale and the climate of
business. This is evident if we again compare companies headed by chief
executives who had been pushing for enhanced spending on culture with
companies whose top officers had not. To understand their motivation for
contributing to culture and the arts, companies were asked the importance
of having a "strong set of cultural, arts and humanities institutions and
organizations in Massachusetts or a city close to your location" for four
company interests: (1) recruiting new managers, (2) enhancing the quality
of life of employees and managers, (3) improving the business climate in
the region, and (4) making managers who become familiar with the arts
more effective in their work. The proportions of the companies reporting
a strong or modest importance for each factor are shown in Table 4.6.
Of the companies whose chief executive had not been pressing for in-
104
creased company contributions to culture, 36 percent indicated that a favorable cultural climate in the state was important for recruiting new managers. By contrast, of the companies led by top officers who had been
encouraging more cultural gifts, 76 percent reported that the cultural climate was important for managerial recruitment. Similar differences in
company outlook on the value of culture and arts in Massachusetts prevail
for the three other areas of potential value to business.
The intensity of involvement of a chief executive is also a strong predictor of expected future growth in a company's giving. Firms were asked to
forecast the size of their following year's contribution budgets compared
to their spending levels at the time of the survey. Again, firms whose chief
executive had become more active in the contributions programs were nearly
twice as likely as other companies to anticipate growth of more than 12
percent. Similarly, companies whose chief executive had been pushing for
increases were three times more likely than other companies to expect substantial contributions increases.
Despite the professionalization of giving among larger companies, the
attitude of top management toward contributions to the nonprofit sector
thus remains a decisive determinant of the level and distribution of giving
among Massachusetts firms. The critical role of top management in determining a company's scale of giving is characteristic of large firms throughout the nation as well. A national survey of 229 major companies in 198081, for example, asked the firms to identify the factors that most influenced their level of corporate contributions. The single most important of
12 major factors identified (including the company's current and past earnings, the volume of requests, and the size of the firm relative to the community), was the "discretion of the chief executive officer." More than
two-thirds of the corporations rated this as a key determinant of the level
of giving. Similarly, interviews with 219 chief executives of another set of
companies in 1981-82 reveal the same trend: four-fifths of the CEOs report that their own influence on giving levels was decisive. Still another
study shows the importance of chief executives in steering company monies to specific recipients. The arts contributions of 69 major companies in
Minneapolis and St. Paul were strongly skewed toward cultural organizations whose governing board included the contributing company's chief
executive.10
The importance of the chief executive's attitude for the health of a company's giving program is implicit in the strategies of a range of campaigns
to enhance company philanthropy. In recent years, the federal government,
state agencies, and associations of both corporations and nonprofit organizations have launched various efforts to increase corporate giving. During the 1980s, the Reagan administration has fostered the concept of "new
federalism," through which its reductions of support for many nonprofit
institutions were to be replaced in part by expanded private subvention
that federal exhortations were to stimulate. At the national level, for example, the National Endowment for the Arts in 1982 established an Office
105
of Private Partnership to increase private support for the arts, and the
White House founded the President's Committee on the Arts and Humanities to achieve the same. Illustrative of programs at the state level, the
Massachusetts Council on the Arts and Humanities launched a "Corporate
Support Project" in 1982 to encourage more company giving in the Commonwealth. Within the business world itself, the Business Committee for
the Arts and the Council for Financial Aid to Education have long promoted more company largesse. The Independent Sector and other associations of nonprofit organizations have led similar efforts to foster more
private giving.11
These campaigns typically work with top management as both agents
and targets of change. Chief executives and other senior managers are invited to join advisory boards, and they are convened for evenings with
fellow business leaders already committed to more corporate giving. To
reward the meritorious and inspire the laggards, awards and honors are
bestowed upon those managers and companies whose contributions have
been exemplary. The Business Committee for the Arts, for example, conducts regional seminars for business executives to convert the unconvinced, and it recognizes a number of companies at an annual awards
banquet for their outstanding contributions to the arts.
The present study confirms the validity of such strategies. The evidence
implies that an especially effective means of leveraging more company giving is through changing the outlook of the chief executive. Although larger
giving programs are well bureaucratized, and although even the largest
programs still occupy only a tiny place in the spending plans of most firms,
the attitude of the chief executive remains critical. Strengthening the chief
executive's appreciation for the value of giving, heightening his or her understanding of the benefits in giving to such specific areas as culture and
the arts, and ensuring that both translate into the budget and policies of
the contributions office are among the most certain avenues for change.
Yet though the channel for change is clear, far less certain is any nonbusiness organization's ability to gain access to the channel. Chief executives often listen to one another on corporate giving, but voices from outside their inner circles sound far fainter.
THE INFLUENCE OF COMPANIES ON ONE ANOTHER
Outside access to both the chief executive and the contributions office is
first accorded chief executives and contributions officers of other companies. In serving on several corporate boards and in taking active part in
trade association activities, senior managers from a range of companies
routinely encounter one another far more often than they do directors of
nonprofit organizations. Similarly, because of their shared concerns, contribution officers usually turn first to one another for advice on the level
and target of their firms' giving.
106
Table 4.7 The Influence of Outside Organizations on the Level and Target of
Contributions by Massachusetts Companies
Outside Organization
Percentage of Companies Reporting

Modest or Strong Influence of Outside
Organization on Own Decisions
Government Agencies
National Endowment for the Arts
National Endowment for the Humanities
Massachusetts Council for the Arts and Humanities
14.5%
11.3
21.1
Nonprofit Association
Massachusetts Cultural Alliance
21.0
Business Associations
Business Committee for the Arts
Conference Board
6.4
21.0
Other Corporations in the Region
51.6
NO'I'E: Number of companies or) which percentages are based ----- 62.
The special influence that companies have on one another's giving policies is evident in our survey of Massachusetts firms. For this analysis, we
focus on corporate giving to culture and the arts. The leading organizations active in encouraging corporate giving in the cultural field include
three government agencies: the National Endowment for the Arts, the National Endowment for the Humanities, and the state art agencies (in Massachusetts, the Massachusetts Council on the Arts and Humanities). Other
organizations include the major state association of nonprofit organizations concerned with corporate giving, the Massachusetts Cultural Alliance, and two business associations: the Business Committee for the Arts,
a national organization devoted to increasing private support for cultural
activities, and the Conference Board, an organization that does not advocate increased corporate giving but does publish the definitive set of statistics on annual company giving, to which many firms look for guidance.
Finally, we include among our list of potentially influential outside organizations other corporations in the region. Our survey question asked each
company "how important or helpful are [these] outside organizations in
setting contribution budget levels or in identifying suitable gift recipients
in the area of culture, the arts and humanities?" Findings on the relative
influence of the outside organizations are displayed in Table 4.7.
Fewer than one company in five singles out the two national endowments or the Business Committee for the Arts as having significant influence on their giving policies. About one in five attributes substantial influence to the Massachusetts Council on the Arts and Humanities, the
Massachusetts Cultural Alliance, and the Conference Board. But one company in two identifies other corporations as influencing its decisions. The
most important single external source of influence on a firm's giving is thus
the giving of other firms.
107
Table 4.8 The Influence of an Outside Organization's Earlier Grant to an

Applicant on the Evaluation of the Applicant's Merits by Massachusetts
Companies
Outside Organization
Percentage of Companies Reporting

Modest or Strong Influence of Outside
Organization on Own Decisions
National Endowment for the Arts

National Endowment for the Humanities
Massachusetts Council for the Arts and Humanities
Another Major Corporation
29.0%
27.4
33.9
50.0
NOTE: Number of Companies on which percentages are based = 62.
An identical conclusion emerges in examining the influence of outside

organizations when a company is selecting gift recipients from among its
many applicants. The volume of requests to companies is so great that
companies must frequently take decisions in the absence of fully adequate
information. Firms have neither the time nor the means for a thorough
review of all prospective recipients' past performance, constituency, or internal management. Given this lack of comprehensive information, a frequently employed short-hand indicator of merit is whether the applicant
has previously received grants or gifts from other organizations of stature.
In reviewing gift requests, Massachusetts companies report being influenced by an applicant organization's success in obtaining support from the
two national endowments, the state arts council, and other corporations.
To assay the relative significance of each, companies were asked, "How
important is the fact that an applicant has already received a grant from
one of [these] organizations in helping you to assess the merit of [the applicant's] program?" Table 4.8 reports the proportion of the firms attributing significant influence to each.
Again, we see that the most influential outside organization is another
corporation rather than a public agency. If another firm has already made
a grant to an applicant, it is a legitimating factor for half of the companies
surveyed, a substantially higher proportion than if the outside organization
is one of the three government granters. Still, it is notable that the imprimaturs of the two national endowments and the state arts council are not
without weight. A third of the firms attribute significant influence to grant
actions by the Massachusetts Council on the Arts and Humanities, and
nearly similar amounts ascribe importance to support from the National
Endowments for the Arts and for the Humanities.
In relying on the confirming decisions of other firms, Massachusetts corporations are using a strategy common to companies across the country.
Nearly a third of the corporate executives responsible for giving programs
of 440 major firms reported in response to a 1975 survey by the Conference Board that "peer company comparisons" were a major factor in setting the contribution dollar level. Similarly, a survey of 229 large firms in
108
1980-81 revealed that most corporations are well informed about the giving policies and practices of other companies: One-third of the companies
solicited giving information from other firms, and four in five were aware
of the other firms' contributions policies. Two-thirds of the companies report that pressure from other firms was a very important influence on their
own giving decisions.12
The relationship between internal decision making and reliance on external information creates an upward spiral of mutual influence. If a company's chief executive is pressing for expanded funding for culture and the
arts, the company frequently turns to other companies for guidance. This
is evident among the Massachusetts companies. Of the firms whose chief
executives have been urging greater spending on culture and the arts during the previous two years, four out of five report that other companies in
the region had influenced their own contribution budgets in culture and
the arts. By contrast, of the firms whose chief executives had not been
urging greater spending in this area, only two out of five report that they
had been open to the influence of other firms.13
As companies newly active in culture and the arts turn to other firms
for guidance in giving, the guidance is not only technical but also normative. They obtain assistance in establishing program procedures, but they
also open themselves to pressure to shoulder greater responsibility for the
health of the nonprofit sector. And they take it to heart. This can be seen
if we divide the Massachusetts companies into two groups: those that attribute significant influence to area corporations in establishing their own
budget levels in culture and the arts and those that do not. We then compare the relative increase of arts and culture funding in these firms' overall
contributions budgets during the two preceding years. Of the companies
responsive to outside influence on their arts giving by other companies, 41
percent devoted a greater share of their contribution budget to culture
than two years before. Of the companies unresponsive to outside company
influence, however, only 17 percent had increased the proportion of their
gifts budget going to culture. Similar findings are obtained if we use the
actual dollar increases in gifts for culture and the arts in place of the percentage increases.
When top managers push their corporations to take a more active role
in funding culture and the arts, then, the firms look to already active companies for guidance. In doing so, they open themselves to more pressure
for more giving, since major donors have evolved a shared corporate culture stressing the value of giving to culture and the arts. Once a company
chooses to open its decision making to suggestions from the business community, the mutually reinforcing effects propel continued growth in its
own giving. And its upward growth in turn encourages other companies
to give still more of their monies. Study of corporate giving in a number
of American cities confirms the upward mutual reinforcement among business firms elsewhere. All other things being equal, a company will increase
its contributions if other firms in the region have already done so.14
109
The process is akin to that of economic "takeoff"; once a threshold of

development is reached, economic growth acquires an accelerating momentum of its own. Once a company initiates significant giving to culture
and the arts, its support is launched on an accelerating curve. The company enters a world in which additional cultural giving is valued, and the
chief executive joins a circuit in which art is a medium of conversation.
For public agencies and nonprofit organizations concerned with strategies
for enhancing corporate contributions to the arts, then, the single most
important achievement is to move a company above the starting threshold.
Once so moved, the internal dynamics of the corporate community can be
expected to carry the company forward thereafter.
THE FORMALIZATION OF CORPORATE GIVING WITHOUT

AUTONOMY
Corporate contributions have been on a growth curve for several decades.

As giving programs have grown in scale, they have grown in organization
as well. When a firm's annual giving budget reaches $500,000 or more, it
generally moves to formalize its program: Contribution specialists are hired,
written procedures are set forth, matching-gift programs are established,
and company foundations are created. The company also moves to bring
its division of gift monies among education, culture, and the other major
areas into greater conformity with the prevailing corporate norms. As more
firms rise into this giving bracket, as is certain over time, the formalization
and normalization of corporate giving will increasingly prevail.
The professionalization we have witnessed in the contributions program
is characteristic, as well, of other programs by which corporations seek to
influence social and political affairs. Similar trends are evident in the organization of corporate public affairs offices and in the operation of political action committees. As companies have intensified their social and political outreach in recent years, they have also formalized the bureaucracy
through which activities are administered.15
There is seeming irony, however, in other changes in the contributions
process. According to classical theory, bureaucratization of a company
program should create a more impersonal and autonomous administrative
system. Individual preferences, whether expressed by those of low or high
station, are in principle subordinated to dispassionate and rule-guided decision making. Theorists would also expect increasingly bureaucratic programs to be more insulated from outside pressures, especially if they are
to take calculating actions in the furtherance of company interests.
Yet we have seen that the rise of more formal organization in the contributions process is not accompanied by a decline in the direct personal
influence of the firm's chief executive. The CEO's influence on the giving
process, ranging from the setting of budget outlines down to approving
grants as small as $500, is nearly undiminished as contribution budgets
110
grow large. And the chief executive's personal involvement, we have found,
makes a major difference. When the personal interest is strong, giving programs prosper; when the personal interest in the arts is strong, cultural
giving prospers.
Moreover, the rise of more formal organization is accompanied by greater
openness to outside influence. This becomes evident if we divide our companies into three groups according to the size of their contribution budgets, as done earlier, and then compare the openness of the three groups
to the influence of other firms in setting contribution levels and in identifying grant recipients in culture and the arts. Of the companies with small
contributions programs (under $75,000 annually), 42 percent report that
other firms had modest or strong influence on their own decisions. Of
companies with middle-range budgets ($75,000 to $500,000), 69 percent
report such influence. Among corporations with large contribution budgets
(over $500,000), 77 percent indicate their openness to guidance from other
corporations. A similar difference is found in a study of corporate giving
to culture and the arts in Minneapolis and St. Paul. Only 5 percent of the
Twin Cities' smaller firms frequently share information on nonprofit organizations they are considering funding, but 40 percent of the larger firms
do so. As a by-product, the managers of large contributions programs come
to share similar knowledge and attitudes about the arts community, a mind
set that is not shared, however, among the managers of smaller giving
programs. Contrary to what organizational theory might suggest, larger
programs with more formal organization are also those most subject to
outside influence by the business community. Program autonomy is inversely related to program size and formalization. 16
As companies enter the ranks of major contributors, they increasingly
look to one another for cues on how to structure their giving. Corporate
contribution programs are thus likely to become more uniform in administration as they grow large. They also become more subject to pressures
to increase giving as they acquire greater sensitivity to the norms of the
corporate community. The norms of the era suggest that responsible firms
will give at least 1 percent of their pretax earnings, and some business
leaders are urging levels of 2 and even 5 percent. Because of corporate
openness to one another's influence in this area of decision making, as
companies become significant contributors, and most major companies do,
we can expect substantial convergence in the structure, level, and distribution of their philanthropic programs.
Although the convergence in corporate practices may lead companies to
give more and to give in similar ways, it may at the same time make it
more difficult for organizations unfamiliar to business to become the recipients. To overcome this problem, securing the endorsement of the chief
executives of several companies can be a critical first step for an organization embarking on a corporate development campaign. As we have seen,
the top officers' active interest can decisively move their companies to make
grants. This in turn can encourage other firms to be more forthcoming,
111
especially if the endorsing chief executives are willing to approach senior

management of other firms on behalf of the fund-raising campaign. Whether
a cultural organization is large or small, established or new, drawing on
the networks of mutual influence within the highest circles of corporate
management may have become the single most effective means of attracting and sustaining corporate support.
NOTES
1. Time-series figures on aggregate corporate giving are reported in Kathryn Troy, Annual
Survey of Corporate Contributions, 1984 Edition (New York: Conference Board, 1984). See
also American Association of Fund-Raising Counsel, Giving USA: 1984 Annual Report (New
York: American Association of Fund-Raising Counsel, 1984).
2. Lester M. Salamon and Alan J. Abramson, The Federal Budget and the Nonprofit Sector (Washington, D.C.: Urban Institute Press, 1982); American Association of Fund-Raising
Counsel, Giving USA: 1983 Annual Report (New York: American Association of FundRaising Counsel, 1983); Nonprofit Sector Project, Progress Report No. 3 (Washington, D.C.:
The Urban Institute, 1983); Council for Financial Aid to Education, Corporate Support of
Education, 1982 (New York: Council for Financial Aid to Education, 1984); Samuel Schwarz
and Mary G. Peters, Growth of Arts and Cultural Organizations in the Decade of the 1970's
(Washington, D.C.: Research Division, National Endowment for the Arts, 1983).
3. Katherine Maddox McElroy and John J. Siegfried, "The Effect of Firm Size on Corporate Philanthropy," Quarterly Journal of Economics and Business 25 (Summer 1985): 1826; Michael Useem, "Corporate Philanthropy," in Walter W. Powell, ed., The Handbook of
Non-Profit Organizations (New Haven, Conn.: Yale University Press, 1987).
4. Troy, 1984, op. cit.; Council for Financial Aid to Education, 1984, op. cit.; Paul
DiMaggio, "Can Culture Survive the Marketplace?" (Chapter 3, this volume); Arthur H.
White and John S. Bartolomeo, "The Attitudes of Corporate Philanthropy in America," in
Corporate Philanthropy, edited by Council on Foundations (Washington, D.C.: Council on
Foundations, 1982).
5. Contributions by Massachusetts companies generally mirror national patterns. Limited
available evidence suggests, however, that Boston-area companies give above-average amounts
to educational institutions but below-average levels to cultural organizations (Michelle Garvin, "Analysis of Corporate Support for the Arts in Massachusetts" [Boston: Massachusetts
Council on the Arts and Humanities, 1982]; Council for Financial Aid to Education, 1984,
op. cit.).
6. One-third of the companies did not report their 1983 contribution budget total, and
they have been excluded from this analysis. Budget totals do not include employee contributions in matching-gift programs.
7. On the relationship between corporations' pretax income and philanthropic giving, see
Hayden W. Smith, A Profile of Corporate Contributions (New York: Council for Financial
Aid to Education, 1983), and Troy, 1984, op. cit.. General information on the organization
and management of contributions programs by large corporations can be found in Kathryn
Troy, Managing Corporate Contributions (New York: Conference Board, 1980), and Anne
Klepper, "Profiles of the Corporate Contributions Professional," Corporate Philanthropy,
edited by Council on Foundations (Washington, D.C.: Council on Foundations, 1982).
8. Troy, 1984, op. cit.; Smith, 1983, op. cit.
9. Michael J. Merenda, "The Process of Corporate Social Involvement: Five Case Studies,"
in Lee E. Preston, ed., Research in Corporate Social Performance and Policy, Vol. 3 (Greenwich, Conn.: JAI Press, 1981), 17-41.
10. John J. Siegfried, Katherine Maddox McElroy, and Diane Biernot-Fawkes, "The Management of Corporate Contributions," in Lee Preston, ed., Research in Corporate Social Per-
112
formance and Policy, Vol. 5 (Greenwich, Conn.: JAI Press, 1983); White and Bartoiomeo,
1982, op. cit.; Joseph Galaskiewicz, Social Organization of an Urban Grants Economy: A
Study of Business Philanthropy and Nonprofit Organizations (New York: Academic Press,
1985).
11. Cultural Post, "President's Committee Holds Meeting" 8, 5 (December 1982): 1ff.;
Frank Hodsoll, "Prospects for Private Arts Support," Cultural Post 8, 7 (March/April 1983):
2. The programs of the National Endowment for the Arts, Massachusetts Council on the
Arts and Humanities, Council for Financial Aid to Education, Business Committee for the
Arts, and The Independent Sector to increase corporate giving are described in the organizations' annual reports, newsletters, and various publications. They can be obtained by writing
the National Endowment for the Arts, 2401 E St., N.W., Washington, D.C. 20506; Massachusetts Council on the Arts and Humanities, One Ashburton Place, Boston, Mass. 02108;
Council for Financial Aid to Education, 680 Fifth Avenue, New York, N.Y. 10019; Business
Committee for the Arts, 1501 Broadway, New York, N.Y. 10036; and The Independent
Sector, 1828 L Street, N.W., Washington, D.C. 20036.
12. James F. Harris and Anne Klepper, Corporate Philanthropic Public Service Activities
(New York: Conference Board, 1976); John J. Siegfried and Katherine Maddox McElroy,
"Corporate Philanthropy in America: 1980," (unpublished manuscript, Department of Economics and Business Administration, Vanderbilt University, 1981); McElroy and Siegfried,
1985, op. cit..
13. The survey asked, "During the past two fiscal years, has the chief executive encouraged or discouraged larger contribution budgets and greater spending for . . . culture, arts
and humanities?"
14. Siegfried et al., 1983, op. cit.
15. James S. Post, Edwin A. Murray, Jr., Robert B. Dickie, and John F. Mahon, "Managing Public Affairs: The Public Affairs Function," California Management Review 26 (Fall
1983): 135-150; Edward Handler and John R. Mulkern, Business in Politics (Lexington,
Mass.: Heath, 1982); Michael Useem, The Inner Circle: Large Corporations and the Rise of
Business Political Activity in the U.S. and U.K.. (New York: Oxford University Press, 1984).
16. Joseph Galaskiewicz, 1985, op. cit.
5
Support for the Arts
from Independent Foundations
PAUL J. DiMAGGIO
Foundations represent the oldest institutional source of contributed revenues to nonprofit arts organizations. The Carnegie Corporation of New
York, the Rockefeller philanthropies, and other private foundations assisted the arts as early as the 1920s; by contrast, corporations first discovered culture in the 1950s, and government assistance to nonprofit cultural
enterprises did not come into its own until the early 1960s.1 Private foundations today continue to support performing and visual arts organizations, at levels comparable to corporate and public contributions.2 Moreover, because some foundation programs focus their grants on specific and
well-formulated objectives that most other patrons neglect, they exert an
influence above and beyond the size of their contributions.
Given the centrality of philanthropic foundations to the support of the
arts, it is surprising how little attention their role has received in recent
years, from the academy or from the art world itself, especially compared
with the verbiage and concern lavished upon government and, especially,
the corporate sector. This chapter is a modest effort to address this imbalance by discussing the evolution of foundations' support for the arts; by
reporting data, tabulated from a study that until now has been unexploited
The research reported in this chapter was supported by the Ford Foundation and the Yale
Program on Non-Profit Organizations. I am indebted to Ruth Mayleas of the Ford Foundation
for carefully reading draft materials and alerting me to several errors of interpretation of aggregate statistics; to Patricia Read of the Foundation Center for providing proofs of the Center's 1985 report on giving to the arts and for guiding me through the Center's excellent
collections; to Karla Shepard of the Commonwealth Fund for a helpful response to a question
about the data that she collected and organized; to Fritz Mosher of the Carnegie Corporation
for providing materials on that foundation's early programs in the arts; and to John G. Simon
for an exceptionally careful and helpful editorial review. A major debt that I cannot fully
acknowledge (in the interest of protecting anonymity) is to the 10 foundation program officers
and 1 trustee who consented to be interviewed for the project of which this chapter is one
product. Needless to say, none of the people or organizations to whom thanks are due is
responsible for, or should be presumed to agree with, any of the opinions or interpretations
expressed in this chapter.
114
by students of the arts, on all appropriations made by 47 of the 54 largest

independent foundations at six points between 1955 and 1979;3 and by
analyzing, in as much detail as available data permit, the allocation of arts
and culture grants to different kinds of purposes and organizations during
the early 1980s. I focus in this paper on lessons from the aggregate statistics, rather than, as is more conventional, notable national foundation programs of assistance to the arts. Although the portrait thus presented is less
colorful than that which an emphasis on exemplary programs would yield,
it is also more globally accurate, depicting the broad valleys as well as the
peaks of the foundation world.
In particular, a more global perspective calls attention to a paradox.
Independent foundations are, in many respects, uniquely organized to act
independently. Yet, as we shall see, the most visible foundation patrons of
the artsthe Ford Foundation, the Rockefeller Foundation, the Andrew
W. Mellon Foundation, and a few others at both the national and local
levelsare quite atypical in their attention to planning, goals, and program development and in their willingness to support activities that are
either experimental or in other respects comparatively unattractive to most
agencies that assist nonprofit arts organizations. In other words, despite
the apparent autonomy of the private foundation and diversity of the
foundation universe, most foundation arts dollars go quietly to major established institutions, in most cases symphony orchestras and art museums, for capital projects, endowment building, or operating support. To
explain this paradoxical finding we shall adopt an organizational perspective that emphasizes, on the one hand, the embeddedness of private foundations in local leadership networks and, on the other, the costs of acquiring reliable information about alternative courses of action.
THE DEVELOPMENT Of FOUNDATION SUPPORT FOR THE ARTS
Foundations, almost from their inception, have made grants to the arts,
although the popularity of arts organizations as recipients of foundation
support has increased since World War II. The earliest systematic data on
the scope of this support come from Eduard Lindemann's pathfinding study
of the grant-making of 80 independent and 20 community foundations
between 1921 and 1930.4 According to Lindemann, the foundations he
studied, which collectively controlled the bulk of foundation assets of the
time, gave a total of between $117,000 and $971,000 a year, or approximately 1 percent of all foundation disbursements for the decade, to "aesthetic" organizations and programs. In 1931, the Twentieth Century Fund's
American Foundations and Their Fields reported that 13 of 122 private
foundations were active in the field of "aesthetics," more than made grants
for the physical sciences, the humanities, government, race relations, agriculture, city planning, or housing. These 13 foundations, 5 of which were
among the 20 largest, provided $1.39 million of support in 1930, or 2.7
Support for the Arts from Independent Foundations
115
percent of total foundation disbursements for that year.5 As the Depression deepened, giving to "aesthetics" declined until it reached $740,000 in
1933, remaining at roughly that level through 1940 (after which no data
are available until 1955).6
The style and substance of early foundation cultural giving varied from
foundation to foundation. The Juilliard Foundation harbored most of its
assets to support its own musical academy; and when, in keeping with the
terms of Juilliard's bequest, it began to assist the debt-ridden Metropolitan
Opera in 1933, its officers intervened forcefully, demanding administrative
reforms and seats on the Opera's board of trustees.7 By contrast, the programs of the Carnegie Corporation, the General Education Board, which
assisted industrial arts and design projects, and the Rockefeller Foundation, which supported playwrights and film projects (and even made a grant
to the national office of the Federal Theatre Project to purchase an offset
printer), were less interventionist in nature.8
Private foundation arts support was dominated throughout the 1920s
and 1930s by the wide-ranging activities of the Carnegie Corporation of
New York under Frederick Keppel, who assumed Carnegie's presidency in
1923. Not until the height of the Ford Foundation's programs of support
for theatre, orchestras, and dance during the 1960s would one foundation
again have such a decisive influence on the institutional development of
U.S. culture.
Consider 1930, which, despite the Depression, was a typical year in the
Carnegie program, with expenditures of $417,000 on the arts. If one subtracts from the national total the Juilliard Foundation's operating support
for the Juilliard School of Music and the General Education Board's assistance for "the industrial arts," Carnegie's contribution represents 82 percent of all independent foundation spending on "aesthetics."9 By the time
Keppel retired in 1941, Carnegie had made grants and provided fellowships of approximately $13.5 million in support of arts activities.
A report to the Carnegie Corporation notes that the arts program had
"been more concerned with educating people to appreciate the arts than
with training professional artists or financing the creation of art works."10
Nonetheless, the Corporation's grants were widely distributed. Carnegie
provided graduate fellowships to many of the leading art historians and
museum directors of this century; distributed "teaching sets" of art books,
photographs, and slides to 302 U.S. colleges and high schools; gave similar
sets of music books, records, scores, phonographs and record cabinets to
356 U.S. universities and secondary schools; and helped endow music departments in almost 20 U.S. colleges and universities. The Carnegie Corporation gave substantial operating assistance to the American Association
of Museums; and it also supported the American Association for Adult
Education, the American Federation of Arts, and the College Art Association, respectively, to investigate the role of music and museums in adult
education, assist the Little Theatre movement, and circulate exhibitions.
The program even made grants to three of the first community arts coun-
116
cils, those of Santa Barbara, Cedar Rapids, Iowa, and Owatonna, Minnesota.11
Despite their somewhat scattered character, Carnegie's grants appear to
have played an important role in disseminating and institutionalizing the
high culture that museums, orchestras, and other arts institutions had begun to define toward the end of the nineteenth century. To a lesser extent,
through subsidization of studies and books on the role of the arts in U.S.
society, Carnegie supported the emerging union of the arts and universities, encouraged the professionalization of museum and orchestra management, and pressed upon trustees the view, more novel at that time than it
is today, that they owed a responsibility to the public.
After Carnegie's almost complete withdrawal in 1943, foundations provided only modest support for the arts for several years. When R. Emerson
Andrews wrote his classic volume, Philanthropic Giving, in the late 1940s,
he reported little foundation giving to the arts aside from grants and fellowships to visual artists, musicians, and composers from a few small
foundations.12
Foundations did make occasional grants to nonprofit arts organizations
throughout this period. But only in 1957, with the inauguration of the
Ford Foundation's arts programs under the direction of W. McNeil Lowry,
did the private foundation once again become a major force in the arts.
The aim of the Ford program was nothing short of revitalizing the performing arts throughout the United States: in the case of orchestral music,
stabilizing symphony orchestras around the country; in the cases of dance
and theatre, creating new industries where none existed. The scale of Ford
support and the instruments the Foundation used to achieve its ends varied. But a distinctive and consistent set of purposes were evident throughout the Lowry years. First, the Ford program sponsored the diffusion of
classical music, opera, theatre, and the dance throughout the United States
by supportingand in some cases helping to createstrong regional institutions. Second, unlike Keppel at Carnegie, who sought to coax the universities into adopting the arts, Lowry sought direction primarily from artists and artistic directors, and focused Ford's attention on nurturing
environments that could attend both to artists' material and to their creative needs. Third, the Ford Foundation sought to help performing artists
by assisting the nonprofit cultural institutions that employed them; and by
encouraging these institutions to build stable paying audiences and, especially in later years, to institute financial-management reforms.
The dominance of the Ford Foundation arts programs throughout the
late 1950s and 1960s was quantitative as well as philosophical. The scale
of that Foundation's appropriations was unprecedented and, until the maturation of the National Endowment for the Arts, unmatched by any other
public or private patron. Beginning in 1962, the Foundation made over
$14 million in grants to enable 13 resident theatres to "reach and maintain
new levels of artistic achievement and financial stability"; provided, in the
late 1960s and early 1970s, approximately $6 million in support for mi-
117
nority theatre institutions; in the 1970s, made over $10 million in cash
reserve grants to 29 resident theatres (these were multiyear matching grants
aimed at eliminating deficits and establishing accounts to buffer the recipients from cash-flow problems); and in 1961 created the Theatre Communications Group, a service organization for the resident stage, which
received more than $3 million in Ford support during its first two decades.
In the dance, the Foundation appropriated over $12 million in support of
seven ballet companies in 1963, and in the 1970s granted more than $7
million for a cash reserve program for 15 ballet and dance organizations.
In the early 1960s the Foundation gave over $4 million to 16 civic opera
companies, adding $8.5 million to this amount in cash-reserve grants during the 1970s. In its most spectacular display of financial largesse, in 1966
the Ford Foundation appropriated $80.2 million in support for 61 symphony orchestras across the United States. The purpose of these grants was
to eliminate deficits and to enable the orchestras to expand their activities
and to achieve a modicum of financial stability.13
Substantial as these figures are, they represent just a portion of Ford's
giving to the arts and omit what were, in some disciplines, substantial
programs of support for creative artists, for the production of new works
by Americans, for documentation, and for professional training. Few parts
of the performing-arts world were untouched by the Foundation's gifts.
Although the Ford Foundation was criticized in some quarters for pushing
the theatres' institutional development at the cost of artistic growth and
audience diversity,14 or for encouraging wage inflation in the symphony
orchestra,15 the Ford programs represented an application of private funds
to artistic development that was unique in magnitude and scope and unusually broad in vision.
The Rockefeller Foundation also began to fund the arts in the late 1950s,
at first focusing its attention on Lincoln Center and then broadening the
program (which in 1963 came under the direction of former Oberlin College Music Dean Norman Lloyd) to professional training in universities,
fellowship programs for creative artists, and support for innovative and
experimental organizations and programs. Although its total expenditure
between 1964 and 1972 amounted to only $24 millionless than one
third the size of Ford's 1966 orchestra appropriation alonethe Rockefeller Foundation funded many innovative ventures. Moreover, it supported
the values of artistic professionalism that the Ford Foundation also embraced, albeit, in contrast to Ford, with a special emphasis on the universities.
Since the late 1960s, other foundations have come to view the arts as
an important category of foundation philanthropy. A review of the key
players in the 1970s and 1980s would find Ford and Rockefeller remaining
at the forefront; it might also mention the Andrew W. Mellon Foundation,
with its commitment to visual-arts conservation and its multiyear projects
in support of artistic and administrative development in museums and the
performing arts; the Kresge Foundation's support for capital expansion in
118
university and independent arts organizations; the John Simon Guggenheim Foundation's longstanding fellowship assistance for artists; the JDR
3rd Fund's and Rockefeller Brothers Fund's work in arts education and
international cultural exchange; the Getty Foundation's massive operating
programs in support of scholarship, conservation, and arts education; and
wide-ranging and often thoughtfully designed programs of local giving by
the Hewlett Foundation, the MacArthur Foundation, the Mabel Pew Myrin Trust, the Ahmanson Foundation, and others. But, as we shall see, a
series of descriptive vignettes would be misleading in so far as it suggested
that such foundation programs are typical. A more balanced view requires
inspection of aggregate statistics on foundation giving.
SUPPORT FOR THE ARTS FROM MAJOR FOUNDATIONS, 1955-79
Fortunately, aggregate statistics on foundation giving are available from a

study by Karla Shepard of grant-making by major private foundations.
Shepard's figures cover all grants made by 47 of the 54 largest foundations
in 1955, 1960, 1965, 1970, 1975, and 1979.16
The figures must be interpreted with some caution. First, because there
is double-counting of grants that fit into more than one category, the only
non-overlapping totals are for "arts, culture, and the humanities," a very
broad classification of which the arts represent only a portion. Thus the
reader should note that these aggregate totals include many grants to such
organizations as libraries, university English departments, and public television stations that supported activities one would not conventionally associate with the arts. (Data are also reported for more finely drawn categories; but these more narrowly defined figures cannot be summed to yield
total support for the arts because of the problem of double-counting.)
Second, both the broad totals and the subcategory figures are based on
appropriations for each year rather than on the number of grant dollars
actually paid out in that year. Because many foundations appropriate funds
in a single year that will be paid out over a period of two, three, or even
more years, data on appropriations are likely to exhibit more marked fluctuation than would data on actual grant expenditures. Consequently, we
cannot be certain to what extent changes in appropriations as measured
every five years reflect trends or simply document exceptional patterns of
appropriations in selected years. Because the Ford Foundation's grants represent a large portion of all arts giving over much of the period studied,
and because the Ford Foundation tended to commit most of its arts spending in the form of rnultiyear appropriations, the problem is especially grave.
Fortunately, Shepard also calculates totals excluding the Ford Foundation.
Because these latter figures aggregate the appropriations of many smaller
foundations, none of which accounted for a large share of arts funding,
they are likely to "smooth out" fluctuations and thus be relatively reliable.
Despite these limitations, the data provide a useful overview of the grants
of foundations that collectively accounted for 35 percent of all grant dol-
119
lars in 1979.17 Table 5.1 displays the number of grants to arts, culture,
and the humanities (and, below this figure, the percentage of grants), in
the aggregate and by arts subcategory between 1955 and 1979. Table 5.2
depicts the size of appropriations (and the percentage for each subcategory
of all appropriated dollars) over that period. Because Ford Foundation
appropriations accounted for such a high proportion of all grant-making
activity by foundations during much of the period reviewed, data for all
foundations and data for all foundations excluding Ford are presented separately in rows 2 and 4. Because inflation makes comparison of dollar
amounts misleading, most of the discussion below will focus on the percentage share of total foundation appropriations allocated to different subcategories of the arts.
Note, first, that the number of foundation grants for arts, culture, and
the humanities grew from 485 in 1955 to 2032 in 1979; while grant dollars expanded from almost $13 million in 1955 to $147 million in 1979.
Although the percentage of all grants going to arts, culture, and the humanities rose only modestly during this period, from 21 percent in 1955
to 28 percent in 1979, the rise in the percentage of foundation dollars
contributed to this category climbed more sharply, from almost 10 percent
to almost 21 percent.
The increase in the percentage of resources appropriated for the arts,
culture, and the humanities was sharpest between 1955 and 1960, then
rose smoothly and steadily for the next twenty years. This trend is somewhat illusory, however, a product of changes both in the Ford Foundation's giving patterns and in Ford's share of all foundation disbursements.
If we exclude the Ford Foundation's grants, we discover a sharp rise in
giving to the arts, culture, and humanities (as a share of all foundation
appropriations) between 1955 and 1960, another rise in 1965, a sizable
decline in 1970, and then stabilization at just above 1965 levels in 1975
and 1979.18
The aggregate figures, of course, tell only part of the story. Giving to
subcategories of "the arts, culture, and humanities" classification developed at different rates. In the discussion that follows, these subcategories
are taken to constitute "the arts": general arts (a heading that includes
arts councils, arts centers, and other multidisciplinary programs); visual
arts; architecture; dance; music; theatre; media and communications; and
museums. (Data are also presented by recipient, as opposed to field of
interest, for museums, performing arts groups, and art councils/consortia.)
Although double-counting precludes precise estimates, the arts component appears to have increased over the period Shepard studied from about
one-third to one-half of all arts, culture, and humanities dollars. The most
established fields in 1955 were those of music and museums, which received 0.5 and 1 percent, respectively, of all foundation expenditures. By
contrast, less than two-tenths of a percent of foundation appropriations
were directed to general arts, architecture, or dance; and just three tenths
to theatre.
Between 1955 and 1975, all of the arts areas grew as a percentage of
120
Table 5.1
Number of Grants Made by 47 Major Foundations, 1955-1979
Category
All Grants
Grants for Arts/
Culture/Humanities
1955
2289
2014
485
460
21.2%
22.8%
1960
1965
1970
1975
1979
3237
2554
3805
3262
4357
3367
6161
7320
6326
801
637
24.8
919
994
826
22.8
24.5
1697
1540
2032
47
39
1.1
85
74
24.9
837
24.2
25.7
5264
27.5
29.3
1813
27.8
28.7
Subclassification by Field of Interest

General Arts
Visual Arts
Architecture
4
4
0.2%
0.2%
23
23
1.0%
1.1%
3
1
0.1%
0.0%
Dance
Music
1
1
0.0%
0.0%
44
44
1.9%
2.2%
Theatre
7
0.3%
0.3%
Media/Communications
Museums
28
17
1 .2%,
0.8%
28
28
1.2%
1.4%
16
12
0.5
0.5
52
44
1.6
1.7
15
12
0.5
0.5
9
9
0.3
0.4
83
73
2.6
2.9
25
18
0.8
0.7
97
29
3.0
1.1
32
30
1.0
1.2
Subclassification by Type of Recipient Institution

36
30
Museum
30
33
1.1
1.3%
1.3
1.5%
24
61
Performing
54
24
Arts Group
1.9
1.0%
2.1
1.2%
28
25
0.7
0.8
83
73
2.2
2.2
25
20
0.7
0.6
10
7
0.3
0.2
87
80
2.3
2.5
45
40
1.2
1.2
88
70
2.3
2.1
48
48
1.3
1.5
60
57
1.6
1.7
77
70
2.0
2.1
1.2
1.4
1.4
88
82
2.0
2.4
18
14
0.4
0.4
118
22
17
42
0.5
0.5
118
106
2.7
3.1
69
51
1.6
1.5
162
95
3.7
2.8
71
69
1.6
2.0
83
76
1.9
2.3
103
85
2.4
2.5
106
1.9
2.0
36
34
0.6
0.6
40
0.7
0.8
148
139
2.4
2.6
121
113
2.0
2.1
223
173
3.6
3.4
103
97
1.7
1.8
123
117
2.0
2.2
188
182
3.1
3.5
123
105
1.7
1.7
181
173
2.5
2.7
78
63
1.1
1.0
5.9
43
0.8
0.7
213
194
2.9
3.1
175
139
2.4
2.2
283
221
3.9
3.5
148
145
2.0
2.3
157
152
2.1
2.4
291
254
4.0
4.0

Category
Arts Council/
Consortium
1955
2
2
0.1%
0.1%
121
1960
1965
1970
1975
1979
17
17
0.4
0.5
21
15
0.5
0.4
62
53
1.0
1.0
96
79
1.3
1.2
0.2
0.2
Row 1: Number of grants from 47 major foundations. Row 2: Number of grants, excluding grants by the
Ford Foundation. Row 3: Percentage of all grants to category in left-hand column. Row 4: Percentage of
grants to category in left-hand column, excluding those of Ford Foundations.
Note: Because of multiple classification of certain grants, subcategories cannot be summed to total.
SOURCE: Printouts on file at the Foundation Center Library in New York from Study of Foundation GrantMaking by Karla Shepard, sponsored by the Twentieth Century Fund.
foundation appropriations. Dance funding, virtually nonexistent in 1955,

reached 0.7 percent by 1965; theatre funding increased from 1 in every
333 foundation grant dollars in 1955 to 1 of every 67 by 1965. Support
for music increased more slowly, from 0.5 to 1.5 percent of foundation
expenditures over the total period. Museum assistance increased from 1.0
to 2.8 percent of total grants, and grants for the visual arts, which represented 1 in every 500 grant dollars in 1955 accounted for 1 in 50 by 1979.
As we have seen, the Ford Foundation's role in performing-arts assistance during this period was substantial. The Ford Foundation appropriated more than all other 46 major foundations combined for dance in
1965 and 1970, for music in 1965, and for theatre in 1965 and 1970.
Consequently, the share of all grant dollars going for dance, music, and
theatre all peak in 1965 as a product of Ford's spending and decline thereafter (although music and theatre nearly recover by 1979).
To what extent was Ford leading the field in its allocation of grant dollars? In dance, Ford's entry in the early 1960s appears to coincide with a
marked decline in support, as a percentage of all grant dollars, from other
foundations: indeed, dance played as large a role in the budgets of other
major foundations in 1960 as it would through 1979. In music, the trajectories of Ford and of other support were similar (although the fluctuation
in Ford's pattern was more marked): up in 1965, down during the early
and mid-1970s, and up again in 1979. Support for the theatre doubled as
a proportion of other foundations' grants between 1960 and 1965, as the
Ford program grew; but then fell off sharply between 1965 and 1970.
These figures warrant two observations. First, the Ford Foundation's
performing-arts expenditures of the 1960s and 1970s, though remarkable
for their size, national scope, and degree of focus, were largely consistent
with more general trends in foundation giving during this period. Second,
the extent of Ford's grant-making was so great relative to that of other
foundations between 1955 and 1975 that any figures on foundation giving
to the arts during this period that include the Ford Foundation's grants
are likely to be misleading. Including Ford depresses the share of foundation grants going towards the performing arts in 1955 and inflates them
by the mid-1960s. Excluding the Ford Foundation's contributions, the rise
122
Table 5.2 Dollars Appropriated, in Millions, by 47 Major Foundations,

1955-1979
Category
All Grants
Grants for Arts/
Culture/Humanities
1955
1960
1965
1970
1975
1979
$132.43M
72.37M
301.33
132.99
575.55
321.75
680.26
494.59
718.54
634.43
$12.65M
9.26M
9.5%
12.8%
42.00
23.62
13.9
17.8
505.03
202.36
76.66
40.00
15.2
19.8
99.98
48.18
17.4
15.2
125.81
99.78
18.5
20.2
147.10
128.76
20.5
20.3
S0.09M
0.09M
0.1%
0.1 %
1.92
0.76
3.68
3.51
4.84
4.07
12.05
4.03
15.18
8.94
$0.22M
0.22M
0.2%
0.3%
2.54
2.13
6.32
4.67
5.48
4.16
14.53
14.17
14.87
14.79
$0.11M
$0.01M
0.1%
0.0%
$0.03M
$0.03M
0.0%
0.0%
1.10
0.92
1.06
0.51
4.14
2.98
2.71
2.66
0.2
0.3
0.7
0.9
0.4
0.5
4.78
3.41
3.60
1.68
1.74
0.68
2.62
2.45
0.3
0.2
0.4
0.5
2.27
1.35
$0.71M
$0.71M
0.5%
1.0%
1.81
1.35
8.44
2.59
5.04
3.66
10.88
9.65
1.7
1.3
0.9
1.1
5.36
5.02
$0.42M
$0.42M
0.3%
0.6%
1.72
0.95
7.34
2.91
6.66
2.62
7.80
4.23
10.08
6.62
0.6
0.7
1.5
1.4
1.2
0.8
0.9
1.1
1.4
1.0
$3.31M
$0.64M
2.5%
0.9%
$1.36M
$1.36M
1.0%
1.9%
9.69
1.72
16.57
4.40
33.83
3.75
26.31
8.46
21.37
12.39
1.3
2.2
1.2
1.7
2.0
20.15
20.11

General Arts
Visual Arts
Architecture
Dance
Music
Theatre
Museums
0.6
0.6
0.8
1.6
0.4
0.7
0.72
0.72
0.2
0.5
0.6
1.0
3.2
0.7
1.7
1.3
2.3
0.7
0.1
3.3
0.8
1.3
1.0
1.3
5.9
1.8
0.8
2.1
2.9
0.8
1.0
3.9
2.1
1.4
2.1
2.3
0.7
0.5
0.3
0.2
1.5
1.5
3.0
3.47
3.43
2.11
2.11
7.70
7.13
20.12
19.96
1.2
0.4
1.0
1.3
2.2
4.0
2.8
3.2
3.04
3.00
7.59
6.97
22.89
22.74
20.78
20.72
0.6
1.5
2.2
3.4
4.6
2.9
3.3
2.6

2.41
$0.49M
Museum
2.36
$0.49M
0.8
0.4%
1.8
0.7%
1.3
3.0
123
Table 5.2 Dollars Appropriated, in Millions, by 47 Major Foundations,

1955-1979 (continued)
Category
1955
1960
1965
1970
1975
1979
Performing Arts Group
$0.70M
$0.70M
0.5%
1.0%
2.22
1.46
0.7
1.1
7.14
2.46
1.4
1.2
6.20
3.34
1.1
1.0
11.65
8.78
1.7
1.8
14.35
12.01
2.0
1.9
Arts Council/
Consortium
$0.03M
$0.03M
0.0%
0.0%
0.46
0.41
0.2
0.3
0.24
0.24
0.0
0.1
1.74
1.14
0.3
0.4
2.79
2.26
0.4
0.5
3.25
2.75
0.5
0.4
Row 1: Grant appropriations, in millions, of 47 major foundations. Row 2: Grant appropriations, excluding those of the Ford Foundation. Row 3: Percentage of all grant dollars to category in left-hand column.
Row 4: Percentage of all appropriations to category in left-hand column, excluding grants by Ford Foundation.
Note: Because of multiple classification of certain grants, subcategories cannot be summed to total.
SOURCE: Printouts on file at the Foundation Center Library in New York from Study of Foundation GrantMaking by Karla Shepard, sponsored by the Twentieth Century Fund.
in foundation support for the performing arts was relatively modest. By

contrast, increases in assistance to the visual arts and museums fields of
interest as a share of the foundation grant dollar were more marked.
The 1960s and 1970s were a time of ferment and expansion in the arts.
As foundation grant-making to arts organizations increased, so did the
number of applicants. How did this affect the size of the grants that foundations made in support of the arts?
We can gain some clues to this by calculating the dollar size of the
average grant by subcategory from the information in Shepard's tables.
(The results of these calculations are exhibited in Table 5.3.) Because the
pattern for Ford Foundation grants is idiosyncratic, we shall consider only
the figures for all foundations, excluding Ford. The average foundation
grant for all purposes grew steadily between 1955 and 1979 (although the
increases stopped keeping up with inflation after 1970). The same was true
of grants to the aggregate category of arts, culture, and the humanities.
Note that the rate of growth in the latter category was faster and steadier,
however. Whereas in 1955, the average arts, culture, and humanities grant
amounted to approximately 45 percent of the average dollar amount of all
foundation grants, by 1979 the ratio was over seven tenths. Like other
grants, however, grants for the arts, culture, and humanities became smaller,
in real-dollar terms, during the 1970s.
Because averages are easily distorted by exceptionally large grants where
the number of grants is small, data on changes by subcategory may be
deceptive. Nonetheless, we can learn something by observing persistent
change in those subcategories with the greatest number of grants. Music
grants increased markedly in size between 1960 and 1965. Although they
declined relative to inflation thereafter, the real value of the average grant
was still larger in 1979 than it was in 1960. By contrast, grants in support
of theatre fluctuated throughout this period but declined markedly in real
124
Table 5.3 Average Size, in Thousands of Dollars, of Appropriations Made by

47 Major Independent Foundations, 1955-79
Category
All Grants
1955
1960
1965
1970
1975
1979
$57.9G
$35.9G
$26.1C
$20.1G
93.1
52.1
132.7
62.0
132.1
95.6
110.4
94.0
98.2
100.3
52.4
37.1
83.4
47.8
100.6
58.3
74.1
64.8
72.4
71.0

General Arts
$22.5G
$22.5G
120.0
63.3
131.4
140.4
103.0
104.4
141.8
54.5
Grants for Arts/

Culture/Humanities
Visual Arts
$ 9.6G
$ 9.6G
48.9
48.4
76.1
64.0
62.3
50.7
123.1
133.7
123.4
85.1
82.2
85.5
Architecture
$36.7G
$10.0G
73.3
76.7
42.4
75.5
75.3
78.2
61.3
54.1
Dance
$30.0G
$30.0G
80.0
80.0
360.0
240.0
62.4
61.3
38.5
31.4
Music
$16.1G
$16.1G
20.7
13.0
97.0
32.4
230.0
212.9
79.1
40.0
42.7
34.5
36.2
36.1
51.1
49.7
Theatre
$60.0G
$60.0G
$118.2G
$ 37.7G
68.8
52.8
163.1
36.4
96.5
51.4
64.5
37.4
57.6
47.6
99.9
59.3
188.3
62.9
208.8
39.5
118.0
48.9
75.5
56.1
$48.6G
$48.6G
108.4
114.3
44.0
44.0
108.5
103.3
195.3
205.8
136.2
138.7
60.7
52.6
91.5
91.7
186.1
194.3
132.4
136.3
92.7
35.1
60.2
39.3
62.0
48.2
49.3
47.3
14.1
14.1
82.9
76.0
45.0
42.6
33.9
34.8
Museums

66.9
Museum
$16.0G
71.5
$16.0G
36.4
$29.2G
Performing Arts Group
27.0
$29.2G
76.7
$15.0G
Arts Council/
82.0
$15.0G
Consortium
Row I: Average size of appropriations from 47 major foundations. Row 2: Average size of grants, excluding appropriations by the Ford Foundation.
SOURCE: Calculated by author from printouts on file at the Foundation Center Library in New York from
Study of Foundation Grant-Making by Karla Shepard, sponsored by the Twentieth Century Fund.
dollars. In short, many foundations responded to the increase in demand

for grants by making more but smaller grants to performing-arts institutions.
FOUNDATION SUPPORT FOR THE ARTS SINCE 1980

Data on foundation support for the arts between 1980 and 1984 are exhibited in Table 5.4. Because the Foundation Center, which collects these
125
Table 5.4 Foundation Grants to Cultural Activities, 1980-84

1980
1981
1982
1983
1984
General Arts
$23.8
534
2.0%
Art/Architecture
$36.3
498
3.0%
$16.9
328
1.4%
$9.8
227
0.8%
$27.0
492
2.3%
$23.4
640
2.0%
$23.7
602
2.0%
37.2
778
2.5
57.4
683
3.9
17.5
401
1.2
12.4
347
0.8
28.3
563
1.9
35.7
892
2.4
20.3
771
1.4
69.1
1075
3.9
48.8
745
2.7
22.5
461
1.3
20.5
405
1.1
40.2
591
2.2
47.5
1012
2.6
28.8
862
1.6
44.9
1181
2.7
50.5
761
3.1
History
52.3
776
4.2
43.1
554
3.4
12.8
360
1.0
20.1
302
1.6
20.9
399
1.7
24.5
799
1.9
18.8
688
1.5
192.6
15.3
208.7
14.1
277.3
15.4
229.0
14.0
Category
Language/Literature
Music
Theatre/Dance
All Arts and Culture

Dollars:
Percent:
$160.8
13.5
21.3
496
1.3
14.6
487
0.9
24.6
577
1.5
44.1
1082
2.7
28.1
958
1.8
Row 1: Appropriations, in millions of dollars. Row 2: Number of grants. Row 3: Percentage of all appropriations of $5000 or more by reporting independent, community, and company foundations.
SOURCE: Foundation Center Statistical Summary, New Series.
data, changed its system of classification and reporting to one similar but
not identical to the Shepard system; because the Foundation Center data
are from a larger number of foundations, including community and some
corporate foundations; and because the Center tabulates only grants of
$5000 or more, these figures are not precisely comparable to those for
prior years. Moreover, because the Foundation Center reports are based
on a slightly different number and set of foundations from year to year,
comparability within this table of dollar amounts and numbers of grants
is not perfect. Nonetheless, because the foundations represented account
for the majority of grant dollars, comparability of the percentage of appropriations allocated to different categories of spending is reasonably reliable. Thus, we shall focus on this figure.
With the onset of the Reagan administration's budget reductions in federal social programs, many observers predicted that the arts' share of the
foundation dollar would decline as foundations responded to the needs of
financially strapped social-service agencies.19 In fact, during the first year
126
of the Reagan administration, private foundation support for "cultural activities" (a rubric that includes general arts, art and architecture, history,
language and literature, media and communications, music, and theatre
and dance) increased markedly, from 13.5 to 15.3 percent of grant dollars.
Between 1981 and 1982, culture's share of the foundation dollar receded;
in 1983 it surpassed the 1981 level; and in 1984 it declined to 14 percent.20
Because these aggregate figures include many grants for such purposes
as education in the humanities or public-service programming for public
television, it is important to go beyond these totals to inspect finer recipient categories. Since 1980, grants in support of the theatre and the dance
have declined slightly as a percentage of foundation outlays, with the largest drop between 1980 and 1981; while the share of grants in support of
music has increased by more than 33 percent. Proportional support for art
and architecture appears to have held more or less steady. The share of
grants to media and communications projects has declined, while the heterogeneous "general" category has fluctuated widely from year to year.
Despite the decline in funding for the broad category of "cultural activities" between 1983 and 1984, the shares of music, theatre and dance, and
art and architecture all increased.
Thus there is no evidence of a wholesale reallocation of foundation appropriations from the arts to human services or other beneficiaries. Indeed,
the early 1980s were good to foundation support of the arts because foundation assets, which stagnated throughout the 1970s, expanded dramatically after 1979. Grant-making followed suit, with appropriations (to all
areas) increasing from $2.42 billion in 1979 to $4.36 billion in 1984.21
Consequently, the arts benefited from maintaining a stable slice of a rapidly growing pie.
WHICH FOUNDATIONS SUPPORT THE ARTSAND WHICH ARTS

DO THEY SUPPORT?
Aggregate data are useful because they highlight the contours of the foundation sector's allocations and permit us to identify trends. But aggregate
data also obscure a great deal of information about the kinds of arts activities that foundations support. In order to understand who benefits from
foundation assistance to the arts, it is necessary to look at the grants and
grant-makers themselves.
Sixty-nine foundations are recorded as reporting grants of $1 million or
more to arts organizations in the 1984 and 1985 editions of the Foundation Center directory, Grants for Arts and Cultural Programs.22 The 1984
list is based on grants of more than $5000 made, for the most part, in
1982 or early 1983, whereas the 1985 list is based on such grants made,
in most cases, in 1983 or early 1984. These reports are only rough guides
to foundation activity, compiled for the purpose of assisting grant-seekers.
127
Nonetheless they provide a useful, if rough, overview to the meaning of

the aggregate figures.
The amount of turnover on the list between 1984 and 1985 is notable
and suggests the episodic quality of much giving to the arts. The Ford
Foundation, which headed the list of the 10 largest arts funders in 1984,
in part as a result of a large grant to the National Arts Stabilization Fund,
is absent in 1985.23 (Ford's total also included grants of $4.5 million to
the Social Science Research Council and $2.5 million to the American
Council of Learned Societies.) Indeed, only 4 foundations were in the top
10 in both years. Of these, 2 (Andrew W. Mellon and Kresge) are independent foundations; 1, Atlantic Richfield, is a corporate foundation; and
1, the San Francisco Foundation, a community foundation.
Most of the 10 foundations reporting the most arts and culture grants
in the 1984 listing gave locally and concentrated their funding on a few
major institutions, usually universities, public television stations, orchestras, or art museums. The Pew Memorial Trust, for example, did most of
its grant-making in Philadelphia. Almost two thirds of its 1984 total represented grants to public television; of the remaining $7.2 million, more
than half consisted of two grants to the Philadelphia Museum of Art. Of
the $2.65 million distributed outside Philadelphia, more than half supported an arts and technology center at the Massachusetts Institute of
Technology.
Some foundations focus intently on a small domain. For example, all
$8.16 million in grants from Palo Alto's Systems Development Foundation
were to universities for computer music projects "leading to artistically
expressive inexpensive instruments," according to the Foundation Center
directory. All but $5,000 of the Don and Sybil Harrington Foundation's
$4.7 million constituted a single grant to the Metropolitan Opera.
Other leading arts supporters concentrate on a single community or region. For example, the Cullen Foundation made all of its grants ($7.7
million) in Houston. The Lilly Endowment spent all but $114,000 of its
arts assistance ($5.1 million, including $3 million in grants to the Indiana
State Symphony) in Indianapolis. The Brown Foundation (Houston, $9
million), the Krannert Charitable Trust (Indianapolis, $5 million), the Ahmanson Foundation (Los Angeles, $4 million), and the William Penn
Foundation (Philadelphia, $3.4 million) were similarly local in orientation.
In sum, of those foundations reported among the top 10 supporters of
cultural activities in either the 1984 or 1985 directories, only the Ford
Foundation, the Andrew W. Mellon Foundation, the Kresge Foundation,
and the Atlantic Richfield Foundation had ongoing national programs of
support for the arts.
The tendency for foundation grants to be concentrated, both geographically and by recipient, is also observed if we look at foundation assistance
to theatre, dance, orchestras and musical performances, and museums. Only
seven foundations reported grants of $1 million or more to theatres.24 Of
these, the three leaders, Mellon, Ford, and Kresge, had national programs.
128
(Kresge's focused on construction grants, many for university theatres or

theatre departments.) The remaining four were all local, two of them community foundations. The Brown and William Penn Foundations were each
among the top ten because of a single grant. Of 17 other foundations
reporting grants of $200,000 or more in support of the theatre, 3 were
community and 2 were corporate foundations. Aside from the corporate
foundations, only onethe Rockefeller Foundationwas national in orientation.
Only 16 foundations reported more than $100,000 in grants supporting
the dance.25 Of these 16, 3 were community foundations and 2 were corporate foundations. Of the others, 3 foundationsHewlett, Starr, and
Stiemkemade only one grant each. Of the remaining 8, only the Ford,
Kresge, and Rockefeller Foundations were national in orientation. The largest
dance funder, the Mabel Pew Myrin Trust ($1.1 million), gave grants to a
variety of dance organizations in the Philadelphia metropolitan area, as
well as one small grant to the Joffrey Ballet.
The 1984 Foundation Center directory of grants for orchestras and musical performances includes 27 foundations that reported grants totalling
$400,000 or more in this category.26 Of these, 5 were company foundations and 3 were community foundations. Of the 10 leading music donors,
only the Ford Foundation was truly national. (The Atlantic Richfield
Foundation made grants to orchestras throughout the United States, but
primarily in the West.) Giving in this area was highly concentrated: Of the
almost $18 million provided by the ten leading donors, more than $13
million was represented by a mere seven grants; and of the latter amount,
three grants to a single institution, the Metropolitan Opera, accounted for
nearly half. The pattern of few, large grants to one or two major institutions was replicated among the smaller donors.
Grants totalling $1 million or more were reported from 21 foundations
in the Foundation Center's 1984 museums listing.27 Of these, 20 were independent foundations, one (The Houston Foundation) a community
foundation. None of the 10 major givers was national in focus. Most of
them made just a few very large grants to favored local museums.
Several notable conclusions emerge from this review:
1. Although the total of foundation support for "cultural activities" is
high, many of these activities (public television, university research, libraries) are only marginally relevant to either the performing or the visual arts.
Support for the performing and visual arts probably represents about half
to two-thirds of all foundation support for "cultural activities."
2. The vast majority of foundation arts dollars is given locally. The percentage originating in private foundations with organized national arts
programs is probably about 5 percent. Although a few locally oriented
foundations support a diversity of organizations, and a handful approach
arts giving systematically, most local support is concentrated on the largest, most prestigious, and most artistically conventional institutions. These
generalizations apply with special force to support for orchestras and art
129
museums (which receive the major share of foundation support), and less
so to support for theatres and dance companies.
3. Muchperhaps mostfoundation support for the arts is episodic and
represents large grants to major capital campaigns. Such support is concentrated on the largest, most prestigious, and most artistically conventional institutions.
4. Because most foundation support for the arts is locally oriented, such
support is geographically uneven. Arts organizations in cities with robust
foundation communities like those of Philadelphia, Minneapolis, San Francisco, and Houston have greater access to philanthropic capital than do
institutions in such cities as Atlanta, Kansas City, Cincinnati, or (at least
until the recent intervention of the National Arts Stabilization Fund) Boston, where local philanthropies have maintained a less vigorous commitment to the arts.
5. Only a very small share of the foundation dollar goes to experimental
arts organizations, minority arts organizations, artists, or community-oriented organizations. In a paper prepared for the Rockefeller Foundation,
Kenneth Goody reported that only one sixth of the foundations with arts
programs that he surveyed responded without qualification that they gave
any support at all to the avant-garde or to new and emerging groups.
Fewer than 10 percent reported providing direct grants in support of artist
fellowships.28 In a review undertaken for the Arts Endowment's Expansion
Arts Division, the Foundation Center found just over $28 million in independent, community, or corporate foundation grants in its 1982 index targeted to all of the following categories, all very broadly defined: "smaller
arts organizations that focus on a minority population, support aspiring
professionals, are community-based in a rural or urban area, or are education-oriented"; education, outreach, or community-oriented activities of
major arts institutions; arts centers and arts councils; and technical assistance for "smaller" arts organizations.29
The relatively few private foundations that do support artists, experimental or innovative organizations, minority institutions, and educational
or community-based activities, and the very few that have long-term, national, focused, and systematically developed program commitments, have
an influence and visibility that far exceed their proportional share of the
foundation dollar. But why are these foundations such a small minority of
all private foundations that give to the arts?
THE POTENTIAL OF THE INDEPENDENT FOUNDATION
Private foundations are widely believed to possess a flexibility in their grantmaking that public agencies and corporations lack. In his introduction to
the Andrew W. Mellon Foundation's 1980 Annual Report, for example,
Mellon President John E. Sawyer noted that, unlike public agencies, independent foundations can respond rapidly to new needs, change or termi-
130
nate programs that are not working, fund "counter-cyclically" to counteract swings in government or corporate attention, and support projects and
goals with long-term or uncertain payoffs. 30 Similarly, a history of the JDR
3rd Fund's Asian Cultural Program reports that "whereas official cultural
exchange programs often operate with much caution, emphasizing established artists and scholars, the Fund has been able to support a large number of young people who showed talent, but were only beginning their
professional development."31 Writing as the federal government was organizing the National Endowment for the Arts, drama critic Brooks Atkinson proclaimed,
If Congress appropriates money for the arts it will, quite rightly, influence or control them . . . Foundations are better equipped to help the theatre, for they are
represented by officers whose training and experience make artistic judgments a
normal procedure . . . Most of the foundations would not be startled by reckless
ideas and bizarre styles of production . . . On the basis of what the foundations
have already achieved in the theatre, I put my confidence in their taste and their
hands.32
The remainder of this chapter is based in large part on interviews with

program officers (and one trustee) of 10 independent foundations that give
to the arts, either nationally or in the community in which the foundation
is located.33 These informants, several of whom had previously worked in
other sectors, echoed these views. Comparing his current employer to the
federal government, one informant reported, "We can afford to take different kinds of risks, to make long-term commitments. We can respond to
things that we might not have thought of when we started." Another program officer with federal-government experience noted that he had been
able to alter his program quickly when it stopped meeting the foundation's
expectations; by contrast, in government he would have had to carry on
despite disappointing results.
An independent foundation program officer who had worked as a junior
staff member in a corporate foundation appreciated her ability to maintain
well-defined guidelines and to make large grants systematically and without external interference. By contrast, her previous employer's grants were
small and made "almost entirely at random." Unlike the independent
foundation, she reported, even the most professionally administered company foundations must answer to employees, shareholders, and the chief
executive officer.
Autonomy and insulation from external pressure are the factors that
foundation staff spoke of most frequently in explaining the greater flexibility they perceived in independent foundations than in government or
corporations. One program officer welcomed his ability to make large grants
without the concern for regional distribution required of grant-makers in
the federal government. Private foundations possess the ability to focus
resources to a greater extent than do governments (which must maintain
legislative coalitions), corporations (which must enhance, or at least not
131
damage, the corporate image), and community foundations (which bear

an encyclopedic responsibility within their charitable domains).
The relative autonomy of independent foundations also enables them to
act without undue concern for public relations. With no corporate sponsor
to please, independent foundations can contribute funds quietly to vital
behind-the-scenes efforts, like scholarship, art conservation, or the training
of younger artists, that lack the gloss of blockbuster exhibits or new wings
for performing arts centers.
Finally, the independence of the private foundation gives it the potential
to take risks, for if the enterprises in which it invests fail, trustees and staff
have only to answer to themselves. As one informant said of a program
supporting artists, "If two thirds of the people we support are forgotten in
twenty years, that's the chance we must take to help the one third that
will make an impact on their fields."
If the individual independent foundation has flexibility and the freedom
to experiment, the foundation sector is believed to possess collectively a
diversity that enables it to sustain an unusual range of purposes and activities. The heterogeneity of foundation charters, missions, and trustee orientations may permit more variation among foundation programs than
among public agencies (which share certain common political imperatives)
or corporations (which are subject to profit incentives and the constraints
these pose).
CONSTRAINTS ON FOUNDATION PROGRAMS OF SUPPORT FOR

THE ARTS
But if the universe of foundations contains programs that support almost

every imaginable artistic pursuit, from the Metropolitan Opera to electronic music, from the National Gallery to alternative spaces, from the
Guthrie Theatre to Alternate Roots, on balance, relatively few of the
hundreds of independent foundations that give to the arts have lived up to
the promise of the sector to make a difference for enterprises that other
patrons will not support. As we have seen, the number of national programs in the arts can be counted on one hand and together account for
approximately $1 in every $20 of foundation grants to the arts. Even if
one adds to these few institutions those foundations that maintain ongoing
and systematic programs of assistance to local artists and arts organizations, it is doubtful that the total rises far above 10 percent of all foundation arts disbursements.
All organizations, even private foundations, face constraints. Discussions of the flexibility and autonomy of private foundations often overlook
this fact, consequently treating a relative advantage as an absolute dispensation from the cares of the world.
In fact, foundations, their trustees, and their program officers are constrained in the kinds of programs that they can develop in support of the
132
arts. These constraints may be neither so dramatic nor so invariant as

those facing their counterparts in the public or corporate sectors, but they
are nonetheless real and may help to explain why imaginative and courageous programs of artistic philanthropy are so unusual, so rarely replicated, and thus so critical for the field as a whole. Let us consider a few
of the possible factors that may constrain foundation programs of giving
in the arts.
Federal and state laws regulating private grant-making foundations set
broad parameters around foundation activities. But in practice they seem
to present few obstacles for most program officers or trustees concerned
with the arts.
Foundation missions and traditions pose more significant constraints,
but these vary from foundation to foundation. Those foundations that pride
themselves on maintaining trim staffs are unlikely to mount fellowship
programs, which are staff-intensive (although they may support fellowship
programs through operating nonprofit organizations). Program officers
working for foundations that have traditionally supported certain disciplines or institutions may find it difficult to abandon old commitments.
For the most part, however, foundation interests pose opportunities for
arts programs as well as constraints. The arts program of one foundation
that is international in orientation, for example, was able to build on the
strengths of the foundation as a whole to mount programs of international
cultural exchange.
Internal politics present a more formidable constraint to many larger
foundations. The staff interviewed for this study varied in the emphasis
they lay on building and maintaining an internal constituency. The director of one major program noted that he attempts to stay attuned to the
preferences of the trustees, to respond to their cues in his program development efforts, and to convince his fellow program directors of the importance of the foundation's activities in the arts. By contrast, the director
of another major program noted that she receives little input from the
foundation's trustees and works largely by herself, submitting new program proposals to the trustees only after they have been fully developed.
In the long run, arts programs that have strong constituencies on boards
of trustees, that are strongly anchored in the more general mission of a
foundation, and the staff of which interact vigorously with their peers would
seem to have stronger survival chances than those that operate more autonomously. In private foundations, as in many relatively small and informal organizations, the strong identification of a program with its director
sometimes creates crises of commitment when the program officer steps
down. (Grants to the arts by one locally oriented foundation, for example,
declined by one half when a program officer who served as the arts' internal advocate resigned.) Where program officers are able to decentralize
their organization's memory of and commitment to an arts program, such
succession crises are more likely to be avoided.
Budgetary change represents another constraint and, in some cases, an
133
opportunity. The systematic approach to program development characteristic of foundations like Ford, Rockefeller, and Mellon is, as I have noted,
rare among most donors to the arts. Most foundations, especially local
ones, with sustained commitments to the arts begin with grants to established institutions, often museums and orchestras, of the sort favored by
the more conservative trustees; they expand their programs only when the
assets and disbursements of the foundation are climbing. Because new programs and new kinds of grantees are most easily accommodated when
their initiation does not require a reallocation of resources, foundation
growth provides avenues for innovative grant-making and external leverage that are unavailable during times of stasis or retrenchment.
Trustee preferences, and the preferences of those with whom trustees
regularly come into contact, represent a major constraint on arts-program
staff. Many of the informants for this study reported that their trustees
were more conservative in their tastes and grant-making inclinations than
were they themselves. Two mentioned that trustees would not permit them
to make direct grants to artists. "Grants to organizations are much safer
than direct grants to genius," said one. Another indicated that she would
like to support smaller and less tested organizations than her trustees would
permit: "We place our emphasis at the higher end of the field. We cannot
do much with the avant-garde, the more experimental, the dizzier end of
the field. . . . I couldn't get away with that." A third noted that trustee
opposition precluded foundation assistance to nontraditional and minority
arts organizations. Another reported that trustees associate the avant-garde
with "bare bosoms and four-letter words."
Trustee conservatism may be a matter of personal taste; or it may result
from the pressures with which the trustee comes in contact in his or her
daily routine. If foundation trustees are usually, in practice, free from legal
or material retribution for their institution's policies, they are nonetheless
subject to all of the forms of interpersonal control (esteem and disesteem,
embarrassment and pride, condemnation and praise, raised eyebrows and
pats on the back) by which people regulate one another's behavior. Because most foundations' trustees are persons of wealth and status and many
are business executives, the worlds that they as a group inhabit are likely
to be more conservative than those of scholars or practicing artists. The
influence of trustee conservatism is probably strengthened by the widespread belief that cultivated people should have "tastes" in the arts (although they may remain respectably unopinionated about such program
areas as medical research or environmental affairs).
Peer pressure on trustees is likely to be most intense in foundations that
recruit their trustees from and make most of their grants in a single community. Under such circumstances, trustees are likely to be held more often
to account for their foundations' actions and to be subject to more concerted pressure from supporters of grantees or would-be grantees. (A program officer at one locally oriented foundation reported his constant struggles against backers of major capital campaigns, who try to persuade trustees
134
to commandeer the arts budget for their favored causes.) This is undoubtedly one reason why most (but not all) local grant-making focuses on the
major established institutions.
Trustees are not, of course, invariably conservative, and staff are sometimes able to maneuver around trustee tastes. Much of the diversity in the
foundation world reflects variation in the values and preferences of foundation trustees. Some innovative programsfor example, one foundation's
program of assistance to film and video organizationsbegin as trustee
suggestions. Moreover, trustees of many mature foundations defer to the
programmatic judgments of staff and of professionals in the field.
What is more, foundation staff are often able to combat trustee recalcitrance through a combination of advocacy and gentle guile. Foundations
that make small grants at a staff member's or president's discretion may
experiment with such grants to prove the worth of an initiative. One program officer reported drawing on a long-standing regional commitment of
her foundation in order to support an innovative organization that would
otherwise have been ineligible for support. Another program officer reported funding certain difficult-to-classify avant-garde performing companies under a program category devised to assist more conventional organizations.
THE PROBLEM OF INFORMATION
The cost of informationof getting it and of evaluating itis as substantial a constraint on foundation innovativeness as any other. If trustee preferences are more binding upon local foundations, information limits may
press harder on national programs, where the number of potential granteesand the distance between foundation officer and granteeis likely
to be greater. As the Rockefeller Panel on the Performing Arts wrote in
1965, "Because decisions on arts applications involve judgments of quality
in an area where there are few absolute standards, there is perhaps greater
uncertainty about making grants than in the traditional areas of foundation support."34
Given the uncertainty surrounding the evaluation of artistic work, and
the ambiguity of much of the information that foundation officers receive,
defining the needs of a field and selecting grant recipients is both difficult
and expensive. Indeed, the only respect in which the federal government
was compared favorably to independent foundations in grant-making was
in its unparalleled access to information. One informant noted that when
he was a federal employee, "information rolled across my desk in barrels
every day." As a foundation program director, maintaining contact with
and access to information from the field has been more difficult. (Another
informant, who had worked in the arts, complained of finding her old
friends suddenly guarded in their comments when she assumed a grantmaking role.)
135
Because it takes time to collect and to evaluate, information is expensive. Almost all of the program officers interviewed for this study described
strategies they use to contain information costs (although few of them put
it in these terms); and many of them noted the trade-off between minimizing expenditures on information and maximizing the openness of their
programs to all talented grant-seekers.
One strategy for containing information costs is to develop such narrow
guidelines that for any round of grants the universe of potential grantees
is finite and knowable. Indeed, one informant prefers setting limits on her
programs that may appear arbitrary precisely because such limits save time
and money, permitting the foundation to spend more on grant-making,
and potential applicants to invest their proposal-writing time effectively.
Such a strategy, which works well to conserve information costs, would
not be appropriate for a foundation that sought to identify new talent; to
make fine distinctions among a great many potential applicants; or to encourage the best small, new, or innovative organizations. (The most widely
cited argument against individual award and fellowship programs is that
gathering sufficient information to make fair and intelligent decisions on
individual applicants is extraordinarily expensive.)
A few of the major foundations that support the arts invest in program
officers who come with years of experience and extensive personal networks, or they provide sufficient travel budgets and staff assistance to enable program directors to forge such connections. In other cases, however,
program officers draw on the expertise of a few individuals who are believed to be "central" to a field, either hiring them as consultants or seeking their advice informally. This is a sensible economic strategy; indeed, it
is difficult to imagine an affordable alternative for any but the wealthiest
foundations. But such consultants, formal or informal, may, after a while,
constitute an invisible college upon which many different foundations rely.
If many foundations draw on the same invisible college, and if members
of that group influence one another as well, program officers may believe
that they are making independent and convergent discoveries about the
field when, in fact, they are all hearing the same conventional wisdom
from the same sources. At worst, such a system may come to resemble a
game of "whisper down the lane," with chance remarks fed back into the
pipeline and magnified, and rumor replacing research as a basis for decision.
The problem of information is exacerbated, of course, by the fact that
evaluations of artistic work are likely to be ambiguous. Although almost
all program officers wish to fund excellent programs and artists, few have
the resources to visit each of the organizations they might assist or to
convene rotating panels for peer review. Under such circumstances, some
informants reported seeking less ambiguous data to help them distinguish
among applicants: information on attendance figures, earned-income statistics, and meeting-attendance records of the applicants' trustees. (Without supplementary information on quality, such practices would lead to
136
grants to organizations that mount popular productions and exhibitions

and select board members who, for whatever reasons, are willing to attend
meetings. Whether such organizations also produce high-quality art is a
moot point.)
Princeton economist Joseph Stiglitz has distinguished between "polyarchies," in which each actor has the discretion to accept or reject a potential
project (or proposal), and hierarchies, in which projects are taken from a
pool only once, with those selected by the lower level passed on to the
next, which re-examines and then approves or vetoes them.35
According to Stiglitz, one can demonstrate mathematically that a hierarchy rejects more good projects than a polyarchy and that a polyarchy
accepts more bad ones. "Under the plausible assumption," writes Stiglitz,
"that there are more bad projects than good projectsafter all, it it easier
to think up bad ideas than good ideaspolyarchy performs better than
hierarchy." 36
The universe of independent foundations is clearly a "polyarchy" by
Stiglitz's definition. If a proposal is rejected by one foundation, it stays in
the pool to be considered by others. Such a decentralized system seems
especially tailored for a field like the arts, where merit is difficult to define
and, until established, may be difficult to discover. The success of a decentralized system in nurturing the arts, however, requires that foundations
value and sustain their diversity and flexibility. For the more similar are
the standards, decision procedures, and information sources of members
of a polyarchy, the more such a polyarchy will tend, in practice, towards
hierarchy, and the less likely it will be to find the "scarce new ideas" of
which Stiglitz writes.
CONCLUSION
Independent foundations, because of their autonomy, flexibility, and diversity, have played a critical role in the arts by supporting those purposes
and programs of merit that other funders have been constrained to neglect.
Yet private foundations are themselves constrained. Relatively few of them
live up to their potential to be different and to take the risks that others
refuse. Despite the comparatively high visibility of the few independent
foundations that maintain creative, national programs of support for the
arts, the persistence of the foundation role cannot be taken for granted.
Most foundation dollars go to established traditional institutions, most
often art museums and symphony orchestras, in the foundation's home
community, frequently in support of building or endowment campaigns.
Few foundation grants support access to and participation in the arts for
the poor and working poor; conservation or preservation of performances
in such performing arts as dance, theatre, or improvisational music; or
assistance for innovative artists and arts organizations. Nor are there many
that support programs and organizations that promote the values of plu-
137
ralism and diversity through presentation of genres that, like jazz performance and composition or ethnic dance, are associated with specific racial
or nationality groups or, like performance art and video art, have emerged
out of the hybridization of classic and commercial culture. The resources
of the relatively few foundations that do support such activities are stretched
extremely thin.
If private foundations are as autonomous and as flexible as they appear
to be, then why does the foundation sector, taken as a whole, display so
little variation in its funding of the arts? For locally oriented foundations
the answer may lie in the networks of reciprocity in which trustees are
embedded, networks that reinforce aesthetic conservatism and that impel
foundations to assist the most powerful and traditional institutions. For
foundations that are large enough to operate at the national level, conformity is encouraged by the high cost of reliable information and by the
strategies that many foundations employ to contain those costs.
The Rockefeller Panel, anticipating a steeper rise in the arts' share of the
foundation dollar than has in fact occurred, called for a division of labor
between the national and local foundation in which the former assisted
experimental projects and demonstration programs and the latter devoted
itself to "the steady general support of performing arts organizations at
the community level."37 There is a logic to this position, but one that relies
on the willingness of the large foundations to act nationally in support of
the arts and the readiness of the local foundations to support a broader
range of cultural endeavors than most of them currently embrace. The
nationalization of boards of trustees that are currently composed of members from the same city or region may, eventually, weaken bonds of local
obligation in some local foundations. A few others may design means of
gathering information that permit them to act more independently and
daringly than they have thus far. Until that happens, however, private
foundations with creative and systematic programs of giving to the arts
are more likely to remain an important, influential, but small minority in
the foundation universe.
NOTES
1. Some corporations did attend to the cultural life of their workers during the heyday of
welfare capitalism, but such programs fell by the wayside during the Depression and, at any
rate, are not comparable to the organized programs of assistance to nonprofit cultural enterprises mounted by corporate philanthropists over the past 25 years. Similarly, the federal
government sponsored major arts projects during the WPA era, local governments have supported public entertainments for most of this century, and both have commissioned memorials and public architecture throughout our history. But only with the creation of the state
arts councils and the National Endowment for the Arts has the major share of this activity
been pursued through nonprofit, rather than public, enterprises.
2. The reader is warned that a substantial amount of guesswork lies behind this statement.
Taking the American Association of Fund-Raising Counsel's projection of $4.36 billion in
foundations disbursements for 1984; estimating a percentage of all grants going to the arts
138
from the Foundation Center's breakdown of grants of $5000 or more from reporting foundations; and assuming that the same percentage applies to foundations that do not report
their grants to the Foundation Centera contestable but plausible procedure, we arrive at
an estimate of from $325 to $350 million for 1984, a figure similar to the value of all public
support for the arts and somewhat higher than the total of corporate contributions. Data
come from the American Association of Fund-Raising Counsel, Giving USA: 1985 Annual
Report (New York: American Association of Fund-Raising Counsel, 1985), 30-31, 42.
3. These data, which are from printouts on file at the Foundation Center Library in New
York, were collected by Karla Shepard as part of a study sponsored by the Twentieth Century
Fund.
4. Eduard C. Lindeman, Wealth and Culture: A Study of One Hundred Foundations and
Community Trusts and Their Operation During the Decade 1921 1930 (New York: Harcourt, Brace and Company, 1936).
5. American Foundations and Their Fields, 1931 (New York: Twentieth Century Fund,
1931), 12.
6. American Foundations and Their Fields. Editions for 1931, 1932, 1934 (New York:
Twentieth Century Fund), 1937, and 1940 (New York: Raymond Rich Associates).
7. Irving Kolodin, The Metropolitan Opera: 18831935 (New York: Oxford University
Press, 1936), 449-450, 477-478.
8. On General Education Board, see American Foundations and Their Fields, 1931, op.
cit.; on Rockefeller Foundation's film and playwright grants, see Malcolm L. Richardson,
"Historical Review of Foundation Activities in the Arts and Humanities" (Report to the
Rockefeller Foundation Arts and Humanities Division, July 1983, mimeographed), 34; on
Rockefeller WPA grant, see William F. McDonald, Federal Relief Administration and the
Arts: The Origins and Administrative History of the Arts Projects of the Works Progress
Administration (Colombus, Ohio: Ohio State University Press, 1969), 580.
9. American Foundations and Their Fields, 1931, op. cit.
10. Brenda Jubin, Program in the Arts, 1911-1967 (New York: The Carnegie Corporation, 1968), 2.
11. Ibid.
12. F. Emerson Andrews, Philanthropic Giving (New York: Russell Sage Foundation, 1950),
211-212.
13. The Ford Foundation, "Activities in the Creative and Performing Arts" (mimeographed, n.d.).
14. Richard Schechner, "Ford, Rockefeller, and Theatre," Tulane Drama Review 10, no.
1 (Fall 1965): 23-49.
15. Dick Netzer, The Subsidized Muse: Public Support for the Arts in the United States
(New York: Cambridge University Press, 1978), 106-107; The Ford Foundation, Sharps and
Flats: A Report on Ford Foundation Assistance to American Music (New York: The Ford
Foundation, 1980).
16. Tables in this paper are based on printouts from Shepard's study that are on file at
the Foundation Center Library in New York. The printouts contain information on all categories of foundation giving during the period Shepard studied.
17. Moreover, data compiled by the Foundation Center (Grants Index, New York, 1982)
indicate that the distribution of grants across subcategories of arts spending by the largest
and by other foundations is quite similar. To the extent that this was also the case during
the period Shepard studied, her figures are likely to be representative of the allocations of
smaller foundations, as well.
18. Because the Ford Foundation's programs were so massive and because much support
was given in the form of multiyear appropriations, the data excluding the Ford Foundation
are more reliable guides to trends in support of the arts among large foundations as a group
than are the data including Ford's appropriations. For example, Shepard's data do not include the $80 million appropriated by the Ford Foundation in support of U.S. symphony
orchestras because that appropriation was made in 1966, a year not covered by her study.
139
19. See Paul J. DiMaggio, "Can Culture Survive the Marketplace?" (Chapter 3, this volume).
20. Foundation Center, Statistical Summary, New Series (New York, Foundation Center,
1985).
21. Ibid.
22. Foundation Center, Grants for Arts and Cultural Programs, (New York: Foundation
Center, 1984).
23. The Ford Foundation's grant was actually made in autumn, 1984; were reporting
times more consistent than required by the purposes for which the Foundation Center collects
these data, its grant would have been included in the 1985 listing.
24. Foundation Center, Comsearch Printouts: Theatre, 1984 (New York: Foundation Center,
1984).
25. Foundation Center, Comsearch Printouts: Dance, 1984 (New York: Foundation Center, 1984).
26. Foundation Center, Comsearch Printouts: Orchestras and Musical Performances, 1984
(New York: Foundation Center, 1984).
27. Foundation Center, Comsearch Printouts: Museums, 1984 (New York: Foundation
Center, 1984).
28. Kenneth Goody, "The Funding of the Arts and Artists, Humanities and Humanists, in
the United States" (Report to the Rockefeller Foundation, November 1983, mimeographed).
29. The Foundation Center, Public/Private Cooperation: Funding for Small and Emerging
Arts Programs (New York: Foundation Center, 1983).
30. John E. Sawyer, "1980 President's Report," Report of the Andrew W. Mellon Foundation, 1980 (New York: Andrew W. Mellon Foundation, 1980), 8-11.
31. The JDR 3rd Fund, The JDR 3rd Fund and Asia: 1963-1975 (New York: JDR 3rd
Fund, 1977).
32. Brooks Atkinson, "American Foundations and the Theatre," Chapter 22 in Warren
Weaver, U.S. Philanthropic Foundations: Their History, Structure, Management, and Record
(New York: Harper & Row, 1967), 314-315.
33. Interviews ranged from 35 minutes to 2 hours in length, with a median duration of 1
hour and 15 minutes.
34. Rockefeller Panel on the Performing Arts, The Performing Arts: Problems and Prospects (New York: McGraw-Hill, 1965), 107.
35. Joseph Stiglitz, "Information and Economic Analysis: A Perspective" (Hoover Institution Working Paper in Economics E-84-16, December 1984).
36. Ibid.
37. Rockefeller Panel, op. cit., 99-103.
6
Public Provision
of the Performing Arts:
A Case Study of The Federal Theatre
Project in Connecticut
ELIZABETH A. CAVENDISH
The establishment in 1935 of the Federal Theatre Project as one of the

Four Arts Projects under Federal One, a section of the Works Progress
Administration, marked the United States government's first major venture
in the arts. 1 The Project was a relief measure and providing work to unemployed theatre artists was its first priority. It was not meant to serve as
a prototype for a federal theatre, although this idea soon surfaced. Nor
was it dedicated, at its inception, to artistic excellence or innovation, although these values soon became prominent in the thinking of many participants. In short, the Federal Theatre transcended its original goals without abandoning them. Yet in trying to fulfill too many missions and to
justify itself to too many publics, the Project foundered. As it did, it became a symbol that has shaped discourse about public involvement in the
arts since the 1930s. For conservatives, the Federal Theatre Project, with
its much publicized productions of radical plays, became a lightening rod
embodying their deepest fears about federal intrusion into culture. For the
left, it became a symbol of a benign state supporting the pursuit of radical
change through the arts.
The Theatre Project has remained a symbol because our image of it is
shaped by memories of participants who tend to eulogize the Project,2 by
histories that focus on the Project's controversial New York units, 3 by the
self-congratulatory publications of the Project itself, or by hostile articles
in the contemporary conservative press. In general, students of the ProjThis chapter represents an extensive revision of the author's senior thesis in American Studies
at Yale College.
Public Provision of the Performing Arts
141
ects, the press, and Project officials themselves have focused in their accounts on atypical incidents and, usually, on the New York Project.
The continuing focus on New York, which employed the largest number
of workers, permeated even contemporary discussion in other states. When
workers in the New York Arts Projects struck for job security and against
pay cuts, the strikes were reported throughout Connecticut. Communist
activity in New York was covered by the same Connecticut press that
ignored the state's own, less political, Theatre Project. Strikes and Communists came to represent the whole Theatre Project during the 1930s, and
in many secondary sources thereafter.
In practice, the Federal Theatre was beset with marked internal tensions
that both supporters and critics have tended to ignore. Project personnel
minimized the conflict between the relief mission and artistic excellence or
social relevance, in a way that audiences and critics confronted by the
performances of worn-out vaudeville actors could not.4 Project Director
Hallie Flanagan could inveigh from Washington against the "small but
precious" character of American theatre without facing the need, as her
lieutenants in most states and communities did, of garnering the support
of middle-class professionals for their projects' survival.5 The leadership in
Washington could write about the Project's efforts to provide an alternative to mass culture for the common man, while local directors imitated
commercial theatre and even began to quest for profitability.6
To be sure, the Federal Theatre Project did transcend its original relief
goal to foster a spirit of cultural responsibility. Many units of the Project
were committed to producing plays that were popular, innovative, or of
special local interest. New York's productions of Professor Mamlock, Dr.
Faustus, and Murder in the Cathedral are theatrical landmarks. The simultaneous opening of Sinclair Lewis' It Can't Happen Here in 18 cities
marked a feat of national theatrical organization. The Living Newspaper,
a fast-paced multimedia review of current events, represented the emergence of a new theatrical form. In some midwestern cities, the Federal
Theatre's performances reached nearly every citizen. And the Theatre Project offered diverse programs, from drama in foreign language to children's
theatre, undeniably broadening access to culture and helping to preserve
and expand the nation's dramatic heritage.
Many of the criticisms leveled at the Project were also apt. As conservatives complained, some productions were tawdry, unsophisticated, or
amateurish, and some units wasted public money. Moreover, Communists
were active in parts of the Project and leftist propaganda plays were indeed
produced.
Yet the Project was too complex to be understood in terms of the pat
slogans of either the left (community involvement, pluralistic drama, social
awareness, innovation) or the right (inefficiency, creeping socialism, amateurishness, Communism, propaganda). For the Federal Theatre Project
meant very different things in most communities. If the project in New
York City, with that city's huge community of theatre artists and vital,
142
organized leftist movements could pursue its members' social agenda at

least for a few years, in most of the United States project leaders devoted
their efforts to building enough community support to enable their organizations to survive from one year to the next. Survival, in most locales,
required balancing the many conflicting priorities of the Theatre Project
against one another and against the diverse demands of several potential
constituencies. The results, although less dramatic than those of the New
York experience, were more typical and may have more to teach us about
the limits and possibilities of public enterprise in the performing arts.
THE CONNECTICUT THEATRE PROJECT: AN OVERVIEW
Shifting focus from the Federal Theatre Project's national ideals to its local
operation depletes the Project of much of its allure and reveals an organization concerned with the daily problems of raising resources and maintaining legitimacy. To be sure, the Connecticut Project could boast of many
accomplishments. Its first unit, opening in New Haven in January 1936
and closing in June of that year, presented two works by Connecticut playwrights, a children's drama, three vaudeville performances, and eight other
productions to a total of over 13,000 viewers.7 In March, the Project opened
units in Bridgeport and Hartford. The former produced 28 plays before
closing in September 1937; a separate Bridgeport vaudeville unit put on
94. Hartford's unit recorded 35 productions before its demise in April
1939, operating consistently on schedule and with financial support from
the municipal government. 8 Hartford also maintained a "Negro Experimental Group," one of three black ensembles then operating in Connecticut.9 Exemplifying its commitment to decentralizing access to theatre, the
Project established workshop units in such small cities as New London,
Norwalk, and Southington, sending productions of classics and other plays
on tour to even smaller places. 10 The Connecticut Project took pride, as
well, in the airing of its "Theatre of the Air" programs on six local stations, in its presentation of six plays by young playwrights, and in its alumni who found employment in broadcasting or on the commercial stage.
Moreover, the Connecticut Project adhered successfully to the federal
guideline that less than 10 percent of its budget go towards nonlabor expenses (although 14 percent, above the national limit, went to supervisory
personnel). Gross receipts for the Connecticut Project totalled more than
$20,000, and more than 80,000 people were admitted to performances
free of charge.11 The Connecticut Project employed 421 persons in its first
year, 12 although, like the Projects in other states, federal cutbacks reduced
this figure to 115 by 1938.13
Highlights of the Connecticut Theatre Project include the Bridgeport
production of Sinclair Lewis' It Can't Happen Here and the electrifying
Living Newspaper expose of tenement housing, One-Third of a Nation.
143
William Dubois' Haiti attracted attention because whites and blacks shared
the stage, as they rarely did in the commercial theatre, while the Harlem
Unit's touring production of Macbeth in Hartford drew the largest audience.
Yet despite these achievements, the Federal Theatre in Connecticut was
vexed by a constant struggle for support and survival. Tensions between
the desire to provide access for the poorest and the attempt to earn enough
money to supplement federal funds, between the drive to mount socially
relevant drama and the effort to obtain political support from the powerful and well-to-do, and between the demands of work relief and the aspirations of the Project's artists were unremitting.
TENSIONS OF MISSION AND INTERNAL PROCESS
The creation of a new organization, with few if any models upon which
to draw, is never an easy task. For the Connecticut Federal Theatre Project, the job was complicated by the multiplicity of goals that participants
could pursue and by constant ambiguity about the role of central authority
in the local units' activities.
Directors with Goals in a Goal-less Organization
In some locations, Federal Theatre Project units were committed to a consistent and overriding ideal of what theatre should be. By contrast, in Connecticut, artistic policy vacillated. Few of the plays that the Connecticut
Project produced illuminated the social crisis of the Depression. Few represented the best of contemporary drama or the classics. Nor was the Project dedicated to experimental plays, techniques, or interpretation. It was
not even democratic in its choice of mediocre plays, for the Connecticut
units avoided producing labor or ethnic drama, favoring stock revivals or
imitations of fluffy Broadway hits.
The Federal Theatre in Connecticut often strove to imitate the commercial theatre from which it might have felt liberated. The ideal of "profitability" persisted in the minds of Connecticut leaders, even though they
were free of the financial and artistic demands of Broadway. Connecticut
was the first state to charge admission to Theatre productions, and Project
leaders boasted more of their increased receipts than of diversified or enlarged attendance.
The impact of this commercial-mindedness on the creative process was
substantial. In November 1936, State Director Gertrude Don Dero, in a
memorandum to all local production directors, decreed that "there will be
no further experimentation without basically sound reasons," and exhorted the directors to adhere to "the best business principles."14 Moreover, Don Dero wanted hits to spark community interest: She appreciated
144
It Can't happen Here not, like national Project Director Flanagan, for its
powerful anti-Fascist message, but because of its salutary impact on attendance. 15
Local directors followed Don Dero's lead. Eager to make the Hartford
Civic Repertory a self-sufficient unit, its first director boasted of attendance by "the finest class of people in the city." 16 Described in press and
internal memoranda as "dead wood," a man who "concentrated on mediocre stock revivals," 17 he was soon replaced by the former director of
the Bridgeport unit, noted for his affection for "snappy Broadway scripts."18
A few months later, the Hartford unit announced that it would experiment
with new plays, condescendingly contrasting itself to the local private "little theatres," with their emphasis on Broadway successes.19 The unit abandoned this policy only one month later to present The Curtain Rises, a
Viennese comedy.20
Yet the Hartford unit demonstrated more stability than its counterpart
in Bridgeport, which swayed under seven directors in only 18 months.
Cecil Spooner, the first, brought artless direction and charges of nepotism,
although audiences seemed to like her Shanghai Sal. Homer Mason, temporary head of vaudeville productions, offered such eternal plays as House
of Fear, and The Trial of Mary Dugan. Local critics smiled when Walter
Klavun introduced Broadway's higher grade of frivolity, then gasped when
Ann Ayers tackled social issues with It Can't Happen Here. Her successor,
Charles Atkins, attempted to base the productions in American life and
Bridgeport's community, including local ethnic choirs in one production
and presenting two plays by Connecticut authors. Wilton Graff carried on
his predecessor's style briefly before yielding to L. Anderson, who guided
Bridgeport's last two productions, Live Dolls on the Moon (with puppets)
and Help Yourself. The Bridgeport unit was closed on short notice when
state Project headquarters moved to Hartford.
The brisk pace of directorial turnover had numerous origins: Don Dero's dissatisfaction with the artistic policy of one director, a commercial
job offer for another, a lateral move within the Project for a third, and a
flagrant judgmental error in yet another director's production of her husband's plays, on which he collected royalties. The rapid progression of
directors indicates the operational irrelevance of Washington's pronouncements of mission to the local level. By and large, the goals of the Connecticut Federal Theatre's units were the goals of their directors; and, like the
directors, they changed rapidly.
Grassroots Drama and Central Control
The Federal Theatre in Connecticut was vexed, as well, by constant tensions between localism and centralism. Supporters of a permanent public
theatre sought central direction and concentration of the best talent at a
single site. But the national Project sought to bring drama to the disenfran-
145
chised, wherever they might live. The Connecticut Project attempted to

reconcile this tension by centralizing its administration, while sometimes
trying to increase access to culture.
At times, however, the conflict between localism and centralism was less
a matter of ideals than of practical politics. When headquarters moved
from Bridgeport to Hartford, consolidating the project, the Bridgeport press
complained bitterly.21 (Local loyalties had flared earlier when more experienced New York workers displaced Bridgeport citizens on the Project
staff.) 22
Throughout the Project's brief life, conflicts between local Projects and
the state-level directorate rent the day-to-day process of artistic work. The
question of who controlled the choice of plays exemplified these struggles.
Official procedures permitted scripts to be considered at the local level,
but once chosen, they were to be sent immediately for state review, accompanied by a report of the director's artistic and promotional plans for the
production. The state, in turn, forwarded the recommended plays and supporting materials to Washington, for yet another review.23 (Local theatres
could avoid red tape by choosing plays already approved by the National
Project's Bureau of Contracts and Play Rentals in New York.)24
Such efforts at administrative centralization were not always successful.
For example, Hallie Flanagan's lieutenant, David Lane, was surprised to
find The Streets of New York opening in Bridgeport in November 1936.25
Washington responded with a flurry of harsh letters, which in turn generated scolding memos from Don Dero, upbraiding local directors for "vital
violations" of administrative procedure.26
In addition to their attempts to monitor the selection of plays, federal
Project officials occasionally intervened in the staging of presentations. For
instance, the Federal Theatre Project's Assistant Director for the East wrote
Don Dero about the White House scene in It Can't Happen Here: "You
may stage the White House scene in a hotel room, and if you do not refer
to the White House by name, you may play the scene."27 Hiram Motherwell, assistant director for the Federal Project, ordered Hartford's production of For Crying Out Loud terminated on the grounds that "it lacks
sufficient merit to justify its performance on government funds. Please cancel production plans and hunt for a play of more definite dramatic interest."28 Although such isolated incidents as the suppression of Ethiopia in
New York attracted more national attention, in Connecticut, attempts to
maintain artistic control represented an ongoing process.
Federal and state Project officials' efforts at creative control may not
have made the local units any less "free" than their commercial counterparts, bridling under the "censorship" of the market. Certainly, the Project
units affirmed the views of neither the government nor their patrons and
at times offered alternatives to commercial fare. What is more, unlike the
effects of the private market, the Federal Theatre Project's sporadic attempts at censorship were decried in the press and subject to ongoing pub-
146
lic debate. Unfortunately, this public debate regarding censorship never

expanded into a broader consideration by the press of the systematic biases
and exclusions of private theatre.
Connecticut Theatre Project officials manifested a general unease about
their federal superiors, editing reviews of favorable snippets and compiling
folders of laudatory letters from professionals and leaders of private organizations. That their discomfort may have been warranted is indicated
by the replacement of Director Don Dero with Charles La Rue in September 1937. (The local press hailed the departure of Don Dero, whom they
termed a theatrical "egg layer," as a "revolution" in the project. 29 ) La
Rue, an experienced actor, director, promotional manager, and financial
executive, had directed the Theatre Project in Nebraska and Iowa.
La Rue had little time to make an impact on Connecticut theatre. In
April 1939, the Connecticut Project was abruptly concluded. (In a few
months, red-baiting investigations by congressional opponents of the New
Deal led to the demise of the Federal Theatre on the national level.) Thus
the Theatre Project, originally committed to decentralizing drama and then
to establishing a national theatre, became embroiled in the conflicting interests of local audiences and actors, and of local, state, and federal officials, including, eventually, Congress.
THE STRUGGLE FOR LEGITIMACY

The contradiction at the heart of the Theatre Project was the battle between its need to establish itself and its urge to democratize the stage. Was
the Project to be a part of the cultural system of the past, a basis for a
national theatre with a politically potent constituency? Or was it to be an
attempt at cultural democracy, a national theatre for the shirt-sleeved people whose pictures covered the Project's in-house publication, Federal Theatre? The Connecticut Federal Theatre Project found itself trapped between accepted notions of who should attend theatre, and in what style,
and the national Project's democratic ideals of opening culture to all
Americans. In Connecticut the Project tried to build its legitimacy, against
the slings of a largely unsympathetic conservative press, by reaching out
to social influentials. In these unsuccessful efforts, it moved far from the
social agenda that the national project had inaugurated.
The Local Press and the Connecticut Project
The Connecticut press tended to treat the Federal Project as just another
commercial theatre. Rarely did a writer evaluate the Project as a whole or
commend its contributions to democracy. When it did not benignly miss
the point of the Project, the Connecticut press usually opposed it. AntiNew Deal editors used the Project as a symbol of boondoggling and se-
147
lected wire service dispatches that portrayed it in a hostile light. By contrast, drama critics held their political diatribes for those few Project plays
that addressed political themes. More destructively, however, these critics
used the standards of the conventional upper-middle-class stage to evaluate the Project's work: Their reports focused on who attended the plays,
what they wore, who starred in the performances, and whether the Connecticut Federal Theatre was as good as Broadway. Thus Connecticut residents had little access to the Theatre Project's own definition of its goals.
Indeed, the Connecticut Project came to echo the reviewers' preoccupations in its own press releases.
The debate over the star system highlights the persistent tensions among
the Project's ideals, the press's beliefs, and popular conceptions of theatre.
The Federal Theatre was strategically and philosophically opposed to the
star system: Its official purpose was to employ unemployed actors (among
whom stars were conspicuously absent), and many participants were actively committed to theatre as collective effort.
Yet personalities, not edifying content, attract audiences, as Hartford
drama critics never tired of reminding the Theatre's management. Critic
Edward Brainard compared the theatre's star system to that of baseball
and the movies and emphasized the crucial importance of celebrities in
encouraging repeat attendance.30 Despite some efforts at accommodation,
the Project's own press releases usually stressed the name and theme of the
play in a valiant effort to oppose the star system.
If the critics decried the Federal Theatre's promotional methods, they
were discomfited by the broadly inclusive audiences that these methods
attracted. Critic Brainard, after proclaiming that he was a Republican, went
on to criticize the audience's "rudeness," explaining that "the motion pictures have made bad children out of the customers."31 Similarly, columnist
Jess Benton of the Bridgeport Herald devoted almost as much space to the
Project's audiences as to its players' acting. In a harshly negative review of
Bridgeport's Blind Alley, Benton expressed irritation at the "distractions
supplied by the audience," whose wholehearted enjoyment of the play was
expressed in spontaneous curtain calls.32
For some, the audiences were a novelty. Ethel Beckwith of the Bridgeport Post congratulated the Bridgeport unit on filling the theatre where
"only ghosts had been for the past ten years," and noted that the new
theatregoers "preferred to leave their ermine wraps at home . . . Cocktail
breath and chatting debutantes were absent at the large and lusty reception." (Nonetheless, the review was accompanied by pictures of men and
women in evening dress, and Beckwith included the names of luminaries
in attendance.)33 Only eight months later, Countess Fairfield, a local society writer, relegated the Bridgeport Theatre to those who did not "bother"
with ties and tails. She noted how different the audiences were in Bridgeport than in New Haven and remarked wistfully, "but then every town
can't have a college." The "Countess" did not wish to seem undemocratic;
148
but she wrote for people who dreaded the influx of working class audiences for social drama: "Despite the fears of some and the DISMAY of
others, the play went over with a bang."34
One of the few early supporters of the Connecticut Federal Theatre was
Julian B. Tuthill, drama critic for the Hartford Times. Tuthill organized a
theatre party "to acquaint Hartford with the work of the Government
Civic Repertory Company which is operating . . . as part of the Federal
Theatre Project." Tuthill reported that his companions "never dreamed
anything so inexpensive could be so good."35 Six months later Tuthill
challenged the community to "set aside their snobbishness . . . and go
and applaud and appreciate the work that is being done by the excellent
acting company." 36 Few traditional theatre attenders heeded his plea. For
the most part, the public stayed away from the shows that the critics admired, and the critics panned the programs that the public liked.
The conservatism of the press was perhaps most evident in critics' treatment of Hartford's Negro unit. Though critics often looked favorably on
the productions, they did so with condescension, using them as occasions
to discourse on race, the audience, or the significance of government support for black drama. For example, when black Connecticut playwright
Ward Courtney produced his second play with the Negro unit, an application to the contemporary United States of themes from classical Greek
drama, Hartford Times critic Charles Niles evinced surprise: "No one can
ever accuse the Negro artist of not working hard or of a lack of earnestness in every one of his or her productions." 37 White critics evaluated
black productions as spectacle rather than art. The Negro unit's plays might
be interesting if they revealed "Negro moods and manners," but the critics
rarely confessed to enjoying them. 38 They were most favorable when discussing the members of the Negro unit as entertainers at children's camps
and block parties: ". . . children were delighted by the Negro Unit's songs
and dances, their strange positions and weird faces."39
The Federal Theatre in Connecticut presented many kinds of plays: murder mysteries, comedies, religious pageants, historical epics, musicals, classics, puppet shows, children's plays, and works by Shakespeare, O'Neill
and Dos Passos. But the press focused its attention on the social dramas,
especially Sinclair Lewis's It Can't Happen Here and the Living Newspaper's critique of slum housing, One-Third of a Nation. In Connecticut,
these two plays came to epitomize the Federal Theatre, their popularity
intensifying the perceived threat of the works themselves.
The critics used a variety of stratagems to condemn these productions.
Bridgeport critic Benton accused the audiences of staying at Lewis's play
only to "ogle lovely Ellen Love."40 Hartford's Tuthill dismissed It Can't
Happen Here as "trivial," contending angrily that "No, it can't happen
here." 41 Six of eight local reviews labeled the production "propaganda,"
a "vote-getting ballyhoo" by "Democratic propagandists." 42
In none of its comments on the play did the Connecticut press note what
the Theatre Project's federal leadership regarded as most important about
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the production: the fact that it opened simultaneously around the country,
enabling thousands of people to hear its message at once. Flanagan regarded Lewis's work as patriotic, and the Theatre Project's production as
evidence of the potential of a permanent national theatre.43 This theme
was lost on the local reviewers.
By 1939, Connecticut's critics were even more explicit about their distaste for One-Third of a Nation, despite their admiration for its production values. The New Haven Journal-Courier, for example, condemned the
playwrights for ignoring the "genetical" aspects of tenement crime, disease, fire, and filth.44 The Yale Daily News complained that One-Third
failed to present the point of view of the landlord and favored "the abolition of the profit motive." "This," it intoned, "is the message of the Theatre representing our National Government."45 To this political refrain,
the Hartford Courant added the charge that the play was not really "art."46
The press cared little for the characters represented in the Living Newspaper's production, so different were they from the upper- and middleclass denizens of polite drama. In breaking down the barriers between art
and politics, the Federal Theatre's social dramas had been "frankly subversive." Noting cuts in the Federal Theatre's budget in 1937, the Greenwich Times editorialized that the "middle-classers aren't going to finance
attacks on their philosophy."47
The Federal Theatre's efforts to justify itself to the press were futile because the social classes the press represented were suspicious of artists and
ideologically committed to the separation of art and politics and to minimal government. Theatre was one of their prerogatives and they did not
want government interfering or widening its thematic or social scope. Indeed, if Connecticut's drama critics were hard on the Theatre Project, at
least they acknowledged its occasional successes. By contrast, Connecticut's small-town press rarely covered the Connecticut Project at all, preferring to run wire-service reports on the latest scandals in the New York
Project.
Charges of "Un-American activities" appeared in Connecticut's news pages
long before the opening of the 1938 Dies Committee hearings on the Federal Theatre. The New London Day reported anonymous "persistent complaints" against the Federal Theatre's "Communist" propaganda, its ribaldry and jocular treatment of U.S. history, and demanded that the money
appropriated for the Project be spent on "enterprises fundamentally American in character."48 Publication of such pieces in early 1936, when the
Connecticut Project was only a few months old, demonstrate the press's
visceral ideological opposition. Before long, the Project was criticized, as
well, for competing with private enterprise, even though commercial theatre had been moribund in the state for at least a decade.49
During the Dies Committee hearings, more than 15 Connecticut papers
published Associated Press coverage on a regular basis, running lengthy
articles almost daily for more than two weeks. The charges reprinted were
various, often fanciful, and, where based on fact, usually applicable only
150
to New York: for example, that the Project advocated "some form of collectivism" and was a "hot-bed of Communism,"50 that Project leftists forced
employees to join Communist organizations, and that they even told "small
blonde Sally Saunders to go out with a Negro."51 In addition to providing
such generous coverage to the Dies Committee, Connecticut's press was
less inclined than New York's newspapers to question ill-founded charges
or to report the rebuttals from the Project's defenders.
In short, Connecticut's newspapers, with few exceptions, either palpably
opposed the Project from its inception, or, evaluating the Project in the
customary terms of commercial drama, soon came to oppose it. With the
exception of a single interview by Julian Tuthill of the director of the Hartford unit, the Connecticut press thoroughly concealed the ideals of the
Theatre Project.52 Again with the exception of Tuthill, it failed to report
the formation of Citizens' Committees to integrate the Project into their
communities. Nor did Connecticut's journalists cover the bulk of the Federal Theatre's diverse programs at CCC camps, children's camps, schools,
and hospitals. Although the Federal Theatre in Connecticut produced four
children's plays and one touring puppet company, only two articles featured this creative program, and even these did not accord the Federal
Theatre itself much notice.53 The press' trivial or sensationalistic concerns
also hampered what could have been a great benefit of the projectincreasing awareness of the public importance of culture, who controls it,
and whose culture is being reflected in public performances. Instead, journalists' preoccupation with the social dramas and the New York scandals
undermined the public standing of the Connecticut Project.
Efforts at Self-Promotion
Rejected by much of the press in advance, the Federal Theatre Project in

Connecticut had to attempt to tell its own story through advertising and
press releases. In so doing, the Project faced the dilemma of attempting to
satisfy its critics while maintaining strong ideals and community roots.
Promotional materials consistently demonstrated a sincere effort to reach
out to those who had not attended theatre in the past. At the same time,
the Theatre Project actively sought the favor of long-time theatre patrons
and the socially prominent.
It is significant that although promotion plans for each play were to be
registered with state-level Project authorities, devising and implementing
these plans were left to the local units, who, it was believed, were in close
touch with their communities. Yet the local units, whether stung by hostility of local influentials or stuck in the assumptions of the commercial
stage, rarely promoted the Project as a vital force in community culture.
Rather than cultivate a new constituency for the theatre through Projectoriented ads or series subscription sales, they tended to seek audiences for
particular shows. Moreover, members of the audience would presumably
151
see shows most likely to appeal to them, shows rooted in their own cultural experience. If series seats had been sold, however, they would have
been exposed to different forms of culture.
The Project's early advertisements were exceptionally restrained by the
promotional standards of the period's cinemas and commercial theatres;
however, as the Project evolved, it used more of the marketing techniques
current in the 1930s. The Connecticut Theatre advertised in a wide range
of publications: the major newspapers, small-town papers such as the Jewett City Press and the Torrington Register, and special-interest publications including the Hartford Insurance Girl and the Bridgeport Sporting
News.
Radio was the Project's most effective promotional tool. The Theatre
Project performed scenes from its plays in production over the air, and
often used its fifteen- to thirty-minute radio blocks to proclaim the goals
and announce the accomplishments of the Project nationally. In addition,
the Project ran daily spots over a variety of stations.54
Throughout Connecticut, however, local units tended to overlook their
natural constituency of labor and ethnic groups in favor of the white-collar
public. In Bridgeport, for example, promotional efforts were focused on
the press and on contacts with such civic clubs as the YMCA and the
Jewish Women's Council.55 The New Haven unit cultivated the most elite
audience, focusing its direct-mail promotional efforts on Yale Department
Chairs, a list of 1,000 prominent New Haven citizens, and a separate list
of previous theatre patrons. It also sent notices to language and history
teachers at local high schools. For its production of A Would Be Gentleman, New Haven supplemented this routine by blanketing Yale students
and several clubs and organizations with promotional material.56
Southington's short-lived unit devised a comprehensive plan that was
approved by Federal Director Hallie Flanagan herself. The prospectus for
the Southington Federal Theatre declared the unit's intent to stage its plays
for "the rank and file of our people in the community." Yet the unit's
promotional plan excluded labor and ethnic groups. Instead, promotion
focused on an effort to persuade local civic organizations to sponsor blocks
of one hundred tickets each, presumably to distribute among their members. All leaders of civic groups, including the DAR, were to be approached, and ministers would be asked to announce upcoming productions from their pulpits.57
The use of national press releases for local promotion was often hampered by an unsympathetic press. For example, the announced opening of
the national Project's Bureau of Research and Publication, which was to
provide opportunities for young American playwrights to produce their
work, was treated in Connecticut's local papers as a story about additional
red tape or support for amateurism. 58
Thus the Connecticut Federal Theatre's efforts at self-promotion faltered
on the hostility of the press and the Project's own reticence about its pro-
152
grams and goals. If local critics erred in treating the Project as just another
theatre, so the production-oriented publicity of the Connecticut units reinforced the critics' disposition.
The Development of Community Sponsorship
Despite problems with the press and publicity, the Connecticut Project had
another avenue open to it in its struggle to establish itself in the community. The Federal Theatre sought to establish itself as a vital cultural force
in American communities. Toward this end, the Project cultivated individual and organizational sponsors to enhance its integration at the local level.
In Connecticut, where the Federal Theatre had received such a tepid initial
welcome, the sponsorship program was especially important.
Federal Assistant Director Hiram Motherwell urged state officials to develop the sponsors program to resolve the local conflicts that he predicted
were inevitable. Motherwell suggested that sponsors be employed to explain the purpose of the Federal Theatre to the press and to secure the
support of local political officials. The Project also looked to sponsors for
advice in planning, loans of skilled workers, office space, scripts, and even
donations: As early as 1936, Washington hoped that sponsors could help
to transform the Project into a self-sufficient, independent institution.59
Motherwell's aspirations rested on an unrealistic confidence in the possibilities of class harmony, and some ambiguity regarding the social background of the projected sponsors. On the one hand, they were to represent
the culturally active, those convinced "of the necessity of supporting arts
as a cultural necessity in American civilization." On the other hand, they
"should include persons truly representative of the communities."60 But in
Connecticut a "truly representative" committee would include many who
thought that government had no business in the arts, especially if it intended to democratize participation.
At first, Connecticut's Theatre Project was able to lure a broad crosssection of supporters into lending their names to a cause about which they
knew little. Yet some conflict was evident from the start. Julian Tuthill,
the Hartford critic, headed the effort to secure sponsors. Early in 1936 he
complained that "many prominent people do not want on yet."61 He also
wished to avoid the practice of using Little Theatre volunteers to develop
sponsors lists, lest the Project be considered amateurish.62 This preoccupation with professionalism led the Connecticut Theatre to ignore a natural
constituency: If the Project would not work with those who already labored on behalf of theatre, how could it establish itself among those who
cared little for art?
By April 1, 1936, Hartford's Sponsoring Committee included few social
luminaries and none of the initial supporters. Among the sponsors were
salesmen, clerks, dressmakers, a housekeeper, a domestic, a stenographer,
a bookkeeper, three secretaries, and several former theatre workers and
professional writers. Less than three weeks later, however, a new list
153
emerged, shorter and consisting almost exclusively of the socially prominent. The Governor, the Mayor, and such influentials as "Mrs. Mary M.
Hooker, Direct Descendant of the first settler of Hartford, Prominent society leader." Thus the Project's divergent concepts of its constituency were
reflected in the lists of sponsors.
The composition of the sponsoring committees, sometimes called Citizen
Committees, in other Connecticut cities likewise demonstrates early acceptanceand often rapid abandonmentof the Project by at least some
members of the local elite. Committees in Bridgeport, New Haven, and
New London contained few working people. In Bridgeport, for example,
the citizen committee boasted many whose principal credential seemed to
be high social standing, as well as several presidents of civic clubs. On
none of the lists did member affiliations indicate the presence of a single
labor leader, despite the national Project's desire to cultivate a labor audience and the need for labor cooperation in facilitating productions. Similarly, sponsors lists overlooked Connecticut's ethnic or religious minorities, with the exception of the Knights of Columbus. Recognizably Jewish
names were absent from the Hartford, New Haven, New London, and
Norwalk lists. In New Haven, Yale men and women dominated the list of
sponsors (notwithstanding which fact Yale was reluctant to provide office
space to the local unit). 63 In Norwalk, religious leaders of mainstream
Protestant denominations were quick to lend their names.64 Similarly, in
New London, religious leaders, business executives and professionals constituted the list.65 Thus, from the beginning, the Connecticut Project's
preoccupation with establishing its legitimacy among community leadership outweighed the national focus on reaching out to disenfranchised constituencies.
In addition to enlisting these individual sponsors, the federal leadership
directed state projects to secure organizational sponsors for every play.
Because the Project could devote only 10 percent of its budget to nonlabor
costs, these sponsors were expected to pay for certain material expenses.66
Federal officials hoped that potential sponsors might be motivated by positive publicity and, in the unlikely event that the play turned a profit, by
the fact that the sponsoring organizations would share half of the net receipts.
Connecticut units entered into a few creative partnerships with organizational sponsors, but ignored important constituencies. The Norwalk
Workshop Unit, for example, sponsored a cosmetics workshop in cooperation with a local business.67 In Hartford, the St. Justin's Ladies Guild
sponsored a play on Catholic themes, and in Bridgeport similar groups
supported religious drama.68 In Altrusia, a "leading women's organization" sponsored a performance of a "Nativity Play" and other local organizations gave practical support: The Polish Choir, French Soloists, Schwachischer Maennerchor, St. Mary's Boys' Choir, and the Russian Symphonic
Choir all lent their talents to the production. 69 Cooperation with Connecticut's ethnic communities would seem to have offered an important means,
154
employed by the Federal Theatre in other states, through which the Connecticut Project might have established itself. Yet instances of this kind of
collaboration were rare in Connecticut.
Similarly, labor groups were rarely solicited for sponsorship of the Connecticut Theatre's productions. The notable exception was the 1938 production of It Can't Happen Here, which the International Workers' Order
and the New Haven Citywide Council for Slum Clearance cosponsored
and the Hartford and New Haven Housing Authorities, the Social and
Labor Legislation Conference, the Workers' Alliance, the American League
for Peace and Democracy, the NAACP, and a variety of other unions and
advocacy organizations endorsed.70
In its sponsorship program, as in the rest of its activities, the Connecticut Theatre was rent by a shifting conception of its constituency. By 1937,
the Project had lost the support of Connecticut's conservative community
leaders. At this point, should the Project have abandoned its efforts at
wooing influentials and focused exclusively upon ethnic and labor support? Political realities demanded that it maintain the appearance of working for the whole community, even when the community was too fragmented for the Project to satisfy all tastes.
CONCLUSION: THE FEDERAL THEATRE AS SUBSTANCE AND SYMBOL
The Connecticut Project bears little resemblance to the symbolic theatre of

the Project's radical enthusiasts or rightist detractors. Amorphous and
variable, the Connecticut Theatre reflected the struggles of individual leaders to create and establish a legitimate institution under a range of administrative restraints. Those in Connecticut who, like Julian Tuthill, seized
on the Project because they supported some of its ideals usually became
disappointed. Those who opposed its ideals were never convinced and
maintained their ideological hostility throughout the Project's existence.
Although Connecticut lacked the New York units' problems, scandals,
and artistic achievements, certain events became emblematic in establishing the Connecticut Theatre's image. One-Third of a Nation brought pertinent drama before new and enthusiastic audiences. Yet it also embodied
the Project's opponents' worst fears and objections. The shrill reaction to
the play reflected its effect on its audiences. The juxtaposition of Senate
leaders and street-dwelling indigents jarred critics' perceptions. The play
flouted long-standing traditions that government should be treated with
reverence, that art should likewise be revered, and that politics and art
should never meet.
The Connecticut Project never solved the problem of patronage, nor did
it ever free itself from administrative infighting. It was a public institution
in an era in which "public" and "private" were poor guides to behavior.
(Ironically, a commercial movie studio purchased the rights to the Federal
155
Theatre's It Can't Happen Here but refrained from producing it for fear
of government retribution.) The Living Newspaper's One-Third of a Nation represented government creation of a new art form and earned sponsorship from a wide range of community, labor, and political groups. Yet
this very sponsorship, so valuable in cultivating the Project's image as a
daring experiment, undoubtedly eroded the support of the professional and
business middle classes, of captains of industry, of civic and arts organizations, and of the traditional consumers of high culture alike.
The loss of these groups' support points to the fatal flaw of the Project
in Connecticut: its failure to win the unquestioned support of any significant group or class in the communities in which it operated. Only sporadically cultivating its natural allies in labor and ethnic organizations, the
Project vainly courted social influentials. Moreover, it failed to garner the
support of liberals in universities and churches who might have encouraged ticket sales, benefit performances, and political lobbies.
Thus Connecticut's leadership strove for commercial respectability and
encouraged local directors to adhere to "business principles" and to forswear experimentation; in so doing, it set aside a public theatre's greatest
asset, its exemption from the demands of profitability. Local directors, too,
often brought a professional, conventional view of theatre to the units. To
a great extent, the Connecticut Theatre's leadership and many of its local
directors had as slim a grasp of the Project's distinctive mission and possibilities as did the newspaper critics who evaluated it in commercial terms.
As the Project suffered from its failure to establish a political base or a
devoted audience; it labored at the same time under intractable problems
of administration. Project administrators and directors constantly fought,
nagged and gossiped over personal peccadillos and artistic mission. The
project vacillated artistically, producing a repertoire utterly lacking in consistency.
In its failure to make good on the Project's initial ideals, the Connecticut
Theatre missed the opportunity to encourage regular theatre going among
new publics. And in the era of talking cinema's greatest popularity, the
existing theatregoing audience was too small to support a national theatre.
What is more, the traditional theatregoers embraced the stage as an
expression of an exclusive culture, as an escape from the irritations of their
own working lives. Most emphatically, they did not want the relief work
of others impinging upon their leisure. Confronted by the hostility of community leaders, the Connecticut Project reacted by abandoning its initial
ideals, by neglecting its most natural constituencies, and by questing endlessly for the political legitimacy it would never find. In the course of its
misadventures, however, it employed thousands of theatre workers during
the depth of the Depression, provided presentations to thousands who might
otherwise have never seen them, and helped to sponsor the production of
a significant new dramatic literature. The Federal Theatre in Connecticut
is neither the angel of leftist mythology nor the devil of conservative demonology. In its more human face, it reflects the ability of a public enter-
156
prise to do much goodalbeit, in this case, usually inconsistently and often

ineptlyunder adverse circumstances.
NOTES
1. President Taft's Fine Arts Commission and the 1934 Section on Fine Arts of the New
Deal preceded it on a much smaller scale.
2. See, e.g., Hallie Flanagan, Arena (New York: Duell, Stone and Pearce, 1940); Milton
Meltzner, Violins and Shovels: The WPA Arts Projects (New York: Delacorte Press, 1976);
Francis V. O'Connor, Art for the Millions: Essays from the I930's by Artists and Administrators of the WPA Federal Art Project (Greenwich, Conn. New York Graphics Society,
1973).
3. Sec, e.g., John O'Connor and Lorraine Brown, Free, Adult, Uncensored: The Living
History of the Federal Theatre Project (Washington, D.C.: New Republic Books, 1978); Jay
Williams, Stage Left (New York: Charles Scribner's Sons, 1974).
4. Hallie Flanagan, "A Report on the First Six Months," Federal Theatre 1, 4: 6.
5. Hallie Flanagan, "Federal Theatre Tomorrow," Federal Theatre, 2, 1: 626.
6. Hallie Flanagan, "What Are We Doing With Our Chance?," Federal Theatre, 2, 3: 56.
7. First Year Evaluations, Narrative Reports File; Box 98; Record Group 33, National
Archives, Washington, D.C.
8. Charles La Rue, "Highlight History of the Connecticut Federal Theatre Project," May
1937-September 1, 1937," Box 596; Record Group 33, National Archives, Washington,
D.C.
9. "WPA Adopts Gilpin Players at Workshop: Negro Unit to Be Used in Federal Theatre
Plan," Hartford Times, September 11, 1936.
10. Stephen Hegarty, Narrative Reports, April 1, 1936 and May 31, 1936, Box 86; Record Group 33, National Archives, Washington, D.C.
11. George Gerwing, "Report on the History of the Connecticut Federal Theatre Project
From Its Inception to Closing," May 23, 1939; Box 596; Record Group 33, National Archives, Washington, D.C.
12. First Year Evaluations, Narrative Reports File; Box 98; Record Group 33, National
13. Gerwing, op. cit.
14. Gertrude Don Dero to All Production Directors; National Office Correspondence Box
50; Record Group 33, National Archives, Washington, D.C.
15. Gertrude Don Dero to C. J. Mauntz, Director of Information, New York City; Connecticut Correspondence File; Box 50; Record Group 33, National Archives, Washington,
D.C.
16. G. Lester Paul, Narrative Report, June 29, 1936; Box 50; Record Group 33, National
17. Don Dero to Hallie Flanagan, November 11, 1936, Connecticut Correspondence File:
Box 50; Record Group 33, National Archives, Washington, D.C.
18. "Washington's Axe Nears Gertie's Neck," Bridgeport Herald, January 31, 1937.
19. Julian B. Tuthill, "Federal Theatre Will Experiment with New Plays," Hartford Times,
February 18, 1936.
20. George Spelvin, "Federal Theatre Gets Off to a Fine Start at Avery," Hartford Times,
September 29, 1937.
21. Humphrey Doulens, "Federal Theatre: Professionals in Bridgeport Are Obliged to
Commute to Hartford at Own Expense in Change of Federal Theatre SetupHomer Mason
Is Out," Bridgeport Post, September 12, 1937.
22. Roger Doulens, "Norwalk's Passing Show," The Sentinel, South Norwalk, Conn., June
157
1936. Also Narrative Reports, September 23, 1938, Regions I and II; Box 90; Record Group
33, National Archives, Washington, D.C.
23. Memo No. 1, Gertrude Don Dero to all Production Directors, November 29, 1936;
Connecticut Correspondence File; Box 50; Record Group 33, National Archives, Washington, D.C.
24. Jane de Hart Mathews, The Federal Theatre 1935-1939: Plays, Relief and Politics
(Princeton; Princeton University Press, 1967).
25. David Lane to Walter Klavun, November 23, 1936. Box 50; Record Group 33, National Archives, Washington, D.C.
26. Gertrude Don Dero to Ann Ayers, John Drabkin, and Arthur Hoyt, Box 50; Record
Group 33, National Archives, Washington, D.C.
27. William Stahl to Gertrude Don Dero, October 23, 1936; Box 50; Record Group 33,
National Archives, Washington, D.C.
28. Hiram Motherwell, November 14, 1936; Box 50; Record Group 33, National Archives, Washington, D.C.
29. Helen Henderson, "So Gertie's Gone and WPA Thittur Hails 'Revolution'," Bridgeport Herald, September 5, 1937; "Axe Smacks Femme Fuehrer," Bridgeport Herald, September 5, 1937.
30. Edward Brainard, "In the Green Room," Hartford Times, September 3, 1936.
31. Edward Brainard, "In the Green Room," Hartford Times, November 10, 1936.
32. Jess Benton, "Public Enemy Wilts before Psychologist," Bridgeport Herald, May 28,
1936.
33. Ethel Beckwith, "Uncle Sam Goes into Legitimate Theatre Business in Bridgeport and
Cecil Spooner's Company Packs 'Em in with Comedy." Bridgeport Post, March 10, 1936.
34. Countess Fairfield, "Society News," Bridgeport Herald, November 11, 1936.
35. Julian B. Tuthill, "Through the Movie Scope," Hartford Times, May 9, 1937.
36. Julian B. Tuthill, "Federal Theatre Hits High Mark in Finest Drama," Hartford Times,
December 29, 1937.
37. Charles E. Niles, review of "Trilogy in Black," Hartford Times, June 19, 1937.
38. Julian B. Tuthill, "Play at Avery Tonight Soon to Become Movie," Hartford Times,
November 8, 1937.
39. "Two Tennis Courts Put into Service at Camp Courant," Hartford Courant, August
17, 1937.
40. Jess Benton, "More and More Ado: 'It Can't Happen Here,'Well, Maybe It Didn't,"
Bridgeport Sunday Herald, November 11, 1936.
41. Julian B. Tuthill, "The Play in Review: 'It Can't Happen Here,' " Hartford Times,
October 28, 1936.
42. Jess Benton, op. cit, November 11, 1936. See also S. M. Trebor, " 'It Can't Happen
Here' Did Happen at the Park Theatre," Bridgeport Life, October 31, 1936; and Al Jackson,
"Thaytah, Tsk, Tsk!," Bridgeport Herald, October 11, 1936.
43. Hallie Flanagan, "Why Not Here?," Federal Theatre 2, 2: 5-6.
44. "Third of Nation Well Presented," New Haven Journal-Courier, January 30, 1939.
45. Lawrence R. Harper, "Playbill: Beating the Drum," Yale Daily News, January 30,
1939.
46. "WPA Offers Housing Play at Bushnell: 'One-Third of a Nation' Pictures Historical
and Human Rights of Public Problem," Hartford Courant, January 20, 1939.
47. "Declining Federal Theatre," Greenwich Times, November 18, 1937.
48. "The New Freedom," New London Day, March 18, 1936.
49. "WPA Theatre Row," New London Day, May 31, 1938. Wire service story also printed
in Greenwich Times, Bridgeport Star, Hartford Times, and Middletown Press.
50. "Federal Theatre Folk Called in Communist Quiz," Ansonia Sentinel, August 19, 1938;
"Hazel Huffman Determined to Keep Subversive Elements out of FTP," Bridgeport Evening
Post, August 20, 1938; "Calls Federal Theatre Project a Cesspool of UnAmericanism," AP
dispatch in Willamantic Chronicle, Waterbury Republican, Torrington Register, Norwich
158
Bulletin, Bridgeport Evening Post, Bridgeport Telegram, Manchester Herald, Meriden Record, New Haven Register, and Hartford Courant, August 20, 1938.
51. "Reds Control Theatre Aid, Actor Tells House Group," New London Day, August
20, 1938.
52. Julian Tuthill, "Stage Fights Way to Front Despite Films" Hartford Times, June 7,
1936.
53. "Favorite 'Alice in Wonderland' to Tour Several Public Schools," New Haven Register, March 15, 1936; "Puppets to Go for Ride Wherever Children Are: 'Through the Looking
Glass!' " Bridgeport Post, July 20, 1937.
54. Connecticut Narrative Reports, Boxes 86 and 596; Record Group 33, National Archives, Washington, D.C.
55. Semi-Monthly Report, Bridgeport, March 15, 1937; Box 596, Record Group 33, National Archives, Washington, D.C.
56. Weekly Reports, April and May 1936, New Haven; Box 86, Record Group 33, National Archives, Washington, D.C.
57. Southington Narrative Report, April 1, 1936; Box 86, Record Group 33, National
58. "State PWA [sic] Adds Bureau to Read Play Manuscripts," Stamford Advocate, September 24, 1936; "Encouragement for Unknown Play Writers," Waterbury Democrat, September 24, 1936.
59. Memo from Hiram Motherwell to Gertrude Don Dero, October 20, 1936, Connecticut Correspondence File; Box 50; Record Group 33, National Archives, Washington, D.C.
60. Hiram Motherwell, Memo to All State Directors and Supervisors Concerning CoSponsoring Committees, February 5, 1936; Record Group 33, National Archives, Washington, D.C.
61. Julian Tuthill, letter to Hiram Motherwell, February 24, 1936, Sponsor's File; Box
604; Record Group 33, National Archives, Washington, D.C.
62. Julian Tuthill, letter to Gertrude Don Dero, February 24, 1936, ibid.
63. Gertrude Don Dero to Hiram Motherwell, November 9, 1936; Box 50; Record Group
33, National Archives, Washington, D.C.; Sponsor's File; Box 604; Record Group 33, National Archives, Washington, D.C.
64. Cleveland Bronner, Narrative Report from Norwalk, April 15, 1936; box 86; Record
Group 33, National Archives, Washington, D.C.
65. Citizen Committee, Connecticut File; Box 50; Record Group 33, National Archives,
Washington, D.C.
66. Charles La Rue to William Stanger: "Division of Receipts at Bushnell," February 16,
1939; Box 596; Record Group 33, National Archives, Washington, D.C.
67. Narrative Report, May 13, 1936; box 86; Record Group 33, National Archives,
Washington, D.C.
68. "St. Justin's Ladies Guild Will sponsor a Presentation of The First Legion' by Emmet
Lavery," Hartford Courant, March 9, 1936.
69. Altrusia Narrative Report, December, 1936; Box 86; Record Group 33, National Archives, Washington, D.C.
70. "Federal Theatre Bringing Famous Play to Memorial," The Prompter, January 1939.
Julian B. Tuthill, "Federal Theatre Has a Treat for Hartford," Hartford Times, January 10,
1939.
Ill
MANAGEMENT AND MISSION
7
From Impresario to Arts Administrator:
Formal Accountability in Nonprofit
Cultural Organizations
RICHARD A. PETERSON
In the decades following the American Civil War, the leading nonprofit
organizations devoted to displaying art works or presenting artistic productions were being formed in the major urban centers of America.1 Very
early, the roles of aesthetic leadershipthose of museum curator, symphony orchestra conductor, and theatrical directorwere separated from
the tasks of arts management, that is, the coordination of the wide range
of "behind-the-scenes" activities from fund-raising to janitorial services. At
its core, the function of this system wasand still isto buffer the art
world, where questions of aesthetic evaluation are primary, from the world
of business, where questions of money-making, economic power, and social status predominate. For nearly a century, the characteristic style of the
buffer role was that of the impresario, but over the past quarter of a century, the impresario has been replaced by the administrator in the management of all but the smallest and fledgling arts organizations.
This chapter will offer an explanation for the rapid displacement of the
impresarial by the administrative style of arts management. If correct, the
My interest in the emergence of arts administration was focused in conversations with Rosanne Martorella in 1975. Her view of the process was first presented in 1977 at the 72nd
annual meeting of the American Sociological Association as "Arts Management as a Function
of Increasing Organizational Complexity." I was privileged to work in the Research Division
of the National Endowment of the Arts during 1979-1980 and had the opportunity to observe
and talk with numerous arts administrators working in the United States and Canada in a
wide range of disciplines. In the years following, I kept a file on the topic and it was, therefore, with great pleasure that I accepted Paul DiMaggio's invitation to prepare this chapter. I
gratefully acknowledge DiMaggio's numerous provocative comments, as well as those of Daniel
Cornfield, Claire Peterson, and John Ryan, on this as well as on an earlier draft of the chapter
which was presented as "Le Role du Controle Formel dans le Passage Rapide d'un Mode
Entrepreneurial a un Mode Administratif de Management des Arts" at the 1985 annual meetings of the French Sociological Association.
162
Management and Mission
explanation may have application well beyond the realm of the nonprofit
arts. First, the impresarial and the administrative styles are characterized.
Next, four factors within the dynamics of the organization and six factors
in the organization's task environment are explored. Then the professionalization and institutionalization of the administrative style are detailed.
Finally, several possible consequences of the new style of management for
the arts are suggested.
THE IMPRESARIAL FORM OF MANAGEMENT
The first generation of nineteenth-century arts managers came from remarkably diverse backgrounds and practiced a range of leadership styles.
The ones that succeeded most often, however, exhibited a managerial style
that combined traditionalistic authority, charisma, and entrepreneurship.
This leadership style will here be identified as impresarial.
Whether running a performance company or a museum, the nineteenth
century fine arts impresario tended to have the following characteristics.
He (rarely she) was reared in an upper-class or upwardly aspiring family.
He led an adventurous early life, not connected with the arts. He deported
himself in a commanding and flamboyant style that was tooled to flatter
the wealthy and tyrannize subordinates, but he related to people on a personal, individualistic basis. Finally, the impresario combined the appearance of a selfless devotion to art with attention to the most minute managerial detail, thus personifying the company in his every activity over what
was often, by modern standards, an extremely long job tenure.
Take, for example, General Luigi Palma di Cesnola, the first full-time
director of the New York Metropolitan Museum of Art, who served from
1879 to 1904, a span of 25 years.2 Cesnola's unlikely but useful preparation for the top museum job included military academy training in his
home town of Turin, Italy, then military action in a local Italian campaign.
After his faction lost the war, he left Italy to spend several years as a
teacher of French and Italian in New York City, where he befriended many
of the city's young people of wealth. With the outbreak of the U.S. Civil
War, he raised and trained a cavalry unit, which then joined the Union
Army. Extensive and often-decorated service followed, as Cesnola rose to
the rank of Brigadier General, surviving a court-martial for misappropriation of funds and his capture by Confederate forces. After the war, he
married a New York debutante, and the couple served for twelve years in
both the United States and the Russian Consular services at various Mediterranean posts. While in diplomatic service on Cyprus he engaged in extensive digs as a self-taught archaeologist. Cesnola came to the attention
of the Board of Directors of the Metropolitan Museum of Art when he
returned to New York to sell his archaeological finds (a number of which
later proved to have been fabricated from fragments of broken statues) to
the museum and to oversee the mounting of the exhibit.
Formal Accountability in Nonprofit Cultural Organizations
163
Cesnola governed the museum autocratically. He had a glass-faced office

built for himself on the balcony of the original museum building, from
which he could see most of the galleries. He regularly wore metal-studded
shoes that telegraphed his coming, and museum guards were expected to
snap to attention at his passing. Like other impresarios, Cesnola devoted
most of his attention to cultivating trustees and other wealthy patrons of
the arts, an activity vital to maintaining the regular flow of money and
artwork donations. Perhaps more important to Cesnola personally, the good
will of these people made it possible for him to acquire inferior works of
art for the museum from his Italian dealer friends from whom, it was
alleged, he derived regular hidden cash commissions. Thanks to the continuing support of influential board members, including the richest banker of
the time, J. Pierpont Morgan, he was twice able to escape public disgrace
on the charge of having sold the museum doctored art work from Crete.
Cesnola was able to stay in office until his death in 1904, but within a
decade of his passing, all of the suspect works had been removed from
public display. Not all early impresarios were as scheming as Cesnola, but
his mix of self-effacing service and self-serving entrepreneurship was not
unusual.3
The museum and orchestra managers who assumed their first major directorships in the early decades of the twentieth century tended to have
less flamboyant early careers than Cesnola, and most had had some direct
experience in an artistic discipline. Nonetheless, their impresarial management style did not differ appreciably from that of their predecessors.
The career of Arthur Judson, who managed the Philadelphia and New
York Philharmonic Orchestras from 1915 through 1956, provides a good
example of the arts organization impresario of the twentieth century.4 Judson took conservatory training on the violin, but judging himself not to be
excellent enough to make a successful career as a violin virtuoso, he switched
to music education and then became a writer for Musical America, soon
moving to the business side of the magazine operation. He joined the Philadelphia Orchestra as business manager in 1915, just three years after it
had hired the energetic and innovative conductor Leopold Stokowski.
The national attention that Stokowski brought to the orchestra made it
possible to cultivate and keep the loyalties of the Philadelphia elite. Judson
was able to convince one patron to defray the operating deficit of the
orchestra for five years so that all the proceeds from the campaigns for
donations would go directly to creating an endowment fund. A few years
later, when he had been made manager of the New York Philharmonic
Orchestra as well, Judson cultivated another patron who "was able to
allocate to various board members the sums of money they were expected
to contribute or raise and then write his own check for the remainder of
the budget. Judson recalls that at the end of each season he would give the
patron an accounting of the operations, whereupon he would cover the
amount that was lacking." 5
Using his position as manager of the Philadelphia and then the New
164
York orchestras, Judson was able to develop a thriving independent business as personal manager to solo and concert artists, classical music groups,
and budding conductors. In using his organizational position for private
gain, he followed in the footsteps of Charles Ellis and Henry Voegeli, who
did much the same in Boston and Chicago, respectively.6 Judson soon began to involve his artists and orchestras in the fledgling media of radio and
phonograph recording. In the process he invested heavily in the Columbia
Broadcasting System, and at the time of his death, his holdings of CBS
stock were second only to those of CBS founder William Paley.7
Over the decades of the twentieth century the freedom and scope of the
personalistic style of the impresario have gradually been curtailed. This
change can be traced over one hundred years through the careers of Cesnola and Judson to Rudolph Bing who, after 23 years of service, retired as
General Manager of the Metropolitan Opera Company in 1972.8 In the
years since 1960, however, a new sort of arts manager has rapidly come
to the fore and has virtually displaced the impresario. The new type of
manager is the arts administrator.
THE EMERGENCE OF ARTS ADMINISTRATION
The arts administrator differs markedly from the impresario in formal education, responsibilities, and managerial style. Whereas the impresario relied on personal ties and charm in an entrepreneurial environment, the arts
administrator relies on the norms of formal accounting in an environment
of numerous bureaucratically structured organizations and unstructured
publics.
Education
Until the mid-twentieth century, training for prospective arts managers

consisted largely of tutelage by active impresarios. Their professional obligations were closely linked to their social life: for museum managers, this
meant wooing art collectors and maintaining rapport with wealthy museum trustees;9 for performing arts managers, it meant compromising the
interests of the chief donors with those of the artistic directors and personnelconductors, choreographers, actors, singers, players, or dancers.10
Most of the twentieth-century arts managers working in the impresarial
mode did, of course, have formal schooling. Paul Sachs, who joined the
Fogg Museum soon after World War I, taught several generations of Harvard students who went on to direct virtually all of the major museums in
America. The primary skill he taught his students, however, was how to
talk to wealthy prospective patrons.11
For the new breed of arts administrators, such training was no longer
adequate. Rather than develop management skills in the idiosyncratic crucible of a liberal arts education and personal experience, these new arts
165
administrators have increasingly been taught through postgraduate professional training. The first two postgraduate programs developed to train
arts administrators were founded in 1966 at Yale and Florida State University. Both of these programs specialized initially in the training of theatre managers, but most programs founded subsequently now train their
students for management roles in any of the arts.
In 1976, a decade after the first programs were launched, Donner12 reported 12 fully operational arts administration postgraduate training programs. By 1981, the number of programs had doubled;13 twenty-three
universities had postgraduate programs in performing arts administration,
and there were another thirteen programs in what has come to be called
"museology," that is, museum administration studies. In addition, a number of agencies provided short-term intensive courses for working admin14
istrators
istrators.
The curriculum of the arts administration program at the University of
Wisconsin at Madison offers a good insight into the range of skills the
new type of arts manager is presumed to need. This program currently
graduates more students each year than any other, and its curriculum has
been used as the model for most of the programs that have been instituted
since its founding in 1969. The Wisconsin program is an area of professional training in the business school. Wisconsin students are required to
take what the program bulletin calls "foundation" courses: microeconomics, financial and administrative accounting, budgets and budgetary
control, marketing, organizational behavior, legal aspects of business, and
statistics. According to the Bulletin, courses in arts administration are also
required.
14
A two-semester seminar in arts administration is given the first year. The first semester is devoted to modules that are environmentally oriented, such as arts administrators and their organizational structures; government, business, education
and labor and the arts; and boards of directors. The second semester focuses on
'How to' modules; planning and programming, contracting and negotiating, marketing the arts, and fund raising and development.15
The only vestige of the older apprenticeship model of training in this rationalistic new program is a half-year internship in an arts organization.
Responsibilities
Shestack16 notes the different responsibilities of the impresario and the

administrator. The museum director of the 1920s, he asserts, needed to be
a connoisseur and a gentleman engaged in wooing art collectors and satisfying wealthy trustees. Shestack contrasts these duties and skills with those
of the administrator of the post-1960 era. The latter must pay attention to
managing the museum, garnering prestigious touring exhibits, and attracting more museum attenders. As Thomas W. Leavitt, who took the famous
"museum class" at Harvard in the early 1950s, has noted,
166
in 1954 we did not realize that we were near the end of an era in the evolution of
art directors. Even today most of the directors of that time are remembered as
being larger than life . . . with a few notable exceptions, the grand style was
gradually replaced with businesslike attention to growth and service. Most of the
great collections had been wooed and won, and the spirit of the late 50s and early
60s called for consolidation, building expansion, larger education departments, and
efforts to excite a wider cross-section of the public into museums. 17
In a "job description" for the contemporary symphony manager, Ralph

Black, an official of the American Symphony Orchestra League, writing in
Symphony News, states that "the responsibility of the manager is to be
responsible."18 In a 23-item checklist, he notes the wide range of things
the administrator is responsible for, and an even wider range of constituencies, most of which did not exist as organized interest groups 40 years
ago, the symphony administrator is responsible to.
Managerial Style
Although his career began before the new form of schooling, the managerial style of Ernest Fleischmann, Executive Director of the Los Angeles
Philharmonic Orchestra, exemplifies the orientation of the arts administrator.19 Trained both as a music conductor and as an accountant, Fleischmann has been applauded for successfully negotiating contractual arrangements with the musicians' union, the City of Los Angeles, record company
executives, and the wealthy members of the orchestra's board of directors
(Thompson, 1976).
Like other administrators, Fleischmann's managerial style has been that
of the technical arbitrator bringing contending interests to agree through
negotiation and compromise. Unlike his irnpresarial counterpart, whose
style was based on flattering and cajoling the affluent elite while dominating performers and employees by an autocratic imposition of his will, the
successful arts administrator relies on the ability to apply evenhandedly
technical knowledge to obtain the best possible results for the arts organization and all interested parties.
EXPLANATIONS Of THE RISE OF ARTS ADMINISTRATION
Why did the irnpresarial form of arts management, which evolved slowly
over the course of a century, so rapidly give way to the administrative
form of arts management? There are a number of alternative theories that
have been advanced by economists or sociologists to account for changes
in organizations of all types. The set of four explanations considered first
focuses on processes taking place in the structure of formal organizations
themselves. After deficiences in each of these organization-focal explanations are demonstrated, evidence will be introduced that simultaneously
brings into question all four explanations and points the way to a quite
167
different sort of explanation, one that focuses on events taking place in

the world beyond the boundaries of the nonprofit organization.
Internal Organizational Factors
Size
It is often assumed that as organizations grow larger, either in the number

of employees or in the size of budgets, they tend, other things being equal,
to become more bureaucratic.20 Martorella 21 has used this idea to explain
the emergence of arts administration.
Virtually all of the surviving nonprofit organizations have grown in size
over the past 50 to 100 years. Size, by itself, cannot explain the growth of
arts administration, however, because this growth has typically been gradual, and because for organizations founded before 1950, most growth preceded by decades the emergence of arts administration. The New York
Philharmonic Orchestra, the New York Metropolitan Opera Company,
and the New York Metropolitan Museum of Art all had employees numbering in the hundreds and annual budgets of over one million dollars well
before the advent of arts administration.22 In a comparative analysis of the
evolution of New York and London orchestras over the past century,
Couch23 demonstrates that increases in size and budget have occurred in
the orchestras of both cities but within the context of radically different
managerial structures. Indeed, there has long been solid evidence that increasing size does not automatically lead to increasing bureaucracy, for as
Dibble 24 has shown, large-scale units of government operated in sixteenthcentury England without bureaucratization.
Task Complexity
It has been widely asserted that as organizations become more structurally

complex, that is, as they take on a greater number of different tasks, they
become more bureaucratic. Again the idea of increasing complexity has
been identified by Martorella25 as a cause of the emergence of arts administration.
Certainly the leading modern opera companies, orchestras, theaters, and
museums are more complex than their earlier counterparts. Contemporary
art museums, for example, in addition to displaying owned and loaned
works of art, may include a library, dining hall, retail art store, theatre,
chamber music hall, art restoration center, arts school, and may mount
extensive educational programs for the general public.26 The major orchestras, opera companies, theatres, and ballet companies have also become more structurally complex as they have taken on a plethora of auxiliary activities. But again, as in the case of size, change in complexity has
come gradually in the past several decades, as Arian 27 has shown in the
case of the Philadelphia Orchestra and Tomkins 28 has shown for the Metropolitan Museum of Art. Finally, as Gersuny and Rosengren29 have shown
for service organizations generally, complexity has grown gradually over
168
the century, and thus it cannot be a primary cause of the rapid and widespread rise of arts administration since 1960.
Organizational Life Cycle
The two most influential early twentieth-century organization theorists, Max
Weber and Robert Michels, asserted that the leadership of organizations
goes through a more or less regular sequence of stages. Although they used
different terms, both believed that organizations that begin with an egalitarian or entrepreneurial leadership style become more bureaucratic and
oligarchic over time, because of the internal dynamics of organizational
development and the succession of organizational leaders.30
The biographies of many arts organizations do reveal a loosely structured early stage when the organization is largely built by a charismatic
individual or group, followed by several stages of increasing formalization
as successors try to perpetuate the institution. From the life-cycle perspective arts administration may be interpreted as emerging during an advanced stage in the cycle of an arts organization's growth and institutionalization.
There are two major problems with this hypothesis, however. The first
is that only in their earliest years do organizations show consistent patterns of change. Beyond the earliest stages, the biographies of arts organizations show a wide range of paths. Nowhere is this diversity of lines of
development more evident than in the histories of twentieth-century American dance companies. 31
The second major problem with the life-cycle hypothesis is that the arts
administration style has been adopted by most art organizations during a
specific historical period irrespective of the age or life-cycle stage of the
arts organizations in question. This suggests, parallel to the findings of
Meyer and Rowan, 32 that formalization was caused by external forces yet
to be identified that affected all organizations in a field at the same time.
We will return to this point below.
Cost Disease
In 1966, William J. Baumol and William G. Bowen published Performing

Arts: The Economic Dilemma.33 The crux of the dilemma as they see it is
that, whereas productivity in the general economy has risen at a compound rate of 2.5 percent per year, thus doubling labor productivity every
29 years, the productivity of performing arts groups has risen very little.
Today, just as in J. S. Bach's time, they note, it takes four instrumentalists
to play quartet music. Nonetheless, because arts performers are consumers
in the general economy, they expect their incomes to rise with the rising
general standard of living. Since arts' productivity is rising very slowly,
arts organizations must raise ticket prices and solicit increased donations
to satisfy employee income expectations. This dynamic of slowly increasing productivity and rapidly increasing costs created what Baumol and
Bowen called the "income gap," and the Baumols now call the "cost disease."34 Although such a cost disease is endemic in any fixed-productivity
169
sector of the economy like the performing arts, many people in the late
1960s argued that it had reached a critical point, and that to survive, arts
organizations had to operate differently. The most common prescription
for curing the cost disease included a call to make arts management more
efficient through the use of business principles of administration.35 The
cost disease, though real enough, does not account for the rise of arts
administration because it is not an epidemic that has broken out in recent
decades. Rather, it was chronic throughout the ascendancy of the impresario as well.
Internal Factors in Concert
In this section, we have examined the proposition that the rise of arts
administration can be explained by dynamics internal to individual arts
organizations: growth in size, increasing complexity, organizational life cycle, and the cost disease. All four of these factors have been at work over
the past century, and each tends to encourage greater bureaucratization in
an individual organization. Thus, we would expect that for each arts organization, the lower the rate of increase in unit productivity and the older,
larger, and more complex the organization is, the greater is the probability
of the shift from the impresarial to the administrative style of arts management.
These intraorganizational factors are quite useful in explaining the differences in arts management style between individual organizations and
among the several arts disciplinessymphony, opera, museums, theatre,
and dancethrough about 1960. Each of the disciplines tended to have a
distinct pattern and rate of change in the four intraorganizational forces
that constrain a change in leadership style.36 After 1960, however, the
trend toward formalization of organizations and the development of arts
administration spread rapidly across all arts disciplines, irrespective of the
size, age, and complexity of individual organizations: It is as if the form
of arts management we call "arts administration" was caused by a contagious substance in the environment of all arts organizations. In the section
of the chapter that follows, we will identify the etiology of the administrative style of arts management and the epidemiology of its spread.
Extraorganizational Factors
A number of agencies and interest groups in the task environment of contemporary arts organizations increasingly hold the organization and its
managers formally accountable for action taken in the name of the arts
organization. The demand for formal accountability in turn puts a premium on employing arts managers adept at working in the administrative
rather than the impresarial mode. In this section, six extraorganizational
factors that have fostered the growth of arts administration will be identified.
New Patrons and Unearned Income
From meager beginnings in the 1950s, and increasing rapidly especially
1 70
since the founding of the National Endowments for the Arts and Humanities in the mid-1960s, local, state, and federal contributions have become
of major importance to funding arts organizations. To a degree far greater
than that of other patrons, government agencies require formal grant applications that follow explicit guidelines, evaluation according to universally applied standards, documented adherence to specified guidelines, and
strict accountability for expenditures.37 What is more, philanthropic foundations and corporate patrons, whose contributions to the arts have grown
rapidly in the past two decades, rationalized their grant-making procedures during the same period. They have taken these steps in part to comply with tax law requirements and also to satisfy the emerging norm of
formal accountability.
The difference between the earlier pattern of informal or personal accountability and the recent shift to formal accountability is clearly shown
in a discussion of the development of local community funding for the arts
by John Blaine, Chairman of the Board of the National Assembly of Community Art Agencies.
In the prehistory of local public funding for the arts, say ten years ago or a bit
longer, those local tax dollars that found their way into the operating budget of
cultural institutions were usually accounted for in a line item buried deep within
the budget of some large city or county agency. Accountability for how those dollars were spent was generally accomplished at a cocktail party, opening night or
on some other occasion that brought public officials together with board members
of cultural institutions.38
In a provocative article on the impact of public funding on organizations

in the arts, Paul DiMaggio39 has speculated on the consequences for arts
organizations of receiving government funds. He hypothesizes that arts organizations that seek and receive government support will have to formulate formal statements of policies and plans, to institute formal audits of
their accounts, and to increase the sizes of their administrative staffs accordingly.
The case of jazz, a field in which there have been few stable nonprofit
organizations, demonstrates the difficulty of conforming to the requirements for receiving public funding. The government has faced great obstacles to granting money for the aesthetic development of jazz because jazz
musicians typically work as shifting small assemblages of players rather
than in a few large and stable institutions. In 1979 Ezra Laderman, then
Director of the National Endowment for the Arts Music Program, pointed
with pride to the fact that the Endowment was finally able to give $1
million for jazz. Laderman noted that "despite the popularity of, and demand for jazz, there are basic problems in assisting the field. Unlike other
art forms that have a strong organizational base, jazz for the most part
does not function within an organization form as do theaters or orchestras." 40
DiMaggio and Powell 41 have developed a theory that places in context
the problem the government has experienced in trying to give money for
171
the development of jazz. They assert that all organizations that regularly
interact with one another in what they call an organizational field, such as
the art world, tend to become structurally isomorphic in order to facilitate
interaction with each other. Since few nonprofit jazz organizations have
had stable organizational structures with standard accounting procedures,
it has been difficult for government agencies to recognize jazz aggregations
with which it could interact on terms fitting its own procedures.
The DiMaggio-Powell hypothesis of increasing institutional isomorphism nicely fits the facts at hand. It serves to explain why the contemporary
new patrons, including government, foundations, and corporations, which
are all formally structured, require formal accountability of arts organizations and facilitate the emergence of arts administration. The hypothesis
of organizational isomorphism also serves to explain why, before the new
patronage existed, the boards of directors of arts organizations which were
largely composed of wealthy, self-made individuals most successfully dealt
with art impresarios who were themselves the entrepreneurs of arts management.
New Audiences
Following the old adage, "he who pays the piper calls the tune," new
patrons should mean new audiences as well. The bulk of government,
foundation, and corporate grants have not been given to cover regular
operating expenses. Rather, most grants have been given to stimulate new
programming aimed primarily at attracting audiences to the arts. Leavitt
succinctly shows the importance of this shift in patrons.
As the country-club atmosphere of museums disappeared, private funds became
harder to solicit and we had to build cases for public tax support from cities,
counties, states and, finally, the federal government. Virtually all of these funds
from public sources were conditional upon our performing additional services for
the public.42
A larger and more socially diverse range of arts consumers is sought by

the new arts managers, less as an end in itself than to show the prospective
new patrons that the arts organization is socially worthwhile. As a case in
point, Cal Bean, Station Manager of WPLN, the National Public Radio
affiliate in Nashville, told me in 1978 that the station had just hired a
development director to increase substantially the number of listenerdonors. This was being done not so much for the money that would be
raised but so that the station would be eligible to apply for larger federal
government grants.
On a grander scale, Salem 43 reports that the Seattle Opera Company
launched a series of money-losing programs in the early 1970s in order
to garner national attention and critical acclaim in the hope of receiving
larger government grants. DiMaggio cites numerous additional examples to
illustrate the organizational, aesthetic, and audience-building consequences of the emergence of what he calls a "grants economy" in the
arts.44
1 72
Several popular commentators and art critics have elaborated on such

assertions. For example, Lilla 45 contends that the new breed of businessschool trained arts managers knows nothing of art. They make museums
"user friendly" with illustrated brochures, shops, and flashy traveling exhibits that excite and pander to extra-aesthetic interests.
As noted earlier, however, the modern arts administrator is not committed to building a bigger and more diverse audience as an end in itself.
Rather, the goal of arts administration is more often "budget maximization." Three examples suggest that administrators may abandon audience
building if organizations can prosper by increasing revenues in other ways.
For example, Robert Brustein 46 reports that the manager of the Lincoln
Center's Beaumont Theatre in New York focused his attention on investing building-fund money rather than on raising the production money necessary to put on plays. Cox 47 found that most of the efforts of managers
of New York's South Street Seaport Museum have gone into real estate
development; only 5 percent of the museum's holdings are on display, and
most of the museum's exhibit space is rented out for boutiques. Finally,
Posner48 reports that the Frank Lloyd Wright Foundation, created to support a Wisconsin retreat for aspiring architects, has neglected the retreat,
instead building an ever-larger endowment fund by systematically selling
original Frank Lloyd Wright drawings and prints. These three illustrations,
though extreme, suggest that arts administrators give high priority to audience building only when it facilitates their primary goal of budget building.
New Sources of Earned Income
In the quest for new sources of funds, administrators have instituted, or

tried to make demonstrably profitable, ancillary activities ranging from
restaurants, publications, gift shops, and membership tours to music recording contracts, affiliated art schools, real estate ventures, and the aggressive investment of endowments. Even if these activities are not new,
they are newly subject to rational accounting and managerial criteria that
evaluate each activity not as a service that arguably ought to be supplied
but as an independent "profit center" to be expanded, eliminated, or turned
over to a concessionaire depending on its profitability.
Administrators are assisted in this process of calculation by a swelling
legion of consultants. Vilker 49 outlines the range of services that can become distinct profit centers and the appropriate effectiveness/efficiency criteria to be applied to each activity. Troyer and Boisture 50 make more extensive inventory of "creative approaches to income production" and discuss
ways of protecting nonprofit status and limiting tax exposure. Hendon's 51
study of the Akron Art Museum represents a comprehensive review of a
museum as an economic enterprise.
The evolution of the dining facility at the Cheekwood Museum and Botanical Garden in Nashville provides a convenient case study of the evolving view of "services" in the transition from the impresarial to the admin-
173
istrative era.52 Soon after the Cheek family donated their estate to a selfperpetuating board of directors in 1960, the kitchen was renovated to serve
the needs of the for-members-only gala parties given in the mansion's main
gallery. Later, the ladies auxiliary of the membership committee began to
serve light lunches in what was called the "Pineapple Room." The ladies
contributed their time and opened the dining room to the public as a fundraising charity. The menu and style of service, however, discouraged anyone but members of their own social class from lunching there.
When it became difficult to find enough volunteers, a staff was hired to
run the operation. In 1979 the newly hired, administratively trained museum manager found that the lunchroom was costing the museum more
money than it took in. He wanted to shut down the operation, but the
board of directors objected. Several years later, he was able to include a
kitchen and dining room, both complying with the sanitary and safety
codes that had been violated in the old facility, in a new building under
construction. The administrator then contracted for the lunch service from
a local affiliate of a nationally known food service catering firm, thereby
ensuring income from a lease-fee while providing consistently good food
without museum management needing to be involved on a day-to-day basis.
In reevaluating many of the services that museums and performing arts
centers have long provided, arts administrators have come to view arts
institutions as having revenue-generating resources well beyond the tea room
and gift shop. For example, the New York Museum of Modern Art has
sold the "air rights" above its new west wing to real estate developers for
$17 million. The idea of art institutions as real estate has also been applied
to orchestra halls. For example, the Buffalo Philharmonic Orchestra Company sold its performance hall to a group of investors organized as a limited partnership. The Orchestra was able to pay off its debts and increase
its endowment with the proceeds of the sale, while the limited partners
have received significant tax advantages from the arrangement.53
Laws, Regulations, and Codes
Legal regulation of organizations has grown steadily in this century, but

the trend has accelerated rapidly since 1960 with the advent of a wide
range of social legislation. The increasing salience of legal matters is suggested by the important place given to law in the education of arts
administrators54 and by the rapidly proliferating professional and practical
literature devoted to legal matters relevant to the arts world.
The impresario could be expected to learn the provisions of copyright
law, obscenity codes, fire insurance and labor regulations, inheritance tax,
and the like while working on the job. The contemporary administrator,
however, must be familiar with an ever-expanding and rapidly changing
set of laws, regulations, and codes in order to compete successfully for a
position in an arts organization. Consider, as an example, just those laws,
regulations, and codes that relate to employees: labor laws, labor union
174
contracts, worker compensation law, retirement plans, medical benefits insurance, employee tax law, equal employment opportunity regulations,
workplace safety codes, record and television performance royalties, and
others.
Personnel
The ability to deal with people was the long suit of the impresario. Styles
varied from individual to individual, but the impresarial technique was a
mixture of kid gloves and mailed fists. The former was usually extended
to patrons and leading stars; the latter was more often shown to employees and social inferiors. All relationships, however, were on a personal and
paternalistic basis. Contracts were typically sealed with a handshake and
long-term informal understandings commonly developed.55
Contemporary arts administrators characteristically deal with personnel
relations in a quite different way. Increasingly the services of featured performers are secured by formal written contracts negotiated with artists'
business managers or professional management agencies. In similar fashion, the services of musicians and backstage technicians are increasingly
obtained on terms set by formal union contracts. The numerous performer
and stagehand strikes that have occurred in all of the performing arts over
the past 20 years attest to the displacement of paternalistic personal relationships by formal contractual arrangements. 56 Baron, Dobbin, and
Jennings 57 report findings parallel to our argument here. They found that
professional personnel managers displaced their personalistic predecessors
in the major manufacturing industries during the World War II era because of the plethora of new regulations promulgated by the federal government at that time.
Logistics
The rate of movement of artists and art works has increased dramatically
over the past 20 years. The advent of jet air travel allows performers,
conductors, and other key artistic personnel to pursue world-spanning careers on a week-by-week basis. Not only soloists, lead dancers, and actors
move at this pace, but choreographers, directors, and conductors now often
hold two or three major positions simultaneously. 58 With the mobilization
of large, spectacular touring museum exhibits in the 1970s, the contemporary museum administrator now has logistical problems the complexity
of which could not have been imagined by the early twentieth-century impresario.
Logistical problems are such that the financing and mounting of major
productions must be planned years in advance. The 1980 New York Museum of Modern Art retrospective on Picasso, for example, required five
years of negotiations with the governments of France and Spain as well as
with dozens of museums and private collectors around the world. The oldstyle arts manager, such as Luigi Cesnola, gained experience on the parade
ground and in battle as a cavalry officer and gentleman in full dash, able
175
to make quick decisions intuitively. Now the new arts administrator, like
the first director of the Tennessee Performing Arts Center in Nashville, an
Air Force missile range officer, is more likely to have been trained to target
audiences methodically and to calculate the probable artistic "bang per
buck" for each of various alternative arts venues.
Extraorganizational Factors in Concert
We have identified government funding as the primary cause of the emergence of arts administration since 1960. If this interpretation is correct,
why did the first massive infusion of federal government money into the
arts during the New Deal government arts program of the late 1930s not
foster the development of arts administration? To my knowledge, no study
has focused on this question, but the nature of government support then
was crucially different from the government's role in the contemporary
era.
Support for the arts in the 1930s was just one small part of the general
"jobs program" aimed at reducing the dramatically high level of unemployment.59 Money was allocated by government functionaries to individual artists or for the production of large commissioned works. With few
exceptions, grants were not made to existing arts organizations, and the
organizations that were created depended almost entirely on government
funding. Thus, when the program was terminated soon after the advent of
World War II, the federal administrators were reassigned and the entire
federal arts organizational apparatus disappeared.60
Since 1960, however, as we have described in this section of the chapter,
six different factors in the environment or at the organization-environment
boundary have increased the need for arts managers with administrative
skills. Although each of the six factors has been discussed separately, they
typically operate in concert, mutually reinforcing the drive toward formal
accountability and increasing the need for arts managers with the orientation and skills of arts administration.
PROFESSIONALIZATION AND INSTITUTIONALIZATION OF

ADMINISTRATIVE STYLE
To this point, we have described the emergence of arts administration as

a consequence of abstract forces that increased the demand for administrative services, but several people and groups took an active interest in speeding
the development of the administrative style as well. In this section of the
chapter we focus on the things that have been done to create an arts organizational world more congenial to the administrative managerial style.
The key processes involved are referred to by sociologists as institutionalization and professionalization.
With growing clarity over the first two decades following World War II,
American arts world leaders perceived a situation full of new opportunities
176
and new problems. First, there was a new feeling that the United States
was, or could become, the center of creative effort in all the arts, ending
the feeling of inferiority that American art world participants had chronically felt relative to European art. Second, attendance at arts events was
steadily rising and numerous new arts organizations of all types were being
founded or revitalized around the country. Third, the cohort of large donors who for the first third of the century had been able simply to underwrite the operating deficits of even the largest organizations could no longer
play that role. Organization costs were rising, but more importantly, individual fortunes had been greatly diminished by the Great Depression,
and the discretionary power of the wealthy was diminished by the workings of tax law that led to philanthropy being channeled to charities through
family or corporate foundations. In consequence there was an increasing
reliance on earned income and a concern for audience building. 61
These changes sparked a widespread discussion of an economic crisis in
the arts, which became focused in 1965 by Baumol and Bowen's concept
of cost disease. There were calls for large new government subsidies to
cure the cost disease. Influential voices, however, argued that it was not
more money that was needed so much as better management practices
within arts organizations. 62 The administrative model emerged by degrees
as the appropriate one for the new-style arts manager.
Four phases can be identified in the effort to institutionalize arts administration and professionalize arts managers. First, in the early 1960s corporations began to loan management personnel to arts organizations to
help with accounting, legal services, cost control, and fund-raising. To legitimate and coordinate this activity within the business world, the Business Committee for the Arts was formed in 1967. The "loaned expert"
program continues today, despite the problems inherent in having someone used to the operating logic of a for-profit industry advising nonprofit
arts organizations. Business Committee for the Arts president, Godwin
McClellan, recounted an incident that illustrates the problem.63 A major
performing company received assistance from a loaned business expert to
eliminate its operating deficits. The company then scheduled a tour of Brazil, thus creating a new deficit of $60,000. When the exasperated business
consultant confronted the arts-organization director, the latter explained
that he needed a sizable deficit in order to spark the annual fund-raising
drive.
Second, to get beyond the "loaned expert," attention turned to retraining arts managers in the logic of administration. "Trade" or "service associations" modeled on the American Symphony Orchestra League were
formed in part to pool managerial expertise and to support short courses
in administrative techniques for practicing arts managers. From its inception, the National Endowment for the Arts subsidized existing trade associations and helped to found new ones. By 1979, the NEA could report,
"At this time, we provide about five million dollars in operating support
177
for more than seventy service organizations, and another two million dollars in project support to these organizations."64
Third, the decade of the 1970s saw the proliferation of graduate arts
administration training programs based in schools of business. Collectively
these are dedicated to developing a new generation of MBA-credentialed
arts managers committed to the logic of administration.
Finally, the professionalization of arts administration has been buttressed by a proliferation of a quasi-scholarly and practical literature treating the full range of management concerns, from identifying potential audiences to cultural-area zoning. Two quarterly journals, Art and the Law,
launched in 1975 by Volunteer Lawyers for the Arts, and the Journal of
Arts Management and Law (formerly Performing Arts Review) exemplify
the wealth of new knowledge being assembled for and by the emerging
university-trained cadre of arts administrators.
The Institutionalization/Professionalization Cycle
As a number of scholars drawing on observations in the full range of forprofit and nonprofit organizations have noted, once underway the processes of institutionalization and professionalization tend to reinforce each
other.65 Among arts organizations the cycle has taken the following form.
The new institutional patrons demand formal accountability of arts organizations. Once the principle of formal accountability is accepted among
arts organizations, the amount of information required is rapidly increased. The National Endowment for the Arts, for example, now requires
all organizations applying for grants to provide a substantial body of information about finances, personnel, budgets, and audiences that the organizations did not collect a decade ago.66
To keep up with the increasing demands, arts organizations borrow
knowledgeable executives from business or retain their own managers. And
business schools begin to educate arts managers, as already noted, to fill
the rapidly growing demand for technically trained personnel. In the process, arts management jobs become more alike from one organization to
the next in each arts discipline, and across all the arts as well. As job
descriptions are standardized, it is easier for administrators to make careers for themselves by moving rapidly from organization to organization.
The frequent need to fill vacated positions leads to a further standardization of job descriptions, which in turn facilitates job-hopping both from
one arts organization to another and from outside the art world entirely.
The advertisement for a Public Relations Director of the Pittsburgh Symphony Orchestra appearing in the July 15, 1985 New York Times suggests
the range of interchangeability. "Seeking PR pro to take on new position.
. . . Strong media background required with innovations and a keen interest in the Performing Arts. PR experience in that area preferred" [emphasis added].
178
The current trend toward standardized job descriptions and job-hopping

is also illustrated by the feature "Musical Chairs" that appears regularly
in Symphony News, the monthly publication of the American Symphony
Orchestra League. During the three months of 1982 surveyed, less than
one-tenth of the job changes noted were for conductors or other artistic
personnel. Nine-tenths of the shifts involved administrators. Another pattern apparent in such lists of job moves is the large proportion that are
transfers between different kinds of arts organizations, such as arts-displaying and arts-presenting organizations; service organizations; government, corporate, or foundation money-granting organizations; and private
consulting firms. Such moves serve to broaden the perspective of the individual administrator and further facilitate the standardization of the arts
management field. With each revolution of the standardization cycle, the
universalized training of the administrator becomes progressively more salient, and the particularistic training of the impresario becomes less relevant and more anachronistic. 67
CODA
Having distinguished two arts management styles, the impresarial and the
administrative, and having explored numerous possible explanations for
the rapid displacement of the former by the latter since 1960, this chapter
concludes by raising questions about the possible consequences of this displacement for the arts.
Astute impresarios and administrators alike have disclaimed any influence on the aesthetic direction of the arts organization for which they work.68
Yet, as Hart 69 has noted, it is as difficult to keep aesthetic and managerial
decisions separate as it is to keep the legislative, executive, and judicial
functions of government separate.
While it is easy to show instances of the aesthetic influence of particular
managers of each era, it is more difficult to show a systematic difference
between the effects of impresarios and administrators. The set of circumstances that induced the shift from impresario to administrator could have
been responsible as well for all the changes in aesthetics during the same
span of years. What follows, therefore, is necessarily a set of conjectures
about the consequences of the activities of impresarios versus those of administrators.
We begin by recalling some of the key differences, previously discussed,
between the prototypical impresario and the prototypical administrator.
The former works in one arts discipline, learns by experience, expects long
tenure in a position, and strives to please the wealthy members of the
organization's board of directors. The latter is trained in a set of general
skills, holds positions in several arts disciplines, expects to make a career
moving from job to job, and strives to make a reputation in the field of
arts management. 70
Based on these differences one would suggest that, all other factors being
179
equal, the collective impact of impresarios was to make the aesthetic thrust
of individual arts organizations increasingly distinct from other organizations in the discipline and also relatively slow to change. In contrast, the
collective influence of administrators should be to make the aesthetic thrust
of arts organizations in a given discipline more nearly alike but, at the
same time, to cause aesthetic fashions to follow each other more rapidly.71
How these antagonistic tendencies of aesthetic homogenization, on the
one hand, and rapid aesthetic change, on the other, will work out in practice depends largely on forces acting on the environment of arts administrators, forces over which they have little control. Further careful study of
the actions of arts administrators will greatly enrich our understanding of
the dynamics of the arts world and expand our knowledge of the operation of nonprofit organizations in general.
NOTES
1. Prior to this development of nonprofit civic arts institutions, the few arts organizations
that existed were typically established as profit-making concerns by enterprising entrepreneurs. Theodore Thomas was the most renowned entrepreneur of orchestral music and P. T.
Barnum, before he founded "the world's greatest circus," established a for-profit museum in
New York City. In addition to paintings and sculpture, his museum featured stuffed animals
and primitive artifacts as well as oddities and freaks of all sorts. Thomas's activities are
summarized by Philip Hart, Orpheus in the New World (New York: Norton, 1973), 10-47.
Barnum's numerous exploits are chronicled by Neil Harris, Humbug: The Art of P. T. Barnum
(Boston: Little, Brown, 1973). Paul J. DiMaggio has shown the shift to nonprofit civic cultural institutions in Boston, the city that led the way in this development, in his "Cultural
Entrepreneurship in Nineteenth-Century Boston" (Chapter 2, this volume).
2. This description of Cesnola's life and activities is drawn from Calvin Tomkins, Merchants and Masterpieces (New York: E. P. Dutton, 1970), 49-59, and Elizabeth McFadden,
The Glitter and the Gold (New York: Dial, 1971). As a semi-official historian of the Metropolitan Museum of Art, Tomkins only notes the charges of criminal activity made against
Cesnola while director of the museum. In her biography, McFadden details all of the considerable evidence of Cesnola's misdeeds. What she does not make clear is why the powerful
board members of the museum, including J. Pierpont Morgan, supported Cesnola to the end.
3. C. G. Loring, for example, the first manager of the Boston Museum of Fine Art, though
a patrician Bostonian rather than a foreign aristocrat, had much the same early career as
Cesnola, including distinguished service in the Civil War cavalry and years spent as an archaeological treasure hunter. See Paul J. DiMaggio, op. cit.; Nathaniel Burt, Palaces for the
People: A Social History of the American Art Museum (Boston: Little, Brown, 1977); and
Walter Muir Whitehill, Museum of Fine Arts, Boston: A Centennial History 2 vols. (Cambridge: Harvard University Press, 1970).
4. This description of Arthur Judson's life and work is drawn from Philip Hart, op. cit.,
71-95.
5. Ibid., 84. Kurt Adler, who became the director of the San Francisco Opera Company
in 1957, notes the vital importance of personal charm in the earlier days. He says of Gactano
Merola, a Neapolitan who was his predecessor, "Merola was a very attractive man. The
ladiesthe wealthy ladies and not only those who had no moneyliked him. Without Merola and the gold rush heirs he attracted, there would be no opera in San Francisco today."
Adler is quoted by Melvin B. Krauss, "Kurt Adler: Gambler at the Opera," Wall Street
Journal, November 27, 1981, 24.
6. Ibid., 79.
180
7. Ibid., 80.
8. See Rudolph Bing, 5,000 Nights at the Opera (New York: Doubleday, 1972).
9. See especially Nathaniel Burt, op. cit., 249-348, and Alan Shestack, "The Director:
Scholar and Businessman, Educator and Lobbyist," Museum News (November/December,
1978).
10. Bing, op. cit.
11. Tomkins, op. cit., 255.
12. This information was compiled from Arts Administration Training in the United States
and Canada (Madison, Wise: Graduate School of Business, University of Wisconsin, June
1977, revised edition).
13. This information was compiled from A Survey of Arts Administration Training (New
York: The American Council for the Arts, 1981).
14. Ibid., 7276, lists 34 agencies that offered such courses and seminars in 1980.
15. Bulletin of the University of Wisconsin, Madison, Arts Administration Program.
16. Shestack, op. cit.
17. Thomas W. Leavitt, "The Beleaguered Director," 91-101 in Brian O'Doherty, ed.,
Museums in Crisis (New York: Braziller, 1972).
18. Ralph Black, "The Symphony ManagerA Job Description," Symphony News (September 1979): 12.
19. The great importance of having a manager with Fleischmann's mix of skills is suggested by the comment of Carlo Maria Giulini, then music director of the Los Angeles Philharmonic, when he was asked by an interviewer whether it was true that he had turned down
numerous music directorships at other respected American orchestras. He replied, "Yes, because 1 couldn't find a rapport between my private life and what a music director in the
United States is asked to do. First of all, the great number of concerts and programs, and
then the involvement in financial problems and unions. But here in Los Angeles with Ernest
Fleischmann I have an agreement that is good for my wishes, for my work and my life. . . .
I am absolutely free from problems that are not my business and that I am not very good at
solving."Giulini is quoted by Martin Bookspan in "Dialogue: Carlo Maria Giulini," Symphony News (February 1980): 19-20.
20. See especially Peter M. Blau, "A Formal Theory of Differentiation in Organizations,"
American Sociological Review, 35 (1970): 201218.
21. Rosanne Martorella, "Rationality in the Management of Performing Arts Organizations," in Jack Kamerman and Rosanne Martorella, eds., Performers and Performances (South
Hadley, Mass.: Bergin and Garvey, 1983), 95-108.
22. See respectively Hart, Bing, and Tomkins, op. cit.
23. Stephen R. Couch, "Patronage and Organizational Structure in Symphony Orchestras
in London and New York," in Jack Kamerman and Rosanne Martorella, op. cit., 109-121.
24. Vernon K. Dibble, "The Organization of Traditional Authority: English County Government, 1558 to 1640," in James G. March, ed., Handbook of Organizations (Chicago:
Rand-McNally, 1965), 879-909. But see Blau, op. cit., who argues that as organizations
increase in size, the proportion of personnel in the administrative sector increases as well.
Blau and his followers have not, however, suggested why a shift in managerial style such as
that from impresarial to administrative should take place.
25. Martorella, op. cit., 97.
26. See especially Vera Zolberg, "Conflicting Visions in American Art Museums," Theory
and Society 10 (1981): 103-125, and Mark Lilla, "The Great Museum Muddle," New Republic 8 (April 1985): 25-30.
27. Edward Arian, Each, Beethoven and Bureaucracy. The Case of the Philadelphia Orchestra (University, Ala.: University of Alabama Press, 1971).
28. Tomkins, op. cit.
29. Carl Gersuny and William R. Rosengren, The Service Society (Cambridge, Mass.:
Schenkman, 1973).
30. The most complete review of ideas relating to the idea that organizations, like individ-
181
uals, experience life-cycle stages is provided by John R. Kimberly and Robert H. Miles, The
Organizational Life Cycle (San Francisco: Jossey-Bass, 1980).
31. This observation is based primarily on a reading of articles on dance criticism because
dance companies have received markedly less scholarly attention than orchestras, museums,
and theaters. A suggestion of the dynamics of dance company development can be gleaned
from Leila Sussman, "Anatomy of the Dance Company Boom, 1958-1980," Dance Research
Journal 16 2 (1984): 23-28; Joseph Mazo, Dance is a Contact Sport (New York: Saturday
Review Press, 1975); Margaret J. Wyszomirski and Judith H. Balfe, "Coalition Theory and
American Ballet," in Judith H. Balfe and Margaret J. Wyszomirski, eds., Art, Ideology and
Politics (New York: Praeger, 1985), 210-236; and Dale Harris, "New Direction for the San
Francisco Ballet," Wall Street Journal May 22, 1985, 26.
32. John W. Meyer and Brian Rowan, "Institutionalized Organizations: Formal Structure
as Myth and Ceremony," American Journal of Sociology 83 (1977): 340-363.
33. William J. Baumol and William G. Bowen, Performing Arts: The Economic Dilemma
(Cambridge, Mass.: MIT Press, 1966).
34. Ibid., 161-180, and Hilda Baumol and William J. Baumol, "The Mass Media and the
Cost Disease," in William S. Hendon, Nancy K. Grant, and Douglas V. Shaw, eds., The
Economics of Cultural Industries (Akron, Ohio: Association for Cultural Economics, 1984),
109-123. Hart, op. cit., 295-330, provides an excellent early application of the "cost disease" argument to a class of arts organizations, symphony orchestras.
35. This recommendation was made early by the Rockefeller Panel Report, The Performing Arts: Problems and Prospects (New York: McGraw-Hill, 1965), and was echoed in numerous subsequent policy statements. See, for example, Thomas J. Raymond and Stephen A.
Greyser, "The Business of Managing the Arts," Harvard Business Review July (1978): 123132.
36. See especially Jack Poggi, Theater in America: The Impact of Economic Forces 18701967 (Ithaca: Cornell University Press, 1968); Kenneth Hudson, A Social History of Museums (New York: Macmillan, 1975); Karl E. Meyer, The Art Museum: Power, Money,
Ethics (New York: Morrow, 1979); Bing, op. cit.; Hart, op. cit.; Mazo, op. cit.; and Burt,
op. cit.
37. Lawrence D. Mankin, "The National Government and the Arts: From the Great
Depression Until 1973" (Ph.D. diss., University of Illinois, Urbana, 1976); Charles R. Swaim,
"The Fine Politics of Art: Organizational Behavior, Budgetary Strategy and Some Implications for Arts Policy" (Ph.D. diss., University of Colorado, Boulder, 1977); Dick Netzer, The
Subsidized Muse (New York: Cambridge University Press, 1978); and Vera Zolberg, "Changing
Patterns of Patronage in the Arts," in Jack Kamerman and Rosanne Martorella op. cit., 251268.
38. John Blaine, "Accountability to the Hand That Feeds You," Museum News, (May
1979): 34.
39. Paul J. DiMaggio, "The Impact of Public Funding on Organizations in the Arts" (Yale
Program on Non-Profit Organizations Working Paper 31, Yale University 1981).
40. NEA News, "Jazz Grants at $1 Million Mark," news release (Washington, D.C.: National Endowment for the Arts, September 1979), 2. The still largely unorganized state of the
jazz field has been noted by D. Antoinette Handy, "Jazz Gets Organized," NEA Arts Review
2, 4 (1985): 18-20.
41. Paul J. DiMaggio and Walter W. Powell, "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields," American Sociological Review 48 (1983): 147-160.
42. Leavitt, op. cit., 95.
43. Mahmoud Salem, Organizational Survival in the Performing Arts: The Making of the
Seattle Opera (New York: Praeger, 1976).
44. Paul J. DiMaggio, "Can Culture Survive the Marketplace?" (Chapter 3, this volume).
45. Lilla, op. cit., 26.
46. Robert Brustein, "Boards Versus Artists," New Republic (October 1983): 22-23.
182
47. Meg Cox, "All at Sea: New York Museum's Problems Show Snares in Mixing Culture,
Commerce," Wall Street Journal, April 12, 1985, 12.
48. Ellen Posner, "Selling Frank Lloyd Wright, the Wrong Way," Wall Street Journal,
February 5, 1985, 30.
49. Barbara Vilker, "The Development of Museum Management Tools," in David Cwi,
ed., Research in the Arts (Baltimore: Johns Hopkins University, 1977), 67-68.
50. Thomas A. Troyer and Robert A. Boisture, "Charities in Fiscal Crisis: Creative Approaches to Income Production," Journal of Arts Management and Law, 20, 4 (1984): 3254.
51. William S. Hendon, Analyzing an Art Museum (New York: Praeger, 1979).
52. The description of the development of the Nashville museum is taken from Roberta
Keller, "Cheekwood Enters Era Four of Arts Administration" (Unpublished manuscript, Vanderbilt University, 1985).
53. Cynthia Saltzman, "Recession impact Hits Art Organizations Hard," Wall Street Journal, December 7, 1982, 52.
54. See notes 12 and 13.
55. Bing, op. cit.
56. Archie Kleingartner and Kenneth Lloyd, "Labor-Management Relations in the Performing Arts: The Case of Los Angeles," California Management Review, 15 (1972): 128
132.
57. James N. Baron, Frank Dobbin, and P. Devereaux Jennings, "War and Peace: The
Evolution of Modern Personnel Administration in U.S. Industry" Forthcoming, American
Journal of Sociology.
58. Alan Rich, "Bigamy on the Orchestral Front," New York (February 28, 1972): 56;
Jack Kamerman, "The Rationalization of Symphony Orchestra Conductors' Interpretive Style,"
in Jack Kamerman and Rosanne Martorella, op. cit., 161-181.
59. The following discuss the efforts of the federal government to foster the arts during
the New Deal era: June Mathews, The Federal Theater, 193539 (Princeton, N.J.: Princeton
University Press, 1967); William F. McDonald, Federal Relief Administration and the Arts
(Columbus, Ohio: Ohio State University, 1969); Jerre Mangione, The Dream and the Deal;
The Federal Writers' Project 1935-1943 (Boston: Little, Brown, 1972); Francis V. O'Connor, Federal Support for the Visual Arts: The New Deal and Now (Greenwich, Conn.: New
York Graphic Society, 1971); Richard D. McKinzie, The New Deal for Artists (Princeton,
N.J.: Princeton University Press, 1973); and Helen Townsend, "The Social Origins of the
Federal Art Project," in Judith H. Balfe and Margaret J. Wyszomirski, op. cit., 264-292.
Hypotheses concerning the quite different reasons for government support to the arts, the
natural sciences, and social sciences are provided by Michael J. Useem, "Government Patronage of Science and the Arts," in Richard A. Peterson, ed., The Production of Culture (Beverly
Hills, Calif.: Sage, 1976), 123-142.
60. The fact that the organizational apparatus developed to administer the federal arts
projects was dismantled does not mean that government projects had no lasting effects. Some
of the arts organizations that led the "arts boom" following World War II were begun with
federal government support in the 1930s or at least survived the Great Depression only because of this aid. Hart, op. cit., provides numerous examples among symphony orchestras.
What is more, most of the artistic and managerial leaders of the postwar arts world were
able to pursue their chosen craft in the Depression years because of the federal arts administration money.
61. Leavitt, op. cit., 95-96; Hart, op. cit., 330-347; Burt, op. cit., 249-257; Meyer, op.
cit., 31-36, 64-69.
62. The professionalization of arts managers was one of the recommendations of the
Rockefeller Panel Report, op. cit., that according to Swaim, op. cit., was influential in shaping the structure of the National Endowment for the Arts. The need to upgrade the managerial skills of arts managers was a continuing theme through the 1970s. See, for example,
Ichak Adizes & William McWhinney, "Arts, Society and Administration: The Role and Training
183
of Arts Administrators," Arts in Society 10, 3 (1973): 40-48; and Raymond and Greyser,
op. cit.
63. Personal communication with Godwin McClellan at a Nashville Area Chamber of
Commerce meeting, April 1978.
64. NEA Memorandum, "Service Organization Study" (Washington, D.C.: National Endowment for the Arts, 1979).
65. This process is discussed by Magali S. Larson, The Rise of Professionalism: A Sociological Analysis (Berkeley, Calif.: University of California Press, 1977), and Randall Collins,
The Credential Society (New York: Academic Press, 1979). An even less sanguine interpretation of the institutionalization-professionalization process is provided by Daniel Moynihan
in his study of the development of the welfare establishment, Maximum Feasible Misunderstanding (New York: Free Press, 1969).
66. The range and detail of information now gathered has been reviewed in the Spring
1984 issue of the Journal of Arts Management and Law.
67. See Zolberg, op. cit. A study of the careers and aspirations of arts managers of U.S.
museums, resident theaters, symphony orchestras, and local arts agencies supported by the
Research Division of the National Endowment for the Arts has been completed by Paul J.
DiMaggio. In comparing the attitudes and experiences of older with younger arts managers,
it presents a vivid picture of the development of administrative-style careerism among arts
managers.
68. See for example Hart, op. cit., 77-79; and Black, op. cit., 12.
69. Hart, op. cit., 77.
70. The contrasting career orientations of the impresario and the administrator are much
like the differences between the orientations of two types of community influentials identified
by Robert Merton as "locals" and "cosmopolitans." See his Social Theory and Social Science
(New York: Free Press, 1968 enlarged edition), 441-474.
71. No one yet has done the research necessary to detail the consequences for the arts of
the shift in the styles of arts management, but there have been suggestive studies of the
analogous processes that are occurring in the creative leadership of symphony orchestras. As
late as 1950, virtually all of the major orchestras of the world had a distinct "sound" that
distinguished each of them from all other orchestras. Now the major orchestras are indistinguishable from each other to all but the most practiced ear. According to knowledgeable
commentators, the primary reason for this change is that orchestras that were once molded
by a single strong conductor over a number of years now have to be able to shift their sound
on demand to fit the expectations of a series of itinerant guest conductors so that a more
nearly uniform international orchestral sound has emerged. These processes are described by
Robert Faulkner, "Orchestra Interaction: Communication and Authority in an Artistic Organization," in Jack Kamerman and Rosanne Martorella, op. cit., 71-83; Jack Kamerman,
"The Rationalization of Symphony Orchestra Conductors' Interpretive Style," in Jack Kamerman and Rosanne Martorella, op. cit., 161-181.
8
Tensions of Mission in American
Art Museums
VERA L. ZOLBERG
The conflict between elitism and populism is a perennial feature of American art museums. Proponents of populism, or the democratization of access to the fine arts for the many, identify the public education function of
art museums as their most important role. Elitists, on the other hand, consider collecting, preserving, and studying art works to be the museum's
central purpose. Yet public education has been claimed as a basic function
by American art museums since their founding. Almost all explicitly assume this obligation in their charters, reiterate the goal in public statements, and most have actually undertaken activities that they defined as
educational. Nevertheless, until recently very few have systematically pursued this aim if it meant sacrificing the others. This essay looks at why
museum people talk so much about their responsibility to a public about
whom they remain deeply ambivalent. To understand the nature of this
ambivalence it is not enough to recognize that art museums have other
interests, though this is central to understanding the gap between the stated
purpose and its realization. Neither is it sufficient to explain the outcomes
in terms of intentions, real or imputed to important actors. Rather, it is
important to examine the American art museum both as a unique institution and in the broader, changing societal context in which it has arisen
and with which it interacts.
In countries such as the United States reformers consider it vital to enlarge access to cultural "goods" such as literacy, knowledge of all sorts,
and appreciation of previously inaccessible forms of art. Rather than confine culture to an ascriptively based membership, they would make it an
achievable right, potentially for everyone. In this light, as with schools, art
museums are expected to expand the cultural horizons of previously excluded groups, "improving" taste even for those not to the manor born,
Reprinted from Social Forces 63 (December 1984). "American Art Museum: Sanctuary or
Free-for-AII" by Vera [.. Zolberg. Copyright
by The University of North Carolina Press.
Tensions of Mission in American Art Museums
185
and promoting moral uplift for those whose previous cultural experience
was perceived as either grossly commercial or merely quaintly folkloric.
They are expected to permit individuals to gain in enlightenment and become "civilized" while society, for its part, gains a reinforced cultural consensus particularly important in modern heterogeneous systems.1 These aims,
altruistic at one level, have been interpreted in a more critical manner, one
arguing that certain groups monopolize the definitions, valuations, and access to certain symbolic products in their own interest, defining the culture
of outgroups as parochial, insignificant, or ignoble.2 Such an interpretation
lends itself to an analysis suggesting that access to and understanding of
what is socially defined as high culture are doled out in doses sufficient
only to create respect for the symbolic goods which dominant status groups
control. The result is to inculcate widespread respect for fine art, but little
comprehension of it, thereby reinforcing the reliance of the uninitiated on
those apparently more adept. To the extent that people acknowledge their
own lack of accomplishment, they are made accomplices in their selfdefinition as inferior, and the cultural distinctions enhancing social inequality are legitimated.3 In these terms, rather than social integration, the
result of anything short of complete democratization is the maintenance of
hegemony.4
Rather than attempt to adjudicate between these interpretations, either
of which could plausibly be imposed on available data, I have chosen to
focus on a middle-range level of analysis, with particular emphasis on the
components of art museums that are most germane to the elitist-populist
debate. To this end, I start by looking at the social uses of the art museum's focal concern, art works themselves; second, I examine the structural modelsand antimodelson which art museums are based, and which
continue to orient their current structure; third, in order to judge the relative importance of their changing priorities I examine the internal stratification of their personnel, with attention to their educational staff; and
fourth, the extent to which their public education policies are internally
generated or chiefly reactions to external forces. In concluding, I will relate
the character of art museums as formed by these components to the changing meanings of elitism and populism in the context of changing aesthetic
categories.
ARTWORKS: STATUS SYMBOLS IN ORGANIZATIONAL CONFLICT
Works of art have long been luxury commodities, valued for their rarity,
association with nobility, foreign cachet, and romantic genius. These attributes, extrinsic to the works' aesthetic substance, have been said to create
an aura, contact with which, through ownership or appreciation, provides
symbolic legitimation for high social status.5 The extra-aesthetic character
of art is no new discovery, having been variously analyzed since at least
Veblen by Marxian and non-Marxian thinkers alike.6
186
As long as art works were visible mainly through religious or civic display, or owned qua art only by the few, they could serve to separate elites
from others. But with increasing availability through mechanical reproduction, public display in museums, and education, they risk losing their distinctiveness as status indicators. It would not be surprising, therefore, to
find that those who have had access to them through inheritance or early
enculturation, or who have attained such access only with difficulty, might
greet their mass diffusion with some reluctance.
In countries such as the United States, however, the idea that wide diffusion is necessary for full democratization, national integration, or as a
right of full membership in society has come to be applied to fine art as
well as to other "goods." In the case of the fine arts, the institution most
clearly assigned a role to achieve this aim is the public art museum. More
than other cultural institutions, such as symphony orchestras or opera
companies, but much like public libraries and schools, it came to be the
most prominent target of those promoting the democratization of culture.
American art museums are complex, multipurpose organizations and,
typical of such organizations, in response to pressures from within and
without, they have emphasized one goal over another at various times in
their history. 7 They have been creatures of their trustees, elite institutions
with conservatorial goals, selecting, preserving and displaying art works as
monuments to their tastes. These are the reasons they were founded, though
not the only reasons, nor are these ideas uncritically accepted today. Curators seek autonomy from their boards to pursue research and acquire
works that they themselves consider important; dealers and collectors try
to influence aesthetic choices; artists seek entry for their works; public
groups demand a say in policy decisions; national museum organizations
criticize the stodginess of trustees. The dissatisfaction that these demands
reveal represents both internal dilemmas and the changing environmental
pressures that impinge on art museums.
Dilemmas, as Blau and Scott suggest, are alternatives endemic in organizations which provide "a continual source of change in the system."8
For art museums, the chief dilemma is between adhering to what are
claimed to be disinterested consummatory aesthetic values on the one hand
and on the other effectively providing service to society at large. In response to the intensity of demands for public service, therefore, museums
launch programs of education and outreach. But whether they succeed or
fail, they create new problems and provoke new demands.
To meet them, however, museums run the risk of being accused of allowing fine art to degenerate into a "mere" commodity, or something akin
to commercial entertainment. On the one hand, art museums have an interest in providing sanctuary for study or quiet appreciation; on the other,
they are impelled to provide service to a broad public whose very presence
jeopardizes this goal. The background for understanding this dilemma will
be reviewed in the following examination of the structural models that
contributed to the making of public art museums. 9
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STRUCTURAL PROTOTYPES OF ART MUSEUMS AND THEIR

IMPLEMENTATION
Art museums as we know them did not spring fully formed into existence
but are institutions based on a number of earlier kinds of display structures. Some of these were sacred, such as churches which exhibited miraculous relics, paintings, and statues of saints and biblical figures in order to
inculcate parishioners with religious beliefs. Others included royal palaces
filled with paintings, statuary, and tapestries, testifying to their owners'
legitimacy and taste, and intended to impress courtiers and foreign dignitaries. Similar to and emulating palaces were the collections of the wealthy,
nobles or commoners, of treasures, curiosities, art works, antiques, or scientifically interesting objects for their own and their invited guests' delectation. At less exalted levels, popular shows and fairs provided entertainment, either live or in the form of objects having to do with historical
events, natural wonders, or freaks, for a paying public as essentially commercial ventures. To a lesser or greater degree and in varying proportions,
most of these displays were supposed to provide moral uplift, education,
and scholarship, as well as entertainment.10 To the extent that these forms
were models for museums, however, they endowed them with inherent
contradictions: whether to be palaces for the few or churches for the many;
to be institutes for scholarly curiosity or fairs for passive spectators; to
cater for the leisure of the elite or entertain the general public.
In modern times museums were created as a form drawing on aspects
of all these models but in sharp contrast to some of their features. Differentiating themselves from commercial entertainment, they claimed a disinterested, high cultural project as their raison d'etre. While other types of
museums followed the related scholarly disciplines of history, natural science, and technology, gaining legitimacy from developments in the interlinked growth of university scholarship and professional specialization,11
art museums based their rationale on connoisseurship and art history. This
differentiation did not happen purely automatically, nor only because of
the inner dynamic of the disciplines that came to encompass them. In great
part it occurred because of the desire of wealthy elites, with the concurrence and sometimes pressure of artists, scholars, and cultural entrepreneurs (some of whom were also wealthy), to create a culture for themselves untroubled by lower income groups and distinct from parochial
religious aims or purely commercial enterprise.12
Although all museums followed this pattern, however, there were important differences in their orientations toward the general public. European museums, as under anciens regimes, took the course of serving as
national monuments, providing scholarly and artistic patronage and edification for high status group members, and used both direct and indirect
means, such as restricted hours, to discourage working people from attending. They were the reverse of purely commercial enterprises, where
anyone was welcome for a fee. Though museums aspired to or claimed a
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high degree of seriousness, however, until the late nineteenth century their
exhibits were not necessarily different in kind from displays at some of the
more popular events, which were just as likely to attract "people of quality" as the general public.13
Because art collecting and patronage were viewed as private pleasures
and hobbies to which the public should not be constrained to contribute,14
not until the second half of the nineteenth century did the idea that government support of cultural institutions was a legitimate way to promote
moral uplift for the citizenry take hold. In the United States it had to
overcome the connection of the fine arts with luxury, impracticality, and
aristocratic degeneracy. The arts had to be made acceptable to American
democracy, where criteria of "condition," hierarchically differentiating citizensexcept for blacks, both as slaves and, later, in Jim Crow legislationhad no legitimacy in law.15 Instead of being defined as the natural
appurtenance of an aristocracy, the arts had to become an acquired taste
whose achievement by everyone ought to be fostered.
The American situation was complicated by increasing immigration which,
from the mid-nineteenth century on, was creating a level of heterogeneity
viewed with alarm not only by groups in direct competition for jobs but
by business interests who, while profiting from the enlarged labor pool,
feared deep societal cleavages based on culture, including language and
religion. On the other hand, beyond these concerns, high income groups
were also creating status distinctions to establish and reinforce their own
social standing. To this end, among the means they adopted was the promotion of the very kind of art that had been considered inappropriate to
egalitarianism. Given the complexity of interests and motives associated
with these various groups, it is understandable that conflicting goals have
been assigned to cultural institutions.
The first priority for most cultural institutions in any case was simply to
get started and become established in a relatively inhospitable environment. Their founders, gifted amateurs, social climbers, hobbyists, or all of
these combined, acting as entrepreneurs in that they made use of existing
prototypical elements which they recombined in new ways, succeeded in
creating the distinctively American art museums. Until the middle of the
nineteenth century, even the fine arts had been profit-making operations.
Nevertheless, the idea that there was a type of art that could not appeal
to everyone, but that was worth supporting even if it did not return a
profit, slowly took root. Combining patriotism and moral uplift with didactic purposes, the founders applied them to "difficult" art and "serious"
music which, by their inaccessibility except to those willing to work and
train their faculties, surpassed mere entertainment and provided leisure activity that insulated them from undesirable contacts.16
Because of external pressure from popularizers and social reformers, as
well as from some inside the institutions, however, museum founders also
undertook to proselytize the unconvinced. But this project was not unambiguously undertaken as a primary goal in all art museums, the rhetoric of
189
democracy notwithstanding. As with symphony societies, opera companies, libraries, and schools, it did not necessarily mean bringing culture to
all the people. In art museums public initiation or education was likely to
be confined to creating art schools for professionals, classes for amateurs,
paid lectures for interested potential collectors and school teachers, libraries and study collections for scholars.
In this regard, Cesar Grana has perceptively distinguished between museums with an orientation to men of leisure based on class membership
and scholarly interests and those with a didactic purpose directed to a
larger public. In these terms he opposed the patron-oriented model of the
Boston Museum of Fine Arts to the public-oriented one of the Metropolitan Museum of Art. According to his analysis the Boston Museum was the
creation of a few major collectors and scholars with little concern for the
broader public. He argues that it differed fundamentally from a publicoriented museum, such as the Metropolitan Museum of Art, which was
committed to a didactic purpose.17 Supporting his argument, the centennial history of the Boston Museum of Fine Arts reveals that even when
support for opening it to a lower-status public came from one of its own
board members, the project was controversial and short-lived.18
Grana implies that the reasons for the differences between these types
of museums lies in the older, established character of Boston society, as
opposed to the more democratically oriented, status-striving, newer regional elites. Yet as I show below, a reexamination of these museums'
development casts doubts on Grana's typology. I shall argue instead that,
in fact, public service was a secondary goal serving instrumental purposes
for all art museums. Regardless of their rhetoric, much of it persuasive,
and the startlingly high attendance figures that they published, their primary goals lay elsewhere.19
For the purposes of this analysis it is worthwhile to consider an art
museum reputed to be even more public-oriented than the Metropolitan
Museum of Art and located in an even newer region, the Art Institute of
Chicago. Founded nearly a decade later than the two eastern museums, in
contrast to Boston the Art Institute leadership deliberately adopted policies
that would increase the number of visitors, both casual and committed.
Unlike the Boston Museum, which located itself at the outskirts of the city,
its leaders purposefully chose a location in the center of public activity,
even if it meant paying high rent. The Art Institute kept long hours virtually every day and an evening each week to enhance its convenience;
published general, informative documents and periodicals; scheduled frequently changing exhibitions of all types, ranging from high art to interior
decorating; established a library and art school; held concerts and receptions; provided space for clubs and artists, architects, and craftsmen; and
sponsored public lectures. All this activity led one trustee to say, "We have
everything but a dog fight here," a statement which is cited with pride by
later Institute personnel.20
The most visible evidence of a public commitment that they offered was
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Table 8.1 Visits to Leading Public Art Museums: 1900
City
Museum Visits
Population
No. of Visits as
Percentage
of City's
Population
Chicago
New York
Boston
(AIC) 861,000
(Met) 703,000
(MFA) 224,000
1,698,575
3,437,202
560,892
51%
20
40
SOURCES: Lawrence Vail Coleman, The Museum in America: A Critical Study, 3 vols. (Washington, D.C.: American Association of Museums, 1939); Richard B. Morris, ed., Encyclopedia of
American History, Bicentennial Edition. (New York: Harper & Row, 1976), p. 659; Eugenia R.
Whitridge, "Art in Chicago: The Structure of the Art World in a Metropolitan Community" (Chicago, 111.: University of Chicago, 1946).
attendance figures. Compared to other museums these were indeed impressive. In the late 1880s the Art Institute could already boast of nearly half
a million visitors, and by the turn of the century, 861,000. The Metropolitan had only 703,000, and even the American Museum of Natural History, a popular didactic institution that had over a half million visitors in
1907, could not compete with the Art Institute, then approaching one million. In contrast, the Boston Museum attracted only 224,000 in 1900.21
Yet these claims notwithstanding, the differences between Boston's
"patron-oriented" museum and other cities' "public-oriented" ones become questionable once we place them in the context of the population
base of each city, as Table 8.1 indicates. Clearly, by comparison with the
Art Institute of Chicago, Boston's Museum was as exclusive as Grana contends. On the other hand, it would appear, paradoxically, that it is the
Metropolitan Museum of Art that failed in its public mission, whereas
Boston lived up to it far more than its leaders may have intended. Such a
conclusion, however, would be premature for several reasons. First, the
administrative boundaries of these cities hamper our ability to make direct
comparisons. Whereas New York had recently incorporated culturally wellendowed Brooklyn, Boston was, and remains, administratively distinct from
Cambridge, with its lively cultural life. Second, the numbers of visits on
which these figures are based are not broken down by "repeat" as opposed
to "one-time" visitors, so that their significance is unclear. Third, we cannot judge the social level of visitors from numbers alone. Most important,
the quality of attendance data in general is highly suspect, since they are
generated by the museums themselves, rather than by an external, objective body.
Despite the shortage of objective measures, Grana's typology is not entirely without foundation. Quite clearly there are differences among these
museums that stem from the conditions under which they were founded
and which affected them long afterward. The most salient of these conditions, 1 would argue, arc the size and quality of their initial collection, the
density of the existing cultural matrix in their city, and the degree to which
191
they were dependent on the public coffers. In this regard, Boston's museum, the patron-oriented institution par excellence, started with fairly
substantial holdings, having had the use of existing collections of the Boston Athenaeum and of a large number of established collectors, whereas
both the Metropolitan and the Art Institute began with sparse art resources, combined in the latter case with very few established cultural institutions. One consequence of these differences is that Boston's elite was
able to establish and enlarge their museum without counting on funds solicited from their city to the same degree that both the Metropolitan Museum and the Art Institute did. Thus even though Boston's museum founders made the mayor of the city a board member, a practice common in
most museums, it was of far greater importance to them to reinforce ties
with Harvard University, whose alumni provided their most important
personnel, both trustees and curators, than with the despised political machine that was gaining power. The Metropolitan Museum of Art and the
Art Institute of Chicago were obliged to use every means possible in order
to obtain municipal support. Citing their commitment to educational aims,
the Metropolitan's founders did not disdain to deal even with Boss Tweed
to gain his support for building and supplying part of the Museum's operating expenses. Attendance figures were an important device to gain this
support. Once the city's commitment was assured, and as the collection
increased, however, their enthusiasm for the public waned.22
Despite the vastly increased attendance at all these museums today, when
we examine the internal stratification of museum personnel, as we shall
now see, the relative importance assigned to public education has changed
less than their numbers suggest.
HIERARCHY OF MUSEUM FUNCTIONS
An art museum's priorities are revealed not only by its constitution and
attendance figureswhich are, in any case, indicative of over-use by higher
status groups and extreme under-use by lowerbut also by the changing
internal stratification in its division of labor. At their founding, trustees
were at the top as providers of funds and facilitators of contacts with
important external actors who could create a political and budgetary environment favorable to their survival. In general, unless the curatorial
functions were performed by trustees themselves (not uncommon in many
museums), curators were clearly their employees, often learning their craft
on the job. Moreover, as DiMaggio has shown, a substantial cadre of curators were "exotic" in origin, coming from Europe and even as far afield
as Japan, with no base of support except for their esoteric knowledge and
their patron, generally a trustee.23 For practical purposes, therefore, trustees could treat museums as their private fiefs and personal monuments,
paying lip service to a public mission without committing much effort to
its accomplishment.
192
Trustee dominance began to weaken somewhat in the twentieth century

as the university discipline of art history and professional organizations
connected with museum work gained authority. In the process, museum
workers became somewhat autonomous of trustees. Alert to new opportunities emerging from changes in tax laws, and with the advent of some
public funding under New Deal programs, as well as the growing sophistication of trustees themselves, dynamic museum directors could reorient
their institutions in more serious directions, transforming collections from
merely fashionable gifts to scholarly purposes,24 replacing at retirement the
dilettantish curators with academically certified experts. The newer curators, themselves better educated, often solidly tenured, became freer to parlay
their expertise to their own advantage because of the growing number of
job opportunities as new museums were founded and as the art market
expanded. By developing external support systems, such as professional
associations, they were able to gain more control over purchase funds with
fewer strings attached and could more effectively manipulate the choices
of art-collecting trustees.25
As far as public education was concerned, however, scholarly curators
were no more interested than men of wealth had been, and perhaps even
less. In fact, on the whole, despite Grana's notion, there was not a great
deal more concern among public-oriented museums to initiate any but highly
motivated visitors into the intricacies of connoisseurship. This becomes
clear if we consider that a genuine concern with educational outreach should
be accompanied by a commitment of a substantial part of its budget, and
the assignment of professional personnel to those pursuits. Instead we find
that educational functions were the least likely to be supported with internally generated funds, specialized personnel, and, until very recently, great
effort.
Museum education is held by some to be an important curatorial function, one which should be taken seriously and not, as Joshua Taylor, late
Director of the National Collection of Fine Arts of the Smithsonian Institution, argued, be "fobbed off "on an underpaid educational staff. Yet just
as "the university has not bridged the gap between top professors and the
community," the museum does even less well with respect to curators,
whose proper goal should be the breakdown of insularity between university scholars and museum staff in order to provide an "elite experience for
everyone."26 But the fact is that the bulk of educational programs is carried out by a few staff members with the aid of volunteers almost everywhere.
Although as students future curators and educators often start out together, usually in art history, their career lines diverge when the successful
Ph.D. (earlier, the M.A.) aspires to a curatorship or university appointment, whereas the Master's (earlier, Bachelor's) "drop-out" becomes a recruit for museum education. Whereas curators are expected to be "objectoriented," museum educators are characterized as "people-oriented," with
the chief function of being "popularizers." 27 But they are rarely given the
193
means, support, or rewards that would validate the importance of their

work for the museums. They are paid less than curators, and their major
activity is organizing volunteers who do much of the educational work,
especially for children. That curators have gradually excluded volunteers,
except from clerical tasks, is a sign of their strong professional standing,
whereas the continuing presence of volunteers in museum education shows
what a long way educators must go before they approach that level of
prestige. It is not surprising, therefore, that educators are frequently frustrated and consider their position as a temporary stop on the road to
something else, perhaps to becoming director of a small museum.28
In looking at what educators actually do, we find that aside from their
preferred tasks of preparing educational exhibits and written materials,
they have little enthusiasm for their other activities. In most museums they
provide little more than a perfunctory orientation for volunteers. At best,
even at the Art Institute, with its strong commitment to public instruction,
and a department headed by a highly qualified person, most education
staff members are still trained on the job, in turn training the volunteers.
At the Art Institute, unlike many others, this is done with care, the educational staff exercising close supervision over them. Yet although educational staff care a great deal about providing "quality" service, they despair of doing so effectively for the groups that might benefit the most. In
fact, in Chicago, the inner-city schools, whose children need the most
preparation, are the least organized. Though geographically more proximate to the museum, they have fewer lines of communication to educational services than the prosperous suburban schools. It is not surprising,
therefore, that education people come to view their task as mere "public
relations." As one staff member put it, "the problem is that, unlike the
Symphony Orchestra which claims to provide public service, the museum
must actually do it." The Orchestra, she pointed out, has the "unique
advantage of being able to limit admissions to the audiences which can
buy tickets, and the limits of seating in the hall." Her conclusion was that
much of the instruction is wasted on people "who are uninterested unless
their family background prepares them to receive it." Thus the public service of the art museum reflects precisely the status inequalities of the society in which it is embedded.29
The reasons for this stem from the fact that museums subdivide their
public, measuring what each segment receives in both quantity and quality
of instruction according to what each is likely to offer in return. For prospective donors, curators and even the director engage in pure courtship
and intensive connoisseur training on a one-to-one basis or through collectors' clubs, in hope of influencing their taste, and to persuade them to
donate works and money to the institution. At the other extreme is prepackaged "mass" education for large groups of children, at best superficial
and often amounting to no more than a day off from school.
The low status of the art education profession, the prevalence of unpaid
volunteers, a largely female staff, a predominantly child client and, as we
194
see below, a small financial outlay testify to the low priority assigned to
this activity. Nevertheless, it cannot be lightly dismissed, since for large
parts of the community who are not in touch with museum culture through
school or other organizational ties, the art museum may seem an esoteric
and unappealing place.30 Since they are aware of no compelling vocational
reason, they are not likely to come into the museum's range voluntarily.
The average museum-goer, after all, receives no observable benefits comparable to those for a major donor. Unlike educational institutions that
provide their clientele with a certificate, a symbol that they consider useful
in their search for employment, the symbolic rewards of museum education are too subtle to be perceived by most of nonelite public. 31 It is nonetheless in the interest of museums to brandish and even exaggerate the
numbers of visitors they attract as they lobby for governmental support.32
THE INCENTIVE OF PUBLIC FUNDING
Before the 1930s museum instruction was limited for the most part to
small groups, mostly of adults, or to lectures requiring payment of admission fees. It took federal funding under New Deal programs to pay unemployed artists who provided instruction for both visiting teachers and
school children, and to create "outreach" programs in poor neighborhoods in some cities.33 More recently, under the federal poverty program,
outreach efforts to culturally deprived groups were revived. When it comes
to allocating their own funds, however, museums are niggardly, devoting
only 13 percent of budget to museum instruction.34 Even the Art Institute
of Chicago, in setting $46 million as the goal for its Centennial Fund,
earmarked at the most only 8 percent of the total for instructional purposes, the bulk of which involved construction costs.35 It is not surprising,
therefore, that populists have regularly denounced the leading art museums for failing to "establish contact with the general community," for
allowing the "upper layer of cultured residents" to monopolize educational services and arrogate to themselves the right to appreciate the arts,
for becoming "hypnotized by the charms of collecting and scholarship."36
Yet not all museum personnel see eye to eye on this question. The cleavage among professional "museum people" was posed in startlingly clear
terms in the early 1970s, when in the course of a public symposium, two
museum directors debated the "crisis" of the museum before a lay audience. The director of a university-connected (public) museum asserted,
I find it very difficult to be a populist . . . I slightly freeze up. The real crises of
what face us are not museums at all, but education. More and more are being
worse and worse educated . . . Processes of education shouldn't go on in the
museum; in fact, the entry of people could be done best after written or oral general examination.
195
This statement met with applause and cheers from the audience. In response, the director of a major New York Museum of contemporary art
(private) asked, "But after they'd paid their admission?"37
The question of who pays for the museum is no minor matter, because
as we have seen, it is largely as a result of governmental support and prodding that art museums have come to reach out to new publics. They benefit not only from direct governmental subsidies but indirectly from tax
incentives for donations and real estate exemptions, justified by their nonprofit, public-service status. Despite their penchant for allocating the fewest possible of their own resources to public education, their increasing
reliance on direct public funding and their concern with maintaining an
environment hospitable both to their altruistic goals of supplying a "merit
good"38 for society and to the pecuniary enhancement of their trustees'
art dealings impel museums to use many techniques for reaching a far
larger segment of the population than in the past. Among these techniques
the oldest is the "blockbuster" show, providing spectacular though often
superficial entertainment, with the disadvantage of creating disruption and
crowding. In order to overcome these problems other devices to disseminate museum culture yet insulate the already committed sectors of the public are being used. Among these is the sporadic revival of the satellite museum, in the form of branches set up in neighborhoods away from the
main premises. Another means is television programs for a scattershot approach to museum instruction with a potentially wide audience. Televising
art has the further appeal of high visibility which attracts corporate sponsorship as well as government subsidy.
Whether these mass approaches succeed in providing an "elite experience for everyone," as Joshua Taylor hoped, or merely represent a stopgap
measure against criticism, the more successful they are in raising public
interest in the arts, the greater the likelihood that future museum-goers
will be better prepared to enter the institutions without having to pass an
examination.
CONCLUSIONS
The ambiguities inherent in art museum educational policies are embedded

in the character of the institution, the diverse motives of the groups that
created and maintained museums, and the demands of outsiders who have
a stake in the institution's policies. As with educational institutions, so art
museums are victims of their own success. Even though their past efforts
to gain a large public indicate less commitment to democratization than
they claimed, they managed to enlarge it to a degree that strains their
facilities. The expansion of their public, both in situ and at a distance as
"appreciators," belies the criticisms by education-oriented observers. At
the same time that this outcome suggests the growth of a shared cultural
196
consensus, however, since in a modern society their public is not homogeneous but disposes of diverse levels of ability to manipulate the symbols
of high aesthetic culture, the status claims of groups composing it may be
reinforced. Thus the growing sophistication of nonelite publics requires a
better quality of display, more scholarly selection of works, and a higher
standard of public education. This public decries the amateurishness of the
inheritors of wealth and their sycophants as much as they do the obstreperousness of a mass public. In this perspective, the sophisticated public is
claiming legitimacy for its own distinction as a status group in relation on
the one hand to dominant elites and on the other to the unsophisticated
public, new to the museum world.
At the same time, however, we must remember that aesthetic culture
itself is not reducible to reified categories but is constantly being redefined.
Art now may include academic, craft, folk, pop, or mass cultural products.
The redefinition of these products as art involves status groups composed
of collectors, patrons, donors, and intermediaries such as dealers, experts,
and critics, as well as creators, such as painters or composers. And art
museums and their personnel, no less than other cultural institutions, are
involved in the process of changing the definitions. One of the consequences is that even the curatorial goals have become more democratic as
the museums welcome into their halls works that were not considered art
until they were granted entry: African "primitive" works, folk art, comic
strips, and even industrial artifacts. The outcomes are a change in the nature of the experience they provide, as well as a change in the characteristics and expectations of their public.
Thus the real world of art museums is characterized by the ongoing
interplay of forces, both internal and external, that resist reductive conclusions, whether based on functional systemics or hegemonic analysis. As
with other organizations, empirical reality suggests that the dilemmas created by the competing goals built into their very structure promote modifications with consequences unforeseen by their initiators.
NOTES
1. This is an outlook that pervades most of the structural-functional analysis of Talcott
Parsons, as indicated, for example, in his Structure and Process in Modern Societies (Glencoe,
111.: The Free Press, 1960).
2. Howard S. Becker, Art Worlds (Berkeley, Calif.: University of California Press, 1982).
3. Pierre Bourdieu, La Distinction: Critique Sociale du Jugement (Paris: Editions de Minuit, 1979). [An English language edition is available as Distinction (Cambridge, Mass.: Harvard University Press, 1984).]
4. Implicit in Bourdieu's outlook is the idea of hegemonic control over dominated status
groups in society. See, for example, his L 'Amour de I'Art: Les Musees d'Art Europeens et
leur Public (Paris: Editions de Minuit, 1966). For a far more radical and heavy-handed analysis, see Nicos Hadjinicolaou, Art History and Class Struggle (London: Pluto Press, 1978).
5. The analysis of the aura of art and the ambiguities of its potential loss in the world of
modern technology are discussed in Walter Benjamin's famous essay, "The Work of Art in
197
the Age of Mechanical Reproduction," published in Illuminations (New York: Schocken,

1969). The subject is further probed in Bourdieu, 1966, op. cit.
6. Frederick Antal, Florentine Painting and Its Social Background (London: Routledge &
Kegan Paul, 1948); Benjamin, op. cit.; Bourdieu, 1966, op. cit.; Herbert J. Gans, Popular
Culture and High Culture (New York: Basic Books, 1974); Arnold Hauser, The Social History of Art, 2 vols. (New York: Alfred A. Knopf, 1951); Pitirim Sorokin, Social and Cultural
Dynamics (New York: American Book Company, 1937); Thorstein Veblen, The Theory of
the Leisure Class (New York: Modern Library, 1931); Max Weber, The Rational and Social
Foundations of Music, trans. Don Martindale et al. (Carbondale, 111.: Southern Illinois University Press, 1958).
7. These themes are treated by the present author in "The Art Institute of Chicago: The
Sociology of a Cultural Organization" (Ph.D. diss., University of Chicago, 1974), and more
centrally in "Conflicting Visions in American Art Museums," Theory and Society 10 (1981):
103-125.
8. Peter M. Blau and W. Richard Scott, Formal Organizations: A Comparative Approach
(San Francisco, Calif.: Chandler Publishing Company, 1962), 222.
9. Museums, as the analysis reveals, are a prime example for the paradigm suggested by
Charles Perrow in his article, "The Analysis of Goals in Complex Organizations," American
Sociological Review 26 (1961): 854-866.
10. For a fascinating and detailed social history of this phenomenon, see Richard A. Altick, The Shows of London (Cambridge, Mass.: Harvard University Press, 1978).
11. See Zolberg, 1981, op. cit., and Magali Sarfatti Larson, The Rise of Professionalism:
A Sociological Analysis (Berkeley, Calif.: University of California Press, 1977).
12. An early but neglected work dealing with this conflict is Hugh D. Duncan's Culture
and Democracy (New York: Bedminster Press, 1955).
13. On the impact of the French Academy on the cultural policies of a number of European countries, see Andre Corvisier's Arts et Societes dans I'Europe du XVIIe Siecle (Paris:
Presses Universitaires de France, 1978). For the commercial side, see Altick, op. cit.
14. Karl E. Meyer, The Art Museum: Power, Money, Ethics (A Twentieth Century Fund
Report) (New York: William Morrow, 1979); Janet Minihan, The Nationalization of Culture: The Development of State Subsidies to the Arts in Great Britain (New York: New York
University Press, 1977).
15. Neil Harris, The Artist in American Society: The Formative Years, 1770-1860 (New
York: Braziller, 1966); Lillian B. Miller, Patrons and Patriotism: The Encouragement of the
Fine Arts in the United States, 1790-1860 (Chicago, 111.: University of Chicago Press, 1966).
16. This ambiguity is brought out both in Zolberg, 1974, op. cit., and with particular
cogency by Paul DiMaggio in "Elitists and Populists: Politics for Art's Sake," Working Papers for a New Society (September-October 1978); "Cultural Entrepreneurship in Nineteenth-Century Boston (Chapter 2, this volume); and "Cultural Entrepreneurship in Nineteenth-Century Boston, Part II: The Classification and Framing of American Art," in Media,
Culture, and Society 4 (1982): 303-322.
17. Cesar Grana, "The Private Lives of Public Museums: Can Art Be Democratic?" in
Fact and Symbol: Essays in the Sociology of Art and Literature (New York: Oxford University Press, 1971).
18. Walter Muir Whitehill, Museum of Fine Arts, Boston: A Centennial History, 1 vols.
(Cambridge, Mass.: Harvard University Press, 1970), Vol. 1, 298-299.
19. Calvin Tomkins, Merchants and Masterpieces: The Story of the Metropolitan Museum
of Art (New York: E. P. Dutton, 1973).
20. Eugenia R. Whitridge, "Art in Chicago: The Structure of the Art World in a Metropolitan Community" (Chicago, 111.: Ph.D. diss., University of Chicago, 1946), 121; and John
Maxon, The Art Institute of Chicago (New York: Harry N. Abrams, 1970).
21. Whitridge, op. cit., 113 and 121.
22. This is apparent whether viewed from the outside (Zolberg, 1974, op. cit.; Grana, op.
cit.) or as inadvertently revealed by one of its own high officials (Maxon, op. cit.).
23. DiMaggio, 1982, op. cit.
198
24. This was the case not only in art museums (Zolberg, 1974, op. cit.) but in other types
of museums as well, as shown by Geoffrey Hellman, Bankers, Bones and Beetles: The First
Century of the American Museum of Natural History (New York: The Natural History Press,
1968).
25. Zolberg, 1981, op. cit.
26. Joshua Taylor, speaking at a meeting of the College Art Association in 1973, illustrated the built-in conflict between democratic goals and the concern of traditional publics
for museum artworks.
27. Zolberg, 1974, op. cit. Bourdieu goes beyond the museum and fine arts alone to analyze the creation of valued meaning with respect to other forms of culture. See, for example,
his "La Production de la Croyance: Contribution a une Economic des Biens Symboliques,"
in Actes de la Recherche en Sciences Sociales 13 (1977): 3-43.
28. Richard Muhlberger reported these results of a survey to the College Art Association
meeting in New York in 1973. A detailed account of the debate on this subject is found in
Zolberg, 1974, op. cit.
29. Zolberg, 1974, op. cit., p. 169.
30. Robert Coles provides poignant evidence on this subject in his contribution, "The Art
Museum and the Pressures of Society," in Sherman Lee, ed., On Understanding Art Museums
(Englewood Cliffs, N.J.: Prentice-Hall, 1974).
31. Bourdieu, 1977, op. cit.
32. This is a recurrent concern, as shown in publications of the American Association of
Museums, especially in The Belmont Report (Washington, D.C., 1965) and their Directory
of the United States and Canada (Washington, D.C., 1965). Not surprisingly, these issues
were even more strongly emphasized in the years when the government was launching programs to subsidize museums. That public agencies arc aware of the necessity for objective
assessments is equally clear from the support by the National Endowment for the Arts of the
indispensable study by Paul DiMaggio, Michael Useem, and Paula Brown, Audience Studies
of the Performing Arts and Museums: A Critical Review (Washington, D.C.: National Endowment for the Arts, 1978).
33. Lawrence Vail Coleman, The Museum in America: A Critical Study, 3 vols. (Washington, D.C.: American Association of Museums, 1939).
34. This is the estimate provided by Muhlberger, op. cit.
35. Zolberg, 1974, op. cit., 169.
36. Theodore Low, The Museum as a Social Instrument (New York: Metropolitan Museum of Art, 1942), is the source of these quotations. As recently as 1979, Karl Meyer, (op.
cit.) found similar outlooks to be common.
37. Zolberg, 1974, op. cit., Chapter 6.
(New York: Cambridge University Press, 1978).
9
The Elusive Promise of
Management Cooperation in
the Performing Arts
MARC R. FREEDMAN
Management cooperation among nonprofit performing-arts organizations

is an intuitively attractive notion capable of eliciting wide rhetorical support from these organizations and their funders. This is not surprising:
Nonprofit arts organizations are unfettered by antitrust regulations, are
dedicated by charter to the public interest, and often labor under severe
financial constraints. Compared to the for-profit sector, then, the barriers
to effective cooperation among nonprofits seem quite low, and the potential payoffs high.
The surprise is that despite such strong attractiveness in theory, few successful instances of cooperation by performing-arts organizations can be
found. A wide disparity exists between cooperative rhetoric and cooperation's record.
This chapter seeks to illuminate this disparity, and to do so through
focusing on one of the most prominent, and most representative, incarnations of cooperation: the attempt by performing-arts centers to provide
central management services to their resident groups.1 The legacy of this
examination is a robust appreciation of the strategic, economic, and political factors that impede, and commonly cripple, well-intentioned cooperative initiatives.
The chapter proceeds in three parts. The initial section chronicles past
and present attempts at centralized management. It is followed by an analysis
of this experience. The concluding section looks at some lessons distilled
For encouragement, ideas and commentary, I am indebted to Paul DiMaggio and Patricia J.
Doyle. I would also like to thank Michael Hoffmann, Carol Thomson, Michael Bailin, Natalie
Jaffe, Alex Hoffinger, and Lisa Mannelia for their valuable assistance. Research and institutional support from Yale University's Program on Non-Profit Organizations, the Cleveland
Foundation, and the Yale School of Organization and Management is gratefully acknowledged.
200
from centralized management, applying them more broadly to suggest alternative avenues for future collaboration and to advance an assessment
of cooperation's prospects as a strategy for improved management in the
performing arts.
THE ORDEAL OF CENTRALIZED MANAGEMENT
Attempts at centralization of basic management functions in the performing arts have proven difficult to implement and sustain. At the outset,
however, this outcome is well masked by the seemingly good sense of cooperation. The candidates for centralized servicessymphonies, dance
companies, theatre groups, and other nonprofit arts organizationgenerally share a performing-arts center and are required to execute the same
basic administrative functions. These tasks, such as bookkeeping and accounting, marketing, box office operations, scheduling, and purchasing,
require staff time and attention. Pooling responsibility for such tasks is, in
theory at least, a means of saving money through achieving economies of
scale.
Performing-arts centers have been the most common vehicle for management cooperation. These centers are usually the sole point of intersection among the resident groups. Centers must perform the same management functions as their constituents. And they often appear unentangled
with the competitive ambitions of these groups. Consequently, performingarts centers have seemed the logical choice to provide combined services
to their member organizations.
Yet despite these apparent advantages, efforts at centralization have almost invariably resulted in frustration. Asked about appropriate instruments for encouraging collaboration between performing-arts centers and
resident groups, William Severns, recently retired administrator of the Music Center of Los Angeles County, suggested that "a long, black, buggy
whip and chair" should be mandatory equipment.2 His cynicism reflects
the viewpoint of many performing-arts center directors who, after identifying common ground with their constituents, have frequently found themselves thwarted in efforts to provide centralized services.
Severns' Music Center, currently home to the Los Angeles Philharmonic,
the Mark Taper Forum, the Los Angeles Master Chorale, and the Jeffrey
Ballet, opened its doors in 1964, offering a range of cooperative services,
including accounting, advertising, and box office operations. The resident
groups participated briefly, but the arrangement soon crumbled as these
groups withdrew.
More recently, the Music Center attempted to persuade residents to agree
on a single unit to handle all television contracts for performances at the
facility. The idea received initial endorsement, but when negotiations got
underway, disagreement among the parties made it impossible to close a
single contract. The effort was soon jettisoned.
The Elusive Promise of Management Cooperation in the Arts
201
Another attempt at centralized management was mounted at the Milwaukee Performing Arts Center, where, in the mid-1970s, Managing Director Archie Sarazin created the Performing Arts Advisory Service to manage
nonprofit resident groups. The Service managed the Milwaukee Ballet briefly,
and then disbanded.
Other, less ambitious efforts have fared no better. In Syracuse, New
York, for example, the Civic Center of Onondaga County has been unable
to institute even joint purchasing arrangements among constituents. This
should not be taken to mean that joint purchasing cannot work; however,
the Syracuse example does reveal how difficult even the most simple forms
of collaboration can be to introduce.
For every case in which collaborative management efforts have been tried
and failed, there are several in which cooperation has not left the ground.
New York's Lincoln Center is instructive in this regard. Powerful and established performing-arts companies, instrumental in establishing the Center, shaped its management structure and carefully restricted it from intervening in member group operations. The Metropolitan Opera, the New
York Philharmonic, and the New York City Ballet have retained their independence, even managing their own performing spaces within Lincoln
Center. Like the major residents of Los Angeles' Music Center, each of
these groups handles its own box office.
In contrast to the quick demise of cooperation in Los Angeles or the
congenital abstention of Lincoln Center, San Francisco's performing-arts
groups have pursued a course of evolutionary withdrawal from management sharing. The three major constituents of the San Francisco War Memorial complex were once thoroughly intertwined. The San Francisco Opera and the San Francisco Symphony shared a manager in the 1950s, and
the San Francisco Ballet was a division of the Opera. The arrangements
proved poorly suited to the growth and transformation of the companies
in the 1960s and 1970s and eventually dissolved. During the summer of
1983, the last vestige of cooperation was shed when the Opera and Ballet
decided to discontinue shared computer services. Both organizations had
achieved a level of activity, complexity, and specialization that justified
ownership of their own computer, and they moved to take advantage of
this opportunity for independence.
As the preceding overview suggests, the record of performing-arts centers in providing unified administrative services for their member organizations has been consistently bleak despite variation among centers in the
nature of their constituencies, the quality of their management, and the
historical trajectories of their local performing-arts worlds. The ubiquity
of failure in such varied sites suggests that the usual practice of blaming
the manager or local idiosyncracies when cooperative efforts founder is
misleading. Instead it is necessary to look for common elements in the
organizational and political environment of collaborative management plans.
For this purpose, two reasonably well-managed, but only partially effective, attempts to institute extensive administrative centralization, the At-
202
lanta Arts Alliance and the Kentucky Center for the Arts, warrant close
examination.
The Atlanta Arts Alliance represents the most durable and comprehensive attempt at centralized management in the performing arts. Because of
its age, the Alliance is often upheld as a model for collaboration of this
type. It was the product of a disaster, a tragic 1962 plane crash in Paris
that killed 122 prominent members of Atlanta's arts and cultural community. The principal purpose of the Alliance was to preserve the Atlanta
Symphony, the Atlanta College of Art, the High Museum, and the Alliance
Theatre through the difficult period following the crash. These organizations relinquished their status as independent nonprofit corporations and
joined together under the umbrella of the new Alliance.
The Alliance manages an arts center created as a memorial to the victims
of the crash, operates a united arts fund-raising campaign, and provides
accounting, payroll, recordkeeping, subscription, and box office services
for its member organizations, called "divisions." Alliance management approves all budgets for these divisions to ensure that they are balanced.
Measured against the backdrop of most collaborative management efforts, the Alliance is a shining success: It has certainly passed the test of
time, surviving for more than two full decades. Its history has not been an
entirely happy one for the divisions, however. In fact, the Alliance's durability may reflect, more than anything else, division managers' fears about
alienating private funders in a region where noncorporate private and public funds for the arts are scarce. Robert Woodruff, the Coca-Cola magnate
who has given over $30 million to the Alliance since its inception, is reputed to have made his sponsorship contingent upon the continuation of
merger among the member organizations. According to Alliance Executive
Vice President Beauchamp Carr, funders "who do not understand the arts,
and who believe them to be badly managed because they lose money each
year," have pressured the Alliance for continued centralization of management.3
The Alliance has performed credibly in raising funds and administering
the performing-arts center. But it has stumbled in providing central management services to the divisions. Charles Yates, who resigned as the Alliance's top administrator in 1984 after serving through the 1970s, was a
skillful fund-raiser who focused on development. At the same time, the
divisionsand their management requirementswere growing rapidly.
Between 1981 and 1984, for example, the total annual Alliance budget
grew from $12 to $20 million, a tribute to Yates' fund-raising success and
an indication of the divisions' increased size, complexity, and growing
management needs.
According to Thomas Bacchetti, vice president of the Alliance and managing director of the Atlanta Symphony, accounting services have been
"woefully inadequate . . . we don't get the information we need and we
pay a lot for it." 4 Andrew Witt, Managing Director for the Alliance The-
203
atre Company, agreed, complaining about the time lag involved in obtaining "simple" budgetary information.5 Such difficulties are perhaps inherent
in the attempt to manage organizations as diverse as a symphony and a
museum with 52-week-a-year schedules, a theatre company organized around
seasons, and an educational institution operating on the semester plan. But
they are consequential nonetheless. Of necessity, the residents have formed
shadow administrative structures that perform many of the same functions
as the Alliance. The strain in the Alliance, at least until recently, has been
considerable. In July 1983, Bacchetti predicted that the Alliance would
"spin apart due to the centrifugal motion of its members."6
In 1984, Don Gareis, a career Sears executive, was appointed president
of the Alliance. He began to address the organization's management difficulties, commissioning a long-range plan for the Alliance and convening a
management group consisting of managers from the four divisions. He has
also supplied each division with two personal computers to handle specialized information and to supplement the services provided through the
Alliance's mainframe.
The Alliance affords a study of centralized management imposed and
perpetuated from the outside and reveals the complexity of serving four
very different organizations at the same time. Although new leadership is
likely to alleviate some of the tensions emerging out of this arrangement,
it remains to be seen whether the complex and growing configuration of
arts organizations can continue to be managed effectively by a central unit.
If Atlanta's member organizations were forced together by necessity, the
Kentucky Center for the Arts has elected to exhort and entice its constituents to experiment with cooperative management. When the Center opened
in November 1983, it offered expertise in accounting, box office management, and program printing to its resident groups: the Louisville Orchestra, the Louisville Ballet, the Kentucky Opera Association, and the Louisville Children's Theater. It has been the Center's intention, as it matures,
to enlarge this menu of services, all of which are provided on a voluntary,
fee-paying basis. The Center's director, Marlow Burt, has attempted to
create strong incentives for members to participate, hiring expert financial
and computer personnel and implementing a sophisticated computer system.
Burt's program has had several factors operating in its favor. The Center
opened with a management team that for four years had been working as
a unit with participating groups in designing the center and its operating
systems. Louisville arts organizations have a long history of collaboration
in fund-raising, as evidenced by the Greater Louisville Fund for the Arts,
founded in the late 1940s. Perhaps most important, Burt, as director, has
earned the respect of the resident group managers and crafted an intelligent and flexible approach to cooperation.
Despite these advantages, only box office services have been voluntarily
accepted by the resident members, and implementation of these services
204
has been plagued with difficulties. Burt has been forced to pressure residents to use the program printed by the center, departing from the original
intention of offering services exclusively on a voluntary basis.
The Kentucky Center's experience underscores the difficulty of inspiring
resident groups to participate in centralizing their management functions,
as the Atlanta case illustrates the difficulty of imposing cooperation. In
different ways, both Louisville and Atlanta represent propitious settings
for implementing effective cooperative management. The following section
attempts to unravel why it is that neither has been, on balance, completely
successful.
THE ORGANIZATIONAL DYNAMICS OF CENTRALIZED

MANAGEMENT
The key to explaining the ordeal of cooperation is in understanding why

it is that performing-arts groups resist, refuse, and impede implementation
and continuation of centralization. This question is rendered more perplexing by the rhetorical enthusiasm for cooperation, not only among expected proponents like performing-arts center directors and private funders but among managers of performing-arts group as well. Andrew Witt,
managing director of the Atlanta Ballet, asserts that "groups could realize
tremendous benefits through working together."7 His counterpart at the
Atlanta Symphony, Thomas Bacchetti, acknowledges that "some joint activities would undoubtedly be useful." 8 Although Mark Light of the Louisville Ballet rejected the Kentucky Center's accounting services and holds
strong reservations about the Center's ticketing and program printing efforts, he joined forces with the Louisville Orchestra to purchase a computer. According to Light, performing-arts groups can cooperate effectively when "they have considerably sympathy of interests and knowledge
of each other's needs."9
In order to address the reasons this enthusiasm does not translate well
into practice, it is necessary to undertake a larger examination of the impetus for and objectives of cooperation. After setting this context, the position of performing-arts groups can be better viewed.
Impetus and Objectives
Centralization of management functions is rarely an evolutionary development. Rather, it is overwhelmingly the product of some major event that
provides an opportunity for reorganization. The two most prominent forms
of impetus are the opening of a performing-arts center (as in Louisville) or
the occurrence of a debilitating crisis (as in Atlanta).
The creation of a performing-arts center militates toward collaboration
in several ways. It places constituents together, often for the first time,
bringing into sharp relief the promise of cooperation in such operational
205
functions as scheduling, purchasing, and box office services. Furthermore,

performing-arts centers often purchase computers and management software that participating groups would like to use but cannot afford independently, creating another obvious area for joint endeavor. Attempts to
introduce centralized management systems have followed closely the opening of performing-arts centers in Louisville, Los Angeles, Denver, Cleveland, and many other locations.
Crisis is the other common impetus to centralization. The Atlanta plane
crash that produced the merger of four major arts organizations is an unusually dramatic example. A less tragic and more recent occurrence in
Hartford likewise illustrates the power of crisis to produce centralization.
In 1982, the floundering Hartford Ballet, poised on the rim of bankruptcy, with loan repayments in jeopardy, received corporate and public
support on the condition that it enter into a de facto merger with the
Connecticut Opera and Hartford Chamber Orchestra. A special committee
drawn from the boards of the organizations involved established a contractual union for three years, with George Osborne, formerly the Opera's
manager, serving as general director in charge of all managerial functions
for the three participating groups.
If efforts at centralization are usually occasioned by dramatic events,
their proponents tend to share certain objectives. The primary goal of centralization is efficiency: in the management of groups, in the management
of the arts center, and in the distribution of philanthropic dollars. A secondary goal, almost as common, is the desire of arts funders and performing-arts centers for greater control over the operations of resident organizations.
The underlying argument for consolidation of management is the promise of enhanced efficiency through economies of scale and administrative
rationalization. In theory, it should be less expensive for a central unit to
produce services for several users than for each of those users to produce
the same services on its own. The cost per unit should drop as fixed costs
are spread and duplication and inefficiency are banished.
For funders, economies of scale represent an opportunity to stretch philanthropic dollars further and to promote better operations, especially if,
as is often the case, they perceive rampant waste and mismanagement. In
the words of Atlanta Arts Alliance president Dan Gareis, corporate and
other private funders will not happily "tolerate duplication and inefficiency."10
For the performing-arts center, centralization offers the prospect of reducing fixed cost, particularly for administrative staff and special equipment, and for expanding the center's role in the arts community. Louisville's Marlow Burt states this view succinctly: "Millions of public dollars
have been spent on the Center. Its responsibility transcends simply operating a building. Simultaneously, resources are scarce and can be conserved by centralizing several management services through the Center."11
A less prominently discussed objective of centralization is control, espe-
206
dally when confidence of donors in the management of arts organizations

is weak. In Hartford, the merger placed control over all operations in the
hands of an administrator who had inspired confidence in funders and
board members, and it: removed authority from the previous managers.
From the standpoint of funders, centralization allows easier monitoring of
management performance, because formerly diffuse responsibilities and
systems are lodged in a single place and executed through a single set of
procedures.
Similarly, managers of performing-arts centers seek to increase the dependence of their member organizations because they are concerned about
establishing the importance and indispensability of their own institutions
and because they prefer to have control over organizations with whom
their centers occasionally compete. And providing such services, especially
financial services, gives the center administration access to information about
the member organizations that may be useful in negotiations.
For their part, performing-arts groups have been almost invariable suspicious of plans for managerial consolidation and have stiffly resisted attempts to implement them. Their suspicions are often discounted by artscenter managers and the funding community. For example, many performing-arts center directors attribute general resistance from resident groups
to what Milwaukee's Archie Sarazin identifies as the "egos" of arts managers.12 Marlow Burt suggests that cooperation would be easier if arts
managers had "more confidence in their own ability and the Center's ability." 13 Atlanta's Don Gareis calls for more "trust" by participating groups
in the Alliance's intentions and capacity. 14
These statements reflect the service providers' response to the puzzling
failure of potential clients to rally around what appears, from the providers' perspective, to be a technically irrefutable proposition for enhanced
operating efficiency. Like most such explanations, they focus on the attributes of personssuspiciousness, egotism, or incompetencerather than
on structural factors. However, the core problems the arts-center managers
face are universal and unlikely to be explained on grounds of personality.
Without a doubt, some egotism exists in the performing arts, and group
managers are not impervious to its touch; certainly, more confidence and
trust on the part of these managers would advance the prospects of cooperation. But to understand the surprising failure of coordination in the
delivery of administrative services to performing-arts organizations, it is
necessary to move away from ad hominem explanations and focus on the
strategic, political, and organizational context in which such efforts occur.
Contrary to the conventional wisdom within the arts community, especially among arts funders and performing-arts center directors, resistance
on the part of performing-arts organizations to cooperative administrative
services is based on sound, if not particularly systematic, management
thinking. The managers of participating groups question not only centralization's unanticipated strategic and political consequences but its basic
operational advantages. This response occurs on two levels. It originates
207
in general concerns about cooperation and its potential impact on competitive position, autonomy, and managerial effectiveness. And it focuses on
the objectives and organization of centralization, as one specific incarnation of cooperation. These layers of resistance will be examined in turn.
Resistance to Cooperation
It is difficult to overestimate the intensity with which many performingarts organizations view themselves to be in competition with other companies, for audiences and, more fiercely, for contributed income. This competition has a visceral feel to it and can be traced in large measure to
survival instincts and the constant, gnawing sense of not having enough
money to continue operating in a viable manner. Under these circumstances, most groups perceive a frustrating dynamic in which the gains by
one organization in grants or audiences must come at the expense of the
others. Whether or not this widely held view (the opposite of which is
invariably expressed at public convocations of arts supporters) is accurateand the evidence on this point is far from cleareven the perception
of competition is a substantial impediment to the sharing of management
services.
There are two reasons for this. First, centralized services make it impossible for a participating organization to employ innovations that will give
it a competitive edge. Second, centralization creates at least the possibility
that some participants will receive better services than others, thus placing
competitors at a disadvantage. (That these somewhat contradictory worries coexist in the minds of many arts managers is evidence less of irrationality than of the tension surrounding the issue of competition.)
The threat of reduced autonomy also figures prominently in resistance
to cooperation and is related to the reality of competition. Organizations
are wary of cooperative arrangements that may constrain their ambitions
for the future or endanger their control over public image or the confidentiality of financial data. Groups are extremely wary of having their image
diluted, even in subtle ways.
Finally, many administrators have legitimate concerns about the actual
(as opposed to theoretical) efficiency of coordination. Coordination of services creates direct costs in the form of fees to the service-providing arts
center; indirect costs in staff time devoted to negotiations with the arts
center and other members and to monitoring of center services; and, in
the worst case, direct costs involved in duplicating unsatisfactory services
in-house. Managers also worry about the quality of service, especially if
they believe that extricating their organizations from a cooperative arrangement may incur the wrath of corporate or public funders.
The prospects of lost competitiveness, reduced autonomy, and managerial inefficiency loom over any cooperative initiative. In order for the constructive participation of performing-arts organizations to be secured, these
concerns must be either defused by careful attention and effective handling
208
or overcome by the potential benefits of the collaborative project. As the

upcoming section contends, centralization is not able to succeed on either
count; its allure for performing-arts groups is limited and its manner of
delivery exacerbates the inherent reservations of these groups.
Resistance to Centralization
Participating performing-arts organizations question the efficiency of centralization and the reality of its apparent economies of scale. This is not
simple quibbling, because the primary objective of centralization is enhanced efficiency in the execution of basic management services. The centerpiece of the managers' position is that proposed basic functions cannot
be easily standardized, especially when participating groups are diverse,
structurally different, or growing. The specialized needs of diverse groups,
they argue, will either be ignored, at the expense of participants, or will
clog the system, rendering it cumbersome and expensive to maintain. Allen
Cowen, president of the Greater Louisville Fund for the Arts, a united arts
fund, suggested that coordinated management systems may actually cultivate "diseconomies of scale." 15
The Atlanta Arts Alliance's troubled efforts to accommodate the needs
of the Symphony, Alliance Theatre, High Museum, and College of Art
illustrate this problem. Division managers have not been satisfied with the
quality or timeliness of services, despite the Alliance's impressive financial
staff and powerful computer system.
Another example of the difficulties of standardization can be located in
the Louisville Orchestra's participation in the Kentucky Center's singleticket box office services. All of the groups involved in the service have
had technical complaints; however, the Orchestra's dissatisfaction has ranged
further. According to its General Director Karen Dobbs, the Orchestra has
"had problems with the Center's box office services because our patrons
were not able to receive preferred seating through the service. Furthermore, we felt the tickets needed to look better, and did not reflect the
image we are trying to maintain." 16
This case is particularly striking because box office services can be classifiedalong with scheduling and purchasingas a relatively simple form
of centralization, unencumbered by many of the complicating factors that
afflict marketing and financial management and, as such, are technically
somewhat more susceptible to standardization. In fact, single-ticket services are the only form of centralization that has taken hold in the performing arts; they are currently in effect at Playhouse Square (Cleveland),
Heinz Hall (Pittsburgh), Kennedy Center (Washington, D.C.), the Brooklyn Academy of Music, the Denver Center for the Performing Arts, and
the Tulsa Performing Arts Center, as well as the Kentucky Center.
Negotiating contracts, contending with dissatisfaction, and attempting
to bring about change consume substantial amounts of staff time for both
the arts center and its member organizations. What is more, the participating organizations must allocate staff time to monitor the arts center's
209
performance of routine services on a daily basis. Once sacrifices in flexibility, response time, and coordination costs are factored in, the efficiency
of centralized management is less than obvious.
Consolidated management systems also threaten to incur long-range costs
for participating organizations that eventually withdraw from the system.
Member organizations are reluctant to have expertise in basic administrative functions lodged in the performing-arts center, outside their own four
walls. The externalization of expertise increases their dependence on the
center since withdrawal would require an investment of start-up costs to
regain competence in the functions that the arts center had performed.
Furthermore, even if centralization does increase efficiency, this advantage is not in itself likely to galvanize performing-arts managers into action. Most arts administrators focus on entrepreneurship and growth. They
recognize the value of cutting costs, but when reducing expenses incurs
risks and increases uncertainty, they are more inclined to pursue possibilities for new revenue.
The vehicle for administering cooperation is as important as the kinds
of services that are provided. Efforts to centralize management have usually cast performing-arts centers as central service providers. However, resident groups have been dubious about the suitability of performing-arts
centers for this role.
Competition exists not only among member organizations but between
performing-arts groups and the arts center as well. Performing-arts centers
play many roles, and some of these impinge upon the role of service-provider. Centers are landlords and producers. They often promote events that
compete with the programs of their resident groups, such as concerts by
visiting symphonies or dance companies; and they negotiate with member
groups over rent and service charges. In many cities the arts center seeks
contributed funds from the same corporations, foundations, and public
agencies as does it constituents. Consequently, performing-arts managers
worry about systems of management sharing that could leave them beholden to a competitor for basic services.
Managers of member organizations also express concern over the arts
center's management capacity. Many centers propose centralizing services
when they are themselves brand new, with little experience in managing
even their own operations. Participating groups also wonder whether a
management system established to administer a building is suited to an
organization that must act swiftly and in an entrepreneurial manner. This
point is probably not a strong argument against the center's capacity to
undertake joint purchasing, for example, but it is more compelling in areas
like financial management and marketing.
THE PROSPECTS OF COOPERATION
The principle lesson of centralization is that cooperation is not easily accomplished. Performing-arts groups are steadfastly inclined toward inde-
210
pendence, wary of cooperation's unanticipated consequences and dubious

about its hidden costs. Although it is not easy to convince groups to abandon their independent orientation and concerns about cooperation, the
frustrating experience of centralization should not be taken to preclude
other forms of cooperation. No clear model or body of knowledge about
successful cooperation exists, but interest in cooperation is alive in all
quarters, and there are cooperative initiatives arguably more successful than
centralization. United arts funding, for one, has been far more durable and
widespread. The joint purchase of equipment, in particular computer technology, has inspired numerous ad hoc arrangements, as well as an ambitious automation consortium currently being mounted in Hartford. These
other cooperative endeavors temper, somewhat, the cynicism that unfolds
from an examination of centralized management's record.
As previously stated, for any form of cooperation to succeed in securing
the active interest and sustained participation of arts organizations, it must
overcome the tests of competition, autonomy, and efficiency. By keeping
these impediments in view, and by employing the shortcomings of centralization as points of departure, it may be possible to chart some more
promising avenues for future cooperation.
Objectives
The primary objectives of centralizationefficiency and control through
consolidation of basic management servicesare not sufficiently important
to performing-arts groups to galvanize them into cooperation. If anything,
these objectives are inclined to sharpen resistance.
Cooperation is more likely to work when its basic objectives are to provide access to new markets or opportunities where all participants stand
to gain, yet none can penetrate independently. Corporate and workplace
giving campaigns by united arts funds are one actual example of this approach; another possibility resides in regional marketing.
United arts funds are mechanisms for raising operating support for collections of arts organizations, usually through an annual fund-raising campaign. Many funds target corporate giving and are able to deliver support
that would be arduous, if not impossible, for groups to tap independently.
Access to corporate officials is limited, and corporations are so numerous
that approaching them is a labor-intensive exercise. Corporate funders respond well to a coordinated appeal rescuing them from hours of agonizing
deliberation over many proposals. Another activity of many united arts
funds, workplace giving campaigns, illustrates how access to potential contributors can be far more likely for a consortium operating under a broad
banner, "The Arts," than for a single organization.
Regional marketing also falls into this category. It is difficult for a single
performing-arts organization to institute effective marketing designed to
draw visitors from outside its metropolitan area because the expense of
advertising beyond the local community is likely to exceed additional rev-
211
enues received. Furthermore, a visitor who comes to see the ballet, for
example, may spend the weekend, attending the theatre and visiting the
museum as well. When this happens, a free-rider problem develops: Other
groups benefit from the ballet's regional advertising without having to bear
any of its cost. A regional marketing consortium can avoid this dilemma
by distributing costs across all the organizations that stand to benefit.
Organization
The prospects of centralization have not been advanced by the performingarts center's role as service provider and coordinating agency. The centers
are poorly suited strategically, politically, and technically for the task.
The organization of any form of collaboration will have an important
impact on its chances of success. The two basic criteria for an effective
arrangement are functional capability of accomplishing the substantive goals
of the project and political acceptability to participants.
A carefully crafted organizational model for cooperation, designed to
address both of these criteria, can be found in the governance structure of
Hartford's Arts Automation Consortium (AAC). The AAC is a network
developed by the Greater Hartford Arts Council to provide computer
equipment and expertise to six participating organizations.
The governance plan provides for three levels of management. Policy is
determined for the AAC by an autonomous six-member governing board,
composed of one member from the board of each of the six major users.
Operational oversight is provided by a six-member management committee, composed of the general manager of each user. Daily administration
is the province of a full-time computer-systems specialist. This arrangement, which is too new to evaluate, is structured to allow regular input
and monitoring from participants.
Catalysts
Centralization has suffered from both too much impetus and not enough
impetus as illustrated by the counterpart cases of Atlanta and Louisville.
Atlanta reveals that funders can enforce cooperation if they are so disposed, but that they cannot mandate its success. Louisville shows that a
voluntary appeal based on quality of services will not move groups to join
forces.
Funders have a key, but delicate, role in aiding effective cooperation.
They can bring organizations to the table in order to initiate discussions
about common ground and the prospects of cooperative projects. They can
underwrite these early explorations with grants to hire consultants and
perform feasibility studies. Finally, they can commit support for ventures
that meet their specific criteria. Initiative and leadership throughout, however, will have to reside with the participants. Otherwise, no cooperative
initiative will take root.
212
CONCLUSION
While all of these alternative approaches to cooperation merit further experimentation and study, optimism should be guarded. First, most of them
are untested. And second, even if the cooperative project has been well
conceived, based on appealing objectives, built on a sturdy institutional
arrangement, propelled by funding support, and led by a diplomatic partisan from one of the participating performing-arts groups, the project's
success will still depend on a number of factors; for example, whether
potential participants have a history of good relations and whether the
relative size and power of these participants is conducive to a compatible
combination.
Moving from the critical perspective of analyzing centralization to the
more prescriptive outlook of the last section only serves to underscore a
basic point threaded throughout this chapter: Despite the wide rhetorical
appeal of cooperation, this organizational strategy is, in reality, only viable
under fairly narrow circumstances. It appears that the banner of cooperation, if waved high enough, will elicit universal applause; as specific plans
come into focus, however, a bewildering set of complications are revealed.
These complications call into question cooperation's essential promise as
an vehicle for improving management and expanding resources in the performing arts.
NOTES
1. This study is based on three rounds of telephone interviews with arts managers and
performing-arts center directors in Atlanta, Louisville, Hartford, Milwaukee, Los Angeles,
Denver, New York, Syracuse, Washington, D.C., San Francisco, Cleveland, and Pittsburgh.
These interviews were conducted between July 1983 and May 1984 and during two-day site
visits to Atlanta, Louisville, and Hartford in April and May 1984. In addition, audited financial statements, public relations materials, and newspaper articles were examined in the course
of this study.
2. William Severns, former administrator, Los Angeles Music Center Operating Company,
telephone interview, July 1983.
3. Beauchamp C. Carr, vice president, Atlanta Arts Alliance, interview in Atlanta, Georgia,
May 1984.
4. J. Thomas Bacchetti, executive vice president, Atlanta Symphony, telephone interview,
May 1984.
5. Andrew M. Witt, managing director, Alliance Theatre Company/Alliance Children's
Theatre, interview in Atlanta, Georgia, May 1984.
6. Bacchetti, op. cit., telephone interview, July 1983.
7. Witt, op. cit.
8. Bacchetti, May 1984, op. cit.
9. Mark Light, managing director, Louisville Ballet, interview in Louisville, Kentucky, May
1984.
10. Don Gareis, president, Atlanta Arts Alliance, interview in Atlanta, Georgia, May 1984.
11. Marlow Burt, executive director, Kentucky Center for the Arts, interview in Louisville,
Kentucky, May 1984.
213
12. Archie A. Sarazin, managing director, Milwaukee County War Memorial PerformingArts Center, telephone interview, July 1983.
13. Burt, op. cit.
14. Gareis, op. cit.
15. Allen H. Cowen, president, Greater Louisville Fund for the Arts, interview in Louisville, Kentucky, May 1984.
16. Karen Dobbs, general director, Louisville Orchestra, interview in Louisville, Kentucky,
May 1984.
10
Financially Troubled Museums
and the Law
NANCY L. THOMPSON
The financial problems of art museums are ubiquitous. "Escalating costs,"

writes Philippe de Montebello, director of the Metropolitan Museum of
Art, "constitute the most acute problem facing museums today." 1 Stephen
E. Weil, deputy director of the Smithsonian Institution's Hirschhorn Museum, states the problem even more baldly: "In terms of operating funds,"
American museums "arefor the most partbroke." 2 Museums' financial woes are also timeless. In his classic study, The Museum in America
(1939), Laurence Vail Coleman, then director of the American Association
of Museums, complained, "Museum income is never adequate. The necessity for making it as large as possible rests upon every institution without
mercy." 3
Although, in recent years, no major U.S. museum has been forced to
shut its doors because of inability to pay debts, there is nonetheless a widespread fear among museum professionals that the economic crisis is worsening. A comprehensive national study of museums, undertaken in 1979
by the National Institute for Museum Services, disclosed that 1 in 10 museums, and almost 1 in 5 art museums, suffered operating deficits in its
last fiscal year. More than one-third reported that over a quarter of their
collections were in serious need of upkeep. During the previous year, onethird of these museums had reduced their level of activity because revenues
had not kept up with inflation. 4
Most large museums rely on income generated by invested endowment
to balance their budgets. Traditional views of fiduciary responsibility have
counseled a high degree of conservatism in the investment of such funds.
Moreover, museum directors or trustees must heed restrictions that donors
have placed on the types of investment that can be made, despite the fact
This chapter represents an extensive revision of a paper written while the author was a student
at the Yale Law School.
Financially Troubled Museums and the Law
215
that many such restrictions reflect a preinflationary era of stable investment returns and price levels.5
The inflation of the 1970s forced modern investment managers to seek
more productive investments in order to maintain revenues in times of
inflation. Several museums have adopted creative strategies for using endowment funds. In the early 1970s, the Museum of Modern Art began to
appropriate a fixed percentage of the average market value of its funds
(usually based upon an average long-term yield) as income for use in payment of expenses, regardless of the actual dividends and interest received.
The Metropolitan Museum has adopted the fixed rate of return method as
well, despite the fact that when the investment portfolio does poorly, the
museum must advance funds from endowment principal in order to finance expenditures, a practice that has engendered some criticism.6
For some museums, however, efforts to institute more advanced financial practices, to implement creative approaches to enhancing earned income, or to find new sources of contributed revenues simply do not work.
Such museums, for a time at least, may enter into a financial crisis and
resort to severe measures. Each of these strategies may bring directors or
trustees into contact with the judiciary, and with a body of statutory and
case law that is both confusing and inconclusive. Directors and trustees
whose institutions face severe financial constraint may discover that the
law limits their options in unexpected ways. The purpose of this chapter
is to summarize the legal environment that museums face, suggest some
ways in which museums may respond to extreme financial exigency, and
offer some solutions to the disputes that have vexed jurists and legislators
in their treatment of charitable trusts and nonprofit corporations.
The timeliness of the topic is reflected in the many museums that have
closed galleries, shortened their hours, or reduced spending on upkeep and
art conservation, and in frequent news accounts of museum financial difficulties. It is reflected, as well, in the substantial number of cases in which
state attorneys general have entered litigation against museum trustees or
directors, charging them with wasting or mismanaging assets, or misusing
their discretion. In almost every such case, such allegations rest in part on
the fact that the museum in question had been operated at a consistent
deficit, allegedly to the detriment of undermaintained collections and an
underserved public.7
Such cases raise important legal questions about the fiduciary responsibilities of museum trustees and directors to the public and to the donors
from whose lifetime and testamentary gifts the endowment funds originated. The answers to such questions affect the flexibility with which museum trustees and directors can meet the challenges of operating under
financial constraints. The pages that follow explore the legal implications
of three strategies, in order of increasing stringency, that museums in severe financial straits may find themselves exploring: reduction of services
and the invasion of capital to cover operating costs; invocation of the legal
doctrines of deviation and cy pres to alter the terms of the trusts from
216
which museums benefit; and dissolution of the organization, through merger

with another museum, dispersion of collections, or bankruptcy. Before addressing these strategies directly, however, we must look briefly at the broad
legal context within which these nonprofit institutions operate.
THE AMBIGUOUS LEGAL CONTEXT OF MUSEUM GOVERNANCE
The legal situation of museums is complicated by the fact that there are
both public and private museums. Although this chapter is concerned primarily with the latter, even here diversity creates complexity; for some
private museums are charitable trusts, whereas others are nonprofit corporations.8
Charitable trusts are created by an individual donor for the benefit of
the public. Property given in trust is managed by trustees, who have traditionally been held to the strict standards of care, skill, and loyalty imposed upon trustees of private trusts. Trustees are expected to observe
conservative standards of investment, have not been permitted to delegate
management authority to others, and have been held strictly accountable
for their actions. Such trustees are permitted to depart from the ordained
purposes and uses of the trust only with judicial authorization. 9
Nonprofit corporations are chartered by the state and must report periodically to state officials on their financial status. They are in many ways
a hybrid between charitable trusts and for-profit corporations. For example, they may hold some assets in trust, others outright. It is estimated that
nearly 70 percent of art museums are set up as charitable trusts governed
by private nonprofit foundations. 10
To complicate matters even further, consensus over the treatment of
nonprofit corporations has eluded judges and legal scholars. As Henry
Hansmann has argued, "The basic corporate law applicable to non-profit
corporations is at a remarkably immature state of development, and remains startlingly uninformed by either principle or policy." 11 Nonprofit
corporation law is currently a muddled hybrid of inconsistent principles
borrowed, respectively, from trust and corporate law.
To What Fiduciary Standards Are Museum Trustees Held?
There is no unanimity as to whether the standard of fiduciary duty to

which the directors of a charitable corporation are to be held is that applied to trustees of private or charitable trusts or rather that observed by
the directors of for-profit corporations. This distinction is significant because traditionally the former have been held to higher standards of fiduciary duty than have the latter.
In general, however, the trend in recent years has been for courts and
legislatures to hold the directors of charitable or nonprofit corporations to
the standards of fiduciary duty that must be observed by the directors of
217
for-profit corporations. This is the so-called business judgment rule, which

allows the directors more freedom in investing the assets of the corporation and in delegating management duties to subordinates than had historically been permitted trustees of a charitable trust.12 The corporate standard of duty has been applied to nonprofit corporate directors by the
American Law Institute-American Bar Association (ALI-ABA) model NonProfit Corporations Act (1964). Under such a standard, trustees are allowed considerable discretion in investment decision making.13
The functions of such trustees are, in many cases, indistinguishable from
those of their business counterparts, for they supervise their organizations'
income-earning activities and, increasingly, are permitted to delegate investment authority, another form of business activity.14 More generally,
courts seem prepared to adhere to the following rule in scrutinizing trustee
behavior. "Trustees having the power to exercise discretion will not be
interfered with so long as they are acting bona fide. To do so would be to
substitute the discretion of the court for that of the trustee."15
This liberalization of standards is important, for it gives trustees more
flexibility in investing and using endowments. For example, it opens the
way to the use as income of realized appreciation on endowment principal,
a practice permitted on a limited basis by the Uniform Management of
Institutional Funds Act, which has been adopted by several states. (By contrast, conservative opinion still holds that such funds may only be spent
with explicit judicial authorization.)
Despite the general trend towards liberalization, a pair of recent cases
involving educational institutions may have held trustees to more rigid
standards than apply in the corporate sphere, subjecting their decision
making to factual scrutiny and repudiation. In the Wilson College case
(Zehner v. Alexander), for example, the judge found that trustees lacked
the authority to close a financially troubled college.16 He criticized the
practices of the board on several specific counts, chiding it for delegating
too little managerial authority, developing an ineffective student recruitment strategy, and cutting clerical assistanceall actions that would seem
to be within the discretionary exercise of business judgment. 17 Such judicial scrutiny would not be applied to the business judgment of a for-profit
corporation's board of directors that had decided to dissolve the corporation, for example.
In a somewhat similar case (AAUP v Bloomfield College), a nearly insolvent college laid off several tenured faculty members in order to save
money. Ruling in favor of the plaintiff professors, the trial judge discerned
bad faith in this action, then went beyond this specific finding to contest
the trustees' assertion of financial exigency, noting that the college held a
valuable golf club that it could sell to raise funds in lieu of dismissing
faculty. The appeals court agreed with the finding of bad faith in the faculty dismissal, but held that the lower judge's statements about the golf
club were inappropriate: "The exercise of the business judgment whether
to retain or to sell this valuable capital asset was exclusively for the board
218
of trustees of the college and not for the substituted judgment of the court."
Indeed, the appeals court held that it was up to the trustees, not to the
court, to determine when the college was in a state of financial exigency.18
Trustees continue to exercise their best business judgment in managing
their institutions; however, the unresolved ambiguity of the laws governing
charitable corporations may at least in theory permit courts to intrude at
their discretion into the realm of trustee decision making, in. their role as
protector of the public welfare.
Who May Sue Nonprofit Museums?
The court may not, however, act sua sponte (on its own initiative) to supervise philanthropic organizations. It may only adjudicate disputes involving them if these have been brought before it by the attorney general
of the relevant state or by persons having special interests in the performance of a charitable trust (for example, a group of trustees). Nearly all
states authorize the attorney general to oversee the fulfillment of fiduciary
duties by directors of charitable trusts and corporations; only 15 states,
however, require charities to report to the attorney general annually on
their financial status.19
Exemplary of a state attorney general's procedure in enforcing a charitable trust is the litigation involving Chicago's George F. Harding Museum, Scott v. Silverstein. In that case, the Attorney General successfully
alleged that the museum was being mismanaged by its directors in breach
of their fiduciary duties, in that
the directors failed to display museum artifacts to the public, in violation of the
museum's corporate charter, mismanaged museum assets by purchasing investment
real estate, consistently operated the museum at a deficit, awarded each other excessive salaries, and secretly sold a painting from the museum collection . . . [and
that] museum artifacts were deteriorating because of mismanagement.20
It is not clear, however, just what degree of trustee mismanagement is

necessary to move an attorney general to action. Operating deficits alone
have never inspired an attorney general to sue. But annual reporting statements revealing consistent operating deficits may invite the scrutiny of attorneys general and suggest the presence of mismanagement in more tangible ways.
Although attorneys general are permitted not just to monitor nonprofit
museums but also to investigate them, the language of state statutes authorizing such investigation generally is permissive rather than obligatory.
Actual practice varies from state to state, depending on the attorney general's prosecutory zeal and the resources that his or her office possesses.21
In most states, taxpayers lack standing to sue for the enforcement of
charitable trusts; the rationale is that frivolous litigation by those without
any genuine interest in the institution might harass nonprofit organizations
and overload the judicial process.22 In the case of Weigand v. Barnes
219
Foundation, for example, a taxpayer sued a Philadelphia art museum to

compel its officers to alter admissions rules which, she claimed, so limited
access to the foundation's galleries as to defeat the purposes of the trust
that created it. The court ruled that "in the absence of statutory authority,
no person whose interest is only that held in common with other members
of the public can compel the performance of a duty owed by the corporation to the public."23
By contrast, parties deemed to have special interests in the performance
of a trust have been granted standing to sue to enforce trust principles.
Active trustees, for example, have been granted standing to sue their fellows on behalf of the corporation.24 Founders of trusts or their heirs, however, are generally empowered to sue only if the founder explicitly restricted the donation so as to maintain a clear interest in its disposition. In
such suits, the attorney general must join as a party.
In recent years, several jurisdictions have illustrated a willingness to
broaden standing to parties other than the attorney general. In Jones v.
Grant, a state supreme court granted standing to a college's students, staff,
and faculty to sue the directors to force them to account for the misuse of
federal and church funds.25 Similarly, in Stern v. Lucy Webb, the judge
granted standing to plaintiffs in a class action suit against a hospital on
grounds that they, "purporting to represent a class of users of the hospital's services, have a sufficient special interest to challenge the conduct of
the trustees operating this charitable institution on a theory of breach of
trust."26
By analogy, the Jones case suggests that a museum's members and other
donors might be able to sue in order to ensure that directors observe requisite fiduciary duties of care, and the Stern case suggests that standing
might accrue to anyone who used a museum by visiting it.
The single recent case of which the author is aware involving standing
to sue a museum for breach of trust, Rowan v. Pasadena Art Museum,
ended inconclusively.27 Former trustees of the museum sought standing to
sue Norton Simon and other current trustees of the museum for allegedly
violating their fiduciary duty to uphold the museum's charter by replacing
the museum's formerly modernist exhibitions with art works from Simon's
own collection. The former trustees sought to sue even though the state
attorney general had not granted them relator status, which would permit
them to institute a proceeding in the name of the attorney general. The
court in this case, however, disposed of the lawsuit on the merits and
therefore did not rule expressly on the issue of whether such formerly involved parties had standing.
Henry Hansmann has argued that broadening standing, in accordance
with the holdings of the Stern and Jones cases, to include patrons and
clients of charitable organizations would strengthen the rationale for applying business-corporate, rather than private-trust, standards of fiduciary
responsibility to nonprofit corporation trustees. (The risk that a more liberal standard of care would generate more lawsuits seems to be minimal,
220
for those states that already have broad standing rules have experienced
no torrent of frivolous litigation.) Business boards, after all, are subject to
suits from stockholders, which act as a check on director discretion. Because charitable trustees experience no comparable threat of litigation, they
are reasonably held to the higher trust standards of fiduciary responsibility.28
In sum, then current case law is murky with respect both to the standards under which nonprofit corporate trustees operate and the classes of
plaintiffs that possess standing to sue. One happy solution to this ambiguity would be the establishment of business-corporate rather than trust
fiduciary standards and the broadening of standing to include nonprofit
organizations' clients and patrons. The former would offer trustees sufficient latitude and flexibility to deal creatively with fiduciary adversity,
whereas the latter would ensure that they be held accountable for their
decisions.
REDUCING COSTS AND CONVERTING ASSETS
In cases of extreme financial exigency, museums have employed at least

three strategies that, undesirable as they may be, are deemed to be preferable to seeking a court-sanctioned change in the purposes of the trust or
in the charter of the museum or to dissolving the museum altogether. These
strategies include cutting costs by reducing services, selling parts of the
collection, and using capital for daily operating expenses. Let us consider
the legal implications of each of these strategies, one at a time.
Reducing Services: How Many Costs Can a Museum Cut
and Still Be a Museum?
Museums may shorten their hours, close their galleries, and curtail the
services they offer to the public. At some point, however, the museum that
pursues such cost-saving strategies may violate implicit or explicit terms of
its charter and thus evoke judicial notice.
The nature of a museum's obligations to its public depends upon the
specific charter or trust indenture by which the museum was founded. Apart
from the individual requirements of these documents, however, there exists
a tacit understanding of what a "museum" must provide in order to be
considered a museum.
The Association of Art Museum Directors, for example, defines a museum as "a permanent, nonprofit, institution . . . which acquires objects,
cares for them, interprets them, and exhibits them to the public on some
regular schedule."29 The voluntary accreditation program of the American
Association of Museums requires that to claim museum status, an institution must exhibit its collection "to the public on some regular schedule,
e.g., regular and predictable hours which constitute more than a token
221
opening, so that access is reasonably convenient to the public."30 Such

access is required because "objects in tax-exempt institutions are held in
trust for the public . . . they are the cultural property of the public, both
present and future."31 Although neither of these definitions bears the force
of law, both of them reflect the current state of professional opinion as to
the minimum a museum must offer its public.
In several cases, actions by trustees that severely restricted public access
to the museums they managed prompted attorneys general to sue them for
breach of trust. In both of the two most notable cases, those involving the
Barnes Foundation and the Harding Museum, specific terms of the founder's trust seem to have been violated by the trustees. In both cases, however, judicial language implies that a generalized public interest was being
violated as well.
In Commonwealth v. Barnes Foundation, the court found the trustees
to be in violation of their trust indenture because they denied the public
access to the Barnes Foundation art gallery despite the donor's stipulation
that "the plain people . . . shall have free access to the art gallery and the
arboretum on those days when the gallery and arboretum are to be open
to the public," but at most two days a week.32 The museum, which contained a valuable collection of Baroque and Impressionist works, claimed
tax exemption yet made access to the collection almost impossible. In addition to finding a specific violation of the trust indenture, the court went
on to note that because the Barnes Foundation was granted tax exemption
as an institution of public charity, it was obliged to open its doors to the
public at least some of the time.
This case suggests that tax exemption could be withdrawn from a museum that had so limited public access that it, in effect, had ceased to
function as a public institution. It is unlikely that such sanctions would be
taken against any museum whose restrictions on access result from a financial incapacity to remain open. Certainly no judicial enforcement action was contemplated against the Detroit Institute of Arts when a municipal crisis closed it for a month in 1975 and resulted in long-term reductions
in gallery hours.
Nonetheless, extreme and open-ended cutbacks of museum services may
be grounds for judicial action. In his complaint against the board of trustees of Chicago's George F. Harding Museum, the Illinois attorney general
charged that the museum violated both the terms of the founding donor's
trust and the public's implicit right of access to the museum because it had
placed most of the collection in a warehouse, permitting the public to see
only a small portion of it, and that by appointment only. The attorney
general contended, "the Museum's artifacts and assets have not been fully
utilized for public appreciation."33 The museum directors, argued that the
Harding was a "teaching museum" and that the collection was being used
for teaching purposes.34 The articles of incorporation of the Harding Museum, however, stated its purpose as "the accumulation and perpetuation
of knowledge of ancient arts and sciences, for the improvement of the
222
mind by the collection, preservation and exhibition of ancient and authentic objects," thus supporting the interpretation of the attorney general.35
In a somewhat similar case, a perceptible decline in the public services
offered by Long Island's Vanderbilt Museum prompted the New York attorney general to scrutinize trustee management of that institution. The
investigation disclosed some evidence of possible impropriety on the part
of the trustees, who were political appointees. But the genesis of the investigation was the museum's decreasing ability to render to the public the
services to be expected from a museum. The American Association of Museums had recently voted to suspend the Vanderbilt's accreditation because
of "inadequate care of facilities and collections," which were uncatalogued, unprotected from heat and humidity, and, consequently, deteriorating. (The Museum's executive director attributed this plethora of problems to inadequate funding.) Apparently this museum had fallen beneath
the functional level deemed adequate to serve the public trust.36
A state legislature, too, may enforce a minimal definition of the word
"museum." A recent addition to the California Tax Code, for example,
exempts museums from a use tax on the purchase of art objects if they
open their galleries for a certain number of hours and welcome the public
free of charge on a regular basis.37
Deaccessioning
Museums may also seek to channel fixed assets, be they endowment monies, physical property, or artworks, into forms and functions in which they
can be immediately useful in paying operating expenses. In particular, art
museums often become repositories for more than art works of quality.
Well-meaning but tasteless benefactors may donate works of art of less
than exhibition quality. Or the museum may have upgraded its collection
so that mediocre works that once formed its core are no longer needed.
Because collections demand space, protection, and maintenance, it seems
sensible for the museum with precarious finances to "deaccession" (the
museum profession's euphemism for "sell") artworks that are unexhibitable and unwanted.
Whether a museum may sell undesirable artworks in order to raise operating funds depends on the terms under which the art was acquired. The
Hirschhorn's Stephen Weil argues that any artwork that a museum purchases out of unrestricted funds should be available for deaccessioning for
any purpose as the trustees deem necessary.38 In contrast, the College Art
Association's 1973 "Resolution Concerning the Sale and Exchange of Works
of Art by Museums," issued in the wake of controversy over the New
York Metropolitan Museum's deaccessioning of portions of its DeGroot
Collection, warned that "works of art should be considered for sale or
exchange only for the purpose of expanding or increasing the value of the
collection, not for operating expenses or building funds." 39 Indeed, most
223
formal deaccessioning policies provide that proceeds from sold works of

art may be used only to purchase other works.40
Such policies serve as a bulwark against allegations that museum are
wasting assets, since, in effect, the artworks are simply being traded. And
when applied to artworks donated without restriction, such conservative
policies reassure donors and their heirs that the donative intent to make
art available to the public will be perpetuated, even if the art itself has
changed. Nonetheless, maintenance of an overly large collection may operate to the detriment of public access if, for example, funds from selling
artworks are used solely to buy others rather than to build quarters large
enough to exhibit all of the art or to pay operating costs for the facility.
Under such circumstances, more flexible policies may be in order.
If trustees supervise deaccessioning and observe corporate standards of
care and discretion, it is unlikely that an attorney general would investigate a good-faith decision to sell artworks from unrestricted sources and
to channel the proceeds into operating funds. 41 It is possible, however, that
a court might conclude that past trustees, by earmarking general funds for
specific uses, have created a binding charitable trust that precludes later
sale of assets in order to turn the proceeds to another use. In Authors Club
v. Kirtland, for example, a literary club had received a bequest from Andrew Carnegie and with it established a general fund to aid indigent writers.42 When club members resolved to use the fund to defray ordinary
operating expenditures, later donors, who had contributed to the fund in
reliance upon the apparent restriction of the purpose for which it would
be used, sued. The court supported the plaintiffs, holding that a restricted
charitable trust had been created and could not be used for other purposes.
To forestall such interpretations, boards employing general funds to purchase fixed assets should explicitly reserve the right to use them for different purposes at a later date.43
Deaccessioning of unrestricted artworks may raise other legal issues,
however. If an artwork, originally purchased out of general funds, is sold,
only subsequently to soar in value, could trustees be charged with wastage
of assets? Presumably if the transaction were made in good faith, following
a business judgment standard of care, the museum directors would not be
liable for such a decision.44
Some critics of deaccessioning have predicted that if museums adopt the
practice of selling art to meet operating deficits, the government might
make future financial aid contingent upon the museum's willingness to
take such a drastic measure. For example, public agencies might demand
that museums sell art from their collections as a self-help measure before
becoming eligible to receive matching public funds.45 Another observer fears
that publicly owned collections supported by public and private funds might
be pirated by politicians, who could force the routine sale of art to meet
operating expenses.46 It seems probable, however, that existing safeguards
are adequate to forestall such occurrences, for such abuses would trigger
224
both public outcry and the scrutiny of the state attorney general, acting in
the public interest.
Up to now, we have considered deaccessioning only those works of art
that the museum purchased out of general funds or received without restriction. The deaccessioning of artworks that have been donated with specific restrictions is another matter. The complaint filed by the Illinois attorney general in the Harding Museum case, for example, alleged that the
defendants "intentionally and in disregard for the corporate charter have
sold a valuable original painting from the museum collection for the purpose of raising monies to offset the wrongful and recklessly incurred annual deficits."47 The attorney general made special note of the fact that
the revenues were earmarked for operating funds, arguing that "a fundamental rule of museum management is that the proceeds of the sale of
artifacts donated to the collection should be used for new acquisitions and
not for the general support of the museum."48 Similarly, when the Metrolitan Museum of Art sold off much of the collection of Adelaide Milton
De Groot, the sales provoked an investigation by the New York attorney
general. Although the De Groot bequest was precatory rather than binding
in its stipulation that the Metropolitan donate to other museums such works
as it did not wish to keep, the museum ultimately agreed to make its future
sales of artwork public.49
How can museum trustees best manage necessary deaccessioning without running afoul of the law? In general, museum trustees planning to
deaccession unrestricted artworks should establish priority lists based on
the manner in which the artworks were acquired (e.g., from unrestricted
funds, directed, bequest, or other means) and based on the quality of the
works themselves. Perhaps, in addition, art historians could be consulted
as experts to assess, to the extent possible, the relative quality of artworks
proposed for deaccessioning so that only the most mediocre works would
be removed from the collection. Artwork donated under restrictions on
future use should be sold only in the event of the gravest exigency and
then, whenever possible, only after securing approval from the donors or
their heirs. Out of deference to the donors' original intent, every effort
should be made to use proceeds from the sale of artworks directly for the
benefit of the remaining collection, for example, for better climate controls, lighting, or conservation facilities, all of which directly support the
preservation of art for the public's enjoyment and appreciation.
Trustees may also attempt to sell works to institutions within their own
community, so that the local public may continue to enjoy it. However,
such a strategy might interfere with the trustees' concomitant obligation
to use the museum's assets as efficiently as possible and thus to receive the
highest possible price the work could command on the open market. If the
highest bidder should be a private purchaser, could the trustees be held
liable for injuring the local public interest in being able to see the art?
Presumably, this is a matter for trustee discretion. Existing cases suggest a
judicial interest in keeping art that is to leave one institution within the
225
same geographic area whenever possible.50 But there is no indication that

trustees would be liable if they failed to do so.
Using Endowment Principal to Pay Operating Expenses
Under certain circumstances, trustees may apply endowment fund principal to museum operating costs without soliciting prior court approval. In
general, such use is permissible when funds are unrestricted, although the
strategy is regarded as appropriate only when operating deficits are severe.
For example, in 1979, the Brooklyn Museum incurred a substantial deficit
when promised contributions for a special exhibition failed to materialize.
In order to pay off the debt, the museum dipped into over $400,000 of
principal from two unrestricted endowment funds at a sacrifice of over
$20,000 in interest. Although there was adverse public comment, other
evidence of the museum's financial plight (such as major cuts in department budgets) existed, and the attorney general did not initiate an investigation.51 Indeed some museums invade endowment principal regularly:
In one recent 13-year period, for example, the Museum of Modern Art
spent $3 million of its endowment to meet current obligations.52
Several states have statutes governing the management of institutional
funds which permit museums to utilize even restricted endowment funds
by using realized appreciation for operating expenses. Nonetheless, "conservative opinion still holds that capital gains cannot be spent from restricted endowment funds without some sort of court proceeding."53
One observer has suggested that in those states that observe a business
judgment standard of trustee responsibility, trustees may borrow principal
from restricted endowment funds and transfer proceeds from its sale to the
general purpose endowment in order to meet operating deficits. As long as
the transaction is treated as an internal loan, at an appropriate rate of
interest, and is likely to be repaid, such arrangements may pass corporate
standards of scrutiny.54
It is not clear how widely such strategies for manipulating restricted
endowment funds are employed, nor is it evident how courts would regard
such nonconservative practices. Such uses of restricted funds would probably not be feasible in jurisdictions that still observe trust standards of
fiduciary responsibility for directors of charitable corporations.
Moreover, it is obvious that the availability of such strategies as deaccessioning and use of endowment capital for operating expenses is dramatically limited by trust restrictions. It has been argued that gifts given with
trust restrictions are detrimental to the public interest.55 Museum directors
agree, in principle. But it has also been estimated that over 90 percent of
artworks in museums were donated with restrictions; monetary gifts are
often similarly hindered.56 To deal with such assets, then, museums must
seek the aid of the courts. They cannot escape the strictures of long-dead
donors at their own discretion. It is to this problem that we now turn.
226
USE OF DEVIATION AND CY PRES
There are two methods by which charitable trustees may deviate from the
stated purposes of a trust in order better to effectuate the specific goals of
a settlor or the needs of the trust or institution as a whole. A "deviation"
permits trustees to alter the administration of a trust, for example, selling
a certain piece of land held by the trust to raise income, even if the trust
instrument has not provided for the sale of that piece of land. The use of
cy pres permits trustees to alter the trust's purposes in order to serve a
related or broader set of charitable ends if the original purpose for which
the trust was established has become impossible to obtain.
The doctrines of both deviation and cy pres are premised upon the theory that "the testator would have desired that the property be so applied
if he had realized that it would be impossible to carry out the particular
purpose."57 Trustees of a financially troubled museum may under some
circumstances petition the courts to invoke one of these doctrines in order
to free assets from restricted uses and apply them toward the more general
benefit of the institution and the public.
Deviation
Restatement (Second) of Trusts 381 provides that the court will direct
or permit the trustee of a charitable trust to deviate from an administrative
provision of the trust if it appears to the court that compliance is impossible or illegal, or if it appears that owing to circumstances not known to
or anticipated by the settlor at the time the trust was established, compliance would defeat or substantially impair the accomplishment of the purposes of the trust.
Deviation is generally invoked to permit the sale or increased use of
property to fulfill a specific goal of the donor. Under circumstances of
fiscal exigency, the court may authorize a sale or mortgage of trust property in order to raise funds, or it may authorize use of principal to make
up for diminished value of trust income.58 Vermont law, for example, permits educational corporations to petition the court to use the principal of
restricted endowments if they become unable to pay their expenses from
current receipts.59
Courts will not authorize such sales or endowment invasion if they are
not necessary for trust purposes; deviation demands that the petitioning
trustee demonstrate that unless the court approves a liberalized use of funds
the original purposes of the settlor in establishing the trust will be frustrated.60 Numerous commentators, however, have urged liberalization of
the doctrine in order to allow change from specific terms of a trust if the
continued restriction of a fund would simply be inefficient or impractical
for the institution. 61 Courts have, on occasion, so construed the doctrine. 62
Extension of such usage would permit art museums to free ample but re-
227
stricted funds, given in trust for specified purposes, for application to purposes in greater need of resources.
Nonetheless, most courts have tended to hold to a conservative standard
in permitting deviation. In two cases in the early 1960s, for example, courts
held that changed economic conditions and general inflation were factors
insufficient to warrant a change in the usage of museum funds. 63 These
cases, however, predated the acute contemporary consciousness, cultivated
by the inflation of the late 1970s, of the financial plight of charitable institutions with conservative or limited investment portfolios.
Harris v. Attorney General exemplifies the contemporary treatment of
deviation in the courts.64 Trustees of the financially strapped Hill-Stead
Museum petitioned the court for permission to sell an auxiliary building
in order to generate additional income for the trust. The court construed
the donor's language regarding the use of the building as merely precatory;
however, the court went on to conclude on its own initiative that the building
was impractical as a museum, costly to maintain, and capable of providing
needed income to the trust if sold. It concluded that change in the trust's
financial circumstances justified the building's sale.
The court furthermore reinforced an earlier deviation that allowed trustees to spend trust principal as required to replace essential property. Finally, on a motion by counterclaimants that the trustees' financial inability
to provide insurance had so impaired accomplishment of the testator's goals
as to cause the trust to fail, the court concluded, somewhat circuitously,
that because the donor perceived her art as unique and irreplaceable money
could not adequately substitute for it; thus provision of insurance was held
to be a matter for the prudent judgment of trustees. Throughout its opinion, this court expressed a strong interest in preserving the museum, which
counterclaimants sought to close on grounds that the trust had failed. The
court permitted deviations as necessary to ensure the institution's survival.
The court did state, however, that principal was not to be used to maintain
the property.
In another recent opinion, In re Petition of Trustees of Hyde Collection,
the court concluded that keeping an art collection intact was more important than providing insurance, given the apparent terms of the donor's
trust indenture.65 The court suggested that the donor did not specifically
require insurance but had instead relied on trustee prudence to care for
the collection in the most practical way. Because endowment income was
adequate to fund improved building security but not to carry insurance,
the court permitted a diversion of funds to the former end.66
In a similar case, Parkinson \. Murdoch, a court permitted trustees to
deviate from the terms of their trust by using principal to provide a curator
for an art collection, reasoning that
As a necessary incident to the carrying out of the expressed intention [of the donor]
to provide an art collection which would last throughout the years, the trustees
228
also have a duty to see that the objects of art purchased are properly housed and
cared for so as not to deteriorate. . . .67
In each of these cases, then, a court permitted a deviation from specific

trust restrictions in order better to effect the testator's purpose of making
the art available to the public in perpetuity.
Courts may also authorize curtailment of part of an art collection in
order to protect the collection as a whole. In Final Judgment in the Matter
of the Application of the New York Historical Society for Modifications
of the Thomas ]. Bryan Indenture, the court accepted the trustees' contention that external circumstances had so changed as to make literal compliance with the trust impossible (although they failed to describe those changed
circumstances), and it permitted them to display only some artworks in a
collection and to sell or exchange the rest, investing the proceeds in a fund
for maintenance of the remainder and for acquisition of additional items.68
Deviation is often sought to permit the directors of a charitable trust to
sell its site and move to another location because of insufficient funds for
maintenance of the present building. 69 In Watkinson Library v. Attorney
General, the court permitted a library to sell its decaying building because
the funds left for its preservation generated insufficient income to maintain
it.70
Many courts blur the doctrines of deviation and cy pres together in
practice, failing to distinguish between administrative variations and substantive changes in purpose. In some jurisdictions, courts have rejected the
cy pres doctrine only to use the doctrine of deviation in certain cases to
the same end.71
In the early 1950s, for example, the Cleveland Museum had acquired
more art than it had room to display and sought a declaratory judgment
authorizing it to divert certain trust funds from their original purpose, the
purchase of artworks, to the construction of a new wing to display the art.
In its decision, the court strained nobly to give the trust funds a general
purpose, writing
The purpose of the settlors was a broad one . . . they aimed at helping to create
and maintain an Art Museum which would endure indefinitely . . . In their day
the most practical way for accomplishing their expansive purpose was to set aside
funds for the acquiring of objects of art ... today the museum's problem is quite
different . . . now it is for an additional building. . . ,72
The court thus concluded that although the settlors' purpose had not failed
the museum was thrivinga deviation of trust income to a building fund
would reflect the donors' own inclinations given the changes in circumstance that they had not foreseen.
This liberal judicial view that restricted funds may be used to respond
to changing needs would, if more generally held, be an invaluable asset to
financially constrained museums. For example, such an application of the
deviation doctrine might allow museums to deaccession and sell restricted
229
artworks (with judicial approval) for a range of purposes. Museums that

request court approval before deviating from restrictions on the use of
their property also forestall subsequent investigation by enforcement agencies.
There appear to be no reported cases in which a museum has petitioned
a court to sell restricted artworks in order to use the proceeds for operating expenses. Because rechanneling of investments, sale of physical plant,
and redirection of restricted funds have all been approved as equitable
strategies, however, sale of artworks would presumably fall under the same
permissive rule. Given the public interest in the perpetuation of charities,
courts would appear ready to permit some truncation of the museum's
goals to ensure its survival. Presumably donors' intents would suffer more
if a museum closed altogether than if it continued to display its art in a
different way. As the court commented in Scott v. Silverstein, "the charitably minded would be discouraged by the sight of charitable institutions
gradually closing.73
The Cy Pres Doctrine
If a simple change in administration of specific terms of a trust cannot

suffice to salvage a financially troubled institution, its trustees may petition
the court for application of the broader cy pres doctrine. Restatement (Second) of Trusts 399 defines cy pres as follows:
If property is given in trust to be applied to a particular charitable purpose, and it
is or becomes impossible or impracticable or illegal to carry out the particular
purpose, and if the settlor manifested a more general intention to devote the property to charitable purposes, the trust will not fail but the court will direct the
application of the property to some charitable purpose which falls within the general charitable intention of the settlor.
Thus an application of cy pres could permit a museum to apply restricted funds to more practical uses. Cy pres is also invoked to distribute
the assets of defunct charitable institutions in a manner that carries out
the donor's intent as closely as possible.
Three conditions must exist before a court may invoke cy pres for a
charitable trust: a valid charitable trust must exist, the settlor's particular
purpose must have become impossible or impracticable of performance,
and the settlor must be shown to have had a general charitable intent.
It is not always clear that a gift to a charitable corporation has created
a charitable trust. Generally, if the property is restricted to a particular
charitable purpose, a valid trust exists.74 However, the general equitable
interest in sustaining charities wherever possible requires that "if it is reasonably certain that the testator intended that the bequest be devoted to
purposes of charity, even though there is no formal trust, a gift in trust
will be implied."75
230
Impracticability of performance is also difficult to establish. In recent

years, there has been some judicial tendency towards leniency in defining
what is impracticable. Thus according to Restatement (Second) of Trusts
399 (Comment q), cy pres may be applied when to carry out a specific
purpose would fail to accomplish the general charitable intent of the settlor, particularly when there has been a change of circumstance after the
creation of the trust. 76 Nonetheless, when the court finds the execution of
the testator's stated purpose practical, it will generally fail to apply cy pres,
even if the purpose is undesirable. 77
Courts have usually been adept in liberally construing trust language to
find a general charitable intent beyond the specific purpose for which
property was given. "Equity is always more ready, in the case of a gift to
a charitable institution which is no longer functioning, to infer a general
charitable intention than to infer the contrary." 78
Many of the cases of deviation previously described involved changes of
sufficient magnitude as to fall plausibly under the cy pres doctrine. In practice, the line between the two doctrines is a thin one.
In Application of Arms in re Louis Comfort Tiffany Foundation, for
example, a trust fund established to support an educational art institute
and museum produced declining income, which proved increasingly inadequate to support the aging, deteriorating trust property. Upon petition,
the court permitted the trustees to sell the physical plant and transfer the
proceeds to the trust fund, with the income to be applied to the creation
of fellowships for artists. It also authorized the trustees to create a permanent physical memorial to the founder as they saw fit, either by maintaining the art museum upon the property or by selecting art objects at
their discretion to be given to other museums for display. The court treated
its action as deviation, but it spoke of the donor's purposes as being "increasingly impossible," and by changing the purposes for which the trust
fund and the art works were used, in fact, applied cy pres principles.79
In general, courts are becoming more flexible in their use of deviation
and cy pres, especially when the survival of a charitable institution is at
stake. Moreover, as jurisdictions increasingly accept use of the businessjudgment standard of investment and management skill for trustees of
charitable corporations, they may be less willing to interfere with trustee
decisions about the rechanneling of restricted assets, and more willing to
approve trustee petitions for cy pres upon lesser showings of need.
At the same time, continued judicial oversight is necessary to ensure that
trustees do not depart too widely from trust restrictions in the use of assets. Ultimately, less formal instruments, such as court-appointed referees
or administrative tribunals, might reduce the burden on the judiciary by
entertaining petitions for equitable relief from obsolete trust restrictions.80
For the present, museums should not neglect to use deviation and cy pres
as devices for reallocating restricted assets to the greater benefit of the
museum and its public.
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CLOSING A MUSEUM'S DOORS
As we have seen, courts place a high value on the survival of charitable

institutions and permit substantial alterations in the terms of trusts to that
end. Nonetheless, museums' deficits may grow so large as to prevent continued operation, triggering the trustees to seek the termination of the trust
or disgruntled creditors to bring dissolution proceedings against the museum. In recent years, several museums have quietly ceased to exist because they lacked adequate funds to pay operating expenses.81
Dissolution and the Law
Almost every state has codified statutory procedures for the voluntary or
involuntary dissolution of nonprofit organizations.82 Forty-eight states require that the attorney general approve the dissolution plan of a nonprofit
organization, which includes its scheme for the distribution of assets remaining after payment of debts.83 In most states, a cy pres distribution of
remaining trust assets is required upon dissolution.
In 47 states, the attorney general may institute involuntary dissolution
proceedings against a charitable organization upon grounds that vary from
state to state and include insolvency, public injury, failure to report, and
failure of purpose due to impracticability. Although extensive supervisory
authority exists, however, it is exercised actively by attorneys general in
only a few states, most notably Ohio, New York, California, and Illinois.84
New York's statutes, although more elaborate than those of most states,
provide a useful illustration of legislative and judicial concerns. The NonProfit Corporation Law generally allows either the director or the board
members of a nonprofit corporation to petition for judicial relief if the
corporation's assets are insufficient to discharge its liabilities. The supervising court may, at its discretion, appoint a referee to hear the matter or
a receiver to manage the trust property. As necessary, the court may issue
injunctions to restrain the corporation from disposing of its assets or to
restrain creditors from harassing the insolvent nonprofit corporation. The
attorney general is a necessary party to any judicial dissolution proceeding.85
If a museum chooses to dissolve or is compelled by proceedings undertaken against it to do so, it must dispose of its assets. In such cases, there
is a natural tension between the rights of creditors to payment and the
rights of donors to see the purposes of their gifts in trust fulfilled. State
statutes usually rank the order in which assets are to be disposed. In New
York, for example, N-PCL 1005 of the Not-for Profit Corporation Laws
provides that "after paying or adequately providing for the payment of its
liabilities, the remaining assets of the corporation shall be distributed" in
a manner consistent with the purposes of specific trusts that the organization holds. Such statutory language might seem to indicate that creditors
232
are to be paid off first, even out of restricted assets if necessary. But no
cases support such a conclusion, and general trust law principles protect
property held under restricted trust from creditors.86
New York museums are chartered under the Education Law, which addresses the issue of museum dissolution more explicitly than does the more
general New York statute governing nonprofit corporations. Section 220
of the Education Law provides that when assets are ready for disposal, art
objects
as far as possible shall not be sold but shall be tranferred to libraries, museums.
. . . If there be any surplus moneys after payments of debts and expenses of liquidation, the court may direct that same be devoted and applied to any such . . .
charitable or other objects or purposes as trustees may indicate by their petition. . . .
This statute suggests that artworks are protected from use to pay off creditors to a greater extent than restricted trust funds might be.
Such statutes for cy pres-like distribution of assets of charitable corporations often do not consider the intent of donors in making a distribution,
instead simply attempting to transfer assets to a charity with a similar
purpose. In In re Will Goehringer, for example, the court expressly distinguished between cy pres, which it characterized as preeminently concerned
with perpetuating the intent of the creator of the trust, and the dissolution
statutes of the Education and Not-for-Profit Corporation Laws, which seek
to transfer assets to another charitable corporation with similar purposes.87
This approach to distribution of assets is not limited to New York. Internal Revenue Service regulations ( 1.501 (c)(3)-l(b)(4)), for example, require as a condition for tax exemption that should a charitable foundation
dissolve, its assets are to be distributed to another exempt purpose or revert to federal, state, or local government for use in the public interest.
Similarly, 46 of the ALI-ABA Model Non-Profit Corporation Act requires that, upon dissolution, assets "held . . . subject to limitations permitting their use only for charitable . . . educational or similar purposes
. . . be transferred or conveyed to one or more . . . organizations engaged in activities substantially similar to those of the dissolving corporation."
Hansmann has criticized the vagueness of the Model Act and its many
statutory imitators. It is unclear, for example, whether "limitations" refers
only to those imposed explicitly by donors or, more broadly, to the implicit expectations of donors of nonrestricted gifts that their donations will
be devoted to charitable ends. Indeed, Hansmann argues, "the restriction
might be read to apply to all assets held by a nonprofit corporation . . .
however acquired . . . [on the] theory that any organization that holds
itself out as serving charitable purposes is impressed with a constructive
trust, and therefore holds its assets 'subject to limitations.' "88
Read most broadly, then, the law would seem to protect even artworks
233
purchased with unrestricted funds from being sold to satisfy creditors. Despite its high valuation of charitable purposes, however, the law is also
concerned with proper payment of debts; it is thus unlikely that such an
extreme view would prevail.
In voluntary dissolutions, distribution of assets is planned by trustees
(with the attorney general's oversight) and submitted for approval to the
court. If dissolution is undertaken at the behest of creditors or the attorney
general, a receiver often designs the distribution plan.89 Even when the
trustees or the receivers act in good faith, the court is under no obligation
to accept the plan submitted, even if the attorney general has approved
it.90 The attorney general may challenge the details of any divestiture plan
proposed by trustees. Potential beneficiaries of the distribution do not have
standing to challenge such plans, however.91
Judicial Prohibition of Dissolution
In several cases, courts have overruled trustees' use of discretion and refused to permit the voluntary dissolution of a nonprofit corporation, concluding that the public interest is better served by keeping the institution
open. In Zehner v. Alexander (the Wilson College case), the court concluded, first, that the trustees' decision to close the college represented an
alteration of the fundamental purposes of the institution, thus requiring
judicial scrutiny under the cy pres doctrine;92 and, second, ruled, as a
matter of fact, that the college's purpose had not failed and that consequently the trustees could not shut it down.93 Similarly, in Application of
New York Law School, the court denied the trustees' application for dissolution of the institution, finding that the law school had "done its work
well" and that there were too few other law schools in the area to accommodate all prospective students.94
In Conway v. Emeny (earlier litigation involving the Hill-Stead), the court
found that trustees had acted in bad faith in seeking to dissolve a landmark historic house museum, the Hill-Stead Museum.95 Although the donor had provided that trustees should have "absolute discretion" to terminate the museum and transfer the assets to another charity if public
interest in the museum flagged, the court found that the trustees, in so
deciding, were tainted by their interest in the other charity. Because the
court felt that there was a strong public interest in the institution and that
it "enjoys a wide reputation and is highly regarded by experts," it construed testamentary language to confer upon itself the right to restrict the
trustees' decision, and hence to refuse to dissolve the institution.
The court also overruled the wishes of trustees in a more recent, and
more complex case, In re Estate of Hermann.96 Here a testator had established a museum trust and a separate testamentary trust to provide for the
museum's maintenance. After several years of operation, the museum's
trustees petitioned for termination of the museum trust on grounds that
the physical plant was decaying, funds were insufficient for renovation,
234
and only one person a month was visiting the museum. The first court to
consider the matter ordered the sale of the museum's physical plant and
transfer of the artworks to a local library for exhibition, but it refused to
terminate the museum trust. Several years later, the testamentary trustees
contended that the museum was no longer an "operating foundation." The
court handling this matter went beyond the request made by the trustees
and ruled that the museum trust had failed. It based this decision in part
on the fact that it was alleged that the museum and its art had "been
almost totally ignored by the public during the past five years" because
the art was mediocre. The appeals court found that the trial judge had
abused his discretion because he had
terminated this trust for the sole reason that the art it is designated to support
'does not warrant the maintenance of a building' and that the public continues to
ignore the display. . . . [I]t is difficult to conceive of a subject less appropriate for
judicial review than the quality of an artistic work. . . .
Consequently, the appeals court held that the museum trust still existed.
It stated that "It is apparent that the objets d'art exist, that adequate funds
are now on hand to acquire land and to construct a building." It ordered
the testamentary trust to continue to pay over its income to the museum
trustees. In so doing, it sought to perpetuate the interests of the testator
rather than to serve an expressed public interest.
These cases indicate that in deciding which interests should be protected
and to what end, courts often exercise personal judgment. The judge in
the Wilson College case, for example, upheld what he perceived as the
public interest in keeping the college open, even at the cost of turning a
small liberal arts women's college into a vocational community college.
In Hermann, on the other hand, the appeals court perpetuated a donor's
wish to display his art collection even though the public found it distasteful.
In some of these cases judicial involvement was generated by allegations
of trustee misconduct. In cases where trustees' actions clearly constituted
an abuse of their discretion, the court could properly intervene. In others,
however, there were no clear indications of trustee misconduct, rendering
questionable the court's substitution of its judgment for that of the trustees, for the court is authorized to reverse the decisions of trustees only if
there is evidence that they acted in bad faith or arbitrarily and capriciously
in an abuse of their discretion.
Distribution of Assets According to Cy Pres Principles
In some states, no statutes provide for the distribution of the assets of

dissolving nonprofit corporations. In these states, courts may order the
transfer of assets according to cy pres principles. Even when charitable
corporations are deemed by state law to own the assets given to them
235
absolutely (rather than holding them in trust), cy pres will apply for purposes of distribution.97
Case law indicates several judicial trends in the application of cy pres to
the distribution of assets of dissolved institutions. First, the assets should
be transferred to the site and setting most similar to that of the failed trust.
In determining similarity, geographic proximity and similarity of purpose
are equally valued. 98
Second, if art is transferred, any trust funds out of which it has been
maintained should be transferred as well. In City Bank Farmers Trust Co.
v. Arnold, an art collection was transferred to Yale University by means
of cy pres and the building that housed it was sold.99 The court ruled that
Yale should also receive the trust fund that the testator had established for
the care of the art.
Not infrequently, a financially troubled museum's physical plant so decays that it can no longer properly house the art.100 Courts seem quite
willing at this point to authorize transfer of collections en masse to another museum. In some cases such a transfer is dealt with under the doctrine of deviation, as a change in the administration of a trust. When the
art institution that formerly housed the collection is dissolved, however, it
would seem that a change of purpose has occurred and that cy pres would
thus be the appropriate instrument.
Courts have exhibited a strong interest in keeping transferred assets of
dissolved art museums together; but the reported cases that reflect this
tendency all deal with charitable trusts, formed by one person. The assets
are thus arguably more coherent, or at least historically more linked together, than the vast collections of large generalist museums, which tend
to be charitable corporations.101
The transfer of an entire collection to an analogous institution, however,
may not necessarily keep it intact. In Gordon v. City of Baltimore, for
example, the court applied the equivalent of cy pres to transfer the books
from an insolvent library to another library nearby.102 The court upheld
the discretion of trustees in selling a large part of the collection which
duplicated holdings in the new host library.
When nonprofit institutions dissolve, voluntarily or involuntarily, courts
possess much potential supervisory authority. They can determine whether
the organization should be permitted to dissolve and, if the museum does
dissolve, how its assets should be distributed. Existing cases indicate that
courts have not been reluctant to exercise this power, and in some cases
have overridden trustee decisions in order to effectuate their visions of the
public good.
Some states have enacted statutes that obviate the need to demonstrate
a general charitable intent by donors in order for trust assets to be distributed to like institutions. Such statutes may help to streamline the distribution process and to remove that factual inquiry into donative intent that
may bog courts down or afford them untoward discretion in reversing the
decisions of trustees.
236
THE BANKRUPT MUSEUM
Up to now, we have been using the term "insolvency" to refer to severe

financial exigency such that an organization cannot meet debts incurred in
the ordinary course of business. The law also recognizes a second form of
insolvency, "bankruptcy insolvency." An organization experiences bankruptcy insolvency when its aggregated property is not sufficient to pay its
debts. This condition calls for a formal bankruptcy proceeding involving
the marshalling of assets, their liquidation, and the distribution of proceeds pro rata among the creditors.
Because nonprofit organizations hold assets in trust, the simple framework of bankruptcy law cannot directly be applied to them.103 Indeed, the
federal bankruptcy bode (11 U.S.C. 303(a)) exempts nonprofit organizations from involuntary bankruptcy proceedings. 104 Creditors who wish
to sue for the assets of nonprofit corporations must therefore proceed under the applicable state insolvency laws. 105 Such reported cases of bankrupt nonprofit organizations as exist, for the most part, date from the
Depression. 106
Nonetheless, there are a few points of bankruptcy law that may be relevant to charitable corporations. First, mere organization under a nonprofit charter may not in itself exempt an institution from involuntary
bankruptcy proceedings if the court finds that the volume of unrelated forprofit business activities pursued by the nonprofit corporation is sufficient
to warrant loss of exemption.107 There is no consensus on how dominant
the for-profit activity need be to result in loss of exemption. If the institution is primarily eleemosynary and pursues profitable activities that are
"substantially related" to its charitable purposes rather than representing
in themselves its dominant pursuit, it ought to be exempt.108
According to 11 U.S.C. 301, nonprofit corporations may enter voluntary bankruptcy proceedings. Very little case law exists regarding nonprofit bankruptcy, however. 109 As in other kinds of insolvency proceedings, the major questions have to do with the rights of creditors in relation
to property held in trust. Can the community's interest in preserving art
for public viewing, for example, be overridden by the interest of creditors
in having their debts paid?
The law has placed a high priority on preserving charitable property. 110
If all assets of charitable corporations were protected from creditors, however, nonprofit organizations would effectively be immune from voluntary
as well as involuntary bankruptcy, to the detriment of creditors and probably of nonprofit organizations as well, since few creditors might offer
credit if they lacked the means to collect on debts. At the same time, naked
exposure of museum assets to creditors could lead to dispersal of art works
to the highest bidders, potentially from other countries or from private
homes, in order to satisfy the creditorial appetite.
The 1978 Bankruptcy Code 11 U.S.C. 541(b), provides that trustproperty may not be levied against by creditors.111 Where assets were given
237
with specific purposes, such restrictions protect them from the creditor's
reach just as they would protect them from discretionary shifts in use by
trustees. The issue again becomes one of breadth of definition: Should all
art in a museum be regarded as tacitly held in trust for the public and thus
protected from creditors? Will trusts be implied from any gift, or must the
gift of artworks be made expressly in trust for the public?
Existing case law suggests that the unrestricted assets of charitable corporations are subject to the claims of creditors.112 Outright gifts, too, seem
to be subject to proper bankruptcy proceedings. In one case, for example,
the court determined that income from a trust estate was itself being given
outright, was not by trust terms held for restricted purposes, and thus
could be levied against.113 Generally, when trust income is to be applied
for the use and benefit of an organization, courts of equity may direct the
application of such income to the payment of debts. Courts have also permitted creditors to levy against physical assets held by charitable trusts or
corporations if they are held without restrictions.114
What, then, of art which the museum has itself bought from unrestricted
funds? Can it be levied against, or is it held pursuant to a binding public
trust? To protect the public interest, it might seem that any art held by a
museum should be protected from liquidation. But, as in deaccessioning,
pragmatism would suggest that legitimate creditors of the museum deserve
to be paid off as fully as possible. If all art were protected, any museum
might with its last bit of cash buy artworks which would then be judgment-proof.
The case law holds that assets given with specific restrictions and purposes will be protected from creditors in bankruptcy. In Hobbs v. Board
of Education, the leading case in this regard, the court found that the
endowment funds of an insolvent college were charitable trusts and thus
safe from creditors, because, in effect, they were not owned by the college.
Such property was crucially different than property that the corporation
could use freely for its own general purposes: "Where donations are made
for the general purpose of carrying on a business of any kind, though in
the form of a trust, the absolute control of the res being bestowed upon
the donee, the property is liable for debts incurred for the purpose intended. . . ,"115
Despite this protection, an insolvent museum could presumably petition
the appropriate court for cy pres relief, which would free it from onerous
trust restrictions so that it might more fully satisfy its creditors. Indeed, at
least one commentator has advocated recognition of the authority of bankruptcy courts to exercise equitable cy pres power.116 According to this line
of argument, invocation of cy pres would be most useful in cases of reorganization of the bankrupt entity.
Certainly, in bankruptcy proceedings the interests of the public must be
balanced against those of creditors. Perhaps the same experts who analyze
the quality of artwork to be culled for deaccessioning purposes could be
called in to evaluate the art holdings of bankrupt institutions. Those con-
238
sidered to be most important (by standards of excellence, popularity, or

art-historical significance) could be transferred by deviation or cy pres to
other museums and thus preserved for public enjoyment. The rest could
be sold to satisfy creditors; wherever possible, they should be sold to other
museums rather than to private collections, so as to preserve them to the
greatest extent possible for the public.
CONCLUSION
A museum does not "own" but, rather, is the steward of the art it possesses. . . .
No charitable corporation may "own" corporate property . . . in a museum, it is
the public that are the shareholders and museum trustees are legally accountable. 1 1 7
Such trustee status is a mixed blessing for the museum. On the one hand,
trusteeship protects the artworks that have been given in trust from being
sold to satisfy creditors. On the other hand, by blocking the most efficient
use and allocation of available resources, trust restrictions may seriously
hinder the attempt of museum trustees to keep the institution solvent.
The financial problems that currently plague museums require clarification of the legal standards that govern museum affairs. Because of their
necessary and increasing involvement in business activities, museum trustees should be held to the business-judgment standard of care and skill that
applies to corporations that are run for profit. This standardless burdensome that the one traditionally attached to private trustsgrants trustees
a freedom of investment and management that could greatly facilitate efficient museum administration. At the same time, this standard prevents
unwarranted judicial intervention into the good-faith exercise of reasonable business discretion.
Courts should extend acceptance of reasonable trustee business judgments into the provision of the equitable doctrines of cy pres and deviation. If trustees believe that restrictions on a fund or other asset harm the
welfare of the museum, courts should be willing to consider applying these
doctrines in order to free the assets for more efficient use, without requiring the trustees to show that the original purposes are impossible to fulfill.
An expansion of standing to enable members and patrons to sue museum
trustees for breach of fiduciary duties would adequately ensure that trustees would not abuse their power and would seek permission to change the
use of restricted assets only when and insofar as necessary.
When museums must close, courts should continue to supervise the distribution of artworks to similar institutions for continued enjoyment by
the public. To protect both the public and museum creditors, courts should
ensure that expert professionals evaluate works of art so that only the
most expendable artworks are sold. Artworks remaining after dissolution,
even dissolution by bankruptcy, should be transferred to similar institutions according to cy pres doctrines.
239
Ultimately, such a liberalized application of cy pres and deviation doctrines to allow museum trustees to use existing restricted funds and assets
where they are most needed is not in conflict with the continuing public
interest in seeing art, nor with the interest of donors in making art available to the public. Similarly, applying corporate standards to the management of museums will allow museum directors and trustees to act with
maximum efficiency for the continued preservation of the museum trust.
NOTES
1. Philippe de Montebello, "The High Cost of Quality," Museum News 62 (1984): 4649.
2. Stephen E. Weil, Beauty and the Beasts: On Museums, Art, the Law, and the Market
(Washington: Smithsonian Institution Press, 1983), 48.
3. Lawrence Vail Coleman, The Museum in America: A Critical Study (Washington:
American Association of Museums, 1935), 177.
4. National Center for Educational Statistics, Contractor Report: Museum Program Survey (Washington, D.C., 1979), 53, 67, 69.
5. W. Cary and C. Bright, The Developing Law of Endowment Funds (New York: The
Ford Foundation, 1974), p 8.
6. See, e.g., The New York Times, March 5, 1978, sec. III, p. 3, col. 1.
7. See, e.g., Complaint in the Harding Museum litigation, Scott v. Silverstein, filed Nov.
1, 1978, Cook Co. Chancery Division, Illinois.
8. J. Merryman and A. Elsen, Law, Ethics and the Visual Arts, 2 vols. (New York: Matthew Bender, 1979), Chapter 7.
9. National Endowment for the Arts, Museums USA (Washington, National Endowment
for the Arts, 1974), 139.
10. Henry Hansmann, "Reforming Non-Profit Corporations Law," University of Pennsylvania Law Review 129 (1981): 500.
11. Marion Fremont-Smith, Foundations and Government (New York: Russell Sage Foundation, 1965), 84.
12. Fremont-Smith, op. cit.
13. See, e.g., Stein v. Lucy Webb Training School for Deaconesses and Mistresses, 381 F.
Supp. 1003 (D.D.C. 1974).
14. Fremont-Smith, op. cit., 154-155.
15. Hansmann, op. cit.
16. See Zehner v. Alexander, Adjudication and Decree Nisi (Franklin Co. Orphans Ct.,
Pa.), May 25, 1979.
17. Judicial Fact-Finding, Zehner, No. 229.
18. AAUP v. Bloomfield College, 129 N.J. Super. 249, 322 A.2d 846 (N.J. 1974); and
appeal, 136 N.J. Super. 442, 346 A2d 615 (N.J. 1975).
19. Office of Ohio Attorney General, Status of State Regulation of Charitable Trusts, 5
Comm. on Private Philanthropy and Public Needs, 2705, 2710-25 (1977).
20. See Complaint, Scott v. Silverstein, filed Nov. 1, 1978, Cook Co., Chancery Division,
Illinois.
21. J. Abbott and R. Kornblum, "Jurisdiction of Attorney General over Corporate Fiduciaries under the New California Non-Profit Corporations Law," University of San Francisco
Law Review 13 (1979): 753.
22. Merryman and Elsen, op. cit.
23. Weigand v. Barnes Foundation, 97 A2d 81, 82 (S. Ct. Pa. 1953).
24. Fremont-Smith, op. cit., p 87.
25. Jones v. Grant, 344 So. 2d 1210 (Ala. 1977).
240
26. Stern v. Lucy Webb, 381 F. Supp. 1003 (D.D.C. 1974).

27. Rowan v. Pasadena Art Museum, Case No. C 322817; Sup. Ct. Cal. 1981.
28. Hansmann, op. cit. 568-569, 610.
29. Report of American Association of Museum Directors, 1971.
30. Resolution of the American Association of Museums, November 3, 1973.
31. Ibid.
32. Commonwealth v. Barnes Foundation, 398 Pa. 458, 159 A.2d 500 (S. Ct. Pa. 1960).
33. Complaint, Scott v. Silverstein, Count I, No.s 6, 9.
34. Scott v. Silverstein, Plaintiff's Draft Pre-Trial Order, 36.
35. Scott v. Silverstein, 374 N.E.2d 756 at 758.
36. The New York Times, October 30, 1980, sec. 11, p. 1, col. 2.
37. California Revenue and Tax Code, 6365: "The museum must be open not less than
20 hours/week, not less than 35 weeks/year, and be open without charge not less than 6
hours/month."
38. ALI-ABA Course of Study, Legal Problems of Museum Administration (Philadelphia,
Penn.: ALI-ABA, 1974), 274.
39. The College Art Association, Resolution Concerning the Sale and Exchange of Works
of Art by Museums, 1973, No. 7.
40. The reader should refer to individual policies of museums, such as those set forth in
Merryman and Elsen, op. cit., Part 7.
41. J. Michael Montias, "Are Museums Betraying the Public's Trust?" Museum News 51
(1973): 25-31.
42. Authors Club v. Kirtland, 248 App. Div. 82, 288 N.Y.S. 916 (N.Y. 1936).
43. ALI-ABA Course of Study, op. cit., 276.
44. Ibid., 256ff.
45. Ibid., 275-276.
46. Kenneth Hudson, Museums for the 80s: A Study of World Trends (London: UNESCO,
1977), 84.
47. Complaint, Scott v. Silverstein, Count I, No.s 12(e), 15, 18.
48. Scott v. Silverstein, Plaintiff's Pre-Trial Order, 36.
49. Karl E. Meyer, The Art Museum: Power, Money, Ethics (New York: William Morrow
1979), 118.
50. Watkinson Library v. Attorney General, 16 Conn. Supp. 448 (Sup. Ct. 1950).
51. The New York Times, July 9, 1979, sec.111,p. 13, col. 1.
52. Ibid.
53. J. Wheeler, "Fiduciary Responsibilities of Trustees in Financing of Private Institutions
of Higher Education," Journal of College and University Law 2 (1975): 210.
54. Ibid.
55. Montias, op. cit. 25-31.
56. ALI-ABA Course of Study, op. cit., 272.
57. 4 Scott on Trusts (2d), 399 (Boston: Little, Brown, 1967).
58. Fremont-Smith, op. cit., 84.
59. V. Stat. Ann., tit. 16, 3681-84.
60. 4 Scott on Trusts (2d), 381.
61. See K. Karst, "The Efficiency of the Charitable Dollar: An Unfulfilled State Responsibility," Harvard Law Review 73 (1960): 433.
62. See discussion in E. Fisch, The Cy Pres Doctrine in the United States (New York:
Matthew Bender, 1950).
63. Cocke v. Duke University, 260 N.C.1, 131 S.E.2d 909 (1963); Toledo Trust Co. v.
Toledo Hosp., 174 Ohio St. 124, 187 N.E.2d 36 (1962).
64. Harris v. Attorney General, 31 Conn. Supp. 93, 324 A.2d 279 (Conn. 1974).
65. In re Petition of Trustees of Hyde Collection, Warren Co. Sup. Ct. (N.Y. 1974).
66. Art insurance premiums have soared in recent years, especially for special exhibitions
showing loaned objects. Up to 55 percent of the Guggenheim's exhibition costs are for insur-
241
ance, for example. See Irving Pfeffer, "Insuring Museum Exhibitions," Hastings Law Journal
27 (1976): 1123.
67. Parkinson v. Murdoch, 332 p.2d 273 (Kansas 1958), p. 277.
68. Final Judgment in the Matter of the Application of the New York Historical Society
for Modifications of the Thomas J. Bryan Indenture, S. Ct. (N.Y. 1967).
69. Fisch, op. cit. 6.04.
70. Watkinson Library v. Attorney General, 16 Conn. Supp. 448(1950).
72. Cleveland Museum v. O'Neill, 129 N.E.2d 669, 1955.
73. Scott v. Silverstein.
74. 4 Scott on Trusts (2d), 348.1.
75. Fisch, op. cit., 130-131.
76. Ibid., 143.
77. See discussion in 4 Scott on Trusts (2d), op. cit., 299.4.
78. 14 C.J.S., 52.
79. Application of Arms in re Louis Comfort Tiffany Foundation, 64 N.Y.S.2d 693 (N.Y.
1946).
80. Karst, op. cit., 469-472.
81. Conversation with Leonard Easter, Volunteer Lawyers for the Arts, November 1981.
82. H. Oleck, Non-Profit Corporations, Organizations and Associations, 14th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), 376.
84. See, e.g., E. Taylor, Public Accountability of Foundations and Charitable Trust (New
York: Russell Sage Foundation, 1953).
85. See N.Y. Non-Profit Corporation Law, 1101 et seq.
86. See, e.g., Fisch, op. cit.
87. In re Will of Goehringer, 329 N.Y.S.2d 516 (N.Y. Surr. Ct. 1972).
88. Hansmann, op. cit., 576.
89. Oleck, op. cit., 376.
90. H. King, "The Voluntary Closing of a Private College: A Decision for the Board of
Trustees?" South Carolina Law Review 32 (1981): 547.
91. Veterans Industries of Long Beach v. Lynch, 8 Cal. 3d 902, 88 Cal Rptr. 303 (Cal.
1967).
92. Fact-Findings, Zehner v. Alexander.
93. Decree Nisi, Zehner v. Alexander, 83.
94. Application of New York Law School, 68 N.Y.S.2d 838 (Sup. Ct. N.Y. 1946).
95. Conway v. Emery, 139 Conn. 612, 96 A.2d 221 (Conn. 1953).
96. In re Estate of Hermann, 454 Pa. 292, 312 A.2d 16 (S. Ct. Pa. 1973).
97. Cary and Bright, op. cit., 76-77.
98. See, e.g., Olds v. Rollins College, 173 F.2d 639 (D.C.C.R. 1949).
99. City Bank Farmers Trust Co. v. Arnold, 283 N.Y. 184, 27 N.E. 2d 984 (N.Y. Ct.
App. 1940).
100. See, e.g.: Watkinson Library v. Attorney General, 16 Conn. Supp. 448 (Sup. Ct.
1950); Application of Arms in re Louis Comfort Tiffany Foundation, 64 N.Y.S.2d 693 (Sup.
Ct. 1946).
101. See, e.g., Trevathan v. Ringgold-Noland Foundation, Inc., 410 S.W.2d 132 (S. Ct.
Ark. 1967).
102. Gordon v. City of Baltimore, 237 A.2d 98 (Md. 1970).
103. See discussion in Oleck, op. cit., 365 et seq.
104. See also 9 Am. Jur. 2d 227.
105. Oleck, op. cit., 370.
106. See In re Elsford Country Club, 50 F.2d 238 (S.D.N.Y. 1931).
107. Michael Sovern, "Section 4 of the Bankruptcy Act: The Excluded Corporations,"
Minnesota Law Review 42 (1957): 203-204.
242
108. Ibid., 235.

109. Oleck, op. tit., 373.
110. Cary and Bright, op. cit., 76-77.
111. Collier's 14th ed.,
70.25, 70.26.
112. Sec, e.g., Ward v. St. Vincent's Hospital, 39 App. Div. 624, 57 N.Y.S. 784 (S. Ct.
1st Dept. 1899).
113. See, e.g., Bradshaw v. American Advent Christian Home and Orphanage, 199 So.
329, 145 Fla. 270 (Fla. 1940).
114. See Arkansas Baptist College v. Wilson, 138 S.W.2d 376 (S. Ct. Ark. 1940).
115. Hobbs v. Board of Education, 126 Neb. 416, 253 N.W. 627 (S. Ct. Neb. 1934).
116. M. Reese, "Cy Pres Powers of the Federal Bankruptcy Courts," Fordham Urban Law
Journal 5 (1977), 435, 443.
117. Meyer, op. cit.
IV
NONPROFIT ENTERPRISE IN
COMMERCIAL CULTURAL
INDUSTRIES
11
Politics and Programs:
Organizational Factors in Public

Television Decision Making
WALTER W. POWELL and REBECCA JO FRIEDKIN
The standard criticisms of commercial television are by now familiar: It is

an extremely profitable, oligopolistic industry that promotes throwaway
commodities and conspicuous consumption; it is a "wasteland" offering
bland, homogenous fare; and the combination of industry concentration
and a limited range of programming results in little that is innovative, as
well as a failure to present a diversity of views.1
Public television, one of the few widely accessible alternatives to commercial television, is sometimes held up as a more worthy enterprise; its
stated mission is to strive for both excellence and diversity. The extent to
which public television meets that challenge is an important question.
Commercial television operates according to a simple set of rules: Programming decisions are responsive to a market system based on ratings.
In contrast, participants in public television do not have clear criteria to
guide them in making decisions and evaluating the results. Lacking objective tests of efficiency or effectiveness, public television is insulated from
the benefits and penalties of a market-based price system. Public television
must cope with diverse and uncertain funding sources and respond to multiple, and sometimes incompatible, goals. The history of public broadcasting reveals a basic lack of agreement as to what it is and what its mandate
should be.2 The stated mission, in effect, is to offer all things to all people:
programs that meet the needs of minority and specialized taste groups and
organization that achieves the Federal Communication Commission's goal
An earlier version of this chapter was published as "Political and Organizational Influences
on Public Television Programming" by Walter W. Powell and Rebecca Friedkin in Mass
Communication Review Yearbook, Vol. 4 (1983), pp. 413-438. Copyright 1983 by Sage
Publications. Reprinted by permission of Sage Publications, Inc. Research support was generously provided by the Program on Non-Profit Organizations, Yale University. We wish to
thank Paul DiMaggio and John Simon for many helpful comments on an earlier draft.
246
Nonprofit Enterprise in Commercial Cultural Industries
of localism, or community control. Recent events have brought to the fore

basic questions about the legitimacy of public television: Are the costs justified given the size of the audience reached? Our research was conducted
at a time (1980-82) when public television confronted fundamental questions about its mission and purpose, as well as faced sharp reductions in
operating revenues as a result of federal budgetary cutbacks.
In this chapter we examine how external political forces and internal
organizational features influence which programs are shown on public
television. Drawing upon interviews and field work conducted from 1980
to 1982 at WNET-TV (New York City, New York, and Newark, New
Jersey) and CPTV (Connecticut), a consortium of five small stations with
a central office in Hartford, 3 we begin with an analysis of the environment
of public television and the processes involved in financing and distributing
programs. We then turn to an examination of the organizational structure
of the two television stations and show how departmental arrangements,
staff politics, and program characteristics shape decision making.
The public television system operates on two levels. At the local level
there are some 300 public stations. These stations can be roughly divided
into two types. A few large stations regularly produce programs for national broadcast. WNET is the largest station in the country, often touted
as the system's "flagship" station. The vast majority of stations, however,
are small and produce only a few hours of local programming each week.
These "consuming" stations purchase virtually all of their programming.
CPTV falls in this category.
At the national level, the Corporation for Public Broadcasting (CPB),
the Public Broadcasting Service (PBS), the National Association of Public
Television Stations (NAPTS), and National Public Radio (NPR) are the
organizational entities that manage and link the public broadcast system
together. The Corporation for Public Broadcasting is a private nonprofit
organization, financed by the federal government, and governed by trustees appointed by the President. The main conduit through which federal
monies flow to public television, CPB distributes money directly to stations, finances program development and production, and provides funds
for PBS and NPR. The Public Broadcasting Service operates the satellite
interconnection, distributes programming to member stations, and makes
long range plans for public television. The National Association of Public
Television Stations is the station membership organization and represents
the local stations in Washington. National Public Radio fulfills all of these
functions for public radio stations. Although public radio and television
are separate operations, NPR receives 20 percent of its financing from CPB,
thus setting the stage for disputes with public television over the allocation
of funds.
The public broadcasting system is both administratively complex and
loosely organized. "Turf battles" are not uncommon. Conflicts over the
relationship between CPB and PBS, between radio and television, and between larger producing stations and small consuming stations are frequent
Organizational Factors in Public Television Decision Making
247
and acrimonious. Power struggles are ongoing, as each element in the system jockeys to use the rapid changes taking place in public broadcasting
to its own advantage. We will not review these disputes here, but we do
examine the influence these various national organizations exert over decision making at the local level.
In addition to the various organizations that constitute public broadcasting, public television stations turn to many other constituencies for
resources and support. These relationships are crucial for a station's financial health, and differences in the structure and program output of stations
can be explained by variations in the flow and allocation of the resources
they receive.4
Public television stations represent a peculiar hybrid of nonprofit, public, and proprietary organizational forms. Public television operates like a
public agency because as much as 70 percent of the budget of a small
station comes from federal, state, and municipal governments. A typical
public station also receives approximately 25 percent of its financial support from members and expends considerable effort on membership and
fund-raising drives and auctions. In this manner, public television resembles many voluntary associations. Along with a great many other nonprofit
organizations, public television solicits financial support from private
foundations and corporations. In addition, public television competes with
commercial television for the attention of viewers and vies with network
and cable television, as well as many of the newer forms of video entertainment, for artists, producers, and programs.
SOURCES OF FUNDING
A major source of uncertainty for public television is the precarious and

turbulent nature of its funding environment. Not only is money scarce, but
external funding relationships are unpredictable.5 Station executives spend
a great deal of time and energy developing, maintaining, and smoothing
relationships with key funders. The yearly funding cycle requires much
staff time, makes long-range planning difficult, and increases the possibility that funding decisions shape program content. We briefly describe each
of the five major sources of funding for public television, its importance,
and the unique contingencies and problems it poses.
Federal Funding
The federal government, although not the largest funder in absolute terms,
has been the most important continuous source of money for public television. In fiscal year 1983 the federal government supplied 17.1 percent of
the income for public television.6 The federal government is the only funder that directly affects the entire public television system, through its appropriation to CPB. More than 40 percent of CPB's budget must be "passed
248
through" directly to the stations, in proportion to their ability to raise

matching, nonfederal funds. Known as Community Service Grants (CSGs),
these federal matches are one of the few "no-strings-attached" grants to
public television stations.7
The degree to which funding is uncertain is well illustrated by the history of federal support for public television. Long-standing concerns that
public broadcasting be financially insulated from political interference,
through a self-sustaining and long-term funding mechanism that could allow the planning necessary to produce quality television, have often been
enunciated but never implemented. The current administrative and funding
arrangements were established by the Public Broadcasting Act of 1967,
based partly on the recommendations of the Carnegie Commission on Educational Television. The Commission suggested that the financing of public television be accomplished through a tax on television sets (as in England). Intensive lobbying by television manufacturers killed this proposal,
and no alternative was found; instead CPB is funded from general revenues on a year-to-year basis. Although these appropriations increased substantially from $5 million for fiscal year 1969 to a peak of $172 million
in fiscal year 1982, neither long-term security nor insulation from political
pressure has been achieved.
The most dramatic case of political interference occurred in 1972 when
President Nixon vetoed a two-year, $155 million authorization for CPB.
Although he justified the veto on the grounds that local stations needed a
greater voice in public television,8 it was widely known that the administration was displeased with the content of many programs, especially such
public affairs series as The Great American Dream Machine (a political
cabaret with a strong antiwar bent), Washington Week in Review, and
Black Journal. The Nixon veto led to a reduction in funding (to $110
million), and demonstrated the political vulnerability of public broadcasting.9
In response to the Nixon veto, Congress began appropriating funds for
CPB up to three years in advance, beginning in 1975 for fiscal years 197678. This mechanism was intended to provide more stable and unobtrusive
federal support and to allow public broadcasting to engage in more effective long-term planning. The principle of advance funding, however, has
not operated consistently. Although funds have generally been appropriated at least two years in advance, the Reagan administration's budget
cuts have proved to be the most serious shock to the system since the 1972
veto. The original Reagan budget proposals recommended the rescission
of appropriations already made for fiscal years 1982 and 1983. Congress
rejected budget reductions for 1982, but cut the 1983 CPB appropriation
by 20 percent. The anticipated stability of advance funding was destroyed,
and federal budget battles have plagued public television throughout the
Reagan years.
The budget reductions created obvious financial problems, and the protracted political bargaining has intensified an already high level of uncer-
249
tainty. For example, in a four-month period in 1981, the budget for fiscal
year 1984 was reduced from $172 million to $137 million, then to $130
million, next to $105.6 million. The administration then recommended a
further cut to $95.5 million. Eventually $130 million was settled on. In an
unanticipated manner, the advance funding mechanism has exacerbated
public television's budget problems by making it harder to receive financial
commitments. For the past several years, the federal government has been
operating under continuing resolutions rather than formal budgets. This
has meant that no budgetary allocations are actually fixed, for they can be
changed every time Congress extends the continuing funding resolution.
Under such a process, the fact that public television funds are set in advance only means that there is more opportunity to change them.
Additional federal support for public television comes from the National
Endowments for the Arts and the Humanities, the National Science Foundation, the National Institutes of Health, and other government agencies.
These grants are typically for development and production of specific programs, rather than for general purpose funds. Program-specific funds are
also available through CPB.
Two important points about program-specific funding from federal
agencies are worth noting. First, the process of obtaining funding is laborintensive and lengthy, often taking several years. Proposals for funding
must be reviewed by a panel of experts, who must reach a consensus before granting final approval. Second, federal funding of this sort is commonly used as "seed money" and usually requires matching funds from
nonfederal sources. Partial funding from the government lends legitimacy
and prestige to a proposal that is then submitted to foundations for additional support.10 Thus, even small reductions in federal spending have a
far-reaching impact on public television programming. Moreover, budget
cuts may lead public television stations to avoid risk in order not to jeopardize future funding from the government or private underwriters.
State and Local Funding
State and local governments, along with state colleges and universities,
represent the largest portion (34.3 percent in fiscal year 1983) of financial
support for public television. It is at the state level that direct political
pressures, or fear of such pressures, most clearly affect stations, particularly small consuming stations. Through both overt and implied means,
state governments place constraints on public affairs programming. According to a former WNET executive, the restrictions are greatest at stateoperated stations.11 "Most of them simply can't do public affairs shows
that look critically at their own state government because of the funding
constraint. There is a terrible baggage that comes with state money." Even
community-run stations, such as WNET and CPTV, feel pressures to deal
favorably with state officials. The WNET executive just quoted noted that
despite WNET's diverse sources of support, "We have to ask the majority
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leader of the State Assembly to come on the air and answer questions. We
do this stroking because we want the money from Albany." CPTV executives were proud of their coverage of the state legislature, noting that it
was a service not provided by commercial stations, but they also acknowledged the value of such coverage in obtaining state funds.
Foundations
Private foundations were once the single largest source of contributions to

public television. Most notably, the Ford Foundation provided $292 million,12 including construction grants, from the early 1950s to the mid1970s. During public television's early years, Ford grants literally kept the
system alive. Ford Foundation support was phased out, however, ending
in fiscal year 1977, and foundation grants now constitute less than 3 percent of public television's revenues.
As a rule, foundation grants are available for the support of specific
programs or artists. Foundation support has been crucial to bringing innovative, "risky" programming to public television. A notable project is
the TV Laboratory at WNET, established in 1972 with grants from the
Rockefeller Foundation and the New York State Council on the Arts. Additional money has come from the Ford Foundation and the National Endowment for the Arts (NEA). The TV Lab was created to explore the
artistic and technological potential of television through research, experimentation, and the creation of innovative projects for broadcast, and it
serves as a major link between public television and independent filmmakers. The Lab has run an artists-in-residence program and has produced or
funded such diverse programs as Making Television Dance, with Twyla
Tharp; Lathe of Heaven, a speculative fiction program; programs exploring abstract video graphics; and numerous powerful documentaries such
as Vietnam: Picking Up the Pieces, and Health Care: Your Money or Your
Life. More recently, the TV Lab coordinated a series by independent producers titled Non-Fiction Television. The series included hard-hitting documentaries on the CIA and US foreign policy and on the use of deadly
force by the police.
Corporations
In the early 1970s, as foundation support declined and federal support

became politically contentious, public broadcasting turned to major corporations for program underwriting. It was not a role that corporations
actively sought for themselves. The corporate share of public television
revenues has grown from 4 percent in 1973 to almost 15 percent in 1983.
But a much larger percentage of the budgets of producing stations comes
from corporations. For the period from 1977 to 1982, corporate underwriting accounted for 22 to 25 percent of WNET's total revenues. More
important, almost half of the national programming on public television is
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financed in part or in full by corporate donations. Corporations generally

fund the production and presentation of such continuing series as Great
Performances or Masterpiece Theatre, rather than contributing discretionary or development money or financing individual programs. The logic
behind this policy is clear: A major series has high visibility, which corporate public relations departments can use to their advantage.
Corporate underwriting grew dramatically during the 1974 oil crisis, a
time when U.S. oil companies were under heavy public criticism. Support
of public television provided the oil companies, who remain the primary
corporate contributors to public television, with one answer to their apparently declining legitimacy.13 Yet continued increases in corporate support for public television are not guaranteed. More nonprofit organizations now compete for corporate dollars, and pay and cable television offer
alternatives for corporations that wish to use the television medium to
develop their corporate image or deliver a message to upscale audiences.
Some researchers suggest that corporate giving is motivated more by the
desire to influence public opinion than by a sense of social responsibility.
Ermann argues that the operative goal for corporate philanthropy is "milieu control," or image management. Burt found that corporations in industries dependent on individual consumption are most involved in philanthropy. Corporate philanthropy is also positively associated with general
advertising expenditures, a more direct form of image building.14
The underwriting of public television shows can be seen as a form of
specialized advertising. Audiences for the shows supported by corporations
tend to be well educated and well-to-do.15 Barnouw argues persuasively,
and our research substantiates, that most corporations interested in image
enhancement want their names associated with non-controversial, highquality showsshows that he calls "safely splendid."16 The director of
public affairs programming at WNET said that the biggest difference between public affairs and cultural programs involves problems with underwriters. He noted ironically that "Exxon had the right idea doing Live
from Lincoln Center. Mobil Oil had the best idea when they funded Upstairs, Downstairs. These are benign shows. They are not offensive, they
are not going to get anyone angry. Public affairs shows get underwriters
angry."
Nothing quite comparable to this direct relationship between program
content and corporate sponsorship currently exists in commercial television. Corporate underwriting of public television resembles the early days
of network television, the so-called golden age when advertisers were commonly sole sponsors of programs.17 The advertisers were very much concerned with the image of their products, hence they routinely read scripts
in advance of filming and sought to approve or reject actors, writers, and
directors. As the television audience grew, however, advertising costs rose
dramatically. Advertisers could no longer afford to sponsor an entire show.
Today network television is a seller's market, with companies standing in
line to purchase time. Advertisers no longer screen scripts in advance; in-
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stead they view completed shows and if they disapprove, they arrange to
purchase time on different episodes or shows. Although advertisers on
commercial television will on occasion cancel their ads because they disapprove of a program's content, thus influencing the program's chances
for renewal, such actions are atypical.18 In contrast, corporate underwriting of public television is highly concentrated among a handful of firms.
There is no queue of firms anxiously waiting to underwrite shows. Hence
the few companies who contribute have considerable leverage, if they choose
to exercise it, over program content. Given these constraints, station personnel assume that most corporations will fund only certain types of programs: prestigious cultural fare, well-balanced public affairs shows like
The MacNeil/Lehrer Newshour, or shows that appeal directly to corporateexecutive viewers, such as Wall Street Week or Firing Line. Proposals
for other kinds of shows are rarely submitted to large corporations for
consideration.
Individuals
Member contributions are another primary source of funding. They have

increased in recent years, primarily because of more strenuous and sophisticated solicitation by the stations. In 1979, members accounted for 11.8
percent of total income; by 1983, individuals contributed 23 percent of
the budget for public television.19 Nevertheless, only 1 in 10 people claim
ever to have contributed to their local public television station; among
frequent viewers, only 27 percent report ever having given money to public
television.20 Generating subscription dollars requires considerable expenditure of time, money, and volunteer effort. Stations are plagued by an
ongoing tension between the need for on-air promotional events, such as
pledge drives and auctions, and the possibility of irritating or even disaffecting viewers with extended interruptions. Connecticut Public Television
recently conducted a pledge week with a "soft sell" campaign, for which
they received much praise, but little money. The vice president for development commented that "compliments mean trouble. It means you're not
getting money, you're getting compliments."
The mix of funding sources, their respective contingencies, and the political tensions within the system combine to shape programming decisions, a point we underscore in our analysis of the program selection and
distribution system.
PROGRAM SELECTION AND DISTRIBUTION:
ADMINISTRATIVE CONSTRAINTS
How does a program come to be shown on public television? Although

public television does not operate as a centralized network as CBS, NBC,
or ABC do, a core of programs are aired by most member stations. These
programs are obtained by stations via two mechanisms, the Station Pro-
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gram Cooperative (SPC) and free distribution by PBS to member stations.

The Station Program Cooperative, administered by PBS, was established
in 1974 to decentralize decision making in public television and give more
voice to many small consuming stations. Producers, including public stations and independent producers, submit several hundred program proposals on a wide variety of topics at an annual program fair. The stations go
through several rounds of bidding to narrow the number of selections to
30 or 40 proposed programs. The final cost of a program to a station is
based on the number of other stations purchasing the show and the size
of the station's Community Service Grant. Producers modify their proposals during the early rounds to try to accommodate stations' needs and to
garner support. Stations are not committed to the purchase of a program
until the final round of bidding, and only those stations that purchase a
program may air it. The entire proposal and selection process takes about
six months.
Program selection mechanisms, including the SPC, are a major source of
conflict between large and small stations. The SPC is dominated by large
producing stations that are reputedly unresponsive to the needs of smaller
stations. The SPC buyer at CPTV complained about the purchasing power
of the large stations: "because of their size, and the pricing formula, they
can out-vote others because they have so much money." Large stations
include administrative overhead costs in their program budgets and then
pass these costs on to other stations through the SPC. This makes stationproduced shows more expensive than programs produced by independent
filmmakers, a fact resented by small stations with limited budgets. Small
stations also complain that they are not fairly credited for their role in
supporting the productions of large stations. The station manager at CPTV
stated that "the system is collectively financed by everyone, but WNET
and WGBH [Boston] get all the credit." However, the SPC buyer for CPTV
pointed out that there is a strong incentive to buy programs through the
SPC rather than through individual acquisition because satellite transmission of core shows by PBS eliminates many technical problems.
The SPC was intended to alleviate the powerlessness of small stations
and institute a more democratic choice process for nationwide programming. Although generally recognized as an improvement over previously
more centralized decision processes, the SPC has not lived up to expectations, and it has been widely criticized.21 Despite its free market intentions,
for example, the SPC is slow, administratively cumbersome, and very conservative. Katzman and Wirt found that purchased programs tended to
have "at least one or two and often all three of the following characteristics: (1) prior national or multi-station exposure, (2) a low price and/or an
exceptionally good value per unit time, and (3) a bandwagon effect."22
The result, they point out, does not necessarily reflect the desires of the
stations. Conservative choices can be artifacts of the selection process. "If
15 new programs are each supported in the voting by 10 stations, none of
the new programs would be purchased even through the 150 stations all
wanted something new."23 The SPC is not the only reason why few new
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programs are shown on public televisionestablished programming is easier to obtain underwriting for and helps retain audiencesbut it does exacerbate the situation.
Free distribution by PBS is a second mechanism by which programs come
to be shown, one that delivers a mixed bag of goods. Fully underwritten
programs do not go through the SPC but are made available to all stations
free of charge. Individual stations decide whether or not to air such programs, but there is clearly a strong financial incentive to broadcast free
material. Because these programs are not subject to a bidding process, underwriters have substantial control over program content. The popular series Masterpiece Theatre, funded by Mobil Oil, is an example of a core
prime-time program provided in this manner. Interestingly, WGBH, the
producing station, did not originally want to acquire the highly successful
series, Upstairs, Downstairs, for Masterpiece Theatre, but was urged to do
so by Mobil.24
Free program offerings, in spite of their seemingly benign nature, can
also generate tensions between large and small stations. For example, several major corporations sponsored Free to Choose, a series based on the
writings of conservative economist Milton Friedman that extolled the virtues of laissez-faire capitalism and was produced by the Erie, Pennsylvania
public station. By making the program freely available, the Erie station
received much national exposure. With a program such as this one, there
is pressure on large stations to carry the free program. The director of
broadcasting at WNET noted that the producing station "may not care
whether Cleveland picks it up, or Portland. But they most definitely want
it to be seen in New York, and if WNET turns down these shows, especially those that are free, we are seen as being unresponsive to the system."
The programs purchased through the SPC or provided free by PBS are
generally the "tried and true" of public television. They are usually of high
quality, and they receive the great majority of corporate underwriting funds
and program-specific government grants. But there are two other major
sources of programming, ones that provide more varied and less expensive
choices for the stations. The Inter-regional Program Service (IPS), run by
the Eastern Educational Television Network, operates as a minimarket for
programs, somewhat like the SPC, but different in several respects. First,
IPS makes programs available that have already been produced, whereas
the SPC offers program proposals and occasional pilots. A program buyer
at WNET jokingly described the difference between the SPC and the IPS
as:
At the IPS you can watch what it is you are going to buy. At the SPC you read a
proposal and try to guess if the station can really deliver it. They might promise
Liza Minelli in a song series, but then they'll get someone off the streets and say
"well, actually she's the same size as Liza." So, at IPS it's an easier choice.25
Second, programs acquired through IPS are generally less expensive because the primary production costs have already been paid. Third, the IPS
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is more flexible than the SPC because it meets frequently, has fewer participants, and uses a simpler bidding process that links the stations and producers directly. Inter-Regional Program Service programs constitute a small
portion of a station's prime-time schedule, so there is less urgency and the
bargaining is less complex than at the SPC.
Finally, IPS and regional networks provide programs that are more suited
to a local market than the programs nationally broadcast by PBS, for which
PBS requires clearance for broadcast in all public television markets. Stations in large metropolitan areas, such as WNET, often purchase programs
from IPS that would be considered too risque, because of language or nudity, for a PBS national feed.
Stations also acquire programs directly from such sources as foreign
television producers and networks, independent producers, and other public stations, which sometimes sell programs on a station-by-station basis.
The documentary Police Tapes, for example, was shot on location in the
South Bronx by WNET. The show won numerous awards, had extensive
international distribution, and garnered exceptional ratings in New York.
It was eventually purchased by ABC for network broadcast, but only after
first being rejected by the SPC because it was considered too controversial.
Rather than making it freely available, WNET sold Police Tapes to about
20 public stations directly.
Small stations depend almost exclusively on the SPC and free PBS distribution for their programming, partly because they cannot afford the
operating costs of long broadcast days, and partly because they lack the
discretionary funds for independent acquisitions. As a result, the conservatism and bandwagon effects of the SPC and the financial incentive to air
free programs leave consuming stations little discretion over their primetime schedules. In contrast, large stations have considerably more program
options. Longer broadcast days provide more time slots for special acquisitions, which can be funded from larger discretionary budgets.
Large stations have greater influence on program content for the whole
system because of their direct involvement in program production. The
major producing stations, such as WNET and WGBH, are responsible for
most national programs. In contrast, consuming stations produce a few
hours a week of local programming, usually public affairs or news shows.
These local programs are often strongly shaped by local political realities.
Moreover, locally produced programs are generally difficult to underwrite
because of their small viewing audience. During the budgetary crisis of the
1980s, many stations have had to cancel or drastically reduce their local
programming. Nevertheless, these shows are perceived to carry out an important component of public television's mandate. The station manager of
CPTV noted that local programming is necessary to maintain a good staff,
and thus a strong station. "Cutting local programming kills the station. It
kills us in terms of what our mission should be, what our staff wants to
be doing, and retards our building for a stronger future."
The role of independent producers deserves special comment. Although
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public television has provided a major forum for independent producers,

the relationship between producers and stations has been strained, and
access to the public airwaves is limited: Only about 5 percent of public
television programs are made by independent producers. The CPB has attempted to improve relations with independent producers by offering them
direct program grants. Although direct funding of independents relaxes
financial constraints, the lack of sustained contact with stations during the
production phase may ultimately mean that the independent's work will
not be deemed suitable for broadcast through PBS. This was the case with
the final segment of Peter Davis's documentary, Middletown, which included teenagers' frank discussions of race, sex, and drugs. PBS required
cuts in the segment before approving it for broadcast. The producer refused and withdrew the last show. Disturbed by the ensuing public controversy, PBS attempted to provide "balance" by offering an "objective"
commentary on the series as a final replacement show. Despite frequent
criticism, independent producers often prefer public television to commercial television because public television is willing to broadcast a documentary in its entirety. Network television, on the other hand, uses only short
segments of a documentarian's footage, usually weaving them into the evening news.26
These tensions illustrate the widely divergent demands made upon public television by various constituencies who seek to use the system for their
own purposes. Programming decisions are influenced by financial conditions at local stations, the amount of underwriting money available for
particular shows, the need to placate various supporters, concerns over
station morale, and the quality of relations between stations and creative
artists.
Given the financial dependence of public television, local stations may
appear to have little choice or control over programming. This is often
true for smaller stations, as subsequent analysis of CPTV will show. However, larger stations can and do exercise power over programming decisions. An analysis of the internal organization of a large public station,
WNET, illustrates how such stations decide which programs to produce
for national broadcast.
STATION ORGANIZATION: INTERNAL CULTURES AND CONFLICTS
A large public television station is a loose confederation of various autonomy-seeking groups. Most public stations have multiple, and often conflicting, goals. Various groups, both inside and outside the station, attempt
to put public television to their own use. For artists as well as corporate
funders, public television is a vehicle for delivering a message, a resource
that interest groups seek to appropriate. In this respect, public television is
a pluralist entity: many disparate groups seek to "capture" it as a means
of serving their own purposes. The managers of public television stations
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also have their own missions and visions and are, naturally, concerned
with the continued existence of their stations.
The most salient internal conflict that affects program choice and content, evident at both WNET and CPTV, is between programming staff,
responsible for the development and production or acquisition of programs, and the funding staff, charged with obtaining program-specific grants
from corporations, foundations, and federal agencies.27 Although specific
administrative arrangements vary from station to station, this internal conflict is common to stations across the country. (Indeed, some variant of
this problem vexes most nonprofit organizations in which product development or service delivery is separated from fund-raising). As a general
rule, programming staff are primarily concerned with the quality of program content, and they believe that funding staff should help them finance
the programs they choose. Personnel responsible for raising money are more
concerned with the ease with which financial support for a program can
be secured and the maintenance of long-term funding relationships, and
they want programs to be developed with these aims in mind.28
Perhaps the clearest example of the programming/development conflict
was at CPTV, where, because of the station's small size, the problem was
an interpersonal dispute rather than an interdepartmental issue. The director of programming described the conflict as "a power thing. . . . We
evaluate our activities differently. Development is concerned with how much
money and membership are generated by a program. I am concerned with
audience. If 17,000 people watch Monty Python, that's good. I'm not as
concerned with how many of them give money." The conflict between
these two organizational functions is evident in three aspects of the programming process: program content, program scheduling, and program
funding strategies.
Program Content
Most decisions about the content of specific programs, as well as ideas for
program development, are the purview of the programming department.
At WNET, underwriting personnel are frequently displeased with program
decisions and want greater influence in these matters. The most common
complaint of the underwriting officers at WNET was that Programming
does not consult with them sufficiently during the program development
stage. One underwriting officer bluntly stated, "Program development is
not a two-way street. If it were, funding would be easier to obtain. We
know what kinds of programs the corporations and foundations want."
Another underwriting officer recalled an instance when a major corporation was interested in supporting a national public affairs show, but he
was unable to go to Programming and say, "Look, 1 have a corporate
sponsor, let's produce another show." He was distressed that WNET could
not respond to opportunities such as this, but did not consider whether or
not WNET should produce another public affairs show, given its current
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mix of productions and program schedule. Another underwriting staff

member's comment, "A lot of the program ideas circulated around the
station don't fit well with corporate interests," clearly illustrates the divergent premises on which the two departments operate.
During our field observations, changes were introduced to increase the
amount of input that underwriting staff have in program decision making.
An executive in charge of underwriting described these changes as follows:
It used to be that Programming would decide they wanted to do a show on dance.
They would develop it and then we would get, through the interoffice mail, a sheet
saying, "we're going to do this dance program," and then we would have to go
out and sell it. That has changed. Now, from the very outset of serious discussion
about a project, someone from my department is involved with Programming in
the discussion of the likelihood of funding, the content of the show, what sort of
competition there is for the show, and so on.
This executive stressed the collaborative nature of the relationship between Programming and Underwriting. His staff's reaction, however, was
mixed. One officer found her role in program decision making enhanced,
noting that:
Someone from Underwriting is there from the start so that major decisions are
made in conjunction with us. I would know we couldn't raise $500,000 for a one
hour show so I would tell them to cut the production costs in half. Or, I would
explain that a particular program should have a host, because you can take a host
on a ten city tour to raise money. Or, I might tell them to get the program developed by October since there's a foundation deadline in mid-October.
Another underwriting officer painted a less rosy picture. She described her
limited input into program development:
We have ideas for programs, we send them to Programming, but we don't get
anything back until the show has been decided upon. In some cases I'll have some
input into marketing. There was a summer musical series that they wanted to do.
I told them that if you want to sell this series you need to add four cities to the
sites, and that will make the shows much more appealing to underwriters. So,
really, my input is catch-as-catch-can.
A member of the publicity department also expressed a need for marketing

input into program decisions. "For example, with the Dick Cavett Show
I'll tell the producer that the ratings sweeps are coming up and Cavett
should schedule the best possible guests. The production units simply aren't aware of the importance of ratings. They're only starting to accommodate these requests."
These comments illustrate the widely held view among nonprogramming
employees that program development decisions should take into account
potential audience size and the chances for obtaining underwriting support. Some underwriting officers evinced little concern for program content. One stated that she found "no moral imperative in public TV." Other
staff were more inclined to balance financial and marketing concerns with
respect and pride in high-quality programming. One marketing employee
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commented that "at a commercial station, program content would never

be separated from marketing issues, as they are at WNET." In public TV,
she said, "programming is more important than sales, whereas in commercial TV programming is a slave to sales." One underwriting officer spoke
of the need, in theory, for a balance. "I care about the substanceand, of
course, the goal for all of us is good programmingbut right now, money's really my main concern."
Programming employees, by contrast, feel that program development and
content are their prerogative. A programming director at WNET, commenting on the high quality of public television programming and on his
disdain for concern over ratings, lamented, "People in public broadcasting
used to think they were doing God's work. They felt they were doing
good, worthwhile shows, and that audience size was not something that
was relevant to a decision about program content."
Program Scheduling
The interests of programming and underwriting or development departments often conflict during quarterly fund-raising drives. Public television
has devoted a great deal of market research to the analysis of what types
of programs generate the most membership dollars. Based on this information, the director of development at CPTV feels he "should be able to
determine what gets on the airparticularly during the fund-raising weeks."
Local programming is usually dropped during pledge weeks because it has
been shown to attract few new members. This practice, of course, runs
counter to the programming department's priorities. In explaining a pledgeweek schedule, the programming director pointed out that "at 7 P.M. we
will not drop local programs. They are usually bumped during membership weeks, but I am concerned with keeping my staff happy, and I want
those programs on the air."
The major determinant of program scheduling is the mix of programs
purchased by a station through the SPC. These programs are scheduled by
PBS, but some flexibility is retained at the station level. Most nationally
distributed programs are "fed" by the PBS satellite several times during
the week. A station may air a show at one of those times or tape it and
air it later. Since it is easier and cheaper to air programs when PBS feeds
them, SPC purchases generally set a good portion of a station's schedule.
At CPTV, the director of programming entered a recent SPC purchase round
with two lists of programs. The "A" list was her first priority and the "B"
list was to be purchased with whatever funds remained. In drawing up her
lists, she was guided by personal preference and viewer appeal. A show's
prospects for obtaining local underwriting did not influence her choices.
In fact, she deliberately included some programs that were difficult to underwrite in her "A" list. She noted that the development department was
displeased with her plan but said "that's the way I want to do it, and as
long as I get support from high enough places, I'll do it this way."
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A final example of scheduling considerations involves the decision to

counterprogram against commercial stations. A programming executive at
WNET noted that, for example, 10:30 P.M. on Sunday is an awkward time
slot. "If someone is watching commercial television at 10:00 the chances
of them changing the channel to WNET at 10:30 are slim, since no commercial shows end at that time." He complained that he cannot convince
other people at the station of the importance of lead-ins and scheduling
issues, even though these concerns are commonplace in commercial television. In contrast, another programming executive believed that WNET
has a core, loyal audience that is different from the audience that watches
commercial TV, and that "trying to schedule against the networks is not
a winning game for WNET."
Program Funding Strategies
Programming staff tend to resent pressures to concentrate on "fundable"

fare. They feel that only a narrow range of programs appeal to corporate
underwriters and do not want to restrict their work to such shows. Programming personnel believe their charge is to create excellent alternative
shows that should be supported on the basis of their quality, not marketability. Of particular concern to Programming is the "inordinate" amount
of time underwriting officers spend on a small handful of national productions.
A marketing person at WNET expressed a different view when he stated
that "underwriters want younger male audiences because they're more influential, which is why The MacNeil/Lehrer Newshour is so popular with
corporations. Science shows have high marketability for this same reason."
Interest in specific target audiences by corporate underwriters means that
many programs receive little or no attention from the underwriting department. A WNET proposal for a children's program, partially funded by
a CPB matching grant, is a good illustration of the problem. Although half
of the money was secured by Programming, Underwriting was very slow
to pursue the additional funds. After several months of inactivity, a programming officer began pressuring Underwriting. However, he was all too
aware of the realities of the situation, noting that "kids' shows are hard
to fund, since kids don't go running to their parents telling them to buy
Exxon."
Local programming also receives little attention from underwriting departments. Virtually all corporate support goes for nationally broadcast
programs. Underwriting maintains that local programs are not comparable
in quality, have smaller audiences, and thus are difficult to fund. Programming people counter that Underwriting does not even try to finance local
shows. This problem is particularly acute at CPTV and, on occasion, Programming secures financing for local productions on its own, much to the
displeasure of the development department. In one instance, a programming employee learned from a friend at an insurance firm that the company had considered underwriting a program and would be interested in
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a musical variety show with appeal to minority audiences. The company's

interest was well suited to a weekly music program produced by the station that featured local ethnic musicians. The development department,
preferring to approach a company for a larger sum to help underwrite the
costs of purchasing an expensive national show, complained that a major
company's support was "wasted" on a "small potatoes show."
There is also conflict over what types of business firms are appropriate
underwriters and worth the efforts of the development department. At CPTV,
Monty Python's Flying Circus was underwritten by Nimbus Waterbeds,
an atypical business supporter. Although Programming welcomes such an
arrangement and wants more support from small businesses, Development
prefers to devote its time to courting large corporations that can provide
more money.
Decisions about the allocation of underwriting officers' time also determine the prospects of special programs. Such programs are seldom underwritten. One underwriting officer at WNET stated:
It's simply not worth my time to go to a corporation to ask for money for a small,
one-shot show. I only go to corporate underwriters if I have a particularly attractive package and I can give them good service so they can see how public TV
works, and potentially they might become a big underwriter.
Underwriting officers at WNET were very concerned that good relations

be maintained between the station and corporate supporters. One underwriting officer described her job as "servicing" corporations. She noted:
The station must have a commitment to their corporate underwriters. We should
let them know what the programs are about, and who the guests will be. We
should send them reviews and clippings of the shows. Servicing involves stroking
them, it involves inviting them to special events, it involves lots of other possibilities for entertaining them. In short, you have to fully execute the contract. I see
my job as sales. There is a lot of prejudice here about the mission of public TV
and many people here don't want to be bothered with the job of raising money.
The same underwriting officer emphatically stated that corporations do

not influence program content, "although clearly you can't find underwriting for programs that are biased in viewpoint or very avant-garde." The
extent of her self-censorship was evident in her approach to corporations:
Some corporations have a negative opinion about public TV. I don't sell programs
to these corporations until I know what message they would like to get across . . .
If we want corporations to get involved, we have to give them more. A proposal
should simply list the priorities for the corporation. What are the things that could
be gained from underwriting this show? I am constantly pressuring this station
with the idea that corporations have to have something visible in return for underwriting a show.
At WNET the programming staff has a strong commitment to the station's flagship role as a major national production center. The largest station in the public television system, WNET is perceived to have an obligation to set system-wide policy by example. This requires a commitment
262
to both quality and innovation. The director of programming pointed out

that the station is also accountable to its local viewers, whom he believes
are the "smartest and most stringent in their demands of any public broadcasting audience in the country." He went on to comment that the station's location in New York gives it a dual role: "We have to meet the
needs of New York City, a small, self-contained world unto itself, and we
must, because it is New York, meet the expectations of other stations, the
federal government, and the national audience for public TV." Program
producers also believe WNET must take risks in order to lead the way for
the entire system. A clear example of this role is the station's airing of
controversial documentaries. Even if most public stations refuse to air a
controversial program, WNET will usually run it. In 1982, Blood and Sand,
a program about the Nicaraguan revolution, was shown in New York,
although few other stations aired it. Back in May 1980, Death of a Princess threatened diplomatic relations with Saudi Arabia. According to a
WNET executive, "it was absolutely never, never an issue as to whether
or not we would show it."29 Such commitment is necessary in order for
WNET to maintain a strong programming staff. Nevertheless, these same
programming strengths create difficulties in obtaining outside funding.
THE INFLUENCE OF FUNDING SOURCES ON PROGRAMMING
The lack of adequate funding for public television creates a situation of

dependency for public television stations.30 It is widely recognized that
most sources of money have strings attached. Each funding source has its
own biases about what it wants to support and what it expects to receive
in return. As former PBS President, Lawrence Grossman, has stated, "Every
source of money is tainted. With federal funds we worry about becoming
a governmental broadcasting arm. Corporate money makes you steer away
from controversy. Membership money means you cater to upper middle
class viewers. The saving grace is that we have diversified sources."31 Indeed, no one would suggest that one single source of funding is preferable
to the present complicated mix of support. One WNET executive said that
although funding sources and multiple responsibilities create headaches,
"it is easier to attempt to partially satisfy a number of different people,
than to try to totally please one person." Another executive noted that,
"Sure, we try to be all things to all peoplethat guarantees that sometimes
we win and sometimes we lose. I prefer that to an either/or situation."
The mix of funding sources is, however, costly in effort spent on raising
money and maintaining the funding relationships. Funders routinely make
requests of public television, many of which are reasonable from the funder's point of view but burdensome for the station. In one instance, a
corporation funding a public affairs show requested that the host visit the
corporate headquarters once a year, and that the corporation be given
263
advance notice of guests so it could circulate the information to its employees and the local community. The host was uncooperative on both
counts, and the corporation discontinued its support, tactfully citing an
economic downturn as the reason.
Some demands more directly concern program content, as we saw in the
case of self-censorship on the part of underwriting staff. We now turn to
an analysis of how the interests and demands of funders influenced the
development and content of one series. Note, however, that supporters
rarely demand specific changes in program content. It is difficult to point
to cases in which programs were altered because of a funder's direct request. Rather than dictate policy, funding sources set clear boundaries within
which program development must proceed if the relationship between funder and station is to last more than a year.
The series Dance in America exemplifies the complicated web of relationships necessary to produce a public television program.32 Dance in
America (DIA) was part of a larger series, Great Performances (GP), a
major effort to produce public television programs of comparable quality
to programs produced in Great Britain, which because they combine high
quality with low acquisition cost, have long been the staple of American
public television. Dance in America received wide critical acclaim, in large
part because WNET producers won the support of an initially dubious
dance community. Dance companies found that following their appearances on DIA, ticket sales increased.
The DIA programs received funds from several sources: Exxon, NEA,
CPB, the sale of DIA to other public stations through the SPC, and WNET's
own discretionary funds. We conducted interviews at WNET during the
planning period for the 1981-82 DIA season, its sixth year of production.
Dance in America represented a reasonably successful partnership of
government, business, dance community, and public television. Each of the
funding sources provided generous support. Exxon had given approximately $0.5 million a year since DIA's inception. (Although this amount
made Exxon a major DIA sponsor, it was only a portion of the corporation's overall support of around $3 million a year for public television.)
The National Endowment for the Arts contributed a comparable amount;
in fact, the Exxon money was a required match to the government funding. The Corporation for Public Broadcasting provided approximately
$250,000 a year for DM, and the sale of the series through the SPC brought
more than $1 million annually.
Dance in America also illustrates the peculiar nature of public television.
At the outset of the series, the participants shared a common goalprogram successand the funders adopted the strategy of letting WNET and
the dance community make program decisions. However, with DIA's success came lofty expectations on the part of funders. The National Endowment for the Arts felt the time was ripe to show off all kinds of dance
experimental, ethnic, jazz, tap, and so onon public television. It wanted
to include documentaries in the series to help educate the viewing public
264
about new dance forms. In short, NEA was a champion of stylistic pluralism. But Exxon was concerned that DM continue to live up to its own
standard of excellence. Its ideal was to showcase Balanchine and Baryshnikov. The Corporation for Public Broadcasting was interested in having
more regional dance companies be involved in DM. They urged WNET
to consider coproductions with other public stations around the country
in order to add regional diversity and, not incidentally, open the door to
obtaining money from state arts agencies and local foundations. The New
York dance community wanted to present postmodern avant-garde dance
works. Other public television stations wanted popular dance segments to
increase the size of the viewing audience. In essence, WNET was an access
point for a host of groups who sought to use DM to achieve their own
ends.
In the early seasons, conflicting demands were met by producing a wide
range of shows, matching the range of interests of DIA's diverse constituencies. These were WNET's "bargaining chips," to use the words of one
DM producer, and the diversity and generosity of funding sources permitted WNET some discretion. But over DIA's first five years, funding levels
remained stable while production costs more than doubled. (Rampant inflation plagued both public and commercial productions during this period.) The challenge for WNET was not simply to produce high-quality
shows on an inadequate budget; it was also to cope with the multiple
demands of artists, funders, and other public television stations when resources were shrinking, a thornier issue.
It became impossible to meet the conflicting demands of the various
participants with declining resources. The number of original productions
in the series had to be reduced, and inexpensive acquisitions of foreignproduced shows were substituted as replacements, making it harder to satisfy the creative expectations of funders as well as to present an exciting
lineup of new shows each season. As a result, audience ratings remained
fixed or declined, and other public stations complained about the high cost
of a series that was becoming increasingly narrow and less interesting each
year.
As the participants became less satisfied with the end product, they attempted to exert more influence over the programming process. For example, CPB wanted dance productions specifically designed for a television
format, and made its contribution contingent on greater regional diversity.
Exxon, which had no interest in low-cost regional productions, held back
final authorization of funds until it saw the complete roster of productions.
But producers at WNET complained that they could not come up with a
season of shows without knowing how much money they had to work
with. The various participants began offering specific ideas for DM, thus
placing the station in a reactive position and further weakening WNET's
role as producer. The various proposals were seldom compatible with one
another. As one producer said, "Exxon proposed three programs that were
their cup of teabut none was NEA's bag."
265
To complicate matters further, one of the principal directors for D1A

left WNET to join CBS Cable in a similar capacity because he was tired
of "coping with contingencies in public TV." He noted, "I just wanted to
work and not have to worry about finances." (Ironically, CBS Cable soon
went bankrupt. Although it produced critically acclaimed programs, it also
ran up $30 million in losses in its first year of operation.) Decisions about
DIA affected the planning and budgeting for other WNET programs,
strained the quality of relations between WNET and funding sources, and
influenced how much money would be spent by other stations in the annual SPC. Other stations counted on WNET's success in order for them to
have programs to broadcast. For the 1981-82 season, the DM segment
of Great Performances was cut back considerably. Only three programs,
each featuring the work of George Balanchine, were broadcast. Exxon and
NEA continued to fund this reduced schedule.
With DIA's success came both increased expectations and declining resources. In public television the ultimate measure of success is whether or
not participants report satisfaction with the results. (It is worth noting,
however, that DIA was very successful in bringing dance into the cultural
mainstream. Several years ago, CBS broadcast Baryshnikov on Broadway
during prime time and it was rated one of the top 10 shows of the week.
This success was attributable, in part, to the "research and development"
work done by WNET with DIA.) As funders sought more influence over
the content of DIA, WNET lost its ability to maintain some autonomy by
balancing the funders against one another. To continue with DIA, WNET
needed NEA money, but the NEA grant was subject to a 50/50 matching
funds provision. Thus without the Exxon money, the coffers would have
been empty. In addition, CPB was increasingly willing to support independent producers rather than WNET, because independents have lower overhead costs. At the same time, the dance community and WNET's pool of
talented producers and directors, as well as corporate underwriters, began
to see cable television as an alternative forum. WNET lost its position as
the exclusive domain for quality dance programming. Both artists and funders had more choices and, as a result, they exerted more influence over
WNET. WNET's reduced attention to dance is a reaction to its limited
control over needed resources. The financial complexity and personnel
turnover endemic to public television result in, to quote the director of the
TV Lab, "the sad fact that nothing that is successful on public television
endures."
SUMMARY
Given the financial constraints under which public television operates, it is

sometimes surprising that any controversial or innovative programming is
produced. In addition to sustaining smooth, ongoing ties with various
funding sources, a producing station must maintain contact with many
266
artistic communities. If program development is not continuous, stations

risk losing the creative producers and directors on their staffs to commercial competitors. For a station to remain viable, management must also
allow program producers and artists some latitude to develop program
ideas free of undue financial constraints. Given these tensions, the record
of public television in producing a lengthy list of high-quality programs in
a working environment that is both heavily politicized and short on resources is no small feat.
In addition, the current financial crisis threatens public television in other
ways. Good ideas may go unexploited for lack of resources. The scramble
for funds and the time spent on negotiations leave little lead time for
thoughtful planning. The opportunities posed by new technologies provide
the most talented and marketable employees opportunity for exit. The staff
that remains will have to do more with less and they may be less capable
of making do with fewer resources.
Compared to commercial television, public television has offered more
opportunity for voice both to funding sources, such as major corporations
and governmental agencies, and to creative artists, such as members of the
dance community and independent producers. In contrast to commercial
television executives, public television managers lack the resources, and the
power associated with them, to plan and execute the kinds of policies they
would like to pursue. A public television station is an assortment of miniorganizations, each composed of staffs with their own priorities and with
varying degrees of loyalty to public television. Caught between shrinking
budgets and new communications technologies, public television must survive on less federal support. Stations have turned to their members, corporate underwriters, and their own initiatives to make up for lost federal
dollars. The case of Dance in America suggests that, with declining resources, public television will become even more subject to outside control.
NOTES
1. Douglas Kellner, "Network Television and American Society," Theory and Society 10
(1981): 31-62.
2. This lack of agreement is even reflected in the language used: prior to 1967, noncommercial television was referred to as "educational television"; since then the common name
has been "public broadcasting."
3. Most of the interviews and some of the field work at the two stations were conducted
by Powell. He was assisted at the Hartford, Connecticut public station by Marguerite Schaffer. At WNET-TV, Claire Sokoloff helped with the interviewing and did much of the field
work. Friedkin collaborated on the analysis of the data and kept track of numerous reports
and statistics on public television finances.
4. Jeffrey Pfeffer and Gerald Salancik, The External Control of Organizations (New York:
Harper & Row, 1978); and Carl Milofsky, "The Contribution of Nonprofit Organizations
to Community," in Walter W. Powell, ed., The Nonprofit Sector: A Research Handbook
(New Haven, Conn.: Yale University Press, 1986).
5. The recent controversies over public television documentariese.g., Middletown, Mat-
267
ters of Life and Death, Blood and SandWar in the Sahara, and From the Ashes . . .
Nicaragua Todaypoint to the way in which financial uncertainty has increased tensions
within the public television community. There is friction between CPB and PBS, and concern
within the public broadcasting community that PBS has become too eager to rein itself in.
Program producers fear that PBS is soft-pedaling controversial material and hoping to survive
on safe cultural and scientific shows aired in highly visible time slots. Moreover, critics charge
that PBS is using its control over program scheduling to force changes in the content of
completed programs. PBS maintains that growing financial constraints require it to concentrate its focus and "plan, develop, coordinate, and deliver the best possible Prime Time national program service" with the capacity to attract nationwide audiences (p. 3 of a PBS
release, "Key Program Elements of Four-Year Plan," March 24-25, 1982). Many of the
smaller public television member stations heartily support PBS's effort to centralize control,
preferring that the hard choices about their future be made by PBS. In other words, their
preference is for a network. Both independent producers and large stations, however, are
opposed to moves by PBS to increase its control over decision making. The large stations see
their influence slipping and fear a loss of support for the programs they produce. Independent
producers, as well as production centers at producing stations, worry that a new era of
timidity has set in as a consequence of budgetary cuts.
6. Corporation for Public Broadcasting, Annual Report (Washington, D.C.: Corporation
for Public Broadcasting, 1984).
7. Nearly 50 percent of CPB's budget is passed through to stations; an additional 20
percent goes to grants for programs. The remainder is used to operate CPB, to fund PBS and
the Station Program Cooperative, and to fund public radio.
8. Public Papers of the President: Richard Nixon, 1972 (Washington, D.C.: U.S. Government Printing Office, 1972), 718.
9. For a detailed discussion of the Nixon veto, see Robert K. Avery and Robert Pepper,
"Interconnection Disconnection: The Evolution of the CPB-PBS Relationship," Public Telecommunications Review 4 (1976): 6-17; see also Carnegie Commission on the Future of
Public Broadcasting, A Public Trust: The Report of the Carnegie Commission on the future
of Public Broadcasting (New York: Bantam Books, 1979).
10. For example, an underwriting officer at WNET spoke of the need for obtaining National Science Foundation support for a series then being developed, The Brain:
"Can you imagine how hard it would be to peddle this show to major firms without the
imprimatur of NSF? It's not that the federal money is that large, but NSF funding serves as
leadership dollars and better enables us to obtain additional funds. Without NSF support,
other funders will be suspicious."
11. There are four types of governance structures among public television stations, based
on who operates them: a state or municipality, a college or university, a community, or a
public school system. The difference is a matter of licensing (a legal grant of a charter from
the Federal Communications Commission) as well as governance. Depending on the nature
of the legal charter, the composition of a station's board of directors will vary. Both WNET
and CPTV are community-run stations.
12. Richard Magat, The Ford Foundation at Work: Philanthropic Choices, Methods, and
Styles (New York: Plenum Press, 1979).
13. Although on-air advertising by corporate underwriters is restricted by FCC regulation,
there are no prohibitions against off-screen advertising. Corporations back up their programming contributions with large promotional budgets. For example, Mobil Oil Company gave
$3.5 million for programs in 1978 and allocated another $2 million for advertising. Gulf Oil
Company allotted $1.4 million for its sponsorship of National Geographic Specials in 1978
and spent $1.8 million in advertising the programs.
14. David S. Ermann, "The Operative Goals of Corporate Philanthropy: Contributions to
PBS, 1972-1976," Social Problems 25 (1978): 504-514; and Ronald S. Burt, "A Note on
Corporate Philanthropy" (University of California, Berkeley, Survey Research Center Working Paper 36, 1980).
268
15. Ermann, ibid.; and Office of Communication Research, Review of 1980 CPB Communication Research (Washington, D.C., 1981).
16. Erik Barnouw, The Sponsor: Notes on a Modern Potentate (New York: Oxford University Press, 1978), 68.
17. Todd Gitlin, Inside Prime Time (New York: Pantheon, 1983), 252-256.
18. The Lou Grant Show, broadcast by CBS in the 1970s, is a recent example. See "Kimberly-Clark Pulls Ads from Ed Asner TV Show," Wall Street Journal, May 6, 1982, 46,
western edition; and Mark Dow and David Talbot, "Asner: Too Hot for Medium Cool,"
Mother Jones, August 1982, 6-13.
19. The 1979 figures are from S. Young Lee, Status Report of Public Broadcasting 1980
(Washington, D.C.: Corporation for Public Broadcasting, Planning and Analysis, 1981), 17.
The 1983 figures are from Corporation for Public Broadcasting, Annual Report, 1984
(Washington, D.C.: Corporation for Public Broadcasting, Planning and Analysis, 1984).
20. Ronald E. Frank and Marshall Greenberg, The Public's Use of Television (Beverly
Hills, Calif.: Sage Publications, 1980), 191.
21. See, among many, Natan Katzman with Ken Win, "Program Funding in Public Television and the SPC," in Douglass Cater and Michael J. Nyhan, eds., The Future of Public
Broadcasting (New York: Praeger Publishers, 1976), 251-274; and Michael G. Reeves and
Tom W. Hoffer, "The Safe, Cheap and Known: A Content Analysis of the First (1974) PBS
Program Cooperative," Journal of Broadcasting 20 (1976): 549-565.
22. Katzman and Wirt, ibid., 255.
23. Ibid.
24. Carnegie Commission on the Future of Public Broadcasting, op. cit., 108.
25. All quotes not attributed to a particular source are from fieldwork and interviews
conducted at WNET and CPTV between 1980 and 1982.
26. Bill Moyers, who has had his own public affairs shows on both commercial and public
television, captures the comparative costs and benefits of the two in the following statement
made in the Mew York Times, April 11, 1978:
The commitment to quality is high in both places. On CBS there are first class journalists,
but they don't get the time on the air. On public broadcasting they have the time on the air,
but they don't have the resources. The one has the money, but not the time; the other has
the time, but not the money.
27. At WNET a recent reorganization, from a functional structure to a multidivisional
structure with three programming divisions (national, local, and educational) and a for-profit
enterprises division, was implemented to help reduce conflict and enhance cooperation among
programming and fund-raising staff. Each division has its own programming, underwriting,
and publicity departments. Furthermore, the separate for-profit division is both an effort to
generate profits and an attempt to keep the other divisions "pure." On paper, the reorganized
structure should reduce the tension between Programming and Underwriting. In practice,
conflict has not been eliminated, but disputes are no longer exacerbated by the fact that
personnel are located in different departments and report to different supervisors. Most of
our interviews took place prior to the reorganization or shortly after its initial implementation.
28. Fund-raising is handled by the development department at CPTV and by the underwriting department at WNET. Our use of department titles depends on the station under
discussion.
29. See Death of a Princess, Harvard Business School Case 9-381-106, for a detailed discussion of the controversy created by the showing of this program in both Britain and the
United States. In particular, Mobil Oil, a generous sponsor of public television, ran a position
statement in the Op-Ed page of the New York Times and other major papers criticizing the
program. The Acting Secretary of State, Warren Christopher, relayed a letter from the Saudi
ambassador to the United States to the president of PBS; Christopher asked that PBS "give
appropriate consideration to the sensitive religious and cultural issues involved."
30. Lee, op. cit., 2324, notes that in 1978, U.S. public broadcasting revenues (radio and
269
television combined) totalled $552 million, whereas commercial broadcast revenues were over
$9.5 billion. The per-person cost differences are also quite large: $10.64 for commercial radio
and $0.37 for public radio; $24.09 for commercial television and $2.15 for public television.
Public television production costs are, however, much lower, approximately 40 percent to 50
percent of the costs per hour of commercial television production.
31. Newsweek, November 20, 1978, 139.
32. The analysis of Dance in America is based on fieldwork done at WNET.
12
Should University Presses Compete
with Commercial Scholarly Publishers?
WALTER W. POWELL
The history of book publishing is replete with alleged crises and so-called
revolutions. Heated debates about the commercialization of writing and
the bleak financial status of the book industry are commonplace to almost
every period in the industry's history. 1 As just one example, at the turn of
the century Publishers Weekly ran stories by publishers lamenting that
baseball and bicycle-riding would reduce the public's interest in books. In
the 1980s, cutbacks in library budgets and in support for higher education
have created new problems for scholarly presses. Although financial and
marketing difficulties seem to be perennial with scholarly publishers, this
sector of the industry has typically managed to survive economic downturns much better than trade publishing. 2 Scholarly publishing is a fairly
stable business with less risk and more steady demand than in other sectors of the book industry.
Nevertheless, many university presses now find themselves under pressure from their parent universities to become self-supporting. New sources
of financing and new markets are being sought. Increased export sales,
increased subsidiary rights income, alumni book clubs, and cooperative
promotion and distribution are but a few of the possibilities that university
presses are pursuing. New, challenging technologiesmicroform publication, videodiscs, electronic journals, and computer data bases for on-demand publishingare also being explored for the more efficient and less
costly means of publication they may offer.
In addition, changes in the structure of trade publishing have created
new opportunities. University presses and commercial scholarly houses are
moving into the territory the larger trade houses have vacated in their
This chapter is based on a keynote address given at the annual meeting of the Association of
American University Presses in Spring Lake, New jersey, June 21, 1982. A shorter version of
that talk appeared in the October 1982 issue of Scholarly Publishing under the title, "Adapting to Tight Money and New Opportunities." The paper appears here with the permission of
the University of Toronto Press.
University Presses and Commercial Scholarly Publishers
271
quest for best sellers. As trade publishers have increased their expectations
of the number of copies a book needs to sell in order to be deemed successful, they have become less willing to take on books that are eminently
worthwhile but have modest sales potential. The crush of big books has
given impetus to scholarly presses. As a consequence, there has been a
change in the mix of titles published by many university presses. Their lists
now include novels, a few textbooks, and even how-to books. In general,
there are more trade-oriented titles and fewer specialized scholarly books.
The lists of many university presses are now hard to distinguish from those
of for-profit scholarly publishers. These changes have not gone unnoticed
by university faculty or by commercial publishers.
In the context of these recent changes, it is instructive to examine the
similarities and differences between nonprofit university presses and commercial scholarly houses. Implicit in this examination is the question of
whether university presses can compete with commercial firms, as well as
whether such competition is appropriate.
In the course of interviews and participant observations I conducted with
colleagues at a number of different publishing houses,3 we encountered a
variety of problems that stemmed from the university press strategy of
pursuing a larger audience. At one of the university presses we studied, the
classification of trade books was a major source of confusion and rancor.
The decision to designate a book as a trade title rested with the sales manager. He had a vested interest in classifying at least a few of each session's
books as trade titles because, whereas the sale of academic titles by direct
mail was the publicity manager's job, the sale of trade books was his exclusive domain. The editors at the press were naturally pleased when one
of their books received trade billing. They felt that a trade book was more
consequential than a typical academic title because it reached a larger audience. Selling books in general bookstores was also something of a novelty at the press. Outside the editorial department, however, the consensus
was that the sales manager was too liberal in his selection of trade books.
The sales manager's classifications created problems for the publicity
department. It was responsible for advertising and promoting trade titles,
yet it had little input into the choice of trade titles and frequently disagreed
with the sales manager's decisions. Since their budget was quite limited,
the publicity staff adopted the practice of selecting one of the trade books
as the title having the widest general appeal that season. They spent most
of their time, energy, and money on this book and more or less ignored
the other books designated as trade, treating them as typical academic
titles. This practice disturbed the editors of the neglected titles, who frequently made eloquent appeals to the publicity department for more media
exposure for their trade books.
In the absence of sufficient money for promotion and marketing, such
problems are common. Yet even if adequate funds were available to university presses, the broader issue of whether trade titles are too risky for
university presses remains: The commercial trade publisher's operating norms
272
of selling books in large quantity over a short period of time are quite
different from the university press strategy of selling books in smaller
quantities over long periods of time.
Other nonprofit organizations also currently face financial cutbacks and
the challenge of new opportunities posed by new technological ventures.
These nonprofit organizations are similar to university presses in that they
also actively compete with commercial firms. The fundamental questions
that many of these organizations are asking themselves are, How can we
maintain our integrity and remain true to our purpose in the face of economic crises? And how do we find new funding sources without jeopardizing ongoing activities?
COMPARISON WITH PUBLIC TELEVISION
There are some interesting parallels between the circumstances found at

some university presses and the problems faced by public television,4 as
well as a few lessons that can be drawn from a comparison of the two
institutions. By 1980, public television faced sharply rising production costs
and competition from new communications technologies such as cable
television. In the early 1980s, financial problems were exacerbated by steep
reductions in federal support. More than operating funds were involved;
programming was and continues to be seriously affected by cutbacks at
the National Endowments for the Arts and Humanities and the National
Science Foundation. As a consequence of this steep decline in federal support for public television, stations had to join a long queue of nonprofit
organizations knocking on the doors of foundations and corporations. It
was all too obvious, however, that corporations and foundations could not
and would not be able to replace federal support.
The Reagan administration, the Federal Communications Commission,
and some members of the public broadcasting community encouraged public
television stations to become entrepreneurial and to utilize new communications technologies to expand their financial base. Faced with declining
support, public television counted on increased member contributions and
new venturescable TV, teleconferencing, satellite broadcasting, videocassettes, specialized magazine and book publishing, foreign markets, and
subsidiary rights salesto carry them through this period of austerity.
But initial moves into these new areas brought howls of complaint from
commercial firms who resented competition from nonprofit organizations.5
The Internal Revenue Service moved to examine the tax status of some of
the new ventures. As a response, many stations spun off for-profit divisions whose sole purpose would be to pursue money-making ventures. A
number of powerful forces, however, constrain public television entrepreneurship:
Political factors: Misperception and/or disapproval of for-profit activities by a station's board of directors, station staff and members, the press, and commercial
firms.
273
Organizational factors: Foremost, the lack of operating capital, and thus the need
to incur substantial financial obligations to banks and to raise seed money from
foundations; a lack of managerial experience; the difficulties of competing with the
wealthier and more powerful commercial rivals.
Regulatory factors: The danger of losing nonprofit tax status; thorny problems of
internal contracting and accounting for time spent on for-profit and nonprofit activities.6
These new ventures have raised considerable concern over the mission
of public television. For example, some stations are producing programs
for cable television. If they produce the same type of programs they broadcast on public television, why should those programs be shown on public
television only after their commercial broadcast? Or if public television
stations produce more standard, popular fare, what effect does this have
on their image and their personnel?
A recent experiment with advertising on public televisionmandated by
Congressraised similarly vexing questions: Will advertising cause a reduction in membership support? Will corporations continue to underwrite
programs if they are also asked to advertise? Will labor contracts have to
be renegotiated because lower wage rates and special rights given to nonprofit organizations are no longer warranted? Because ratings are the basis
of any advertising rate schedule, will programming have to be changed in
an effort to obtain a wider audience? Will advertising trigger serious political and financial opposition from commercial broadcasters?
Some employees feel the new ventures are far too risky and expose the
stations to undue financial risks during a lean period. The costs of the new
ventures are being reevaluated, and stations are analyzing whether they
have overextended themselves. Future entrepreneurial efforts will probably
be undertaken with more caution and considerable advance planning. Station executives are asking themselves what criteria for expansion are appropriate to an organization in which legitimacy is a crucial concern and
conventional tests of market and ballot do not apply as readily as they do
in commercial and governmental organizations.
ASSESSING APPROPRIATE ACTIVITIES
How should such nonprofit organizations as university presses decide what

are appropriate new ventures? In my opinion, three closely related concerns must be taken into account. The first is to utilize the organization's
comparative advantage by specializing in what it does best. The second is
to recognize the important role played by such noneconomic factors as
reputation and goodwill. The third, and perhaps the most crucial, is not
to forget obligations and responsibilities to the academic community, which
is the primary base of support for university presses. Authors and readers
are a resource; they must be kept informed and their opinions solicited
about current developments. University presses can and should do more to
274
stay in contact with their faculties. It is part of the mission of nonprofit

publishers, and it makes very good business sense.
Specialization
The law of comparative advantage was first set out almost two centuries
ago by the economist David Ricardo in his studies of patterns of specialization and exchange among nations.7 It is obvious that if one country is
better at producing foodstuffs and another excels at manufacturing goods,
both can save resources by tradingeach exporting to the other the good
it produces at the lower cost. Specialization of this kind permits larger
outputs and economies of scale in production. But Ricardo's basic finding
was a counterintuitive one: even if one country is more efficient than
another in the production of every commodity (that is, if it has an absolute
advantage in every commodity), both countries will still gain by trading.
Even if a country is at an absolute disadvantage in relation to another
country in the production of all goods, it is said to have a comparative
advantage in producing the goods that it can produce least inefficiently.
Applied to nonprofit organizations, Ricardo's insights suggests that an
organization will gain the most by specializing in what it is best at and at
finding someone else to do other work. Even if the service that is hired is
not as good as one it could provide, an organization is still better off
emphasizing its strengths. Take the case of a university press with a goodsized backlist and good distribution capabilities. It is looking for ways to
generate additional revenues from the sale of backlist titles. It considers
starting an alumni book club, hiring a subsidiary rights person to pursue
foreign translations, and launching a major promotional campaign to tout
its backlist. But unless it is well endowed, the press should not try to do
all three at the same time. It would risk too much financial exposure. The
choice should be the alumni book club because it will build on the press's
existing strength in distribution. For the other ventures, it should look for
other presses with strengths in those areas, who could reduce their costs
by taking on added work. If none exist, another possibility might be starting a collaborative arrangement in which many presses could avail themselves of a subsidiary rights service. In difficult economic times, nonprofits
should emphasize what they do best and find other firms to provide additional needed services. Nonprofit organizations have more to lose than
commercial firms; they may lose not only money but their reputations and
nonprofit tax status as well.
Reputation and Goodwill
As part of our research on the book industry, we collected data concerning

author-publisher relations from a random sample of over 200 authors. For
purposes of comparison we surveyed authors who had recently published
books with several large university presses, a major college text house, a
275
variety of different-sized trade publishers, a small commercial scholarly

house, and a large professional monograph publisher. University presses
were found to have a number of distinctive features. As one might expect,
they received the lowest marks for book distribution, speed of decision
making, and size of advances. On a positive note, a major concern of the
authors in our sample was their publisher's regard for the integrity of their
work: university presses received very high marks on this. Their books
carried a mark of prestige and were noted for their high quality of design.
Commercial houses paid much less attention to these concerns. Moreover,
the nonprofit tax status enjoyed by university presses exempts them from
the Thor Power Tool ruling in the United States,8 and as a result their
books can be kept in print longer and greater emphasis given to the backlist.
Problems with copy editing as well as other aspects of the production
process were commonplace for many authors, but not for those published
by university presses. Most presses have a staff of manuscript editors or
copy editors, unlike many commercial houses, which rely on outside freelancers. In addition, university presses employ a high-quality labor force.
In many university towns there is a captive labor pool of faculty spouses.
This overqualified staff can be a great boon for authors.
The most pronounced complaint of the authors in our sample was editorial turnover. If an author's editor departed from the house sometime
during the publication process or upon the book's release, the author was
likely to be unhappy with the publisher. In this respect, university presses
turn out to be rather different from for-profit presses. We found that university presses have much greater editorial stability than their commercial
counterparts.
All these factors are noneconomic ones. They are not easy to evaluate
in financial terms. Nevertheless, they are essential elements in the publishing process and important ingredients in a satisfactory author-publisher
relationship.
Obligations
Of the many different sectors of the book publishing industry, scholarly

publishingand here I include commercial houses as well as university
pressesis the one most closely tied to both the producers and the consumers of the books. The scholar and the editor are often linked: Careers,
reputations, and theories may rise and fall with the fortunes of commercial
scholarly houses and university presses. In scholarly publishing, "invisible
colleges"closely tied groups of scholars working in the same general area
located on different campusesplay a crucial role as talent scouts and
gatekeepers. The would-be author who ignores this system and sends a
manuscript to an editor without some imprimatur from a member of the
appropriate invisible college does so at his or her own peril.9
Yet in some respects, university presses are not as open to the academic
276
community as are commercial scholarly houses. Both university presses

and commercial scholarly houses were more receptive to the young writers
in our sample (under age 40) than were trade or text houses. Commercial
scholarly firms, however, were much more likely than university presses to
sign previously unpublished authors. Series editorswell-known senior
scholars who have staked a claim to an area of research and who, in return
for a small percentage of royalties, are responsible for new books published in their general areaserve as vital links between the commercial
monograph houses and new talent. Series editors are knowledgeable about
up-and-coming young scholars and about those who are played out. By
contrast, such senior scholar brokers are somewhat rare in university press
publishing. The advisory board at most presses performs a similar evaluative function, but university presses generally lack comparable talent scouts.
One consequence of this lack of communication between university presses
and the academic communityin particular, junior facultyis that some
university press policies are not well understood. Among the more serious
problems are:
Multiple submissions: Is this practice permissible or frowned upon?
The slower, more deliberate pace: Why does the review process at university presses
take longer? What is gained from this longer time period?
Multiple bidding: On what basis do university presses compete with each other
and with commercial houses?
Advance contracts: The practice of offering a contract on the basis of a proposal
or incomplete manuscript is confusing. Do these quasi-official documents really
mean anything? Are they helpful?
Two- and three-tiered lists: Why do some books receive a great deal of attention
while others are handled much more quietly? Are there financial reasons behind
this or is it just a consequence of the author's academic status?
These are but a few of the topics about which faculty need to be educated. Presses should also explain why most dissertations, even those from
elite universities, are difficult to publish. Many junior faculty do not understand that libraries typically buy only the books of established writers
or that promotion seldom creates an audience where one does not already
exist. One press director we interviewed was particularly open with his
faculty. He stated, "I tell the faculty straight out. If the eminent senior
faculty do not publish with us it is impossible for us to do books by promising young faculty and graduate students."
Commercial publishers are not expected to make these efforts. But it
should be the responsibility of university presses to do so, and I maintain
that it is also a sound organizational practice. One of the most common
errors that nonprofit organizations are making in this period of financial
crisis is to overlook relatively quiet interest groups. As they scurry about
looking for new sources of funding, the problem of balancing the demands
of many different stakeholders is greatly increased. And the organization,
in responding to one set of pressures, may take actions that will cause
other supporters to become disaffected and unhappy.
277
Our survey of authors demonstrated the value of open communication

on the part of publishers. The signing of a book, an act dominated from
the publisher's side by the acquiring editor's enthusiasm, is an occasion for
great expectations, at least on the author's side. The book is usually something the author has lived with for at least a year or two and which will,
the author hopes, repay the time put into it not only in terms of some
money but also fame. It is these lofty expectations, we believe, that explain
why most of the authors in our survey were disappointed in their publishers. The one striking exception was a group of favorable responses from
authors who had recently been published by a large professional monograph house. This firm had the highest percentage of satisfied authors of
any house we studied. In general, university presses did fairly well on this
survey, while trade and text houses fared quite poorly. What was particularly interesting was that over 70 percent of the authors of this particular
monograph house were extremely satisfied with the advertising, promotion, and distribution. The key was the manner in which the house approached its authors. The editors were very direct and open: they told the
author what kind of services would be provided, explained that every book
receives a features mailing and an ad in a major journal, and solicited the
author's suggestions. In short, they were honest about the limited sales
prospects, open to ideas, and responsive to the author's concerns.
SUMMARY
In general, our research and our interviews with authors suggest that university presses have higher standards than commercial houses and pay more
attention to the quality of the design and production, as well as remain
truer to the integrity of an author's work. On the negative side, however,
university presses are slower, somewhat less accessible to young authors,
and less candid with authors about a book's prospects than are commercial scholarly houses. In light of these differences, the recent moves by
university presses to produce more popular and marketable titles raise
questions about the extent to which such policies will make university presses
even less accessible to junior faculty and newly minted Ph.Ds. At the very
least, it should be the responsibility of university presses to keep faculty
members informed about the new directions being pursued and the financial circumstances that make such activities necessary. I do not doubt the
ability of university presses to compete with commercial firms, nor do I
question the motives of the individual presses. But I do worry about the
aggregate consequences for the scholarly community if the distinction between nonprofit and for-profit publishers becomes more blurry. The result
of such a process could lead to a very different publication system, one in
which access is much more limited than is currently the case. And the
experience of public television should serve as a reminder that changes in
strategy can raise serious questions about purpose and mission, as well as
endanger nonprofit tax status.
278
NOTES
1. For an extended discussion of this cyclical view, see Chapter 1 of Lewis Coser, Charles
Kadushin, and Walter W. Powell, Books: The Culture and Commerce of Publishing (Chicago: University of Chicago Press, 1985).
2. See the discussion of the financial health of different subsectors of the book industry in
Chapter 1 of Walter W. Powell, Getting into Print: The Decision-Making Process in Scholarly Publishing (Chicago: University of Chicago Press, 1985).
3. The research is based on interviews and participant observation in a large sample of
for-profit and nonprofit publishing houses. For a detailed discussion of the research design,
see "Appendix on methods," 375381 in Coser, et al., op. cit. and the introduction to Powell, Getting into Print, op. cit.
4. Walter W. Powell and Rebecca Jo Friedkin, "Politics and Programs: Organizational
Factors in Public Television Decision Making, (Chapter 11, this volume).
5. The landscape is dotted with commercial firms, research firms, travel agencies, professional service firms, etc. that are suing or lobbying or just plain screaming about the nonprofit
firms that are said to be "unfairly" competing with them with the help of the lawtax
exemptions, favorable postal rates and pension laws, and the preferences for nonprofits that
are built into all kinds of government grant and contract programs.
John G. Simon, "Research on Philanthropy," (Paper delivered at the 25th Anniversary Conference of the National Council on Philanthropy, Denver, Colorado, November 1979, 9).
6. For a detailed discussion, see James D. Levine, "Public Television Funding: Tax and
Policy Implications" (Yale Program on Non-profit Organizations Working Paper, New Haven,
Conn., April 1982).
7. David Ricardo, Principles of Political Economy and Taxation, 9 vols., cd. P. Sraffa
(Cambridge: Cambridge University Press, 195152).
8. In January 1979, the U.S. Supreme Court ruled in a case brought by the Thor Power
Tool Company against the Internal Revenue Service that, contrary to what the plaintiff claimed,
warehouse stocks of tools could not be depreciated for tax purposes unless they had left
warehouse inventory. This meant that the tool industry had to discontinue its practice of
carrying inventories at reduced prices for tax purposes. Soon thereafter, the Internal Revenue
Service ruled that this decision was not only binding on the power tool industry but also
applied, inter alia, to the publishing industry. To the IRS, books are products, just like tools
or toilet paper. As a result of the Thor ruling, some publishers have had to change their
accounting procedures and the value of their backlist books in stock. Other publishers had
already followed these accounting procedures; for still others who publish few backlist titles,
the Thor decision is of little consequence. University presses, as nonprofit organizations, are
tax-exempt and hence not affected. But for many high-quality commercial firms, both scholarly and trade, the backlist has provided the backbone of their operations through thick and
thin, and they depended on being able to depreciate the value of their backlist inventory.
Now it is no longer as economically feasible to maintain stock on many titles and sell them
gradually through backlist orders. A house that formerly kept titles in print may decide to
remainder them rather than to bear the cost of maintaining them in print. Such destruction
will be especially harmful for research monographs, which are slow to sell.
9. See Chapter 5 of my Getting into Print, op. cit.
13
Should the News Be
Sold for Profit?
CHRISTOPHER JENCKS
Serious questions have been raised about the way in which the United
States gathers and distributes news. Few American journalists are satisfied
with existing arrangements, and many have chronic fantasies about starting their own newspaper or magazine (though few, it seems, imagine starting an organization to produce television news). But despite perpetual
grousing, American journalists seldom discuss how news ought to be collected and distributed in a democratic society. Unlike their European counterparts, they have made no political effort to improve existing institutional arrangements.
Having begun my career in journalism, I find this reluctance to think
about alternatives both puzzling and discouraging. Why, for example, are
so few journalists disturbed by the fact that news is collected and distributed for private profit? Other professions, while frequently avaricious, at
least recognize that the organizations through which they deliver servicesuniversities, hospitals, courtsrun better on a nonprofit basis. Why
shouldn't newspapers, news magazines, or television news be run the same
way?
Eliminating the profit motive does not imply public ownership or control of the new media. It is quite compatible with the present method of
financing the collection and distribution of news, which depends in large
part on intermingling news and commercial advertising. Nor does eliminating the profit motive imply dismantling existing news organizations; it
would simply mean lending these organizations enough money to buy out
their stockholders and then running them on a break-even basis.
Let me begin by conceding what many readers might not concede, namely
that the profit motive is the best-known method of making an organization
give its customers what they want when they want it. News is no excepFrom Working Papers for a New Society. Copyright 1979. Reprinted by permission.
280
tion to this rule. Profit-oriented news media are concerned with maximizing advertising revenue. To accomplish this they tinker endlessly with both
the format and substance of the news in order to attract the largest and
most affluent audience they can. Such efforts appear quite successful; if
public enlightenment depended simply on getting as many people as possible to read newspapers and watch television news, there would not be
much basis for complaint against the existing system.
But what the public wants is not always what it needs. And when a
profit-oriented organization has to choose between giving people what they
want or giving them what they need, it almost always chooses to gratify
wants. The argument that people don't know what is good for them is, of
course, hard to reconcile with conventional democratic ideas. Democracy
assumes that in the last analysis people are the best-perhaps the only
judges of their own needs. Those who believe in democracy are rightly
suspicious of experts who claim to know the public's needs better than the
public itself does. But although skepticism is certainly warranted, a closed
mind is not. We all know of instances in which people want things that
are bad for them. The task of social reform is to deal with such situations
without doing more harm than good.
In the case of news, the conflict between what we want and what we
need derives from well-known human weaknesses: exhaustion and laziness. Most of us read newspapers and watch television while we are halfawake in the morning or after a tiring day's work. Our appetite for difficult ideas or moral ambiguity is even lower than usual at these times. A
news organization seeking to maximize its audience therefore finds that it
pays to make the news simple and exciting, not complex or challenging.
Those who manage the news media justify this approach by arguing that
the public is divided into two distinct groups: a small number of "intellectuals" who want detailed information, careful analysis, and moral challenge, and a much larger group of "ordinary people" who want quick
summaries, simple concepts, and moral reassurance. Defenders of the present system then describe their critics as elitists who don't understand ordinary folks. But this argument is too simple. Eggheads and yahoos certainly exist. For the most part, though, this is a schism within the mind of
each reader or viewer. "Intellectuals" are hardly immune to the appeal of
easy entertainment, as the fascination with Watergate attested; and although "ordinary people" often prefer entertainment, most also have a
certain appetite for educationfor experiences that literally "lead them
out" of the narrow confines of their everyday lives. Furthermoreand this
is the crucial pointmost people regard their impulse to be educated as
more creditable than their impulse to be entertained. We are proud of the
moments when we rise to an intellectual or moral challenge. The moments
when we ignore or avoid such challenges, although far more numerous,
leave us with no comparable sense of satisfaction. Thus, while it is true
that most people want the news to be entertaining most of the time, it is
also true that most people "want to want" the news to be enlightening.
Should the News be Sold for Profit?
281
An organization that collects and distributes the news therefore faces an

uncomfortable choice. One alternative is to ask as little as possible of its
audience, maximizing its size but losing its respect. Television networks
have made this choice and have learned to live with the fact that even the
most assiduous viewers have a low opinion of the medium. Newspaper
chains, which seldom care about the respect of local readers and usually
see each local paper as a "profit center" rather than a community service,
tend to make the same choice.
The other alternative is for a news organization to seek the respect of
its audience and worry about audience size only insofar as that is essential
to solvency. Public television sometimes adopts this stance. But public television has kept itself financially precarious by refusing to accept most forms
of advertising. A number of family-controlled papers, such as the New
York Times, the Washington Post, and the Los Angeles Times, also seem
to value their reputations more than they value maximum profitsthough
all strive to ensure "adequate" profits. If all newspapers were produced on
a nonprofit basis, I think they would place far more emphasis on winning
the public's long-term respect and far less on maximizing audience size.
The same is probably true of television news. The lure of profit is one of
the few motives strong enough to make an organization pursue policies
that risk public obloquy. Eliminate this motive and you shift the balance
toward respectability.
Eliminating the profit motive would create a crisis of legitimacy in existing news organizations. Instead of letting the shareholders choose their
directors, these organizations would have to select trustees in some other
way. Furthermore, once they defined their official purpose as "public service" rather than private profit, tremendous controversy would arise about
what the public really needed and who should define these needs. The
experience of other nonprofit organizations, such as universities and hospitals, suggests that in the long run the professional staff would probably
acquire a major role in running the organizations and deciding what was
really "news," regardless of how trustees were selected. This would be a
drastic change. Today's news organizations treat journalists as hired help,
not professionals, and give them very little voice in running the organizations they work for.
What distinguishes a profession is its ability to convince other people
that only members of the profession know enough to evaluate practitioners' work. This claim allows the profession to exercise significant control
over its members' careers. Doctors or lawyers, for example, can expect
those who hire them when they finish school to be doctors or lawyers
themselves. This pattern will persist throughout their careers. If they make
a serious mistake, those who evaluate its seriousness will again be doctors
or lawyers, unless they end up in a malpractice suit. Scholars, too, can
expect those who hire and promote them to be mainly fellow-scholars.
Journalists, by contrast, must entrust their careers to the judgment of corporate managers. These managers are often called "editors," which makes
282
them sound vaguely like fellow professionals, and are often former journalists. But that is no more relevant than the fact that the managers of
universities are called "deans" and are often former scholars. A manager
inevitably comes to identify with the organization, not with a former craft.
If journalists wanted professional autonomy comparable to scholars, they
would have to ensure that their careers depended largely on judgments
made by other working journalists, not by editors or other corporate managers.
A journalist's claim to autonomy differs from that of most professions,
however, in that it does not rest on strictly technical expertise. A journalist
is more like a teacher than a scholar. Like teachers, journalists seek to
instruct their audience and must often try to get people to absorb ideas
they don't find intrinsically interesting. Unlike teachers, journalists cannot
force people to pay attention by giving exams on their material. They are
therefore under constant pressure to bring everything down to the level of
the least attentive reader or viewermuch as teachers are under pressure
to bring everything down to the level of the least attentive student. Some
measure of professional autonomy would give journalists the short-run
protection they need in order to persuade the public to accept their judgments about what is worth knowing over the long run. If the news media
operated on a nonprofit basis, journalists would almost certainly be better
protected in this respect.
If one is convinced that the news media should be nonprofit, the next
question is how we might get from here to there. In the case of television,
the change could be relatively simple. Congress could instruct the Federal
Communications Commission to reserve certain hours of the day for national and local news and to restrict broadcasting during these hours to
nonprofit organizations, which would lease broadcasting facilities from existing commercial stations. CBS, NBC, and ABC News would presumably
separate from their profit-making parents, establish themselves as independent nonprofits, and apply for the right to broadcast national news. Under
the FCC's present, rather arbitrary, licensing procedures, these new nonprofits would probably get their licenses and continue to enjoy oligopolistic privileges. Local television news organizations would presumably follow the same pattern. The main change would be in the internal operation
of these groups.
The transition to nonprofit status would be somewhat more complicated
in the case of newspapers and newsmagazines. In the print media the division between news and entertainment is not so clear-cut, and separating
the two functions is probably impractical. An entire publication would
therefore have to be converted to nonprofit status. The most politically
promising way to do this would be to allow shareholders to convert their
stock to government-guaranteed bonds on favorable terms. Such conversion might be made mandatory when shareholders died or wanted to transfer
the shares.
Such changes are hardly imminent. The question, however, is not whether
Should the News be Sold for Profit?
283
they are imminent but whether they would be desirable. If a consensus

were to emerge among journalists that news ought not to be sold for profit
like shoes or deodorants, I suspect journalists could alter other people's
views rather quickly. At the moment, journalists are not even thinking
about such questions.
V
EUROPEAN PERSPECTIVES
14
Public Support for the
Performing Arts in Europe
and the United States
JOHN MICHAEL MONTIAS
In Western Europe, a broad variety of organizations offer plays, operas,

classical music, and ballet. Some, like the Dutch orchestra foundations, are
akin to American nonprofit organizations; others, especially in Germany
and France, are public agencies subordinate to central, regional, or municipal organs of government. In the European capitals, and in some of the
largest provincial cities, private proprietary theaters play an important role.
Most European performing-arts organizationsincluding many private
onesreceive subsidies, although only those that are not strictly private
and proprietary are dependent for the bulk of their incomes on public
support. Generally speaking, government subsidies are on a lavish scale,
while the donations of individuals, businesses, and foundations, in contrast
with the United States, are modest or minimal.
Ideally, I would have wanted to link each major organizational form to
a pattern of behavior. Lacking information sufficiently detailed to do this,
I have had to confine the analytical portions of this paper to a single organizational distinction: between "private proprietary organizations" and
"all other organizations" in the performing arts. The latter group comprises nonprofit organizations of the American type and quasi-governmental organizations of the French or German type. I call all companies, enterprises, associations, foundations, or firms belonging to this group
"nonprofit organizations" (NPOs), although the reader should keep in mind
that some of them may differ substantially from organizations that are
From Comparative Development Perspectives, ed. Gustav Ranis and Robert L. West, published by Westview Press, copyright 1983. Reprinted by permission. The author is grateful
to Avner Ben-Ner, Henry Hansmann, Daniel Levy, Paul DiMaggio, Richard R. Nelson, Susan
Rose-Ackerman, and John Simon for their very helpful comments (empirical, theoretical, or
of both kinds) on an earlier draft of this chapter.
288
European Perspectives
legally classified as nonprofits in the United States. However different they

may be, most NPOs in Europe and the United States share one characteristic: they are recognized by virtue of having been created by an organ of
government or by an explicit act of a specialized government agency such
as the Conseil d'Etat in France or the Internal Revenue Service in the United
States as being of public interest or utility (in German gemeinnutzig, in
French d'utilite publique). This public-utility attribute legitimates the direct aid (subsidies) or indirect support (tax exemptions) that they receive
from government agencies.
The paper is divided into several parts. I begin by summarizing the divergent histories of public support for the performing arts in continental
Western Europe and the United States; next I assemble statistics on the
organization and the financing of theatre, opera, concert, and ballet organizations in the 1970s in both parts of the world; finally I analyze the
theoretical behavior of nonprofit organization producing "elite" and "popular" shows in competition with a private-proprietary sector producing
only "popular" shows. The chief purpose of the modeling exercise employed in this part is to show the consequences of increased levels of subsidies on the choices made by the manager of this hypothetical NPO between the two types of shows.
HISTORICAL SURVEY
France
In Europe, partronage of the performing arts by ecclesiastic and secular

authorities goes back to the Middle Ages. In the fifteenth century it was
already common practice for the aldermen of northern French towns to
allot funds for the staging of mystery plays which were generally put on
by members of church groups ("confraternities"). In some instances all the
expenses of a playchiefly for costumes and stagingwere paid from the
town treasury.1 From the late sixteenth century on, as European kings and
princes acquired absolute power, they took over the twin roles of policing
and subsidizing the stage. Monopolies and privileges were granted to royal
companies that catered to elite tastes. In seventeenth-century Paris, companies that did not secure royal or aristocratic patronage and sought to
play for a broader public were harassed by the police; if they were not
banned altogether, they had to restrict their entertainment to pantomime,
puppetry, and other exhibitions that were not in direct competition with
the established companies.2 In France and Sweden, theatre companies and
musical groups in the capital or at the seat of the court enhanced the
prestige of the royal house. This was reason enough to merit support.
After the French Revolution of 1789, which proclaimed the freedom of
founding new theatres, centralized controls were reimposed, first under
Napoleon, then under the restoration. The modern pattern emerged in midnineteenth century: in the capital, a handful of subsidized theatres and
Public Support for the Performing Arts in Europe and the U.S.
289
opera houses coexisting with more numerous commercial establishments

(42 private theatres in 1878); in the provinces, each municipality of any
consequence financing the erection and the operation of a theatre building
for the free or low-cost use of theatrical and operatic companies (resident
in the larger cities, itinerant in the smaller), which frequently also received
an operating subsidy from the city. Controls on the repertory and even on
the staff of theatrical companies were exercised by the departmental prefects and by the Ministry of the Interior until the 1870s.
Germany and Austria
From the late seventeenth century on, German and Austrian princes set
about creating theatres and opera houses, frequently providing a permanent home and financial support for companies, many of which had been
regional touring groups in the past. During the Enlightenment, the notion
gained currency among German-speaking intellectuals that the theatre was
capable of providing an essential part of a good citizen's education and
that public funds deserved to be given out to advance this end, just as they
were given for the purpose of educating the young.3 A Kulturtheater was
needed to uphold higher moral aesthetic, and even patriotic standards. In
the absence of political centralization, the emperors of Austria, the kings
of Prussia, the princes, margraves, and electors of the German-speaking
world created their own court theatres. Emperor Joseph II of Austria founded
a national theatre in 1776 "for the development of good taste and the
improvement of morals."4 From 1791 on, Goethe directed the court theatre of Weimar which became a showplace for German Enlightenment.
Some municipalities, in emulation of the high nobility, also began to found
and support their own theatres and operas about this time.
The eighteenth century debate on the value and purpose of the theatre
began to affect the administration of theatrical establishments in the first
half of the nineteenth century. In 1808 Freiherr von Stein proposed that
the Prussian theatre be detached from police control and placed under the
supervision of the Ministry of Cults and Education. "The theatre," he
pleaded, "is an educational establishment (Bildungsanstalt)." Bildung, a
word with no precise equivalent in English connoting education and cultivation, was the intellectual foundation upon which later advocates of
public support for the arts were to build.
Emancipation of the theatre from police authority was only accomplished in the wake of the Revolution of 1848. Shortly after that event,
Edward Devrient, a leading theatre man of his time who was largely responsible for drawing up a plan for reform of the Prussian theatre, wrote
a widely disseminated manifesto in favor of a subsidized Bildungstheater.
"All that is capable of edifying and refining mankind," he argued.
should be protected by the state and be made independent of naked gain; this
applies to art as well as to school and church. Competition . . . must be excluded
once and for all. Private industry, whether in the form of rental concessions or of
autonomous enterprises, under the present circumstances can bring no higher ben-
290
efit to the theatre; without the backstop of monetary support which will guarantee
the independence of the stage from the crowds that bring money, the theatre cannot be conducted on pure principles.5
Prussian nationalism was surely not absent from Devrient's proposals. But
his ideas were also influential in cities and smaller states where the desire
to base art on high principles (mixed with local pride) motivated the adoption of his policies.
Already in 1818, the general assembly of one of the German kingdoms
(Wurttemberg) resolved to subsidize its national theatre and opera house
in Stuttgart from the regular budget. This lasted only two years, however,
after which the assembly refused to meet this "wasteful expense" and the
king was forced to meet the deficit of the former Court Theatre from his
own pocket.6 About the same time the municipality of Mannheim began
to share in the burden of maintaining the National Theatre created in 1774
by the Duke of Gotha. In 1839 the city placed the theatre under regie
(direct management) and undertook to guarantee all its losses. The city of
Freiburg followed Mannheim's example in 1868. The same policy was
adopted by Strasbourg in 1886, Mulhausen in 1903 (both of these presently French cities then under German suzerainty), Kiel in 1907, Essen,
Hagen, and Leipzig in 1912, Breslau, Dortmund, and Eberfeld in 1913.7
In the case of symphonic music, wealthy patrons and "free associations"
(freie Genossenschaften) created and financed large new ensembles. Private
and cooperative support provided the bridge between the patronage of
princes and other potentates of the eighteenth and early nineteenth centuries and the state-subsidized activities of the post-World War I era.8
The rise of publicly and cooperatively supported organizations in the
second half of the nineteenth century coincided with a growing gap between bourgeois-popular and elite culture. Elite groups were able to mobilize public support for "serious" theatre and music at a time whenand
perhaps becausecommercial enterprises were increasingly pandering to
the "bad taste" of the dominant bourgeois public. 9
By the 1920s, theatre, opera, and orchestral music were dominated by
gemeinnutzig (public-interest) organizations supported by local and state
organs. In 1929 these NPOs employed 89 percent of the singers, twothirds of the actors and actresses, and over 80 percent of the musicians
engaged in professional activities.10
Many of the NPOs were regie enterprises, owned by and directly subordinate to municipal and state organs which covered their financial deficits. The financial guarantees against unforeseen losses, in an industry where
such losses frequently occurred due to the vagaries of an uncertain demand, placed a substantial contingent burden on the budgets of the cities
and states (later Lander) that had committed themselves to this Kulturpolitik. Nevertheless, by the 1 920s these included virtually all the cities and
states that had any theatre or opera whatsoever. Data for theatre-andopera subsidies, as initially estimated or forecast (Voranschlage) and as
they were actually realized in the 1920s and early 1930s, were published
291
Table 14.1 Percentage Breakdown of the Earned Income and Subsidies of the
Nonprofit German Theatres (1911, 1926/27, 1934/35, 1973/74) (percent)
1926/27
1934/35
1973/74
63.2
5.7
3.9
27.2
60.1
0.1
8.2
1.0
32.3
44.5
2.3
6.2
40.7
12.0
0.2
5.4
0.1
81.9
100.0
101.7
93.7
99.6
1911
Subscriptions and ticketsa

Radio and TV income
Other earned income b
Private Support
Government subsidies
Total Income
NOTE: The percentages do not add up to 100.0 in 1926/27 and 1934/35 because they have been computed
from sector-wide averages in each income category, some of which, for lack of detailed data, were based
on an incomplete coverage of all theaters in the sector (note in the source). The data for 1911 cover only
eight theaters, those for 1934/35 only municipal theaters.
aIncluding sales to theater groups, associations, students, etc.
b
Programs, cloakroom receipts, guest appearances, tours.
SOURCE: Fritz Herterich, Theater und Volkswirtschaft (Leipzig: Duncken and Humbolt, 1937) 281, 187;
Deutscher Buhnenverein, Theater-statistik 1973/74 (Koln, 1974), 56.
shortly before World War IIthe only ones of the kind that I have come
across for any country. They show wide disparities for Munchen (DM 2.3
million compared to an estimated DM 0.8 million), Berlin (4.4 million
versus DM 2 million), Wiesbaden (DM 1.5 versus DM 0.75 million), and
Weimar (DM 1.6 versus DM 1.1 million). On average, losses in the 192627 season exceeded estimates by 43.3 percent for state theatres and 35.2
percent for municipal theatres.11
The same statistical source provides a valuable glimpse of the long-term
structure of receipts of the German nonprofit theatre and opera in 1911,
1926/27, and 1934/35. This structure is compared to data for 1973/74 in
Table 14.1.
Imperfect as the data in Table 14.1 may be, the trends they reveal are
too pronounced to be fortuitous. The share of subscriptions and tickets in
total income fell drastically over the years covered, from over 60 percent
in the pre-World War I period to 44.5 percent under Nazi rule (for municipal theatres only), down to 12 percent in 1973/74. Private support accounted for a small but significant part of total income in 1911; it has
been negligible in recent years. Government supportthe obverse of the
above phenomenahas had to fill an ever-widening gap. As in the preWorld War I period, this gap has been filled by municipal and state (later
Lander) subsidies, not by the central or federal government, which, for the
most part, has relegated cultural policy to regional and local organs of
power.
Sweden
In Sweden, as in France, the history of patronage in early modern times
coincides with the largesse of the reigning monarchs. During the period of
Enlightenment, especially in the second half of the eighteenth century, the
292
kings of Sweden emulated their fellow autocrats in France, Austria, Prussia, and Russia by founding academies of letters, royal theatres, and opera
houses.12 After 1809, the Riksdag, or Parliament, which now ruled over
the constitutional monarchy, voted the national budget, a modest part of
which was given over to support of the arts. The civil officials of the nobility wished to continue the royal patronage of the arts on an eighteenthcentury scale or beyond, but their pro-art policy was resisted by the
economy-minded representatives of the peasantry in the Riksdag. The influence of the latter was especially strong in the last forty years of the
century. It was not until late in the nineteenth century that representatives
of the industrial bourgeoisie and labor members of the Riksdag were able
to muster the votes for a more generous arts policy.13 But the sluices only
became wide open a decade after World War II, once the social democratic
governments had met the most pressing social welfare needs of the nation:
the arts were now ready for the benefactions that government officials,
intent on recreating the brilliant patronage of the enlightened monarchy of
the eighteenth century, could at last lavish on them.
The Netherlands
The Dutch national government launched a serious program of support

for the performing arts later than the other European countries so far considered; but its commitment, once made, went very deep. The watershed
here was World War II, shortly after which a dramatic increase in subsidies to all cultural and welfare activities took place.14 Symptomatic of the
government's enhanced commitment was the decision taken in 1948 to
help symphony orchestras break their dependence on the box office by
guaranteeing the full salaries of all accredited orchestra players. 15 Since
that time the salaries of actors employed by national theatres have also
been guaranteed. Thus, when the Nieuw Rotterdamse Toneel and the Nederlandse Comedie closed "under popular pressure" during the course of
the 1970/71 season, for reasons discussed below, the government saved
very little money because it continued to pay the two theatres' salaries.16
The Dutch experience with the large-scale subsidization of music and
theatre in the 1960s and 1970s is so interesting and instructive that it
deserves separate consideration. In the late 1960s, as part of the European
youth revolt which culminated in the French university riots of 1968, Dutch
students and intellectuals assailed the repertoire of subsidized orchestras
and theatres. The Notenkraker (Nutcracker) group raised an outcry against
the performance of esoteric music. The "Tomato Action Group" castigated and forced the closing of De Nieuw Rotter damse Toneel and the
Nederlandse Comedie for their failure to stage serious plays relevant to
their social concerns. Soon thereafter, in the early 1970s, new companies
(Werk Theatre, Satyr, Baal, de Appel) were created that specialized in tragedies and serious social plays. The old, established state and municipal
theatres adapted their repertoire to this "activist" demand. Light and
middle-brow plays and operettas which had helped to stretch out subsidies
and sustain socially redeeming works in the past were thrust aside.
293
This virtual seizure of the subsidized theatres by activist minorities was,

from the viewpoint of attendance, a disaster. Attendance at all professional
subsidized theatres, which had been hovering around 1.4 to 1.5 million
from 1965 to 1969, fell to 1.1 million in the 1972/73 season and 907,000
in the 1974/75 season.17 What is more, the professional private theatre,
which had been gradually edged out of the market by the mid-1960s,
underwent a brilliant revival in the 1970s. Attendance at private theatres
which had fluctuated between 150,000 and 250,000 in the period from
1965-69 rose to 750,000 in the 1974/75 season. As the director of the
Association of the Netherlandish Theatre companies put the matter in an
interview, the subsidized theatre, by specializing in tragedies and serious
plays, had left a gap in the market which was soon filled by the private
theatre. In the last section of this chapter, a stylized version of this development is analyzed theoretically.
United States
The lack of a tradition of royal patronage combined with a strong Puritan

tradition helps to explain the almost total absence of government support
for the performing arts in eighteenth- and early nineteenth-century America.
New England and Dutch Calvinists, the Quakers, and other religious
groups strongly disapproved of the theatre, which, according to a widely
shared view, encouraged "shiftlessness, idleness, and immorality."18 As late
as 1774, the Continental Congress issued a resolution calling for the suspension of "horseracing, gambling, cockfighting, exhibition of shows, plays,
and other expensive diversions and entertainments."19 In the last one or
two decades of the eighteenth century, religious prejudice against theatre
was still so strong that plays had to be advertised as "moral lectures."20
In a cultural climate of this sort, when cities were still small and most
taxpayers were farmers who had not the time, the money, or the inclination to attend performances, the expenditure of government revenue to
subsidize the theatre was unthinkable.
In the first half of the nineteenth century, British touring companies supplied most of the better theatrical fare. Native companiesincluding the
popular minstrel showsappealed to an uneducated public, which also
patronized the circus, the exhibition of freaks, and other outlandish curiosities. The great P. T. Barnum offered both "high" and "low" art. In his
autobiography, he explained his policy as follows: "Show business has all
phases and grades of dignity, from the exhibition of a monkey to the exposition of that highest art in music or the drama, which entrances empires
and secures for the gifted artist a worldwide fame." 21 To be sure, he made
more money exhibiting curious animals and freaks than presenting high
art, with the exception of singer Jenny Lind's prodigiously successful tours.
Barnum expressed views on the business of art that were widely held at
the time. "Art," he argued,
is merchantable, and so with the whole range of amusements, from the highest to
the lowest. . . . People cannot live on gravity alone; they need something to satisfy
294
their gayer, lighter moods and hours, and he who ministers to this want is in a
business established by the Author of our nature. 22
If God Himself smiled on such enterprises, why should government tamper

with them?
Not all Americans conceived of art as an ordinary consumption activity
that private enterprise could satisfy just as any other. Already in the 1830s
the painter William Dunlap had called for government support of the fine
arts, including especially the theatre, on the model of France and Germany
where the theatre was flourishing under government auspices.23 He proposed that the states establish their own theatres "in order to eliminate the
profit motive from theatrical enterprises and thus improve the quality of
both the plays and the performances themselves."24 But his plan found no
political support and withered on the vine.
Another painter, Rubens Peale, sought to introduce high culture to Baltimore in the 1820s and 1830s by mounting an operation with the aid of
civic-minded patrons that combined business and art. His was a farraginous mixture of high and low art and of natural science, typical of his
time. The "Baltimore Museum" that he dedicated to the "improvement of
public taste and the diffusion of science" exhibited contemporary paintings, copies of old masters, and natural-history specimens; it also staged
theatrical performances "in order to meet the annual deficits of the institution." 25 When the enterprise began to fail, Peale attributed his difficulties to "the sordid calculations of shortsighted commercial avarice"by
which he meant his patrons' unwillingness to put up the funds that were
necessary to turn it into a success. The subsequent fate of the institution,
according to cultural historian Lillian Miller, "is a story of gradual deterioration from a museum devoted to art and science to a theatrical 'saloon'
and finally to a P. T. Barnum showcase."26 The city of Baltimore itself, as
far as I can make out, never contributed a penny to bail out the failing
enterprise.
At the federal level, if there was any serious consideration of subsidizing
the arts at all in pre-Civil War days, it was directed toward the plastic
artschiefly to the decoration of public buildings. But the government's
participation was limited by the apathy of a Congress engrossed in the
controversies between North and South, free and slave interests, and national power and states' rights.27
The alternative to commercial theatre and opera in the eighteenth and
nineteenth centuries was not the state-subsidized quasi-governmental enterprise but the amateur, religious, or other noncommercial group. Church
music and college theatricals flourished already in the eighteenth century.28
"Thespian" and "Aeolian" musical societies began to mushroom in colleges and cities. The New York Philharmonic Society was founded in ] 842
as a cooperative venture, almost exclusively with foreign-born musicians,
who paid the expenses and divided the profits. New York's Concordian
and Euterpian Societies, Boston's Handel and Haydn Society, and Phila-
295
delphia's Musical Fund Society began to cater to the tastes of city elites.
After the Civil War, conservatories were founded in all the larger cities. In
the late 1870s and early 1880s, wealthy patrons banded together to launch
new orchestras and build opera houses. The Metropolitan Opera, founded
in 1883, was one such enterprise. Paul DiMaggio has recently shown how
in Boston, the traditional "Brahmin" elite, after yielding its dominant position in city politics to a new class of immigrants and parvenus around
the time of the Civil War, founded "a system of nonprofit organizations
that permitted them to maintain some control over the community even as
they lost their command of its political institutions."29 The Boston Symphony Orchestra, together with the Museum of Fine Arts, were the kingpins of these NPOs in the arts. These organizations drew their sustenance
from a tightly knit group of rich, civic-minded patrons, not from the city
treasury. The growing gulf between cultural and political elites of
nineteenth-century America, which had no evident counterpart in Europe,
made it much more difficult to transfer the responsibility for supporting
cultural activities from private to public patronage when the old Maecenates could (or would) no longer carry the burden.
The rise of a professional theatre "for art rather than for profit" lagged
behind the parallel development in music. It was not until shortly before
World War I that the first attempts were made to found professional theatres dedicated to high-minded artistic ideals.30 The deficits incurred by
these avant-garde theatres were metif they were metby private backers
and members' contributions. With the exception of the well-endowed New
Theatre founded in New York in 1909, which folded after two seasons of
heavy losses, the art theatres were small and economically run. Actors who
were not yet unionized were paid very small salaries when they were paid
at all. In the 1920s the "noncommercial movement" developed rapidly
from 50 groups in 1917 to over 1000 by 1929, including college and university theatres.31 The first municipal theatres were founded in this period,
including one supported by the town of Northampton in Massachusetts.
Large cities, however, did not begin to subsidize the theatre until the 1930s,
and very few are doing so systematically to this day.
A handful of states, spearheaded by New York, made their initial moves
toward a policy of regular support of the performing arts in the late 1960s
and early 1970s. The federal government, with the exception of the generously funded Federal Theatre (1935-39), did not, so to speak, get into
the act until Congress passed a bill establishing the National Foundation
on the Arts and Humanities in 1965 and money was appropriated for its
component organization, the National Endowment for the Arts, in the following year.32 Federal government subsidies in the 1970s in part supplemented, in part supplanted, the help given by the major foundations (Ford,
Rockefeller) in the 1960s.
To sum up, government at all levels in the United States came to subsidize the arts at least a century after such support had become a regular
practice in Western Europe. The lack of a tradition of princely patronage,
296
lingering puritanical attitudes, the dominance of a mercantile spirit, a

widespread ideology of self-reliance, the generosity and enterprise of wealthy
patrons cooperating to found "societies" to supply the cultural activities
they desired, all help to explain the distinct American pattern of development.33
We should also take into consideration the more democratic way of
running cities and state government in this country that did not give music- and theatre-loving elites as much opportunity to impose their tastes on
the public as in Europe.34 The idea, fostered by European elites, that theatre and music should be part of a good citizen's Bildung never took root
in America. Finally, as we shall see in the next section, the more generous
provisions for deducting donations to the arts in the U.S. Internal Revenue
code stimulated private patronage in the United States and staved off the
necessity of government help to keep arts institutions on an even keel.
A STATISTICAL OVERVIEW OF THE CONTEMPORARY

ORGANIZATION AND FINANCING OF THE PERFORMING ARTS
Organizations
Official European statistics cover the heavily subsidized nonprofit sector
fairly well; data for the private proprietary sector, however, are scarce,
and when available, frequently of mediocre quality. What is called "private" may be an amalgam of proprietary organizations and struggling theatres and ballet companies that are too small or too recently founded to
be recognized as worthy objects of subsidization by the state. Table 14.2
illustrates the multiplicity of organizational forms in the theatre and opera
of the German Federal Republic. The registered associations in Table 14.2,
like the French associations reconnues d'utilite publique, are those judged
by a government agency to be of public benefit. In my analysis of public
subsidies in the tables that follow I have taken the registered associations
out of the private sector and included them in the nonprofit sector.
"Regie management" refers to direct management by agents appointed
by a state (Land) or municipality (Gemeinde) for the account of that agency.
The expenditures of theatres and operas under regie management are comprised in the budget of the founding agency. Limited liability companies,
by contrast, are responsible for covering their expenditures from their receipts and such subsidies as they may receive from one or more government agencies. Some of these companies were private, others public. The
shareholders of the public ones may be states, municipalities, or a mixture
of both. Private individuals, as far as I am aware, do not hold shares in
these public companies.
Of the 45 German "culture orchestras"essentially, orchestras playing
"classical music"14 were organized under Lander and 21 under municipalities, 8 were associations, 1 was a limited-purpose association, and 1 a
corporation under public law (Korperschaft des offentliches Rechts).35
297
Table 14.2 Organizational Forms of Theatres and Operas in the German

Federal Republic, 1973/74 (number of organizations)
"Public" Theatres or Operas
Organized Under:
Mixed
States MunicipalGrand
Sponsorship
ities
Total "Private" Total (Lander)
Individually owned
Registered associations
Regie management
Limited liability companiesa
Othersb
Total
38
38
17
24
4
7
49
16
13
13
3
36
6
2
7
11
168
83
85
16
44
25
24
49
40
17
a Gesellschaften mit beschrankten Haftung.

b
Civil law corporations (Gesellschaften burgerliches Rechts), limited purpose associations (Zwechverbanden), companies in which liability of one partner is limited (Kommand Gesellschaften) and private firms
(Offene Handelsgesellschaften).
SOURCE: Deutscher Buhnenverein, Theater-statistik 1973/74, (Kohn, 1975), 12-14, 52.
The organizational status of French theatres and orchestras is as variegated as the German. The Comedie Francaise, although legally an association (the full-fledged societaires still draw part of their income in the form
of shares), is in reality a national theatre receiving a large part of its income from the central government budget, as do other national theatres
(Chaillot, I'Odeon, L'Est Parisien, Strasbourg)3 6 Major subsidized theatres in the provinceschiefly founded by municipalitiesare linked to the
central government by "conventions" or contracts that specify the number
of new plays and the total number of performances they must "produce"
in a three-year period to earn a fixed amount of subsidies for that period.
In 1979, there were 27 major regional theatres linked to the central
government by such "conventions." Most of these theatres were originally
founded by municipalities and operated as concessions; they have of late
been placed under the direct management (regie) of their municipal governments because of the difficulty of finding "concessionaires" willing to
take on substantial risks of incurring unforeseen losses.37 These provincial
theatres make up what the Ministry of Culture and Communications calls
"la decentralisation dramatique." More authentically decentralized are the
300-odd "independent companies," most of which apply for centralgovernment aid; of these only about a tenth are successful in the national
competition for subsidies. The legal status of some of the small, financially
weak companies is often ill-suited to their operation. For if they are organized as associations, the law of July 1901 which regulates such organizations does not allow them to engage in commercial activities and hence
to obtain a theatre license.38 Some theatres, nevertheless, are organized as
informal associations and even receive subsidies from the central government. A few have opted for the status of Societe Ouvriere de Production
298
(workers' cooperative), created "by workers or employees desirous of exercising their profession in common." 39 A few theatres have no juridical
status to speak of: they are classified as "de facto companies" (societes de
fait) and are not eligible for subsidies at all.40 All these small "decentralized" companies are essentially nonprofits. But even individually owned
theatres and theatres organized as limited-liability companiesrepresenting the so-called private sectormay receive subsidies if they produce new
plays by French authors or stage old plays in substantially new ways.
In Holland, most subsidized theatres, orchestras, and ballet companies
are organized as foundations. The Nederlandse Opera of Amsterdam, for
instance, is a foundation covering 75 percent of its expenditures from state
subsidies and a part of the rest from hosting provincial municipalities when
the opera goes on tour.41 Such foundations are administered by boards on
which representatives of subsidizing government agencies are assured a seat
and a measure of influence. In Sweden, national theatres are typically administered by five-member boards, two of which are appointed by the government. The directors of municipal theatres are appointed by the town
council which covers the theatres' financial deficits.
The Financing of the Performing Arts
The statistics of receipts and expenditures of performing arts organizations

in Tables 14.3 and 14.4 cover exclusively autonomous professional organizations. They exclude orchestras that are part of a radio network, military bands (because they are not professional), and school theatres (because they are neither autonomous nor professional). 42 In accord with the
basic principle of classification set forth in my introductory remarks, nonprofit organizations comprise public institutions, associations, foundations, and joint-stock companies whose shares are held by public institutions. "Private" organizations are strictly proprietary (although they may
also receive public subsidies).
In Austria and France, as shown in Table 14.3, the total receipts including subsidieswhich approximately equal the expenditures or factor costs
of nonprofit performing-arts organizations vastly exceed those of private
organizations. No precise statistics are available for the other countries,
but a comparison of the size of audience in the two types of German and
Dutch theatres indicates that the predominance of the nonprofit sector holds
for these two countries as well.43
Table 14.4, showing the percentage distribution of the total incomes of
performing-arts organizations, throws into relief the enormous difference
between Western Europe and the United States in financing the arts. In the
dominant nonprofit sector, earned income in the five European countries
listed represented between one-tenth and one-third of total income (approximately equal to total expenditures). The Swedes have gone farthest
down that route: ticket income accounted for only 10.5 percent of total
income in the 1974/75 season (3 percent of the Royal Opera's and 7 per-
299
Table 14.3 Financing of the Performing Arts, Western Europe and the United
States in the Early 1970s * (millions of national currency units)
Austria
Nonprofit opera
and theater
Private theatre b
Direct Subsidies
National
State
or
and
Federal Local
Date
Earned
Income
1973
1973
282.2
43.0
680.3
31.7
253.5
21.5
Private
or
Foundation
Other
Income
Total
2.1 *
0.5a
1218.1
96.7
France
Public/nonprofit
Private
Germany
Nonprofit c
Private
1973
1973
136.0
80.0
178.0
1.0
113.0
427.0
81.0
1973/74
1973/74
195.3
n.a.
2.9
883.4
14.3
5.0
10.6d
1097.2
n.a.
Netherlands
Nonprofit
Theatre
Otherf
1972/73
1972
6.5
3.6
12.1
10.8
7.6
1.9e
31.3
16.5
1974/75
29.4
181.7
69.7
280.8
1970/71
1970/71
90.4
105.1
3.4
4.9
58.2
10.5b
167.4
105.1
Sweden
Nonprofit
United States
Nonprofitg
Private theatre
27.7
NOTES: *Operational budgets only, excludes capital expenditures.

a
Proceeds from lotteries.
bThree large private theaters in Vienna.
c
Theater, opera, and symphony orchestras, only.
d
Subsidies from public radio-television stations, public lotteries ("lotto") and "other public sources."
eFinancial aid from Omroep Foundation.
'Nederlandse Opera, Het Nationale Ballet, and Concert Gebouw Orchestra, only.
gThese estimates, based on the Ford Foundation survey of 166 performing arts organizations, may seriously underestimate the contribution of state and local subsidies, due to underrepresentation in the Ford
sample of small companies which were more dependent on state support. State legislative appropriations
to all the arts were $25.2 million, of which at least 40 percent, or $10.8 million, were allotted to professional performing arts agencies (see DiMaggio 1981, 4-9).
h
Corpus earnings used for operations plus certain transfers from endowments.
iBroadway and commercial touring, only (23.5 million audience in 1977); excludes small summer stock
(4.9 million estimated audience), large musical arenas and hard tops (6.6 million), and summer theater
(11.1 million).
SOURCES AND METHODS: Austria and Germany: Deutscher Buhnenverein, "Theater statistik 1973/74,"
Koln, 1975.
France: For Paris-based private and public nonprofit theaters and orchestras, Ministere de la Culture et de
I'Environnement, Annuaire statistique de la Culture, Donnees de 1970 a 1974, La Documentation Francaise 1977, vol. 2; for provincial theaters, orchestras, and opera houses, data were extrapolated from
fragmentary statistics for 197071 in annex 1 to the unpublished report prepared for the Ford Foundation, Theater and Music in Western and Northern Europe 1960-1972, by Ruby d'Arschot.
The Netherlands: Ministerie van Cultuur, Recreatie en Maatschappelijk Werk, Toneel ter Zake, The
Hague, 1978, 5, 57; data for other nonprofit, annex 3 of the Ford Foundation report by Ruby d'Arschot.
Sweden: Statistika Centralbyran, Statistik Arsbok for Sverige 1976 (Stockholm), 330-336.
United States: The Ford Foundation, The Financing of the Performing Arts: A Survey of 166 Professional
Non-profit Resident Theaters, Operas, Symphony, Ballet, and Modern Dance Companies (New York: The
Ford Foundation, 1974).
300
Table 14.4 Financing of the Performing Arts, Western Europe and the United
States in the Early 1970s (Percent of Total Income)
Direct Subsidies
National State
or
and
Federal
Local
Private
or
Foundation
Other
Income
Total
Date
Earned
Income
Austria
Nonprofit opera
and theatre
Private theatre
1973
1973
23.2
44.5
55.8
32.8
20.8
22.2
0.2
0.5
100.0
100.0
France
Public/nonprofit
Private
1973
1973
31.9
98.8
41.7
1.2
26.5
_
100.0
100.0
Germany
Nonprofit
1973/74
17.8
0.3
80.5
0.5
1.0
100.0
Netherlands
Nonprofit
Theatre
Other
1972/73
1972
20.8
13.0
38.7
59.6
34.5
29.4
6.1
100.0
100.0
Sweden
Nonprofit
1974/75
10.5
64.7
24.8
United States
Nonprofit
Private theatre
1970/71
1970/71
54.0
100.0
2.0
2.9
__
34.8
_
100.0
6.3
100.0
100.0
SOURCES: Same as for Tables 14.3.
cent of the symphony orchestras' total incomes in that season).44 Comparable figures for the Paris Opera and the Comedie Francaise were 20 and
21 percent, respectively, in 1974.45 In Austria, earned income came to 23.2
percent of total income in the subsidized sector. In contrast, in the United
States even the nonprofit sector in the Ford Foundation survey of 166
NPOs covered 55 percent of its expenditures from ticket incomes. In the
aggregate, the earned income of the 32 U.S. operas covered 65 percent of
their total income.46 Even the private theatre received generous state and
local subsidies in Austria and Germany, amounting to over 50 percent in
the former and to roughly a quarter of total income in the latter.
Although the financing of the performing arts in the English-speaking
countries other than the United States is not systematically examined in
the present study, it may nevertheless be observed that the patterns of
public and private support in the United Kingdom, Australia, Canada, and
New Zealand more closely resemble those prevailing in the United States
than they do those in continental Europe. The share of earned income in
the total receipts of NPOs in the United Kingdom, Australia, and New
Zealand in the early 1970s may not have been quite so high as in the
United States and Canada (32 to 49 percent in the first group, 55 to 60
percent in the second), but it was still appreciably higher than in Austria
301
(23.2 percent), Germany (17.8 percent), the Netherlands (20.8 percent),

and Sweden (10.5 percent). France, with 31.9 percent, representing the
highest share of earned-to-total income in my sample of European countries, was on a par with New Zealand's 32 percent.47
In the United Kingdom, Australia, and New Zealand, there was a marked
disparity between theatre and opera on the one hand, and orchestral music
on the other, in the extent to which NPOs covered their expenditures from
their own receipts. The share of earned income exceeded 50 percent in
theatre and opera companies, but it was only 16 to 21 percent for orchestral groups.48 This difference was not nearly as marked in the United States
and Canada. In fact, when orchestras are removed from our list of performing-arts organizations, the overall averages are remarkably similar
in all the English-speaking countries. On the continent, no clear pattern
of privileged public support for music or any of the other arts emerges
from the statistics: all forms of "high art" were, and are, heavily subsidized.49
Among the sources of support ("nonearned income"), the national government provided a major share in Austria, France, Holland, and Sweden.
In the federated system of West Germany, support for the arts is the nearexclusive responsibility of the states (Lander) and the municipalities. In no
country of Western Europe did private, business, and foundation support
contribute more than a few percent of total income. The United States
again marks a sharp departure from the European pattern of finance. Here,
private and foundation support made up about 76 percent of the unearned
income of the NPOs in the Ford Foundation sample and perhaps 55 to 60
percent for all NPOs.50 Even in the English-speaking countries other than
the United States, which in this as in other respects represented an intermediate position between the United States and continental Europe, the
share of private, business, and foundation support was relatively modest,
namely, 8 percent in Australia, 13 percent in the United Kingdom, 6 percent in New Zealand, and 15 percent in Canada.51
The relatively low federal subsidies listed for the United States in Tables
14.3 and 14.4 are now, of course, antiquated. Total subventions from the
National Endowment for the Arts, expressed in 1972 prices, went up from
$10 million in 1972 to $90 million in 1980.52 Appropriations by State Art
Councils rose from $28 million in 1971 to about $40 million in 1980, also
in constant prices. Unfortunately, we do not have financial statistics for
performing-arts organizations, such as the Ford Foundation collected for
the early 1970s, to assess the impact of the increase in government subsidies on the "income gaps" of these organizations. The data available for
symphony orchestras alonemajor regional and metropolitan organizationsdo not point to a radical increase in the percentage of total incomes
accounted for by government subsidies. Tax-supported grants (federal, state,
and local) represented 14.5 percent of the total income of 160 orchestras
in 1973/74 and 14.7 percent in 1978/79.53 When the data are in for the
entire decade of the 1970s they are likely to show some widening of the
302
"income gap"government subsidies accounting for a larger share of total

incomesbut nothing like the preponderance of such subsidies in the budgets of comparable organizations in Western European countries.
So far we have looked only at current government support for the performing artsessentially at the operating subsidies of theatres, opera houses,
symphony orchestras, and ballet companies. But the total contribution of
government to the arts is a good deal larger than just operating subsidies:
it includes capital expenditures, which in domains other than the performing arts typically exceed current expenditures, and specialized arts education (music schools and so forth). In France, where the accounts of central
government carefully distinguish current and capital expenditures, the capital expenditures in 1973 amounted to about half the level of current government expenditures on the theatre and music in 1973, compared to nearly
three-quarters of such expenditures in the plastic arts (chiefly for art museums).54 The statistics of Table 1.4.5, wherever possible, comprise both
current and capital expenditures as well as specialized arts education (chiefly
music and art schools).
Of the data in Table 14.5 only those for the Netherlands have been
published by the government in the desired format. They include both current and capital expenditures and cover central, provincial, and municipal
support for the performing and for the plastic arts; they segregate subsidies
to special schools, training young people and adults in the various arts;
and they are net of any receipts received directly by government organs in
each sector. France's data for support of the arts at the central government
level are also excellent, but those for local support are at best fragmentary.
The British data assembled by Peacock and Godfrey exclude capital expenditures and professional training in the arts as well, in the case of "total
government support," as subventions to historic homes.55 The United States
data are poor at all levels and represent only an approximation to the
desired statistics.56 Nevertheless, the disparity between the level of government support of the performing arts between Austria, Germany, the Netherlands, and Sweden (seven to thirteen dollars per capita), and Great Britain and the United States (less than half a dollar per capita) is so large it
cannot possibly be bridged by more comprehensive coverage of expenditures in the Anglo-Saxon countries. Indeed, the inclusion of capital expenditures and specialized arts education in Germany and Austria would in
all likelihood widen their lead over the United States and Britain in their
level of government support for the performing arts. I doubt whether more
complete statistics for French expenditures on the arts at the municipal
level would alter France's overall record, about midway between the highexpenditure and the low-expenditure countries.
Indirect Support
The data in Tables 14.2 through 14.4 refer to direct government support
only. They do not reflect the indirect expenditures in the form of tax exemptions, tax deductions, and free rent of government-owned facilities.
Table 14.5
Total Government Support for the Performing Arts in Western Europe and the United States
Federal or
National
Support for
the Arts
Austria (1973)a
France (1973)
German Fed. Rep. (1976) a
Great Britain (1970/71)a
Netherlands (1975)
Sweden (1970/71)
United States (1974)
n.a.
27.2
12.0
39.0 C
38.3
63.4
40.0
Percentage Share of the Performing Arts in:

Total
Federal
All
Government
or
National
Government
Support for
the Arts
Budget
Budgets
n.a.
n.a.
53.1
35.4
54.5
67.0
47.0 b
0.6
0.13
0.005
0.05
0.24
0.37
0.014
0.51
n.a.
0.30
0.04d
0.50
0.33
0.02b
Government
Support for
Performing
Arts as
Percent of
National
Income
0.19
0.04b
0.13
0.023
0.23
0.19
0.008 b
Per capita
Government Support
In
National
Currencies
166.0
8.5
17.9
0.18
32.6
36.4
0.44
In
U.S.
Dollars
8.30
2.10b
7.00
0.44
13.40
6.90
0.44
NOTE: Total government support for the arts includes specialized arts education, museums, and conservation of monuments. It excludes television and radio, archives, literature,
cinema, and libraries. Current and capital expenditures as well as transfers are covered, except as otherwise indicated.
aCurrent expenditures, only.
bBased on a very rough estimation of municipal and other local expenditures.
c
Includes central government subsidy to the BBC for music and ballet.
d
Exclusive of professional training in the arts.
SOURCES: Austria and France: Sources to Table 14.3.
Germany: Deutscher Buhnenverband, Theater-statistik 1978/79 (Koln, 1979).
Great Britain: Alan T. Peacock and C. Godfrey, "Cultural Accounting," in M. Blaug, ed., The Economics of the Arts (London: Mark Robertson, 1976), 91.
Netherlands: Central Bureau voor de Statistiek, Statistiek inkomsten en uitgaven van de overheid voor cultur en recreatie 1975 (The Hague, 1979), 8, 24.
Sweden: Claude Fabrizio, Le Projet Suedois de Democratie Culturelle: Essai de Comparaison avec la Situation Francaise" in Notes et Etudes Documentaires, July 22, 1975 (no.
4205-4206).
United States: Dick Netzer, The Subsidized Muse: Public Support for the Arts in the United States (Cambridge: Cambridge University Press, 1978), 46, 79, 90, 93, 95.
National and local budgets and national income data for all countries listed are from the official statistical yearbooks of the respective countries.
304
Tax exemptions are especially important in Western Europe, tax deductions in the United States. In France, the normal rate of the value added
tax (VAT) was 17.6 percent in the period covered in the tables. For the
arts the tax is legally reduced to 6 percent. But in fact the actual rate, paid
by both nonprofit and profit theatres, is still lower. The tax base (base
imposable) for the first 140 performances of "dramatic, lyrical, musical or
choreographic works newly created in France or of new productions of
classical works" (oeuvres classiques faisant I'objet d'une nouvelle mise en
scene) is only 30 percent of the ticket price (which is itself, in the case of
subsidized works, only a fraction of value added). As a result, a VAT of
2.1 percent of receipts "has almost become the rule in the theatre." 57 Supposing the full 17.6 percent rate had applied to an estimated 80 percent
share of value added in the total expenditures of all professional
performing-arts organizations, 58 the tax bill would then have come to FF
72 million in 1973 instead of FF 5.4 million that were actually paid (on
the assumption that all performing-arts organizations remitted 2.1 percent
of their earned income to the Treasury in the form of VAT). If these numbers are correct, the national government's contribution should be raised
from 179 million FF to 246 million, or 42.7 percent of the total income
of performing-arts organizations. For the nonprofit sector alone, the national government share would then rise from 41.7 percent to 48.5 percent
of total income.
In Germany, performing-arts organizations are totally exempt from the
VAT (and as far as I can make out pay no other taxes of any significance).
If the normal rate of 12 percent of VAT were applied to 80 percent of the
expenditures of nonprofit organizations in the sector, they would have to
remit DM 106 million to the treasury. However approximate this figure
may be, it clearly shows that the indirect contribution of the federal government is many times greater than its direct contribution (of the order of
9 percent of all expenditures including VAT taxes at the 12 percent rate).
Free or subsidized rent of opera houses, theatres, and concert halls make
an important "hidden" contribution to nonprofit performing arts organizations all over Europe but one that is difficult to capture statistically. In
the Federal Republic of Germany, rental expenses account for only 0.7
percent of the total expenses of all nonprofit theatres and opera houses.59
According to a French author's analysis of the expenditures of a "typical"
private theatre in Paris, rent and rental expenses came to 4.5 percent of
total yearly expenditures.60 If we assume comparability of real expenditures in Germany and France, the implicit subsidies stemming from free or
concessionary rentals may amount to 3 to 5 percent of the total expenditures of German nonprofit theatres and opera houses.
If indirect aid in the form of rental subsidies and tax exemptions is
counted, total government support for the performing arts in the Federal
Republic rises above the figures in the last column of Table 14.5 by about
28 percent, to at least $9.00 per capita.
In the Netherlands, municipalities run their own (subsidized) theatres
305
which sign contracts with theatre groups and opera and ballet companies
for performances. They may pay outright for a performance, share in the
ticket receipts, or charge rent for the hall placed at the disposal of the
performers. A governmental study of seven major Dutch theatres
(Schouwburgen) shows that, in the season 1972/73, precisely two-thirds of
their total expenditures were covered by subsidies (Ft 5.6 million) and only
one-third from their rental and other receipts (Ft 2.8 million).61 The subsidies of municipalities to all 54 theatres in activity in the season was Ft
16.7 million (but it should be kept in mind that the theatres held opera
and ballet performances as well as theatricals). In the same season, the 11
subsidized theatre groups covered in the data for Table 14.3 received subsidies equal to Ft 14.8 million, amounting to 79.2 percent of their total
expenditures.62 When subsidies to theatre groups and to theatres are consolidated, they rise up to Ft 39.6 million: Ft 24.6 million (62.2 percent)
from the municipalities, Ft 12.1 million from the central government (30.5
percent), and Ft 2.9 million from the provincial authorities (7.3 percent).
The data in Table 14.5, however, are not affected by these adjustments,
since they already comprise both subsidies to theatres and to theatre groups.
In France, most of the larger nonprofit theatres and opera houses in the
provinces are owned by either a municipality or one of the 21 Maisons de
la Culture, which themselves are jointly owned by the central government
and one or more municipalities. I have not found statistics that would
enable me to compute the subsidies associated with the operation of these
theatre and opera houses as distinguished from the costs of the performances that took place in them.63
Indirect government expenditures on the arts in the United States are a
different nature altogether. The bulk of these expenditures are in the taxes
forgone by the federal government whenever individuals make deductible
contributions to the performing arts. Mark Schuster, in his doctoral dissertation Income Taxes and the Arts: Tax Expenditures as Cultural Policy,64 estimated that cultural institutions of all kinds received contributions
amounting to $530 million in 1973, of which $310 million, or 58 percent,
was in the form of tax expenditures. If this percentage is applied to the
estimated $58.2 million donated to the performing arts in 1970/71, we
obtain a figure for indirect support of $34 million. This rough estimate is
of course intended to cover all NPOs, not just those included in the Ford
Foundation sample, which tallied only $8.3 million in the way of direct
subsidies from all governmental services. If this sum of $34 million is added
to the $94 million in direct support at all levels of government estimated
for 1974, we obtain a figure for total per capita government support of
almost $0.60. This is of course still way below the level of government
support in the Western European countries in our sample.
The tax legislation of European Countries also encourages donations to
the arts, but it is generally less permissive in the provisions it makes for
deductions than in the United States. In Germany, individuals may deduct
up to 5 percent of their taxable income, and enterprises up to 2 percent of
306
their gross income, for donations aimed at promoting the public interest.
In France, individuals may deduct only 0.5 percent of their net income for
donations to organismes d'interet general (an additional 0.5 percent is permitted in case the donation is made out to the Fondation de France). Enterprises may deduct up to 1 per 1000 of their gross income for such
purposes. In most instances, aggregate donations came to far less than the
permissible limit obtained by applying the maximum percentage to estimated total incomes. Thus, in France, a study made in 1965 showed that
donations in a sample of 300 enterprises only amounted to 0.22 per 1000
of their gross income as against the 1 per 1000 permitted.65 Private philanthropic activity in Europe may well be more inhibited by a lack of tradition of giving and by high levels of government support of welfare, educational, and arts institutions. In France especially the patronage of private
individuals and firms is regarded with suspicion, for fear of money-minded
interference. The tendency is to "demand more state intervention because
it offers better guarantees of liberty and equality." 66
Conclusion
No matter how the financial statistics of the performing arts are put togetherwhether or not, for instance, they include capital outlays and indirect government expendituresthe inference is inescapable that total per
capita government support is many times greater in continental Western
Europe than in the English-speaking countries.
This conclusion applies to the arts in general. I have already speculated
about the origins of these differences in the historical section of the chapter. A subsidiary question that I have not addressed is this. What accounts
for the differing shares of the performing arts in total government support
for the arts in various countries? I have no conclusive answer to this question, but I am struck by the influence on these shares of the historically
conditioned burden that the federal or central government must bear for
conserving the monuments inherited from past generations. In France and
Holland, where about a third of all central-government expenditures for
the arts are normally earmarked for conservation, this onerous responsibility exerts an adverse influence on the size and share of the budget for
the performing arts. In Sweden, conservation expenditures amount to a
much smaller share of the total government supportless than 10 percent.
Here, the performing arts represent a larger share of total support than in
the other countries. In this country, which is less encumbered (and embellished) by vestiges of the past, there should be more leeway, given the total
amounts budgeted for the arts at all levels of government, to finance the
performing arts. I am not confident enough of the data in Table 14.5,
which show that less than 50 percent of total support to the arts went to
the performing arts, to assert that this proportion was abnormally low by
European standards. In any case, we should recall that the tradition of
government aid to museums and to the adornment of public monuments
is older here, and perhaps better entrenched, than that of government aid
307
to theatres, opera societies, and orchestra groups. It may be that the proportion will gradually change in favor of the performing arts as U.S. levels
and patterns of public support for the arts come to resemble European
precedents.
A RETROSPECTIVE ANALYSIS
The story of the European financing of the performing arts may be summarized in the following points.
1. Government support has deep historical roots but has grown especially rapidly
in the period after World War II. It now represents the bulk of receipts of
professional organizations.
2. The level of private donations, which were never a preeminent source of support (if we except princely patronage which may be likened to government
support), has declined over time. They are now a very minor source of receipts
in all countries surveyed.
3. Nonprofit organizations (as defined in this paper to include quasi-governmental
organizations) have gradually acquired a dominant place in music and theatre.
In the last 10 years, however, the private (commercial) theatre in the Netherlands, for reasons that will be explored, has regained some of the ground it lost
to the nonprofit theatre in the 1960s.
In this analytical section I outline a model, fully fleshed out in a mathematical note which is available from the author. The model can be made
to yield a pattern of behavior consistent with the historical evolution just
listed.67 The model is, of course, a stark simplification of this complex
history. It abstracts from reality, in particular, by assuming that the costs
of producing shows and the preferences of consumers of the performing
arts remain constant as government support increases. This approach assumes away the possibility that the widening gap between the expenditures
and receipts of performing-arts organizations was actually due to rising
wage costs unmatched by increased consumer expenditures on the products of the industry. Such a rise in wage costs, according to William Baumol's well-known diagnosis of the deteriorating financial conditions of the
performing arts, might be ascribed to the fact that performing-arts organizations must pay their personnel wages and salaries that are more or less
competitive with those paid in rising labor-productivity sectors (such as
manufacturing), despite their failure to match the productivity gains of
these sectors. The model also ignores the inroads of the motion pictures,
television, and phonograph records on consumer demand for the performing arts, which have historically contributed to the gap between box-office
receipts and expenses. As we shall see below, the model can accommodate
rising production costs or declining consumer demand, but it focuses exclusively on the effects of a change in a single variablegovernment supportall others being held constant.
The model analyzes the behavior of a single nonprofit organization as-
308
sumed to be representative of all the NPOs in the performing-arts sector.

This NPO is engaged in competition with a private (profit-oriented) sector,
but only the first-round effects of this competition are tracked in this analysis.
When the NPO, for example, reduces the price of a popular type of show
that is competitive with shows produced in the private sector, it necessarily
encroaches on the sales of the latter. No consideration is given to the possibility that private enterprises might lower their prices to regain at least
some of their customers.
Suppose the NPO were offering a single type of show for a uniform
price per attendant. It faces a demand schedule for tickets showing what
the audience for the show would be at every price. There will normally be
a capacity limitation for the size of the audience attending any one performance. Provided customers are indifferent between attending sooner or
later, the total audience at any given price may be defined as the capacity
attendance multiplied by the number of days during which the show is put
on. For an NPO constrained from incurring losses or earning profits, the
total audience at which price equals average total cost per attendant determines the number of days during which the show will be performed. If
there are two audience levels for which this equality holdsthe first where
average cost per attendant is falling, the second where it is risingthe
NPO will presumably choose the higher level of total audience. The only
limit that needs to be taken into consideration is the number of days in
the season during which shows are normally staged. In the absence of a
binding constraint on the limited run of the production, it is evident that,
when total costs are reduced, the demand schedule will intersect with average total cost at a point corresponding to a lower price and a larger
audience. This will also be the result if the NPO receives government subsidies or private donations which will, in effect, offset its fixed costs.
This one-product model has been subjected to econometric tests. Burkhauser and Getz have estimated the impact of subsidies on the output,
measured by the number of performances, and on the employment of nonprofit symphony orchestras. They found that, because the price elasticity
of demand for tickets was small (from 0.128 to -0.132), subsidies caused
only very moderate increases in output and that their main impact was in
reducing ticket prices.68
Consider now an NPO producing two kinds of showselite and popularwhere only popular shows compete for the audience of the private
profit-oriented sector. Let v and w represent the size of the audience (number of tickets sold) attending elite and popular shows respectively. Normally the demand for each type of show is represented as a function of its
price. But we can also regard prices as inverse functions of audience size.
Since the two types of shows are substitutes in consumption, we also want
the price corresponding to a given audience size for each type of show to
decline whenever the audience for the other type of show increases. An
example of two linear price functions satisfying the conditions might be:
309
where is the price of elite shows and of popular shows.

In this example, the demand for popular shows is more elastic and greater
at any price than that for elite shows. In each equation, own-demand (v
in the case of and w in the case of
has a greater impact on price than
the demand for the other type of show. (If this were not so, simultaneous
equilibrium in the two markets would not be possible.)
The net revenue of the NPO may be written:
where S denotes government subsidies, D private donations, and C total

costs, which will normally be an increasing function of v and w.69 If the
organization is neither to make profit nor to suffer a loss, this expression
must be set equal to zero.
In contrast to the one-product model discussed above, there will generally be an infinite number of combinations of v and w that will satisfy the
net-revenue-equal-zero constraint for given levels of subsidies and donations. In Figure 14.1 each ellipse-like contour is the locus of all such combinations corresponding to a certain level of S and D (both assumed here
to be constants, exogenous to the problem). With the smallest S and D,
only the innermost contour is attainable. Since it does not intersect either
axis, we know that some of both types of shows must be produced if no
losses are to be incurred. Points on a given contour located below the
straight line marked d(NR)/dw = 0 and to the left of the line marked
d(NR)/dv = 0 are inefficient in the sense that more of both types of shows
could be produced without violating the constraint. (They are equivalent
to a point equating average cost and average revenue at a low level of
output in a one-product model.) A point such as q located inside the contour would generate profits. By definition, it would be shunned by the
NPO. A point outside a given contour would be unattainable, given the
level of S and D corresponding to this contour, because it would be conducive to losses. As the level of S and D increases, we pass on to successively higher contours. With the second contour, it becomes possible (though
inefficient) to meet the no-loss constraint while producing nothing but
popular shows. The third contour indicates a level of S and D so large as
to make it possible to produce nothing but elite shows, even though there
was less demand for them than for popular shows. In this particular case
S and D are even large enough to cover all fixed costs so that both shows
could be staged at no charge at all to consumers.
This rather laborious introduction is intended to drive home a key point
of this paper: the imposition of a no-profit-no-loss constraint leaves the
managers of NPOs with considerable scope to choose the mix of popular
and elite shows that best suits their preferences or whatever goal they may
310
Figure 14.1 Number of Attendants of Popular and Elite Shows Given by a Nonprofit Institution
be pursuing (including the satisfaction of their administrative superiors or

the support of the constituency that elected them to the job). The mathematical analysis (presented fully in the note, available from the author)
may be used to ascertain the choices that managers would make, for various levels of S and D, if they were bent on maximizing their audience for
elite shows. It is readily shown that they would set a price for popular
shows that would maximize their net revenue from staging such shows and
expand the level of output of elite shows to a point where their price
would fall below marginal cost. Indeed, managers, given sufficiently high
311
S and D, might wish to drive the price of elite shows below zero: they
might use the profits made on popular shows to pay audiences to attend
their elite shows. This is an example of the well-known phenomenon of
cross-subsidization familiar to students of NPOs.70 Less immediately obvious is the conclusion of the model that an increase in subsidies will normally cause managers to increase v at the expense of w, the audience for
popular shows. This point is illustrated in Figure 14.1 by the negative
slope of the line marked d(NR)/dw = 0, the locus of all combinations of v
and w selected by a manager maximizing v, given increasing levels of S
and D. (It is easily verified that this line will be straight if the price and
cost equations are all linear in v and w.)71 The reason why w must diminish as subsidies and donations increase is that these outside sources of
finance obviate the need for cross-subsidizing elite shows from the profits
of the more popular shows.
A second aim of the model is to predict the impact of higher levels of S
and D on the prices of the two types of shows. Now it is immediately
obvious that as v increases in response to higher levels of S and D, the
price of v must fall (since the decline in w is only moderate compared to
the increase in v, which has a stronger impact on
than does w). But
what happens to the price of popular shows, competitive with the shows
put on in the private sector, as the level of S and D rises? We have seen
that the level of w will undergo a moderate decline. This should, other
things equal, cause a rise in . But there is also the larger increase in v to
take into account, which should have a depressing effect on . It is shown
in the mathematical note that if the cross-effects of v on and of w on
are about the same size, the net impact of the two tendencies will be to
leave unchanged.
The capacity limitation mentioned earlier stems from the limited length
of the season. The constraint will only bind if the total demand for both
types of shows is high enough for the NPO to run a number of performances in excess of the days available in the season. Such situations
possible for various combinations of v and ware represented in the figure by the straight line with a unit negative slope marked v + w = 8A, where
S is the number of days in the season and A is the daily capacity of the
theatre or hall available to the NPO. Starting from a demand-constrained
regime, an increase in subsidies may eventually cause the NPO to run up
against its capacity constraint. If it is expanding along the line d(NR)/dw = 0
(consistent with the manager's maximization of v), it will hit the constraint
at point u. Any further increase of S and D would involve a sharper tradeoff between v and
than before. Moving along the capacity constraint
from u to m, for instance, would require the NPO to reduce w at the same
rate as it is increasing v, which implies in effect that every extra day during
which it stages an elite show must be compensated by a one-day reduction
in the run of the popular shows. This will necessarily cause an increase in
(since is necessarily more sensitive to a decrease in w than to an increase in v of the same magnitude). 72
312
The model is more flexible than this stripped-down version might indicate. The analysis in the mathematical note introduces separate quality
variables for elite and popular shows. As the quality variable increases
(e.g., as the number of different productions of a given type of show is
raised), the demand for this type of show rises, but at a diminishing rate.
It turns out that, under reasonable assumptions about cross-effects (of v
on and w on , the same results hold as in the simpler model in the
case where it was assumed the manager was maximizing the audience of
elite shows: an increase in subsidies and donations will cause w to decline
at a moderate rate as v rises.73
The consequences of growing government support for the performing
arts, culminating in the experience of the Netherlands' theatres in the period from 1965 to 1975, may be traced heuristically with the help of the
model. We may begin by assuming that in the 1960s the managers of
Dutch theatres had only a moderate preference for elite shows. They were
perhaps maximizing their total audience at a point such as a in Figure
14.1. As subsidies rose they moved from a to r and then to s, still using
popular shows to subsidize elite shows. Along this path, prices of popular
as well as of elite shows were declining.74 The NPO sector must have been
encroaching on the market of the commercial theatre. In the late 1960s,
under pressure of Tomato Action Group and of other student groups, the
managers of NPO theatres changed their policy: henceforth, they chose
their mix as if they were maximizing the audience of elite shows. With a
constant level of subsidies, they moved from a mix indicated by point s to
one on the same contour indicated by point t. The drastic decline in w
concomitant with this move would have been associated with an increase
in , thus reducing the NPO's competitiveness with the commercial sector.75 With an increase in subsidies, a manager still pursuing the maximization of v would have traveled along the line from t to u until he encountered a capacity limit. Along this path would have remained approximately
constant. Any further increase in subsidies would have compelled the NPO
to give up one unit of w for every unit increase in v, as it moved from
point u to point m in Figure 14.1 along the capacity constraint. This, as I
have already explained, would have caused another round of increase in
, tantamount to a further loss in the NPO's competitive position vis-a-vis
the commercial sector in the market for w. If enough NPOs behaved in
this manner, as I believe Dutch theatres did in the early 1970s, the joint
effect of their output decisions would be tantamount to a withdrawal of
the nonprofit sector from the market for popular shows. This behavior
would be sufficient to explain the extraordinary revival of the commercial
theatre during the first half of the 1970s, which regained much of the
ground lost to the NPOs during the 1960s.
In the Dutch story government subsidies played a predominant role, private donations a negligible role. Still, if the model is to have wider application, it may be useful to dwell on the factors determining the level of
donations (so far considered exogenous like subsidies). Henry Hansmann,
313
in his model of the performing arts, which inspired my own attempt at

modeling the impact of outside financial support on the output of art services, assumes that donations in a one-product NPO will be a constant
fraction of the surplus enjoyed by consumers of the product.76 This consumers' surplus is approximated by the area under the conventionally drawn
demand curve. It is easily shown that the effect of a marginal increase in
subsidies on this surplus must be positive. In my view this is an unrealistic
treatment of donations, at least in Europe where foundations do not give
matching grants contingent on government support. In particular, the positive effect of government subsidies on donations postulated by Hansmann
is hard to reconcile with the negative association between donations and
subsidies revealed by the European experience. In any event, as far as strictly
private donations are concerned, I would argue that patrons of the performing arts are more likely to donate money to their favorite organizations if they fear that, in the absence of their donations, the show will not
go on. Granted that the size of their potential donation will be partly determined by their consumers' surplusa measure of how much they would
be willing to give rather than do without the service altogetherthe fraction of that surplus they will be willing to give may well be inversely correlated with their expectations of the level of output of the NPO (as long
as they consider that level to be beyond their own individual influence). If
so, the fraction of consumers' surplus donated will be a number from zero
to one, diminishing with v. As is explained in greater detail in the mathematical note, the effect of an increase in government subsidies will be to
increase donations at a diminishing rate until some critical value of v is
attained. From that point on, further increases in subsidies will cause donations to decline and eventually cause them to go down to zero. When
donations are on a rising trajectory, their effect is to reinforce the impact
of increasing subsidies on v. Conversely, on a falling trajectory, they will
diminish the impact of increasing S on v. (Needless to say, if government
subsidies are tied to matching funds from private sources, donations will
be more strongly correlated with subsidies than this model would lead one
to expect.)
We are now ready to explore the consequences for consumer welfare of
increasing the level of government subsidies preferred to NPOs. We have
found so far that NPO managers were able to exercise discretion in their
output mix in meeting the no-profit-no-loss constraint and that subsidies,
by relieving them of the financial necessity of producing popular shows
that they had no personal interest in staging, could reinforce their personal
inclination to put on mainly elite shows. If "consumers' welfare," as experienced by consumers at each point in time, is our criterion, then it is
pretty obvious that a manager concerned only with putting on elite shows
will act in such a way as to reduce welfare if he receives larger subsidies.
This is so almost by definition since shows are only "popular" if they
please consumers, and any reduction in the number of popular productions and/or tickets sold to such shows must reduce their welfare. A more
314
analytical way of looking at the matter is to argue that since profits are
being made on w and losses on v, the marginal rate of substitution of
consumers, equated to the ratio of market-clearing prices and , cannot
be equal to the relative marginal costs of the two types of shows. As long
as marginal rates of transformation (ratios of marginal costs) are not equal
to marginal rates of substitution for consumers, Pareto-optimality cannot
be achieved.77 Operating the model in reverse gear, we can readily see that
a cut in subsidies, by inducing an increase in w and a reduction in v, is
likely to enhance welfare. All this of course only applies if and when managers, by imposing their own tastes, pursue a policy at odds with their
customers' preferences. A manager maximizing a function of v and w with
reasonable weights attached to both may well promote welfare when subsidies are increased by putting on more of both kinds of shows.
The introduction of quality variables, specifically identified in the analysis in the mathematical note with the number of productions of v and w,
does not substantially affect our conclusions about the welfare implications of massive subsidies. Under the "normal conditions" defined in the
note, some of the subsidies will be used by the NPO maximizing the audience size for, or the quality of, elite shows to increase quality, and some
to lower and widen the audience attending these shows. But as long as
the increase in subsidies is associated with a reduction either in the size of
audiences attending popular plays or in the number of productions of popular plays, consumers' welfare will be adversely affected.
To these pessimistic arguments, we may counterpose the idea that elite
productions have a positive long-run impact on welfare. That is, as consumers are exposed to more difficult worksmore complex patterns of
symbols in terms of Scitovsky's conception of art 78 they gradually get to
understand and appreciate them.79 Their relative demand for v-type productions increases. Post hoc, these changes in taste validate the manager's
choices. Strictly speaking, this infant-industry argument for subsidies tending to promote elite productions requires that the increase in demand be
sufficient not only to bring about a state of affairs where the (v, w) combination chosen by the manager in each period maximizes intertemporal
consumer utility but where the increase in consumers' surplus eventually
generated is sufficient to compensate for the temporary losses in welfare
incurred before the change in taste took place. The argument, in any case,
is of doubtful empirical validity. If culture consumers were so malleable,
there would be no need to increase subsidies through time as the Netherlands, Germany, and Sweden have done on such a wide scale.
The remaining arguments in favor of massive subsidies to NPOs promoting nonpopular, money-losing cultural ends turn on Bildung. These
arguments do not necessarily imply that an elitist minority need impose its
tastes by social compulsion on a recalcitrant majority, for example, by
milking subsidies through manipulation of the political process. Consumers may not enjoy "serious" music or theatre, now or after prolonged exposure. Yet, they may be willing to vote to subsidize music and theatre, or
315
to elect representatives who will promise to subsidize them, because they

regard high-culture offerings as being, in one way or another, important
to their community or to the nation as a whole. I leave to political scientists and sociologists the task of ascertaining how widespread such an attitude toward merit goods may be. But even if the voter should favor art
as Bildung, I am not sure that the NPO is the right conduit for large-scale
subsidies to achieve this cultural end. There is no guarantee that managers
of NPOs, whose policies may be influenced by career and professional
considerations having nothing in common with the Bildung aims accepted
by voters, may, if given too much leeway, move away from optimality,
whether welfare if defined in terms of consumers' sovereignty or according
to some other, broader notion.
In conclusion, the performing-arts organizations in Western Europe are
the recipients of generous government subsidies, which have undoubtedly
given much satisfaction to at least a minority of the population, contributed to the cultural education of another segment of the public (partly
overlapping with the first), and added to the luster of the states and cities
that spent their tax monies on these activities. The United States has only
recently begun to emulate the European pattern in this regard, but it has
not gone nearly as far in the direction of public support for the arts as
European governments have done. The European experience occurred in a
sociopolitical environment that differs in essential respects from the one
prevailing here. European organs of government are less responsive to
popularnot to speak of populistpressures than ours. Class cleavages,
which are more profound than they are in this country, make Europe's
common citizens more ready to accept the cultural leadership of its elites.
Any policy that would use tax monies to subsidize high culture to the
point of virtually giving it away free for the benefit mainly of better-off
citizens (as in the case of Swedish opera) would be considered profligate
and inequitable by the wide U.S. public. In a highly culturally heterogeneous country such as the United States, the claims for public support are
too many to address, let alone satisfy, all of them. At the same time, a
policy lavishing subsidies on a few activities, especially of an elite sort, is
likely to be resented both by the public at large and by unsuccessful claimants. Arts organizations risk losing the sympathy of the broad U.S. public
if they press their demands for government support beyond the point of
compatibility with its basic values.
NOTES
1. For details see Jules Magnin, Les Theatres Municipaux de la Province (Le Mans: C.
Blanchet, 1909), 7-12; and Michele Versillier, La Crise du Theatre Prive (Paris: Presses
Universitaires de France, 1973), 23-41.
2. Jules Bourassies, Les Spectacles Forains et la Comedie Francaise (Paris: E. Dentu, 1875),
4-5.
316
3. No author, "Le Theatre en Republique Federale d'Allemagne," Notes et Etudes Documentaires, September 15, 1964, no. 3119, p. 1776.
4. Fritz Herterich, Theatre und Volkswirtschaft (Munich and Leipzig: Verlage Duncker
and Humbolt, 1937), 59-60.
5. Herterich, ibid., 60.
6. No author, op. cit., 6.
7. Herterich, op. cit., 9.
8. In the United States, also, private patronage and associations or cooperatives played a
key role in supplying orchestral music in the second half of the nineteenth century. But, in
contrast with the German experience, state and municipal organs of government in the United
States did not take over the responsibility for financing orchestral music in the first quarter
of the twentieth century.
9. On this point see Erika Wahl-Ziegler, Theatre und Orchestra Zwischen Markthaften
und Marktkorrektur; Existenzprobleme und Uberlebenschancen eines Sektors an Wirtschaftstheoretischer Licht (Gottingen: 1978), 34-35.
10. Herterich, op. cit, 20.
11. Ibid., 290-292.
12. Department of Cultural Affairs, Swedish Ministry of Education and Cultural Affairs,
The State and Culture in Sweden (Stockholm: The Swedish Institute, 1970), 7.
13. Ibid., 8.
14. The arts may have benefited from the gradual dismantling of the historical Verzuiling
system whereby each major social group, including especially the Protestant and Roman Catholic
communities, had received, and was left to administer, a portion of government support.
Since there had been no organized constituency concerned primarily with the arts, there had
been little support for arts activities. On Verzuiling and its decline, see Ralph M. Kramer,
"Governmental-Voluntary-Agency Relationships in the Netherlands," The Netherlands Journal of Sociology 25 (1979): 155-173.
15. States General of the Netherlands, Tweede Kamer, 1976-1977 session, "Nota Orkestenbestel" (The Hague, 1977), 12.
16. Interview with Bernt Langenberg, director of the Verenigung van Nederlandse Toneelgeselschapen (Association of Netherlandish Theater Societies), June 1980.
17. Data supplied by the Verenigung van Nederlandse Toneelgeselschapen. Attendance at
other performing arts, including symphonic music, where repertory was not nearly to the
same extent influenced by the demands of the activists, also fell, but much less drastically.
18. Cited in Russell B. Nye, The Cultural Life of the New Nation, 1776-1830 (New
York: Harper & Row, 1960), 262.
19. Ibid., 263.
20. Ibid., 264.
21. P. T. Barnum, Struggles and Triumphs: Forty Years' Recollections, Written by Himself
(New York: American News Company, 1871), 71.
22. Ibid., 72.
23. Lillian B. Miller, Patrons and Patriotism: The Encouragement of Pine Arts in the
United States, 1790-1860 (Chicago: University of Chicago Press, 1966), 36.
24. Ibid., 37.
25. Ibid., 132.
26. Ibid., 234.
27. Ibid., 36.
28. In the second half of the eighteenth century, an observer complained that theatricals
at Yale "had turned the College into Drury Lane" to the detriment of "the more solid parts
of learning" (cited in Miller, ibid., 263).
29. Paul DiMaggio, "Cultural Entrepreneurship in Nineteenth-Century Boston" (Chapter
2, this volume).
30. Except for a few short-lived ventures in the 1 890s. For details, see Jack Poggi, Theater
in America: The Impact of Economic forces (Ithaca: Cornell University Press, 1966), 102.
31. Ibid., 107.
317
(New York: Cambridge University Press, 1978), 59.
33. In the United States and especially in Canada, there is evidence to show that government and private support for the performing arts are substitutes. See Steven Globerman,
"An Explanatory Analysis of the Effects of Public Funding of the Performing Arts," in
W. S. Hendon et al., eds., Economic Policy for the Arts (Cambridge, Mass.: Abt Books,
1980), 73.
34. It is interesting in this connection to recall the examples of Wurttemberg in the period
from 1818 to 1820 and Sweden in the late 1860s, when democratically elected representatives balked at the lavish expenditures on royal establishments.
35. Deutscher Buhnenverein, Theater-statistik 1973/74 (Koln: 1975), pp. 12-14, 52.
36. The Strasbourg national theatre, unlike the other national theatres, is organized as a
"public corporation of an industrial and commercial character."
37. Jean-Pierre Hue, L'Etat et les Nouvelles Formes du Theatre depuis 1968 (Doctoral
Thesis, Universite de Rouen, Faculte de Droit et de Sciences Economiques, 1979), 19.
38. An ordinance of October 14, 1945 deemed all "theatrical activity" to be "commercial
in nature" but excluded national theatres from this definition. (See ibid., 30.) Several Parisian
orchestras (Concerts Colonne, Lamoureux, and Pasdeloup) are also organized as associations
but, for some unfathomable reason, they are not denied the opportunity of engaging in regular commercial activity. (I assume that a concert is neither more nor less commercial from
a legal viewpoint than a theatrical performance for which tickets are sold.)
39. Hue, op. cit., 234.
40. Ibid., 128.
41. Ruby D'Arschot, Theatre and Music in Western and Northern Europe, 1960-1972
(Report prepared for the Ford Foundation, New York, mimeographed n.d.), 472-485.
42. At the Yale Institution for Social and Policy Studies meeting where the findings in this
paper were first presented, one participant commented that the level of public support for
the performing arts in Europe and the United States would look very different if military
bands and high school theatricals and orchestras were included in the statistics of public
support. In support of this view, Richard Magat brought to my attention a news release by
U.S. representative Fred Richmond, who pointed out that, in the recommended federal appropriations for 1982, $89.7 million was earmarked for military bands as against $88 million
for the National Endowment for the Arts as a whole. In France, FF 84 million was spent in
1979 for all the musical activities of the Ministry of Defense (chiefly military bands), a sum
equal to just over 20% of the Ministry of Culture's budget for music and dance subsidies of
all sorts and 5.6 percent of estimated government support for music at all levels (data supplied by France's Conseil Economique et Social, cited by Xavier Dupuy in an unpublished
doctoral dissertation at Universite de Paris). Since this paper concentrates on the behavior of
nonprofit organizations competing with privately owned organizations in the marketplace,
the narrower definition used here may be more appropriate than one that would include
government support for the arts in the military and the schools. In any event, the more
comprehensive data are not available on a comparative basis.
43. In Germany, the "public" theatres had an audience of 17.3 million people in 1973/74,
and the private theatres, including cooperatives, of 4.7 million people. In Holland, the audience of "subsidized theatres" was 1.4 million in 1969-70, of private and other unsubsidized
theatres about 180,000. In 1974/75, for reasons that will be discussed, the audience of subsidized theatres shrank to 907,000, while the audience of private and other nonsubsidized
theatres rose to an estimated 750,000. (Information obtained from the Association of Netherlandish Theatre Societies in Amsterdam.) Because Dutch orchestras and ballet companies
are all subsidized foundations or associations, the balance of the entire sector clearly favors
"nonprofits."
44. Statistika Centralbyran, Statistik Arsbok for Sverige 1976 (Stockholm), 330-336.
45. Ministere de la Culture, Annuaire Statistique de la Culture: Donnees de 1970 a 1974
(Paris: 1978).
46. The Ford Foundation, The Financing of the Performing Arts: A Survey of 166 Profes-
318
sional Non-Profit Resident Theatres, Operas, Symphony, Ballet and Modern Dance Companies (New York: The Ford Foundation, 1974).
47. C. D. Throsby and G. A. Withers, The Economics of the Performing Arts (New York:
St. Martin's Press, 1979).
48. Ibid.
49. Holland is probably exceptional in the degree to which nontraditional art forms such
as the puppet theatre and pantomime are publicly subsidized. But even in Holland, the line
is drawn between modern dance, which is deemed worthy of support, and exhibition ballroom dancing or figure skating, which are not. As far as I can make out, jazz and pop music
are not regularly subsidized in any Western European country.
50. The Economist (London) published an estimate of this share, which it set at 59 percent
for 1975, without supplying details on how the figure was calculated (cited in Throsby and
Withers, op. cit., 146).
51. Throsby and Withers, op. cit., 146.
52. Hilda and William Baumol, "On Finances of the Performing Arts During Stagflation:
Some Recent Data," journal of Cultural Economics 4 (1980): 12.
53. Ibid., 3.
54. Expenditures on the newly constructed Centre Beaubourg in Paris are kept separately.
In 1973, capital expenses for the Centre came to FF 126 million compared to 95.6 million
spent on total current and capital support for the theatre and FF 93.7 million for the opera.
Data are from Ministere de la Culture, op. cit., 23, 34.
55. Alan T. Peacock and C. Godfrey, "Cultural Accounting," in Mark Blaug, ed., The
Economics of the Arts (London: Mark Robertson, 1976).
56. On the basis of data published by Netzer (op. cit., 64, 88, 93, 95), I estimated 1974
federal support for the performing arts (as defined in Table 14.5) at roughly $39 million, and
local (municipal and county) support at $25 million. Total support for the arts (performing
arts plus visual arts) in that year amounted approximately to $79 million at the federal level,
$60 million at the state level, and $60 million at the local level.
57. Versillier, op. cit., 90-91.
58. In the French national theatres, personnel expenses range from two-thirds to fourfifths of total expenditures. In the Paris Opera, salaries came to over three-quarters of total
expenditures in 1974. Purchases of goods and services amounted to 17 percent of total expenses (Ministere de la Culture, op. cit., 176, 227).
59. Deutscher Buhnenverein, op. cit., p. 57.
60. Versillier, op. cit., p. 76.
61. Some theatres, such as De Twentse Schouwburg, are owned jointly by the municipality
and a local foundation. In Amsterdam De Brakke Grond Theatre is part of a building complex owned by the (private) AMO-Bank, which, via a management firm, rents the facility for
Ft 65,000 a year to a foundation called Theater Unie. Property relations between and among
municipalities, foundations, private firms, and theatre associations are too tangled to be described in detail here. (They are summarized in Toneel ter Zake; Een Onderzoek Naar de
ExploitatieUitkomsten van Gesubsideerde Toneel Voorstellingen [The Hague: Ministerie
van Cultuur, Recreatie en Maatschappelijk Werk, 1978], 26-27.)
62. Ibid., 18.
63. About 33 percent of all performances in Maisons de la Culture in 1977/78 consisted
of music, theatre, opera, and dance; movies represented 53 percent of the total. Data are
from Ministere de la Culture et de la Communication, Donnees Statistiques d'Ensemble sur
les Maisons de la Culture (Paris: February, 1980), 10.
64. Mark Schuster, Income Taxes and the Arts: Tax Expenditures as Cultural Policy (Ph.D.
dissertation, Department of Urban Studies, Massachusetts Institute of Technology, 1972), 55.
65. Interview material (Ministere de la Culture et de la Communication). On the other
hand, it is said that the 0.5 percent deduction on personal income is automatically taken by
most French taxpayers whether they donate to charities or not, so that it has no real effect
on giving.
66. Hughes de Varine, "Le Soutien Prive a 1'Action Culturelle dans le Cadre Local et
319
Regional," Ministere de la Culture et Communication, Service des Etudes et de Recherches

(Paris, August 1977).
67. The model has the same basic structure as the one first developed by Henry Hansmann
in his "Nonprofit Enterprise in the Performing Arts" (Chapter 1, this volume). The differences between my model and his are the following: (1) popular and elite productions are
explicitly segregated; (2) a capacity constraint is introduced limiting the total number of
tickets sold per day; (3) private donations are treated differently; and (4) the influence of the
NPO's output decisions on its competitive position vis-a-vis the commercial sector is examined.
68. Richard V. Burkhauser and Malcolm Getz, "What Federal Subsidies Will Buy: The
Case of Symphony Orchestras," Department of Economics and Business Administration
(Vanderbilt University, Working Paper 81-W18), 9-10.
69. Costs, in particular, will vary with the number of days during which each type of
show is staged.
70. Estelle James, "Cross-Subsidization by Non-Profit Organizations: Theory, Evidence,
and Evaluation" (Yale Program on Non-Profit Organizations Working Paper 30, 1982).
71. The line marked d(NR)/dw = 0 is the locus of combinations of v and v that would be
selected by a manager maximizing v as S and D increased.
72. That is, the own-effect of w on is always absolutely greater than the cross-effect of
v on .
73. It may also be noted that the contours will shrink not only when subsidies and donations decline but when production costs increase faster than the sale of tickets, a symptom of
"Baumol's disease." The erosion of demand due to competition from movies, television, and
phonograph records, if it were not matched by a reduction in costs, would also have that
effect.
74. The inverse demands functions for and in terms of v and w were assumed to be
such that a simultaneous increase in both arguments must reduce price.
75. The reason must rise as the output-mix is shifted from point s to point t is this: The
shape of any contour is elongated in the vertical direction because, by assumption, w is more
popular than v, hence with a given level of subsidies, the audience level w at point / that
could be attracted if w were maximized is greater than the level of v at point t where v is
maximized. Hence, for any mix of v and w such as the one at point s, which would be
chosen if v and w were equally preferred (or at least if w were not strongly preferred), the
contour must have a slope with an absolute value smaller than unity. This implies that any
gain in v from point s to point t must be associated with at least as large a loss in w. But,
since the impact of w on (the "own-price effect") must be greater than that of v (the "crosseffect"), the price-raising effect of the decrease in w must be greater than the price-reducing
effect of the smaller increase in v.
76. Hansmann, op. cit.
77. This is not to deny that a subsidy given to a one-product enterprise might increase
welfare by reducing the gap between price and marginal cost (a point stressed by Hansmann).
What is going on here, however, is that the subsidies make it possible for the manager to
alter the NPO's output-mix in a way that is increasingly inimical to consumers' interests.
78. Tibor Scitovsky, The Joyless Economy (New York: Oxford University Press, 1975),
Chapters 1 and 2.
79. This type of consumer behavior has been modeled by Roger McCain, "Reflections on
the Cultivation of Taste," Journal of Cultural Economics 3 (1979): 30-52.
15
Tax incentives as Arts Policy
in Western Europe
J. MARK DAVIDSON SCHUSTER
In studying government policies vis-a-vis the arts it is all too tempting to

focus on direct government aid to the arts; our attention is focused on
direct aid because this segment of the arts support system is the easiest to
quantifythe numbers can often be obtained from public budgetsand
the easiest to trace. In this sense, arts researchers have been like the person
who looks under the streetlamp for the missing wallet, not because that is
where it was lost, but because that is where the illumination is the best.
Recent research has begun to call our attention to the fact that we have
drawn the boundary of our analysis of arts policies too narrowly. 1 Tax
policies, copyright laws, zoning, unemployment and employment programs, urban redevelopment programs, and social security legislation are
among the ways that governments can affect the flow of money to the arts
and the mix of artistic activities ultimately available to the public. Taken
together, these policiesall forms of indirect aid to the artsprovide ways
for governments to support the arts without directly writing a check.
One of the distinguishing characteristics of U.S. arts policy is its heavy
reliance on tax-based mechanisms to provide indirect aid to the arts. In
the United States, taxes forgone through various arts-related tax incentives
provide three times the amount of direct aid to the arts from all levels of
government.2 In no other Western country is tax-based indirect aid as important to the arts. But, for the most part, this difference is not due to
differences in national legislation. Most Western European countries, for
example, provide tax incentives for charitable contributions by individuals
and corporations, and many of these countries go further than the United
States in tailoring their tax laws to achieve other very specific cultural
objectives. The real difference lies in historical patterns of patronage and
the modern importance of the public sector in support of artistic activities.
This chapter is based on research supported with funds from a general-purpose grant to the
Program on Non-Profit Organizations from the Rockefeller Brothers Fund.
Tax Incentives as Arts Policy in Western Europe
321
Tax incentives affecting the arts take a number of different forms in

Western countries, includingbut not limited toexemptions from capital gains taxes, exemptions from estate and gift (capital transfer) taxes,
exemptions from wealth (permanent capital) taxes, charitable contribution
deductions from income in calculating income taxes, credits against and
exemptions from income taxes, exemptions from local real property taxes,
and preferential rates for value added taxes. Each country, in selecting and
implementing a variety of the tax incentives from this menu, creates a de
facto policy of indirect aid to its arts and culture. Whether or not the
government has considered these tax incentives as an explicit policy is unimportant; the result is an implicit policy that has important financial and
aesthetic effects on the arts.
In this chapter I discuss some of the more interesting examples of tax
incentives as arts policy in Western Europe and compare them, where possible, to similar examples in other countries. Generally, my focus is on the
nonprofit arts or on arts goods narrowly defined, but in the last section I
show how European countries have used the value added tax to provide
incentives and implicit subsidy to the profit-making cultural industries
through the market for cultural goods. All these examples make the case
that an analysis of governmental arts policy must be expanded to include
a consideration of indirect aid mechanisms, and they illustrate well the
many issues inherent in determining the appropriate mix between direct
and indirect aid mechanisms.
A complete analysis of these tax incentives would evaluate them from
two perspectives: with respect to their economic effects and with respect
to their cultural and aesthetic effects. Not only do tax incentives affect the
relative cost of artistic goods and services, they also affect the relative mix
of artistic activities that public and private arts institutions, artists, and
entrepreneurs ultimately choose to provide. Unfortunately, with currently
available data it is only possible to hint at the likely economic effects of
most of these tax provisions, and it is virtually impossible to infer the
cultural consequences. Therefore, my primary focus is on describing each
of the tax provisions, emphasizing how each can be understood as a form
of indirect aid to the arts.
INCOME TAX INCENTIVES FOR CHARITABLE CONTRIBUTIONS
The charitable deduction is widely recognized as the cornerstone of charitable giving in the United States, and the taxes forgone as a result of the
charitable contribution deduction are the most important source of indirect government aid to all types of nonprofit charitable institutions. In the
view of the Boston Globe, "there is something very appealingone is
tempted to say very Americanabout this system of the individual personally directing the flow of some 'government' dollars."3 The popular view
seems to be that the United States is the only country with such a tax
322
Table 15.11
Country
Tax Incentives for Charitable Donations in Selected Countries
Type of Incentive
Belgium
Deduction
France
Deduction
Corporations
Individuals
Greece
Deduction
Italy
Deduction
Corporations
Individuals
Luxembourg
Deduction
Netherlands
Deduction
Corporations
Individuals
Switzerland
West Germany
Deduction
Corporations
Individuals
Deduction
Corporations
Individuals
Limitations
Minimum: Bfrs 1000 per donation
Maximum: Lesser of 10% of total net
revenues or Bfrs 10 million
Maximum: 1 per mille of turnover
2 per mille for groups listed
by Ministry of Culture
3 per mille for groups listed
by Ministry of Finance
Maximum: 1% of taxable income
5% for groups "in the public
interest"
Unlimited
Maximum: 2% of company income or
5% of salaries
Currently limited to financial support of
exhibitions sponsored by gov't approved institutions or gifts to gov't or
nonprofit institutions for acquisition
and restoration of goods of artistic interest
Proposal to expand this to gifts to performing arts organizations
Minimum: Lfrs 5000
Maximum: Lesser of 5% of total net income of Lfrs 5 million
Beneficiaries very limited
Minimum: FI 500
Maximum: 6% of taxable profits after
carryover of losses
Minimum: Higher of FI 200 or 1% of
gross income
Maximum: 10% of gross income
Unlimited federal
10% of cantonal income tax
Maximum: 10% of profit for political
parties, social affairs, science, and culture;
5% of profit for other charity; or
2 per mille of turnover
Maximum: 10% or 5% of income
(as above)
Country
Type of Incentive
Canada
Deduction
United States
Deduction
Corporations
Individuals
Denmark
Covenant
323
Limitations
Maximum: 20% of net income
Maximum: 10% of taxable income
Maximum: 50% of adjusted gross income
30% gifts of certain property
20% to private charities
At least 10 years
and
Deduction
Minimum: Annual total > Dkr 100

Each donation > Dkr 50
Maximum: Annual total of Dkr 1000
Ireland
Covenant
At least 3 years
Very limited number of beneficiaries
Great Britain
Covenant
Unlimited amount
At least 4 years
Higher rate relief up to 5000 pounds
Some differences in Scotland and Wales
Sweden
None
NOTES: For France, Italy, the Netherlands, West Germany, Canada, the United States, Great Britain, and
Sweden the information in this table is accurate through 1984. Because these laws are not changed frequently, much of the information on the other countries, which is generally accurate through 1978, is
undoubtedly still accurate, though there may have been changes in upper limits for contributions.
SOURCES: J. Mark Davidson Schuster, Supporting the Arts: An International Comparative Study, report
for the Policy and Planning Division, National Endowment for the Arts, Washington, D.C., April 1985.
[Canada, France, Italy, Great Britain, Netherlands, Sweden, United States, West Germany]
Ignatius Claeys Bouuaert, Taxation of Cultural Foundations and of Patronage of the Arts in the Member
States of the European Economic Community, Commission of the European Communities, XII/670/7S-E
1975, 74-104.
Arthur Andersen & Co., "Overview of Governmental Support and Financial Regulation of Philanthropic
Organizations in Selected Nations," in Research Papers Sponsored by the Commission on Private Philanthropy and Public Needs (Washington, D.C.: U.S. Department of the Treasury, 1977), Vol. V, 2976.
"Ce que I'on peut deduire de sa declaration de revenus pour versement a une fondation," 30 lours d'Europe
no. 237, April 1978, p. 19.
Colin Brough, As You Like It: Private Support for the Arts (London: The Bow Group, October 1977),
15. [Greece and Switzerland]
Hamish R. Sandison and Jennifer Williams, eds., Tax Policy and Private Support for the Arts in the United
States, Canada and Great Britain (Washington, D.C.: British American Arts Association, 1981), 8-29.
[Canada, Great Britain, and the United States]
"Dons et Subventions Verses a des Ouvres ou Organismes d'Interet General," Notes Bleues, Bulletin
d'Actualite du Ministere de 1'Economie et des Finances, no. 96, 8-14 November 1982, Paris, France, and
Service des Etudes et Recherches, Ministere de la Culture, Paris, France, "Regies Actuelles de Deductions
Fiscales Autorisees en cas de Versements a des Organismes Culturels," January 1984. [France]
J. Mark Davidson Schuster, "Tax Incentives for Charitable Donations: Deeds of Covenant and Charitable
Contribution Deductions," Working Paper #71 (New Haven: Yale University, Institution for Social and
Policy Studies, Program on Non-profit Organizations, December 1983, forthcoming in the University of
San Francisco Law Review). [Great Britain]
Alan Feld, Michael O'Hare, and J. Mark Davidson Schuster, Patrons Despite Themselves: Taxpayers and
Arts Policy, A Twentieth Century Fund Report (New York: New York University Press, 1983), 31, 48.
[United States]
324
incentive; Daniel Boorstin, the Librarian of Congress, in discussing arts

support in the United States has said, "there are hidden subsidies. There's
no other country in the world where people and business are encouraged
to support cultural institutions by being given tax benefits."4
But the charitable deduction is no longer an exclusively American phenomenon; Canada, West Germany, France, Belgium, Luxembourg, the
Netherlands, Italy, Switzerland, and Greece are among the countries that
now have clearly recognizable charitable deduction provisions in their income tax laws.5 Nor is a charitable deduction the only way to provide
tax-based incentives for charitable giving. The Research Papers of the
Commission on Private Philanthropy and Public Needs, for example, were
filled with suggestions for alternative mechanisms including, for example,
the tax credit, the direct matching grant, the sliding matching grant, and
the percentage contribution bonus.6 Yet, with the exception of the deed of
covenant in Great Britain, Ireland, and Denmark, none of these proposals
has ever been implemented, so we have little actual experience with which
to study their actual effects on charitable giving.
The tax incentives for charitable contributions that are currently in use
are summarized for selected countries in Table 15.1. Most of these countries have implemented deductions through which charitable contributions
can be deducted from the taxpayer's income before calculating the taxpayer's income tax liability. A donor with a given marginal tax rate in each
of these countries would have the same financial incentive for making a
contribution; in each case the price of giving one unit of the national currency would be 1.00 minus the donor's marginal tax rate.7
These deduction provisions differ in two important ways: limits on the
total amount of allowed deductions and constraints on the list of eligible
beneficiaries.8 Some countries, most notably the United States, have very
generous upper limits on deductibility; lower limits elsewhere may be deceptive because the donor may be allowed to carry over excess deductions
to the following year. Other countries, such as Denmark, have genuinely
low upper limits, presumably to place a cap on tax revenues lost through
this incentive. Several countries have placed floors on deductibility, insisting that the donor contribute at least a certain minimum amount before
receiving a tax benefit.
The policies concerning the range of institutions eligible to receive taxassisted charitable contributions also vary widely among these countries.
In Italy, individual charitable contributions can currently be made to government agencies or to institutions approved in advance by the government in support of exhibitions or for acquisition and restoration of goods
of artistic interest. In Luxembourg, beneficiaries are more limited, with the
arts represented only by state and municipal museums. In Ireland, the list
is extremely limited and apparently includes no arts institutions. In most
cases the national government takes a much more active role in determining eligibility than has been the case in the United States. This involvement
comes from a desire to target the tax incentive as effectively as possible
325
without spreading it out too broadly and from a fear of encouraging tax
evasion.
Whatever the configuration of a particular country's charitable deduction legislation, it is clear that in no other country is the charitable deduction used as much by potential donors and as effectively by potential recipients as it is in the United States. This phenomenon has often been
explained by pointing to the low upper limits in force in most countries,
but this explanation is unsatisfactory when it is realized that donors are
not contributing enough to be constrained by the current limits. The difference in practice surely must be more the result of the relative importance of the public sector in each of these countries and of the relative lack
of private initiative and support for the arts in the presence of such heavy
public support.
But as Table 15.1 indicates, there is another system currently providing
tax incentives for charitable donations in Great Britain, Ireland, and Denmark: the "deed of covenant." Though the deed of covenant is more the
exception than the rule for tax-induced donations, it is an intriguing system whose structure and implementation provide a fascinating and instructive counterpoint to the charitable contribution deduction. A comparison
of the two helps illustrate a number of the issues inherent in tax-based
indirect aid for the arts.
The British Deed of Covenant
The British deed of covenant, unlike the charitable deduction in U.S. law,9
was not originally created as an incentive for charitable giving.10 The British income tax originated in Addington's Act of 1803, in which it was
established that transfers of income from one taxpayer to another would,
for income tax purposes, be treated as the income of the recipient, to be
taxed at the recipient's tax rate, and not as the income of the transferor.11
To guarantee that such transfers could not easily be used to dodge income
taxation, they were required to be made under a contractthe "covenant"on an annual basis for a period of at least seven years. The importance of covenants to charities is clear when coupled with the fact that
charities themselves are exempt from income tax; the transferred income
is treated as the nontaxable income of the tax-exempt charity.12 In principle, then, the donor should be able to transfer any amount of pretax income to a charity through a covenant without paying any taxes.
The actual transfer of income under the British deed of covenant is a bit
more complicated than this underlying principle of taxation suggests. Because the British tax collection procedure is based primarily upon the PayAs-You-Earn (PAYE) system, most income tax is withheld at the source so
the taxpayer has only after-tax income with which to pay his or her deed
of covenant obligations. As a result, the individual donor typically enters
into a "net covenant" in which he or she agrees to donate a fixed annual
amount of after-tax income to the charity for the duration of the covenant
Figure 15.1
How the Deed of Covenant Works
For purposes of comparison, all of the examples presented assume

that the goal of the donor is to channel 100 (or $100) to the charity.
Example 3: Deed of Covenant, Post-1980, Donor Tax Rate = 50%

Donor
Chanty
Donor earns:
Donor pays:
Donor pays:
+100
70 net covenant
50 income tax
(50% x 100)
- 20
+ 20 higher-rate relief
[(50%-30%) x 100]
Donor gets:
+ 70 net covenant
+
30 reclaimed by charity
+ 100 received by charity
Example 1: Deed of Covenant, Donor Tax Rate = 30% (Basic Rate)

Donor
+ 100
70 net covenant
30 income tax
(30% x 100),
Donor earns:
Donor pays:
Donor pays:
Charity
+ 70 net covenant
+
Government
Gov't receives:
+ 50 income tax
Gov't pays:
30 to charity
Gov't rebates:
20 to donor as
higher-rate relief
+ 100 received by charity

Government
Gov't receives:
Gov't pays:
Example 4: Charitable Contribution Deduction, Donor Tax Rate = 50%
+ 30 income tax
30 to charity
Donor
Donor earns:
Donor pays:
Example 2: Deed of Covenant, Pre-1980, Donor Tax Rate = 50%

Donor earns:
Donor pays:
Donor pays:
Donor
+ 140
70 net covenant
70 income tax
(50% x 140)
Donor pays:
taxes
Charity
+ 70 net covenant
(50% x 100)
- $ 50
+ $ 50 reduction in
annual income tax
(50% x 100)
Donor gets:
100 received by charity

Government
Gov't receives: + 70 income tax
Gov't pays:
30 to charityGov't retains:
+ 40 net taxes
Charity
+$100
- 100 deductible
contribution
50 withheld
Government
Gov't receives:
Gov't rebates:
+ $ 50 withheld
taxes
50 reduction in
donor's income tax
Note: Unlike the deed of covenant, the government is not directly involved in the financial transfer to the charity in the charitable deduction transaction.
+ $100 received by charity
327
agreement.13 In theory, the charity can recoup all of the taxes paid by the
taxpayer on that income by reclaiming them from the government, and
that is exactly what happens in the simplest case. (See Figure 15.1, Example 1.)
In practice, the application of deeds of covenant to charitable donations
violates this general principle. Charities are only allowed to reclaim taxes
at the basic rate of tax in force at a particular time (the lowest tax rate
applicable to any individual's income), whether or not the donor actually
paid a higher rate of tax, as is shown in Example 2. Until recently, this
meant that the higher-rate paying taxpayer/donor actually paid more in
taxes on the income involved in the charitable transfer than the charity
was able to reclaim, so the difference was retained by the government as
part of its general tax revenue. Thus, the deed of covenant in its pure form
is essentially a tax credit, with the credit percentage determined by the
lowest current tax rate.
Unlike the charitable deduction, by which the donor channels the entire
donation to the charity in one paymentincluding the taxes that would
otherwise be due and the donor's private (net of tax) contributionthe
deed of covenant separates the flow of money into two streams: the donor's private contribution, flowing directly from the donor to the charity,
and the forgone taxes, flowing first to the government and then reclaimed
by the charity. From the charity's perspective, it is absolutely clear what
the various origins of its funds are: private contributions from private donors and taxes forgone as a result of governmental legislation.
At first glance, this distinction may seem to be without any practical
significancethe charity still gets the moneybut it becomes absolutely
critical when considered with the degree to which public policy deems it
appropriate for donors to place conditions on their donations. It is eminently reasonable to allow the donor to have complete control over the
private contribution portion of the donation, but to the extent that public
policy has encouraged and helped support donations through taxes forgone, it might be argued that the more general interest of the taxpaying
public ought to outweigh the voice of the individual donor in determining
its dispersal. The charity is free to spend the taxes it reclaims from the
government for charitable purposes unrestrained by donor stipulations. In
this regard, the deed of covenant stakes out a middle ground between direct governmental aid to charities, in which individuals have no control
over the expenditure, and the charitable deduction, in which individuals
have complete control.
From Inland Revenue's perspective, this separation of financial flows has
other desirable characteristics. It offers an easy way to monitor and affect
the distribution of funds by charities.14 Inland Revenue spot-checks charities to make sure that they are spending their income on charitable purposes. If a violation is found, Inland Revenue simply denies reclamation of
taxes on deeds of covenant. Because the system gives Inland Revenue some
teeth in carrying out this monitoring, it is unwilling to give up this control.
328
A related argument in favor of separation of financial flows has to do with

taxpayer fraud. Under the charitable contribution deduction, taxpayers do
claim deductions for charitable contributions that were never made; the
deed of covenant system would seem nearly to eliminate this type of fraud.
Many British charities have long argued that another desirable characteristic of the deed of covenant is the multiyear nature of the contract.15
The perceived advantage is that it introduces an important element of security into the charity's income flow, making it easier to budget from year
to year and minimizing the cost of fund-raising. Whether or not this is
true is difficult to ascertain empirically, but it is widely believed.
When the Conservative party returned to power in Great Britain in 1979,
its fiscal policies were designed to deemphasize the income tax and to exploit other sources of taxation further, particularly the value added tax
(VAT). The Finance Act of 1980 was a watershed for British charities
because, in translating these Tory policies into law, it included four provisions that have had a direct financial impact on charities.
The major reform was a reduction of tax rates. Of most immediate concern to charities was the fact that the basic rate of tax was lowered from
33 to 30 percent, representing a cost to charities whose outstanding net
deeds of covenant would be supplemented by taxes reclaimed at a lower
rate than had been in effect when they were first written. Though the government has, at times, provided transitional relief for charities when such
changes in the basic rate were implemented, such relief was not offered in
1980.
The second policy that had an immediate and substantial effect on charities was an increase in the rate of VAT from 8 to 15 percent. Charities
are not exempt from VAT and, like all consumers in the economic chain,
are expected to pay their share of VAT.
On the positive side, the Finance Act of 1980 provided for "higher rate
relief" on covenanted contributions, an additional tax incentive for donors
who pay more than the basic rate of tax.16 This provision was designed to
offset partially the cost to charity of the two reforms just discussed.17 With
higher-rate relief, donors can now subtract the gross value of the covenanted donation from their income, thereby avoiding the payment of higherrate taxes on the donation and lowering its net cost to the donor. (The
donor still "pays" the basic rate because it is that portion that is reclaimed
by the charity. For an example of the effect of higher rate relief, see Example 3.)
One interesting result of higher rate relief is that the increased fiscal
incentives for charitable donations under a deed of covenant are now virtually identical to the incentives offered under the charitable deduction.
Compare Examples 3 and 4. These incentives should lead to increased
giving, and because they are directly proportional to the donor's marginal
tax rate, can be expected to interact with donor preferences to benefit
particularly those charities who draw their support from higher income
donors. (Indeed, because of this latter point the National Council for Voluntary Organizations has argued for a composite system that would incor-
329
porate the administrative advantages of the deed of covenant with an equal

increase in the financial incentives for all donors, without offering undue
advantages to the charities favored by wealthier donors.)18
The success of higher rate relief, from the charity's perspective, will ultimately rest on the ability of charities to explain the new tax provisions
to their potential donors and to justify increased charitable contributions
for the services they provide. In the first instance, higher rate relief passes
the new tax savings back to donors, and because of this, the burden is
placed on the charities to convince their donors to pass these savings along
to charity in the form of increased covenants. In the words of Prime Minister Thatcher, "the onus is on charities to make these provisions work to
their advantage."19
The Finance Act of 1980 also lowered, from seven to four years, the
required minimum length for a charitable deed of covenant, and it is hoped
that this, too, will provide additional encouragement for charitable contributions by making the contractual agreement less onerous. Because of the
multiyear nature of covenants, it is still too early to tell just what the
combined net effect of higher rate relief and the shortening of the required
time period has been.
For someone who is accustomed to the charitable contribution deduction, the most lasting impression of the deed of covenant must be its administrative complexity. British charities struggle with this problem constantly as they try to explain the tax implications of charitable giving to
potential donors. The system is not an immediately transparent one, and
it requires quite a bit of donor sophistication to be used effectively. Inland
Revenue is moving toward a system of self-assessment of taxes, and it is
perhaps this change more than any other that will result in a clearer donor
understanding of the covenant system.20 Donors will come to see much
more clearly what the tax advantages of their deeds of covenant are, in
much the same way that U.S. taxpayers are aware of how charitable contributions reduce their tax liability when they are deducted from income.
Another by-product of the complexity of the system has been the growth
of a wide range of administrative arrangements that legally circumvent the
deed of covenant system, greatly increasing its flexibility.21 Through the
use of such administrative arrangements, knowledgeable donors can come
very close to replicating the wide-open flexibility of a charitable deduction
within the more rigid structure of the deed of covenant.
Corporations can also make their charitable contributions through deeds
of covenant in order to take advantage of the tax incentive, though the
actual procedure is slightly different than the one outlined for individual
donors.22
The reforms of the deed of covenant in the Finance Act of 1980 have
moved the deed of covenant closer to the charitable contribution deduction in two respects: For taxpayers with the same marginal tax rates, the
financial incentives for charitable giving are now identical in both systems,
and with higher rate relief donors have been given the opportunity to restrict the expenditure of a portion of the taxes foregone via the deed of
330
covenant. While increasing the financial incentives for charitable giving,

the changes have abandoned two aspects of the pure covenant system that
might have been desirable to retain in a public policy vis-a-vis charity: the
principle of weighing each donor's gift equally with tax incentives and the
principle of clearly dividing the charitable contribution into two financial
streams, separating all the taxes forgone under the tax incentive from the
donor's private net-of-tax contribution. At the same time, the deed of covenant is a system that sacrifices some flexibility in favor of the revenue
authority's ability to monitor a charity's expenditure of its income, and in
favor of the predictability of income flows that may be embodied in the
multiyear requirement.
Despite the economic incentives for contributions in the deed of covenant, the financial effect, particularly for the arts, has been quite small. (In
fiscal 1982, for example, the government rebated 77 million to charities
as a result of deeds of covenant. No records are kept that would allow an
easy identification of the portion of these repayments that went to the
arts.23) Undoubtedly, this is partially because of the complexity of the covenant system, but even the simpler charitable deduction, when incorporated into a system where there is a tradition of large-scale public support,
would prove insufficient in and of itself to initiate a strong trend toward
private support. In addition, the arts have had some difficulty in staking
their claim for additional charitable contributions in an economic period
when other, more pressing social needs have been making increased demands on private support.24
Private donors are unlikely to find many British museums attractive beneficiaries because they are already receiving substantial subsidy directly from
tax revenues. The recent move of the Science Museum and the Victoria
and Albert Museum to trustee status was undertaken to bring them in line
with the other national museums, which have been trustee museums for
some time, and with the hope that it would make these museums more
attractive to private donors, thereby easing the pressure on public support.
Many arts institutions have "Friends of" organizations associated with
them, and these organizations have been successful at attracting covenanted donations, particularly for collection purchase funds. Because these
organizations are formed through private initiatives, they do not give the
impression of being already heavily subsidized by the taxpayer.
The picture is not very dissimilar for the performing- and other arts
organizations that are the traditional clients of the Arts Council of Great
Britain. Though most of these institutions are registered as non-profitdistributing companies under the Charities Act and therefore eligible recipients for covenanted contributions, they have not been overwhelmingly
successful at attracting private donations either. The Arts Council estimates that only 3 percent of its clients' income comes from private support, and most of that comes from corporate sponsorship, which would
be deductible in any event as a business expenditure for publicity. Most
covenanted income comes from private individuals who tend to give toward
bricks and mortar or other capital projects that have a local attraction. 25
331
A charitable deduction or a deed of covenant alone is not sufficient to

ensure a healthy stream of private support for the arts, even if the financial
incentives are generous and the field of application broad. The tax incentive interacts with donor preferences and with historic patterns of private
and public support. Although technical adjustments may be of primary
interest in establishing a fair and efficient system of tax incentives, these
adjustments will have little effect in a system with little precedent for private support. Many of the Western European countries are currently struggling with the problem of how to increase private support for the arts.
Most of them are turning first to the corporate sector in much the same
way that President Reagan has recently turned to the private sector for
support of human services in the United States. For them, the key does not
lie in the implementation of tax incentives; most of them already have tax
incentives for charitable contributions in their national tax laws. The key
lies ultimately in a changing view of the relative roles of the private and
public sectors, a much more difficult problem to address.
CAPITAL TRANSFER TAXES
Tax rules that govern the transfer of artworks are clearly of concern to
arts institutions. Formerly part of estate and gift taxes and now, in most
countries, in newly unified capital transfer taxes, these are some of the
most interesting examples of tax incentives as artistic and cultural policy.
Capital Taxation and the National Heritage in Great Britain
An unusually complete set of tax incentives affecting the transfer of artworks can be found in British tax law, where a series of provisions concerning "Capital Taxation and the National Heritage" are in effect.26 These
provisions are all designed to preserve and provide access to the best examples of the nation's artistic and cultural heritage while providing tax
advantages for the owner and, at the same time, limiting the actual cost to
the exchequer. Included are "historic properties, land of historic, scenic or
scientific interest, and objects and collections of national, artistic, historic
or scientific interest [that] form an integral and major part of the cultural
life of the country."27
The available tax reliefs are consciously designed to take account of the
fact that the international price for an artwork is often greater than the
price within Great Britain. Thus, the reliefs are quite clearly designed to
counteract the incentive for selling the property on the open market and,
perhaps, losing it to another country or to private hands. At the same time,
an important premise underlying the British tax law is that it is not necessarily desirable for these artworks to come into the possession of public
institutions, which have limited funds for conservation, maintenance, and
security and limited space for storage and display.
332
[I]t has been the policy of successive Governments that this national heritage should
be conserved and protected for the benefit of the community. . . . so far as possible property of this kind should remain in private hands and . . . where this is
no longer possible the owners should dispose of it to those bodies in this country
which have been set up specifically to hold such property in trust for the community.28
At first glance, the choice to allow tax relief for the transfer of property
that remains in private hands seems to be an indefensible one. Two propositions form the foundation of this policy. First, the government believes
it is important to exhibit objects of importance to the cultural heritage in
an appropriate context, as part of the fabric of society, exploiting any
historical associations of the object. In this view, the display of the object
out of context, in the relatively sterile environment of a museum, for example, is to be avoided. Second, the private owner may be more interested
in and more able to provide for the care and maintenance of the property.
This may be particularly true for the security of objects retained in an
owner-occupied stately home. Though it would be tempting to conclude
that a policy of this sort is a reflection of the current Conservative government's emphasis on privatization, these tax provisions have been in existence in one form or another for a number of years, through a variety of
governments.29
Three different types of tax relief are available under these provisions:
"conditional exemption" the "private treaty sale," and "acceptance in lieu."
In the discussion that follows, I generally limit myself to a discussion of
the implications of these provisions for the transfer of artworks, but they
apply equally to heritage properties of all types.
Conditional Exemption
An individual who acquires a work of art by inheritance or gift may be
eligible for "conditional exemption" from capital transfer tax. The work
of art must be of national, scientific, historic, or artistic interest and be of
sufficient quality to be displayed in a public collection. Thus, the object
must be determined by the government to be "museum worthy." The transfer
of such an object is exempt from capital transfer tax if the new owner
applies for conditional exemption and agrees to (1) keep the object permanently in the United Kingdom (unless the Treasury agrees to allow it to
travel abroad temporarily for special exhibition purposes), (2) take reasonable steps to preserve it, and (3) take reasonable steps to ensure public
access. These three undertakings are the quid pro quo for tax relief and
ultimately define the limits of the public interest in these works. (A similar
set of exemptions from transfer duties in exchange for public access exists
in France, where the law has consciously been extended to exemptions for
artworks in corporate collections. 30 )
The public access requirement is the keystone of the public interest in
this tax incentive. Owners of conditionally exempt artworks can ensure
public access in one of several ways. The object may be exhibited in a
room that is open to the public for a reasonable number of days each year
333
(including appropriate publicity and assurances that the object will actually be on display). Free access is not required; the owner may charge a
reasonable entry fee. This is the most desirable option when the owner is
also the proprietor of an historic home to which the object has an integral
connection. Alternatively, the owner can loan the object on a long-term
basis for purpose of display to a public collection or to a museum, gallery
or historic house run by a charitable trust and open to the public. It is
assumed that the custodian institution will display the object and not simply store it, thus serving the public's interest. This option places the burden
of preservation and security on the displaying museum while preserving
the donor's options for the ultimate disposition of the object (at which
point the conditional exemption may or may not be continued, depending
on the nature of that transfer).
Finally, the owner can choose to enter the object in a list, maintained at
the Victoria and Albert Museum, of conditionally exempt objects. In so
doing, the owner agrees to allow members of the public to view the object
by appointment and to lend it on request to public collections for temporary exhibition. The list contains precise information on the object itself,
on arrangements for public access, and on the general location of the object. It need not identify the owner or the precise location of the object.
The object does not have to be viewed in the owner's home and it may be
loaned anonymously. These provisions are all designed to protect the security of the object and the owner, but effectively limit public access to
the most knowledgeable art scholars, who are most likely to use the system
effectively.
The Capital Taxes Office (CTO), which administers the capital transfer
tax legislation, has made some estimates of the extent of conditional exemption.31 The number of claims for conditional exemption has grown
gradually over the last few years:
1980-81
1981-82
1982-83
67 claims (land and chattels)

77 claims (land and chattels)
89 claims (38 land claims and 51 chattels)
Claims were not necessarily processed in the year they were initially made,
and approximately 5 percent were rejected or withdrawn. The CTO has
estimated that for the last two years listed above the value of the exempted
claimseither the uncorroborated value claimed by the owner or CTO's
"guesstimate"was 7.3 million and 5.5 million respectively. The proportionate number of claims for land exemption has been increasing, presumably because the bite of capital transfer taxes would be the worst there.
It is impossible to estimate from these figures how many works of fine art
have come under conditional exemption because other types of objects are
included in the exemption and because one claim can include collections
with numerous objects.
The owner of a conditionally exempt object can transfer the object to a
new owner without tax liability by giving or bequeathing it to someone
who renews the conditional exemption; by giving or bequeathing it to a
334
public collection, to a university, or to certain heritage trusts or charities;

or by taking advantage of one of the two other reliefs from capital transfer
tax. In specifying a limited list of possible recipients for exempt donations
of property, British law differs in a significant way from U.S. law, which
grants such exemption for donations to any nonprofit tax-exempt organization so long as the property will be used for the tax-exempt purposes of
the charitable institution. Thus, British law goes further in determining
which institutions are the most appropriate to receive these objects.
An owner who decides to sell a conditionally exempt object loses the
exemption on the previously exempted transfer and taxes are due. In addition, the owner is requested to give the public collections three months'
notice of the intent to sell. Though such notice is not required, if it is not
given the government can withhold an export license indefinitely for an
object of national importance.32 In this way, the British government recently delayed the export of three drawings purchased at auction by the
Getty Museum. 33
The Private Treaty Sale
If the owner should decide to sell a conditionally exempt object, the government is able to participate at an advantage in the bidding for the object
through a second capital transfer tax incentive, the "private treaty sale."
The government has authorized museums and certain other publicthough
not necessarily governmentalbodies to offer to pay the owner the net
after-tax market value of the work of art plus a percentage of the taxes
forgone if the object ends up in public hands. For works of art and other
objects, public bodies are generally advised to "offer the seller an amount
equal to 25 percent of the benefit of the tax exemption, subject to negotiations above or below this figure where flexibility is appropriate."34 This
administrative arrangement is known as the "douceur," literally, the
"sweetener." Through the use of the douceur to sweeten the purchase price,
the seller and the acquiring institution share, in a sense, the value of the
tax exemption. An example makes this clear:
Open Market Sale
Private Treaty Sale
Current Market Value
100,000 pounds
(paid by buyer)
100,000
(amount unpaid)
Capital Transfer Tax

(example of 60%)
- 60,000
(collected by gov't)
- 60,000
(forgone by gov't)
Received by Seller
Net of CTT
40,000
+ 15,000
(paid by public museum)
+ 25% of Tax Liability

(25 %x 60,000)
Total Received by Seller
40,000
(paid by public museum)
40,000
55,000
NOTE: For simplicity, this example assumes that no capital gains taxes were due on the sale. If capital
gains taxes were due, the douceur would be applied to the sum of the forgone capital transfer taxes plus
the forgone capital gains taxes.
335
The benefit to the seller is clear; he or she nets 15,000 more than would
have been possible in the open market (assuming that the negotiated market value of 100,000 is the maximum that could be realized in the international market and not just in the national market). The benefit to the
public is not quite as obvious. The public collections obtain a work of art
that is worth 100,000 for a direct outlay of 55,000, a net public benefit
of 45,000, but a benefit that is only realizable in artistic terms, embodied
in the artwork and unable to be translated into support for any other
government program. In so doing, the exchequer has forgone 60,000 in
taxes, which could have been used to support any public program deemed
appropriate. The "true" cost to the government is, therefore, 115,000
60,000 in forgone taxes and 55,000 in actual expenditurefor a 100,000
work of art. The bottom line in this calculation is ultimately the incalculable benefit of bringing the work permanently into the public collections
and avoiding exportation.
In theory, the private treaty sale is self-regulating, based on an agreement negotiated between the potential seller and the public institution. In
practice, though, it is not as straightforward as a simple example might
suggest. First, it requires the determination of a "market" value as the
basis on which all of the calculations will be made. The owner and the
institution negotiate an agreed value, but there is little guarantee of how
well it will actually represent what the artwork could command on the
open market, because the test will never be made. Thus, the value agreed
on will depend on the relative bargaining positions and abilities of these
two parties alone and not of all the parties who might be involved were
the work to be offered on the open market. If the institution is particularly
eager to have the object, the seller may be able to negotiate a more advantageous price than the market would afford. This seems to be compounded
in the case of artworks for which an auction house or an independent
member of the art trade acting on behalf of the owner determines a value
for the object.
Second, the parties may negotiate the level of the douceur itself. The 25
percent figure is a general guideline and is not mandated by law.35 The
government recognizes that for low-value objects 25 percent might not
provide a sufficient inducement, and that for very high-value items it may
not be necessary to offer as much as 25 percent. For artworks, the Office
of Arts and Libraries has stated that the douceur is typically between 20
and 25 percent and that they could think of no recent case in which the
douceur exceeded 25 percent. The level of the douceur and whether or not
it should be fixed by law are two constant points of contention.36 The
auction houses that negotiate on behalf of private owners are particularly
resistant to decreases in the douceur, as their fee is pegged to the final sale
price. In the case of donations of land and buildings, the douceur is set
lower, at 10 percent of the forgone taxes, because there is no danger of
these properties being exported if they are not purchased by public bodies.
Finally, the private treaty sale requires that the institution be able to
336
obtain specific information about the seller's potential tax liability. Thus,
the Capital Taxes Office is asked to disclose the potential tax liability and
confirm the exemption. In providing tax incentives for the transfer of cash
or property, either by donation or sale, governments have generally been
unwilling to implement schemes that would reveal the donor's tax position
to the recipient institution. The tax implications of the tax incentives in
U.S. law, for example, are only seen by the donor when annual tax calculations are made. In Great Britain itself, an unwillingness to reveal this
information to the recipient institution was given as one of the reasons
that higher rate relief on deeds of covenant was rebated back to the donor
rather than forward to the charity, though this case certainly would have
been considerably more complex than for private treaty sales, as it would
have involved making countless potential tax liability determinations. 37
Survey data indicate that, from 1978 through 1980, English museums
and galleries acquired between 50 and 60 items by private treaty sale.38
Most items were valued at less than 500,000, only 2 at more than 1
million. Scottish arts institutions acquired 26 items. Private treaty sales
could not be separated from total acquisitions of Welsh institutions. The
Capital Taxes Office has released data on more recent private treaty sales
of all types of heritage property to all of the eligible institutions: 39
1980-81
1981-82
1982-83
63 private treaty sales (land and chattels)

46 private treaty sales (land and chattels)
51 private treaty sales (4 land claims, 47 chattels)
Although they certainly constitute only a small portion of all acquisitions

by these public bodies, private treaty sales may represent particularly key
objects and properties that would otherwise pass into private hands for
another generation or out of the country altogether.
It is interesting to compare the private treaty sale to the "right of
preemption" (droit de preemption) in French law. The French state has the
right to preempt the purchase of an artwork at a public sale by buying it
from the highest bidder at his or her bid. The right may be exercised only
for works of "great interest to the national patrimony." 40 Critics of this
state intervention in the art market point out that when it is known that
the work is desired by the public museums, it dampens the interest of
private individuals in bidding and may injure the seller by lowering the
price ultimately realized at auction (whether or not the government actually exercises its right of preemption). When coupled with the right of
retention (droit de retenue), by which the state can prohibit exportation of
certain art works, it may also lower the price by dissuading foreign purchasers.41 On the other hand, it may reduce the seller's uncertainty sufficiently to raise the reserve price.
Acceptance in Lieu
The final tax relief provision, "acceptance in lieu," is linked to the preservation of the national cultural heritage. If capital transfer taxes are due on
337
any assets, certain works of art may be accepted as payment for that liability. Whereas works receiving conditional exemption or eligible for private treaty sales must be "museum worthy," in order to be accepted in
lieu of tax payments works must be "preeminent," a stricter standard.
When accepting an artwork as payment for capital transfer tax, the government calculates the value in the same way it calculates the offering price
for a private treaty sale: the net value the donor would have realized if he
or she had sold the work and paid the taxes due plus 25 percent of the
taxes forgone by exempting the transfer from capital transfer tax. (In this
case the douceur is fixed at 25 percent, but this restriction may be meaningless given the flexibility inherent in determining an actual market price.)
This amount is offset against the tax liability of other property in the estate.
Continuing the example begun earlier, suppose the artwork with a market value of 100,000 had been offered in lieu of taxes rather than sold
via a private treaty sale. On the artwork itself 60,000 of capital transfer
tax are due. Assume that on the remainder of the estate the additional tax
liability is 600,000. Offering the painting in lieu of taxes results in a tax
benefit of 55,000 that is offset against the tax liability of the remainder
of the estate. Thus, the donor pays 545,000 in capital transfer tax in
addition to the transfer of the painting itself. If the donor had simply paid
capital transfer tax up front, the total tax liability would have been 660,000
(600,000 + 60,000). The tax benefit implicit in this particular form of
acceptance in lieu reduces the total tax liability by 15,000; the donor
ends up "paying" 645,000 in taxes, the 100,000 painting plus 545,000
on the remainder of the estate. 15,000 of tax are forgone (and 100,000
of tax are allowed to be paid in kind rather than in cash) to provide an
incentive to channel this artwork into the public domain.
Another possible advantage to the donor using the acceptance in lieu
procedure is that the donor can make the offer with the condition that the
item should pass to a particular institution or that it should be allowed to
remain in situ. If the object passes to a private institution or remains in
situ, formal ownership is vested in an appropriate public body, which
"loans" the object and ensures that any conditions are being complied
with. Thus, an individual can pay capital transfer taxes with an artwork
and still retain physical possession. Once again, the desirability of having
the work remain in an appropriate setting is the primary consideration,
subject to acceptable arrangements for reasonable public access, security,
and conservation.
Most tax incentives, once implemented, can be used by institutions or
individuals without limit. The interaction between the financial benefits
and the tastes of individual donors, on one hand, and the plans of cultural
institutions, on the other, determines the extent to which the incentive is
used and the amount of taxes forgone. Acceptance in lieu is unlike other
tax incentives in this regard. It is subject to a strict upper limit specified in
advance by Parliament. An annual amount is actually budgeted and di-
338
vided in half between the Office of Arts and Libraries and the Department
of the Environment, the two major government agencies charged with the
preservation of the national heritage. When an item is accepted in lieu of
taxes each pays one-half of the value to Inland Revenue. In recent years
acceptances in lieu of taxes have been limited to 2 million.
This unusual attempt to make a tax expenditure explicit through an
actual budgetary transferthe only such example I have come across in
investigating tax expenditures for the arts in a number of different countrieshas drawn criticism from the Education, Science and Arts Committee of the House of Commons:
[T]he Committee deplore the practice whereby every time tax is paid in kind in
this way rather than in cash, the Treasury insists that the transfer has involved
public expenditure. There should be no attempt to inhibit the already limited purchasing powers of Secretaries of State, or of the National Heritage Memorial Fund
by notional transfers of this kind made simply for accounting purposes. It is quite
obvious that there can be no open-ended commitment on the part of any government to accept objects in lieu of money, but this does not mean that the practice
of allowing certain taxes to be paid in kind, where the objects in question are of
great importance, should not be unequivocally recognised in law. 42
Whether or not one agrees with the policy of placing an upper limit on a
tax incentive of this sort, making explicit the forgone taxes does help to
keep in mind the fact that such incentives do have costs associated with
them.
Each year from 12 to 20 cases requesting acceptance in lieu are initiated.
In the last two years only 1 or 2 claims have been rejected, probably due
more to discouragement given to claimants early in the process than to
any looseness of government standards. The fiscal year ending April 1983
was the first time that the whole acceptance in lieu fund was spent. No
doubt, this will lead to pressure on the government to increase the limits
on acceptance in lieu. No one can be sure what the government's response
would be if an extremely valuable heritage item were offered in lieu, posing an unusually high charge against that limit.
Other British Incentives
What have been described here are specific tax provisions that provide
incentives so that transfers of properties deemed part of the national heritage will be conducted in ways that reflect the public's interest in those
items. It has been the policy of successive governments to encourage such
property to remain in private hands, if possible, and for their owners to
care for them and ensure public access. These tax provisions are in addition to other, more general, provisions that affect the transfer of all sorts
of property to public or charitable purposes. In Great Britain, as in many
countries, gifts and bequests of any property to charities are exempt from
capital transfer tax and capital gains tax. But such gifts are not deductible
from income for purposes of income taxation. Thus, these gifts do not
receive the generous twofold tax incentive that U.S. donors receive.43
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In Great Britain, gifts and bequests to public and quasi-public institutions are also exempt, as are gifts or bequests of certain types of property
with public benefit to appropriate non-profit-making bodies (as distinguished from charities in British law). In the latter case, the exemption is
granted when the Treasury determines that a goal of the organization is
the preservation of such property for the public benefit, that it has the
financial capacity to maintain the property, that it will ensure public access
and accept restrictions on the use, disposal and preservation of the property, and that the donor will not retain any personal interest in the property. Once again, the public interest is carefully established before the
granting of an exemption.
The French "Dation"
One of the most widely known tax provisions in European cultural policy
is the French dation. Under this provision all heirs, donees, or legatees may
pay estate taxes with works of art, books, or collections of objects or of
documents of high artistic or historic value. Like the British acceptance in
lieu provision, the dation was an integral part of a 1968 legislative program to "promote the conservation of the national artistic patrimony."44
Any such payment is subject to the recommendation of a governmentappointed commission, which determines whether or not the works are of
sufficient quality to meet this definition, and to a government decision as
to whether or not it wishes to accept payment in this way.
Since the recognition of the dation as a means of tax payment, the government has received works of Lippi, Fragonard, Rubens, Cezanne, Manet, Renoir, Goya, Ernst, Calder, Pissarro, Monet, and Picasso, among
others.45 But the most extraordinary dation has been the "Dation Picasso," which formed the bulk of the collection of the new Picasso Museum in Paris. This dation included:
229
149
85
1496
33
1622
35
many
30
paintings
sculptures
ceramics
pastels, collages, designs
notebooks of sketches
prints
illustrated books
documents
works of friends
The estimated value of the estate was FF 1.154 billion. Because Picasso's
brother died shortly thereafter, a second estate was involved, and the total
estate tax liability was approximately FF 290 million. In other, less extraordinary years the value of works given by dation was FF 1.7 million
340
(1973) and FF 7.7 million (1974). One commentator has concluded that
the dation has been much more successful than either the right of preemption or the right of retention in enriching the national collections.46
Unlike the British acceptance in lieu, the dation does not appear to present a financial incentive for paying estate taxes with artworks. If the value
of the artworks is simply credited against the estate taxes for the entire
estate, the donor ends up paying the same amount of estate taxes (including the agreed on value of the artwork). Whatever advantages there are
probably lie in the fact that the estate tax liability may be paid relatively
simply, by surrendering artworks rather than having to liquidate them on
the open market. An individual who has just inherited an estate and is
considering donating an artwork in the estate to the statesuch a donation is, in its own right, exempt from transfer taxesis well-advised to use
the artwork as a dation instead, because the difference between the market
value of the work and the estate taxes that would be due on it alone can
then be offset against the taxes due on the remainder of the estate.
What incentive does the government have to turn down a proposed dation? The financial implications of the forgone taxes are easy for bureaucrats to ignore when confronted with the opportunity to obtain an important artwork for the national museums for "free." On occasion, the
commission has turned down proposed artworks, in one case because the
artist owed back income taxes and in another because the artist was already well represented in the national museums. In both these cases, however, the decision was overturned when a new president of the commission
was named, presumably because of the negative publicity generated by the
former commission president's decisions, which made the government appear ungrateful. 47 Unlimited use of such a tax provision can prove costly,
but putting a workable fair limit on its use may be politically impossible.
ARTISTS' INCOME TAXES
All Western countries struggle with problems inherent in the income taxation of artists. What constitutes professional activity as opposed to a hobby?
What are deductible business expenses? Where is the boundary between
ordinary income and capital gain income? How should donations of the
artist's own work be treated? How are income streams that vary considerably from year to year to be handled? How should commissions, grants,
or awards be taxed? Though the debates on each of the questions are very
real, their solution is more a technical matter depending on the legal
framework of each country than a matter of conscious cultural policy.48
Into the midst of all the technical provisions dealing with artists' income
taxes, one extraordinary provision has crept. In the Irish Budget for 1969
70, the minister for Finance, Mr. Charles Haughey, declared:
As further encouragement to the creative artists in our midst and to help create a
sympathetic environment here in which the arts can flourish, I will provide in the
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Finance Bill that painters, sculptors, writers and composers living and working in
Ireland will be free of tax on all earnings derived from work of cultural merit.49
To be eligible for the exemption the work must, in the opinion of the Irish
government, be original, creative, and of cultural or artistic merit. The
only other qualification, the residency requirement, is a rather broad one:
the artist has to be resident in Ireland for at least six months in the year
or own a house permanently ready for his or her occupation, even if for
only a day or two in the year. Irish citizenship is not required.
Just as U.S. cities use tax deals to attract new development, Ireland had
decided to use tax laws to attract and retain artists, and it was "reported
in the international press as the most enlightened fiscal measure ever taken
by any Minister for Finance in relation to the arts."50 This particular tax
exemption, though idiosyncratic in the extreme, deserves closer attention
as it clearly reveals a number of the pitfalls in using tax incentives as a
cultural policy.51
By April 1984, the Irish government had approved 1284 applications
representing 1116 different individuals, with 134 cases pending.52 Earlier
figures show that approximately 68 percent of those approved have been
writers, 23 percent painters, 6 percent sculptors, and 3 percent musicians.53 Through the first six or seven years, half of those benefiting were
non-Irish; the Revenue Commissioners now estimate that a majority are
of Irish origin.54 The best-known artists attracted by this scheme have included a number of international spy writers, such as Len Deighton, Frederick Forsyth, and Leslie Charteris, as well as J. P. Donleavy, Richard Condon, Alun Owen, and Wolf Mankowitz. Irish writers who had emigrated
to Britain and returned included playwrights Hugh Leonard and Brian Friel
(who simply moved across the border from Northern Ireland to County
Donegal).55
What was the objective of this exemption? One magazine article concluded:
By attracting artists who would never have considered taking up residence in the
Emerald Isle in view either of the weather or because it is so far from the leading
cultural centres, this tax lawwhich exists nowhere elsehas brought about a
cultural and literary revival in Ireland, restoring its international prestige.56
Yet it seems unlikely that such migration, even in large numbers, would
contribute very much to the international artistic prestige of Ireland.
The artists this scheme attracted were those so wealthy that the exemption represented a substantial, but unnecessary, subsidy. It is the wealthy
artist who can benefit most but needs it least. One journalist has noted:
From the point of view of Irish artists, the main disadvantage of the scheme is that
very few Irish artists do earn enough to pay income tax and so they gain no benefit
from the exemption. Most live "pulling the devil by the tail," and many are of the
opinion that a form of subsidy, direct or indirect, to local artists would be more
beneficial to the local scene than encouraging a tax-free haven for wealthy foreign
artists.57
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All of this suggests the more general question of why the forgone amount
of income tax is the right amount of subsidy in the first place. With indirect aid based in tax incentives it is easy to lose track of the fact that there
are real, though difficult to calculate, costs associated with them. The Revenue Commissioners currently estimate that the cost of this relief to the
state is approximately 600,000 per year, a figure that seems low.58
This scheme is misdirected in another fundamental way. It is directed at
the wrong group of artists. While subsidizing creative artists, whose works
can be enjoyed anywhere irrespective of the presence of the artist, the exemption offers no financial incentive at all to those artists whose presence
is a critical component of the artistic product, the performing artist. A
subsidy directed toward the performing artist would seem to be better
equipped to have a tangible effect on the cultural life of the country. The
practical reason for not extending this benefit to performing artists lay in
the difficulty of determining a boundary that clearly defines who is eligible
and who is not and that, presumably, would keep the costs of the program
within acceptable bounds.59
Though the Irish experiment is the most extreme such example, a mythology of sorts has grown up in the United States around the supposed
preferential treatment for artists in European tax laws: for example, the
widely alleged ability of European artists to pay their taxes with works of
art instead of cash. Although this does seem to be true in Italy,60 it is less
clear that this is normally a possibility in any other country. Unfortunately, very little accurate information has been available.
For example, Elias Newman, president of the Artists Equity Association
of New York, testifying before the House Ways and Means Committee in
1973, claimed that in the Netherlands artists were not taxed on the first
50 percent of income from works of art and that the tax on the remainder
could be paid with paintings or sculpture that were, in turn, given to schools,
hospitals, and public institutions. 61 The first has never been true. The second has only a grain of truth: When someone is unable to pay income
taxes, the authorities can confiscate the taxpayer's property and hold it
pending payment. In the case of artists and many rich people, the property
often includes works of art. In the Netherlands, a tremendous stock of
such artworks has been seized by the government, particularly in Amsterdam where many artists reside. Some of the artworks are distributed to
public buildings for display. In 1979 the government even mounted an
exhibition of paintings that were damaged in storage in Amsterdam.62 Thus,
these artworks come into the public domain not because of any special tax
incentive for visual artists but because the artists are expected to pay normal income taxes.
Newman went on to testify that France exempts the first 30 percent of
an artist's income from tax. This is a bit closer to the truth. French professionals can claim a standard deduction of 10 percent of income for professional expenses. Certain professions, including some cultural workers, are
entitled to claim a supplementary deduction. For example, musicians, con-
343
ductors, and theatre directors are entitled to a supplementary 20 percent

(for a total deduction of 30 percent); dramatic artists, cinematographers,
and choreographers are entitled to an additional 25 percent.63 To the extent that these supplements are adequate estimates of actual professional
expenses, which could be itemized and deducted if they exceeded the flat
deduction, they do not provide subsidy to these artistic professions. If actual expenses are less than the total deduction, the deduction does provide
a subsidy, but it is hard to argue that the deduction provides an incentive
to become involved in one of these artistic professions. The deduction is
better understood as a tax simplification provision, having more to do
with ease of tax administration for both the artist and the government.
WEALTH TAXES
Although few countries actually have wealth or permanent capital taxes,

where such taxes have been used, their structure often reflects assumptions
concerning public policy goals for the arts. A wealth tax may have an
impact in the cultural field in one of two ways: by taxing or exempting
the property of cultural institutions themselves and by taxing or exempting
objects used for cultural activities or of artistic value that are part of otherwise taxable wealth.
Until recently only four members of the EEC had levied a permanent
capital tax: Germany, Luxembourg, the Netherlands, and Denmark. Belgium, however, had a special capital tax on the assets of certain organizations.64 The German permanent tax on capital is broad, encompassing
the assets of both natural and legal persons. Organizations whose main
aim is to benefit the community are immune in much the same way that
U. S. charitable institutions are exempt, say, from local property tax. Only
those assets for which rules of valuation exist are liable to the tax, and
valuation of artworks in private possession is a tricky matter. Thus, works
of art owned by individuals and created by living artists or by artists who
have been dead for less than 50 years are not taxed. Other works of art
and collections are liable to the tax if their total value exceeds DM 20,000.
Property of artistic, historic, or scientific value is only taxed at 40 percent
of its value. Such property may be completely exempted if its preservation
is of artistic, historic, or scientific value, provided that (1) the general public, or at least researchers, have access to it and (2) it has belonged to the
owner or the owner's family for at least 20 years. Incomplete and unsold
works of creative and performing artists are not taxed.
The permanent tax on capital in Luxembourg is derived from the German system. Both natural persons and companies are liable to the tax.
Recent works of art by Luxembourg artists who are living or who have
not been dead for more than 15 years are exempt. Other works of art and
collections are taxable only if their total value exceeds Lfrs 500,000. Works
that are "of benefit to the community" are taxed at only 20 percent of
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their value if they are accessible to the public. In some circumstances they
may be totally exempt. On the other hand, Luxembourg levies a tax on
the assets of nonprofit-making associations and establishments of benefit
to the community, thus affecting some cultural activities; the financial impact, however, is minimal. A similar special tax with no specific arts exemptions is levied in Belgium.
In the Netherlands, a capital tax is charged only on the assets of natural
persons. Works of art are exempt without limit, except that items of a
professional nature are not exempted; unsold art works in the possession
of the artist or a collector are therefore liable to tax. Immovable property
that comes under the auspices of the nature conservancy law is taxed at
two-thirds of its value, a reduction that seems to be offered to give the
owner a relatively larger ability to maintain the property in good condition. A further reduction in taxable valuation is available for properties to
which the public has access.
Similarly, the Danish wealth tax is levied only on natural persons.
Moveable property and household equipment not used by the taxpayer for
business purposes are not included in taxable assets, so works of art, books,
paintings, sculptures, manuscripts, and other items in private collections
are not taxed. The artist's own works are considered to be part of his or
her private collection and are not taxed.
From these examples alone one can infer little about the pros and cons
of exempting artworks from wealth taxes. To make artworks liable to
capital taxes, as several of the countries do at least in part, may encourage
owners to dispose of conspicuous objects and to be secretive about the
ones they retain. Objects that are sold may come into the public's possession both because they may more readily enter the market and because
they may command a lower price, though public purchase funds are limited and international prices likely to remain substantially higher than national prices. Objects that are hidden from view become even less accessible to the public, and that is why public access becomes a quid pro quo
for partial or full exemption.
If artworks are to be taxed, valuation is a major problem. Concerning
the exemption of artworks from capital tax in the Netherlands, Bouuaert,
in his study of taxation and the arts in the EEC, concluded, "While it was
initially introduced (in 1892) to protect the arts, it has been retained mainly
because of the difficulties of assessing the value of property of this
kind"[emphasis added].65 His choice of words is revealing: Just what does
it mean to "protect" the arts in the context of capital taxes?
Exempting artworks from capital taxation seems, on its face, to be the
more reasonable alternative. Owners will not be provided with an incentive to dispose of their objects, some of which might have close ties to a
particular family or building. But this point of view fails to take into account the dynamics of the art market. If artworks are one of the few types
of property exempted from capital taxations, then they become a very attractive investment in which an individual can shelter large amounts of
personal wealth. The art market should respond with rising prices, fueling
345
speculation and making art an even more attractive way to shield wealth
from capital taxation, but making acquisition, either by the public collections or by private individuals, more expensive.
The counterproductive result has been observed whenever the relative
tax incentives have been changed to provide greater exemption for artworks:
English painting of the eighteenth century began to be collected in the United States
after the 20 percent duty on classic works of art was repealed in 1909, and . . .
modern French paintings began to be collected after the duty on contemporary
works was abolished in 1913. . . . (T)he speculation characteristic of ... art
markets has been supported by the absence, in France, of a tax on capital gains
and, in the United States, by the tax breaks available to collectors who donate
works of art to public museums. Every change in such laws affects the markets for
art works and thus the professional lives of everyone involved in the relevant art
world.66
Whether such an increase in prices in the art market would be desirable

from a cultural policy standpoint is problematic, but the possibility that
the art market would respond in this way entered passionately into the
public debate when the British Labour Government proposed a Wealth
Tax in 1974. Hugh Jenkins, in his memoirs of his tenure as Labour Minister for the Arts, has vividly recaptured the intense debate that swirled
around his insistence that, in principle, artworks should not be exempted
from a wealth tax.67
In the context of the Labour Government's program to reduce income
inequality in British society, Jenkins regarded denying exemption as a way
to "separate fine art from its traditional associations with exclusiveness
and personal wealth."68 For him the public's interest in these art objects
lay more in their broad accessibility than in tinkering with and perhaps
inadvertently fueling prices in the art market, and he proposed a way to
bring more objects of artistic value into public hands while maintaining
the intent of the tax. Artworks would not be exempt but the tax would be
deferred if the owner agreed to public display of the artwork, to making
it available to scholars, or to loaning it to public collections for display.
The forgone taxes embodied in the exemption would be exchanged for the
public benefit of increased accessibility. Jenkins further suggested that
the problem of valuation of those artworks that would be taxed could be
solved by the owner making a self-valuation with the stipulation that the
government would always have the option of buying the object at that
price, providing an incentive to keep the valuation reasonably high. The
trade-off was to make possession sufficiently attractive to encourage
retention (within Great Britain) but not so attractive as to increase hoarding.
Nearly without exception, the art world, arguing along the general lines
that taxation would not be "good for art" and that "art and commerce
ought to be kept separated," did not support Jenkins' position. In the end,
the debate over exemption for artworks provided the wedge needed by
opponents of the wealth tax to bring about its eventual defeat. As a result,
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most of the interesting public policy questions posed by these events were
never addressed directly. Given that many of the artworks that would be
liable to the tax were not of British origin, whose heritage would actually
be protected through exemption? How much truly valuable artwork still
remained in private hands and at what rate would it come onto the market
if exemption were not allowed? And, perhaps most important, is protecting art the same thing as protecting the art market?
Denying exemption for artworks can thus be seen as a policy instrument
designed to bring more objects of artistic value into public hands or, at
the very least, to make them more publicly accessible. It would not be
undesirable for objects to come onto the market, if the government could
respond adequately with purchase funds augmented with other incentives
such as the private treaty sale, and it would not be undesirable for artworks to remain in private hands exempted from wealth taxes in exchange
for some form of public access.
In October 1981 the debate surfaced again, this time in France. Laurent
Fabius, Budget Minister, introduced the Socialist government's proposed
Finance Bill for 1982. The bill included a new wealth tax (impot sur les
grandes fortunes), and it specified that paintings, jewelry, and other art
objects would be included in the definition of wealth and thus be taxable.
To monitor the market and establish the value of these works of art, all
sales over ff 5000 would be required to be made by check, and insurance
companies would be required to provide information on any individual
who had taken out an insurance policy insuring artworks for more than ff
100,000.
The art world was outraged. Collectors, the auction houses, and many
major artists united in opposition to the proposal. Daily newspapers and
weekly newsmagazines of all political perspectives warned of the death of
the Parisian art market: The national art market would go underground,
they argued, and the exportation of artworks, already encouraged by higher
international prices, would accelerate. 69 Virtually no attention was paid to
the likely impact of exemption on the art market; in the popular view,
exemption would "obviously" encourage the arts, whereas taxation would
discourage them. And no one asked about the effectif anyon the individual creative artist.
In either case, a wealth tax poses difficulties. If artworks are not exempted, valuation becomes necessary, and it may prove too cumbersome
to administer fairly on a large scale. If artworks are exempted, then the
state must find a clear definition of what is art and what is not. Of course,
this is problematic for any government policy that is designed to treat
"art" in special ways.
Finally, President Mitterand intervened personally, deciding that artworks would be exempted from the tax as long as they were not sold for
export. In exchange for this concession, a transaction tax on the sale of
artworks was increased from 3 to 6 percent for sales in galleries and from
2 to 4 percent for sales at auction. The art world rejoiced. Only a few
347
dissenting voices were heard. One journalist clearly summed up the policy
dilemma inherent in such a choice:
For reasons of equality, the wealth tax was to have been levied on works of art.
For reasons of liberty it was lifted. In both cases, the real economic motives were
disguised, purely and simply, as moral motives.70
Though the battle over exemption of artworks was furious, the irony
lay in the fact that the wealth tax would only have applied to the wealthiest of individuals, individuals who, arguably, could afford the tax in any
event. Only individuals whose wealth exceeded ff 3 million (5 million in
certain cases), roughly 1 percent of French taxpayers, would have been
taxed, and the tax rate would have begun at 0.5 percent and increase to a
maximum of 1.5 percent. Of course, on the other hand, the revenue forgone by exemption would have been small in comparison to total government revenues to be realized from this tax. This point illustrates a common
property of tax exemptions for the arts. While the taxes forgone by any
tax incentive for the arts are likely to be small compared to total revenues
of the tax in which they are embedded, they nonetheless may have a significant impact on the arts; both impacts must be measured to evaluate
the incentive properly.
VALUE-ADDED TAX
All of the member countries of the EEC and a number of other European
countries have adopted value-added taxes as important revenue sources.
The value-added tax (VAT) is essentially a national sales tax levied on the
consumption of all goods and services, and its relationship to the arts poses
a number of trickly questions of tax administration and of cultural policy.
The value-added tax is collected through a series of incremental steps.
Producers of a good or service pay VAT on the inputs they purchase. They
then produce their own outputa good or service that is purchased by
another consumerand VAT is charged on that sale. The amount of VAT
paid on inputs is subtracted from the amount realized on the sale of outputs, and the difference is forwarded to the government as tax revenues.
Thus, even though the tax is collected incrementally, it is the final consumer who bears the total burden of the tax.
The intent and structure of VAT pose two issues for the arts:
1. To what extent should artistic and cultural "outputs" benefit from lower rates
of VAT?
2. To what extent should the artsparticularly nonprofit arts institutionsbe exempt from paying upstream VAT on the inputs they purchase?
Both of these issues have been the focus of sustained debate throughout
Europe.
In implementing VAT, governments have tried very hard to eliminate
possible loopholes. Value-added taxes are levied on all forms of consump-
348
tion, irrespective of the characteristics of the sector whose outputs are being
taxed. They are clearly conceived as a revenue-raising tool and not as a
means to encourage or discourage certain activities in accord with government policies.
The theory of value-added tax calls for a single tax rate to be applied to
all goods and services, conforming to the actual pattern of consumption
by maintaining the relative prices of these goods and services in the marketplace and not distorting competition. In addition, the use of a single
tax rate dramatically simplifies tax collection. In practice, however, most
European countries actually use two, three, or four different tax rates, and
culture is one sector in which VAT rates have deviated from the countries'
standard rates. In this regard VAT legislation has been designed to affect
rather than to reflect the actual consumption pattern, providing an incentive through lower rates (or a disincentive through higher rates) for certain
types of consumption.71
Table 15.2 summarizes the VAT rates for selected arts activities in the
countries of the EEC. Not only does the general level of VAT vary from
country to country, but the actual application of VAT to the arts and
culture varies widely within countries, with different cultural sectors liable
to different rates of tax. Some of these countries clearly use VAT as a
technique to provide indirect subsidies by lowering relative prices for certain artistic activities, while others treat certain cultural goods (e.g., records) as luxuries and tax them at a much higher rate, under the assumption that those who purchase them can well afford higher taxes and that
demand for these goods is not highly price elastic.
In considering the actual application of VAT to the arts and culture in
Europe, it is useful to distinguish between cultural services and cultural
goods. It is clear that in the EEC there is an intent to reduce the rate of
VAT on cultural services. The Sixth European Council Directive of 1977,
which dealt with questions of harmonization of VAT within the Community, committed the governments eventually to exempt theatre, concerts,
and other cultural events, activities that the Community wished to encourage because of their public interest.72
In the three EEC countries where the rates have not been reduced for
these activitiesthe United Kingdom, Denmark, and the Netherlands
arts institutions have been lobbying for a reduction based on three arguments: (1) High prices resulting from the imposition of VAT, and particularly VAT at the standard rate, make it more expensive for the public to
enjoy these events; (2) VAT is due irrespective of the profit or loss position
of the institution, and arts institutions tend to lose money; and (3) it is
illogical to tax by one hand activities that may be subsidized by the other.
All three of these arguments call for a trade-off between the logic, internal
consistency, and relative simplicity of VAT as a tax-collecting mechanism
and the use of such a system to provide relative incentives for certain types
of activities. 73
The first argument is one of the traditional justifications for governmen-
349
Table 15.2 Value-Added Tax: Rates for Cultural Sectors in Selected

European Countries
Country
Belgium
Denmark
France
Great Britain
Ireland
Italy
Luxembourg
Netherlands
Sweden
West Germany
Books
6%
20.25
7d
0
10
6
5
5
23.46
7k
Cinema
16%
20.25
7
d,e
15
10
14
10
19
0
7
Records
25 % a
20.25 b
33.33
15
30-40 h
35i
10
19
23.46
14
Concerts,
Theatre,
and Events
6%
22 d,f
Other
Entertainment
6%
22c
17.6d,g
15
15
8
5
19
0
01
15
15
8
5
19J
0
7
Standard
Rate
17%
22
17.6
15
25
15
10
19
23.46
14
NOTES: a 16% for language teaching and for medical or scientific uses.
b
20.25% VAT + additional tax on 30% of wholesale price = 41.75% total tax.
c
Zoos, museums and libraries are exempt.
d
33.33% for pornographic or violent works.
e
Nonprofit cine clubs are exempt.
f
In certain cases the 7% rate is applied only to 70% of taxable value. See text.
g
7% for music halls, circuses, fairs, and variety shows at which beverages are not served.
h
30% on records pressed in Ireland, 40% on imported records.
i
6% for educational uses.
i
5% for zoos, circuses, and fairs.
k
13% if considered harmful to young people. (Probably applies to other sectors as well.)
Exemption applies to all public cultural organizations and to other bodies with the same cultural ends;
private promoters making use of public organizations such as municipal orchestras are also exempt.
SOURCES: Rates for France, Great Britain, Sweden, Netherlands, and West Germany are accurate as of
1984 (confirmed through personal interviews). Rates for other countries are accurate as of 1980-81. In
these cases differences between columns 1-3 and 4-6 may be due to increases in tax rates between 1980
and 1981.
Columns 1-3: "Taux de TVA Appliques aux Differents Produits de Communication au 15.03.80 dans les
Pays de la C.E.E." Audiovisuek et Communications Digest, June-July 1980, 9.
Columns 4-6: House of Commons, Third Report from the Education, Science and Arts Committee, Session 1981-82, "Public and Private Funding of the Arts: Interim Report on Value Added Tax and the
Arts," paper 239 (London: Her Majesty's Stationery Office, March 3, 1982), v.
tal subsidy. If the price of a socially desirable good is kept low, more of it
will be consumed. For arts activities this argument raises a serious question
concerning the treatment of performances of commercial artistic institutions. Should they receive preferential treatment too, since they are providing services of a cultural nature? Not to extend an exemption to activities
sponsored by commercial organizations would give nonprofit institutions
an additional unfair competitive advantage, which flies in the face of the
theory of VAT as a tax that minimizes distortion of the market. In Great
Britain, the House of Commons Education, Science and Arts Committee
has argued unsuccessfully that exemption from VAT should be extended
not only to nonprofit cultural institutions but to commercial organizations
as well, as long as they provide cultural services that are in the "public
interest." 74 The government has estimated that such a broad exemption
could cost "on the order of 100 million pounds a year."75
350
The second and third arguments also contradict the theory of VAT. Because it is a tax on consumption and not a tax on income or profit, the
relative financial position of the institution, and whether or not it is receiving public subsidy, are immaterial as far as the theory of VAT is concerned. Government may well choose to subsidize a nonprofit activity that
cannot otherwise balance its books, but to do so through differential VAT
rates is to use a policy that is poorly targeted to achieve the desired result.
It might be much better to subsidize those deficits through direct governmental aid to particular institutions in need of such support. This appears
to be the British government's main objection to VAT exemption for these
artistic activities:
VAT [relief], . . would apply thinly across the board irrespective of how deserving
a body is of support. Grant assistance, on the other hand, can be directed where
the effect would be most beneficialallocations of subsidy to arts bodies are made
after an assessment of their total financial circumstances, including the incidence
of VAT.76
From this perspective the ultimate question becomes, Is direct aid or indirect aid the more efficient and cost-effective mechanism for distributing
subsidy? Through tax-based subsidy provisions, a government may avoid
the necessity of making difficult decisions as to whom to fund (or not
fund), but the level and distribution of that subsidy will be determined by
a variety of factors out of the government's control, factors that may ultimately make the subsidy ineffective.
A few attempts have been made to tailor VAT laws to implement very
specific cultural policies. In France, for example, whereas most concerts,
theatrical performances, and other cultural events are taxed at a reduced
VAT rate of 7 percent, there is an additional reduction offered to promote
the creation of new French works or productions. For the first 140 performances of dramatic, lyric, musical, or choreographic works newly created
in France, or of classic works made the object of a new production, VAT
is calculated at the reduced rate on the basis of 30 percent of the price of
entry. A work is determined to be "classic" if its author or creator has
been dead more than 50 years or if he or she appears on a list that is fixed
by agreement between the Ministry of Culture and the Ministry of Economy and Finance.77 This tax provision promotes French content and perhaps innovation and experimentation in cultural presentations by allowing
the incentive to be realized by an entrepreneur (or institution) who chooses
to move the mix of cultural activities in this direction.
The most striking differences in VAT rates within countries are found
in the treatment of the goods that are outputs of the cultural industries.
(See Table 15.2) European cultural ministries are becoming more and more
concerned over the economic health of the proprietary cultural industries
(the book, film, record, and broadcasting industries), a concern that has
not been an important part of U. S. arts policies. 78 These countries often
use tax law and regulation to provide protection and incentives for their
351
cultural industries, and VAT has become a frequently used tool for providing such implicit subsidies. In this regard tax-based incentives can be used
to provide subsides where direct aid cannot: Western governments generally consider it highly improper, ill-advised, and perhaps illegal to provide
direct government aid to profit-making institutions.
The clearest examples of this method of relative subsidy are in the publishing industry. Most European countries tax books and periodicals at
rates of VAT below the standard rate, an incentive designed to subsidize
the flow of printed information and cultural materials. (In Great Britain,
however, the Thatcher government is currently considering making books
subject to VAT at the standard rate.) On the other hand, the recording
industries tend to be taxed more heavily with the justification that records
and cassettes are-luxury items and their consumers are better able to pay
a higher tax.79
But it would be a mistake to think of all lower VAT rates as providing
subsidy. Because of the iterative nature of the VAT collection process, there
are a number of technical difficulties that arise, particularly in the market
for art objects. Most consumer goods travel through the economic chain
in an orderly way, incurring VAT incrementally at each step of the production and distribution process until the final tax burden falls on the final
consumer. The market for art objects is much less predictable in this way.
Artworks move in and out of the hands of private individuals. Each time
this happens that individual is treated as a final consumer and has to pay
the total of the accrued VAT. When this individual, who is not on the
VAT register as a seller of a good or service, sells the work back into the
gallery and auction system, he or she cannot reclaim the VAT paid upstream. When the artwork is resold by the gallery or at auction, the work
begins accruing VAT at its full price once again. As a result, the tax paid
by the previous owner is paid again, in addition to any tax on new increases in the value of the artwork.80
Because it is difficult to design a VAT collection system that will avoid
this type of double taxation, some governments have tried to accommodate this technical problem either by using a lower base on which to assess
the tax or by using a lower tax rate. In France, for example, VAT on
artworks is charged at the standard rate on the lesser of 30 percent of the
sale price or the difference between the sale price and the price at which
the artwork was purchased by the current seller. In the Netherlands, on
the other hand, a lower VAT rate of 5 percent is used for artworks.81
Notice that in the Netherlands the 5 percent VAT rate has two different
interpretations: While it is a technical adjustment to the value-added taxation of art works, it is an implicit subsidy to book production.
Some arts institutions may find themselves in the position of offering
free services, including admission, to the public rather than charging for
them. In these cases there is no VAT due on the institution's output, and
the burden of the VAT paid upstream by the institution cannot be passed
on to any other final consumer. In a technical sense, the institution is the
352
final consumer. Just as we asked to what extent cultural goods and services
should be exempted from VAT taxation, we can ask whether nonprofit
institutions should be allowed to recover upstream VAT payments. The
finance office of the Arts Council of Great Britain has suggested to arts
institutions that to avoid this problem they should charge a nominal fee
on which VAT would be due. This collection of a small amount of VAT
would allow the institution to recoup all of the VAT payments made upstream.
The European experience with VAT is also useful to illustrate the unintended artistic consequences of tax reform. In the United States we have
recently heard calls for a flat-rate income tax, as well as proposals for a
value-added tax, both to establish a "fairer" system of federal taxation.
The implications for nonprofit charitable organizations of these proposals
are difficult to judge because it is not at all clear that it would be possible
or desirable to reinstitute the tax exemptions or incentives that these institutions enjoy under the current systems of taxation. Would a charitable
income tax deduction also be allowed under a flat-rate income tax? Perhaps, but that undermines the attractive simplicity of the flat-rate proposals. Would the value of sales tax exemptions and property tax exemptions
be replaced under a value-added tax? It is unlikely. 82
The British experience is quite clear in this regard. In Great Britain VAT
replaced the selective employment tax and the purchase tax, both of which
included exemptions for nonprofit charitable institutions. 83 This switch
represented an immediate and substantial jump in the organizations' costs.
Nonprofit institutions that did not sell any goods or services of their own
had to absorb this cost directly. Institutions that did sell goods or services
could, in theory, pass this new cost onto the purchasers of their products,
but only through prices increased to reflect the new VAT. Such increases
might reduce the consumption of their output. For the art world, this meant
less consumption and enjoyment of artistic activities, activities that the
government was simultaneously trying to encourage through other policies.
When VAT was instituted in Great Britain in 1973, the chancellor of
the exchequer "gave pretty firm assurances that, to the extent that the
subsidised theatres and concert halls suffered, additional funds would be
made available to the Arts Council to enable the blow to be minimised." 84
But this promise has now been turned on its head. The exchequer has
made it clear to the Arts Council of Great Britain that if lobbying for the
reduction of the VAT rate for artistic activities were successful, the government would reduce the Arts Council's grant correspondingly, roughly
maintaining the overall level of subsidy from all government sources.85
The design and implementation of value-added taxes raise two of the
most important issues involved in using tax-based provisions to provide
subsidy to the arts: What is the appropriate balance between the design of
a watertight revenue-collecting instrument and other societal goals? And
what should the relationship be between direct aid, which can be used in
353
precisely targeted ways and which makes the evaluation of subsidy more
public, and indirect aid, which may be spread thinly across many eligible
recipients irrespective of their relative worthiness in a manner that hides
the subsidy from public scrutiny? Through the design of their individual
VAT systems, each European country has implicitly answered these questions and, despite the intent to harmonize the VAT systems of at least the
EEC countries, their answers vary widely.
SUMMARY
Historically, U. S. arts policy has relied heavily on tax-based mechanisms

to provide indirect aid to the artsmost notably through the charitable
contribution deduction. But now, tax incentivesas well as other forms
of indirect aidare becoming increasingly popular in many countries. As
a result, any comprehensive study and evaluation of a government's policies vis-a-vis the arts today must take account of the effects of the various
forms of indirect government aid. Futhermore, it is important to recognize
that these effects are not only financial; they may also be artistic. The way
in which the arts are funded can have a significant impact on the type of
art that is ultimately produced and made available to the public.
Tax incentives are the most ubiquitous form of indirect aid to the arts,
though to date they have been relatively poorly documented. So that their
artistic implications can be fully explored and understood, tax incentives
must be studied as cultural policies, not merely as financial conduits. In
this chapter, I have discussed some of the more important issues that arise
when tax incentives are viewed in this way, issues that must be confronted
in designing such incentives for the arts, as well as in the prior decision as
to whether the arts should be supported through direct or indirect means.
One issue is the problem of shifting perspectives. The revenue lost through
a specific tax exemption or incentive is often significant when viewed on
the scale of the revenue-raising instrument in which is it embedded, but
when it is viewed from the perspective of the arts its impact might be
substantial, for better or for worse. This fact makes it all too easy for
government agencies, committees, or legislative bodies making taxation
decisions to overlook the impact of a proposed change on a particular
sector or to assume that the impact will be small. Often this is exacerbated
by the fact that the government bodies concerned with tax policy are not
also responsible for arts policy. Each policy may be promulgated without
proper regard for the other.
A second issue is disguised behind the rhetoric that surrounds government arts support. It seems to be widely believed that tax exemptions and
tax incentives are members of that class of government policies that are,
by definition, "good for the arts." But the debate around the exemption
of artworks from wealth taxes clearly illustrates that one person's view of
what is good for art is not necessarily another's view. That which is good
354
for one type of art may not be good for another, and benefits to one sector
may well entail costs to another. A tax incentive, just like any government
policy, may ultimately turn out to be counterproductive.
A third issue is the extent to which tax incentives can be usefully targeted to achieve specific policy goals. With a couple of exceptions, the
examples in this paper suggest that targeting may be exceedingly difficult
because tax incentives operate through the choices of countless individual
decision makers who choose whether or not to respond to the incentive.
In many circumstances, the flexibility inherent in direct aid programs, where
it is possible to make explicit choices about who will receive aid (and who
will not), can lead to a more efficient allocation of limited resources. But
at the same time, the government might find tax-based subsidy provisions
attractive for the very reason that through such provisions it can avoid the
necessity of having to make difficult funding decisions.
The recognition that an arts policy is financed out of limited resources
points to a related issue. With direct aid programs, budgetary constraints
are relatively clear. But it is difficult to predict the true cost of a proposed
tax incentive scheme (or even to estimate the true cost of an existing one),
and because it may be considerably more difficult to place a meaningful
limit on the use of a tax incentive, such incentives may ultimately prove to
be particularly costly ways to support the arts. (Even charitable contribution deductions, while limiting the deduction an individual may take, do
not limit the number of individuals who may take the deduction other
than in the most general sense to taxpayers.) The difficulty of limiting a
tax incentive is further complicated by the paradox that many tax incentives work best for those who need them the least: Charitable contribution
deductions and the Irish income tax exemption are excellent examples of
incentives that increase with the wealth of the concerned individual.
Tax incentives can play an important role in supporting the arts. But
they must be seen as cultural policies and debated and evaluated in much
the same way that direct aid mechanisms are. Exposing them to the light
of public scrutiny, forcing them to answer tough questions concerning their
effectiveness, and matching them to the particular circumstances in each
country can only improve government's ability to support the arts in a
manner that is financially sound and artistically informed.
Update: As this volume goes to press, Britain has introduced charitable
deductions for the first time. Since 1 April 1986 corporations have been
allowed to deduct charitable contributions from their income up to a limit
of 3 percent of dividends paid. As of 1 April 1987 individuals will be
allowed to make contributions through payroll deduction plans up to a
limit of 100 per year; these contributions will be eligible for a tax credit
calculated at the basic rate of tax. Both individual and corporate donors
will still be able to take advantage of the deed of covenant provisions.
355
NOTES
1. Alan L. Feld, Michael O'Hare, and J. Mark Davidson Schuster, Patrons Despite Themselves: Taxpayers and Arts Policy, A Twentieth Century Fund Report (New York: New York
University Press, 1983).
2. J. Mark Davidson Schuster, "The Interrelationships Between Public and Private Funding
of the Arts in the United States," Journal of Arts Management and Law 14, 4 (Winter 1985):
77-105.
3. "Getting Credit for Charity," The Boston Globe May 30, 1978, 18.
4. "Can the Government Promote Creativityor Only Artists?" The New York Times,
April 25, 1982, p 6E.
5. For a summary of the tax incentives for charitable contributions in several European
countries, see: Ignatius Claeys Bouuaert, Taxation of Cultural Foundations and of Patronage
of the Arts in the Member States of the European Economic Community, Commission of the
European Communities, XII/670/75-E, 1975; and Arthur Andersen & Co., "Overview of
Governmental Support and Financial Regulation of Philanthropic Organizations in Selected
Nations," in The Commission on Private Philanthropy and Public Needs, Research Papers
(Washington, D.C.: U. S. Department of the Treasury, 1977), Vol. V, 2975-2993.
6. The Commission on Private Philanthropy and Public Needs, "Alternatives to Tax Incentives," Vol. IV, Part V, of Research Papers (Washington D.C.: U. S. Department of the
Treasury, 1977).
7. A particular donor, of course, would not have the same marginal tax rate in each of
these countries because of differences in the definition of taxable income and in the determination of tax brackets and tax rates. Yet the similarity in financial incentives in these systems
lies in the fact that two donors in different countries with identical marginal tax rates will
face identical marginal prices for their charitable contributions.
8. A useful summary of the limitations in each of these countries is contained in Bouuaert,
op. cit.
9. For a detailed technical analysis comparing the British deed of covenant with the charitable deduction, see J. Mark Davidson Schuster, "Tax Incentives for Charitable Donations:
Deeds of Covenant and Charitable Contribution Deductions," University of San Francisco
Law Review, 19, 3/4 (Spring/Summer 1985): 329-376.
10. The origins of the charitable contribution deduction and the deed of covenant are
discussed in James Douglas and Peter Wright, "English Charities: Part ILegal Definition,
Taxation, and Regulation," Yale. Program on Non-Profit Organizations Working Paper 15
(New Haven, Conn., 1980), 69-70.
11. J. D. Livingston Booth, "Address Given to a Meeting of Charity Representatives at
the Middlesex Hospital," July 23, 1980, available from Charities Aid Foundation, Towbridge, Kent, England; and Donald R. Spuehler, "The System for Regulation and Assistance
of Charity in England and Wales, With Recommendations on the Establishment of a National Commission on Philanthropy in the United States," in The Commission on Private
Philanthropy and Public Needs, Research Papers, Vol. IV, 3073-3075.
12. Thus, whereas in U. S. law it is appropriate to think of and analyze the charitable
deduction as a tax expenditure, in a system with a deed of covenant that perspective may be
less helpful. Ironically, it is the deed of covenant system that separates the taxes forgone into
a separate financial stream, which would greatly facilitate the identification and estimation
of a tax expenditure.
The careful reader will note that I have not insisted on using the term "tax expenditure"
in this paper even though the analysis is clearly within this school of thought. It is less
important to reach agreement on whether or not a particular provision of tax law is a tax
expenditure than to understand the effects that changes in tax law have on charitable donations. In this regard, Francis Gladstone, Head of Policy Planning for the National Council
for Voluntary Organisations, has concluded, "it is quite clear that tax concessions for charities are not a right but a privilege granted by Parliamenta privilege that has to be justified
356
like any other public policy." Francis Gladstone, Charily, Law and Social Justice (London:
Bedford Square Press, 1982), 143.
The British government, itself, seems to be of two minds on this question. It feels that
higher rate relief, for example, "is not a tax expenditure, it's letting people have more of
their own money," but it grants this relief to individuals who make a particular type of
expenditure, which can only be made to charities. Interview with Anthony Gray, Policy Division, Inland Revenue, July 8, 1983. And the government does now publish an estimate of
tax expenditures in which taxes forgone via covenants are estimated: "Britain's Tax Expenditure," The Economist (January 27, 1979), 60-61.
Nevertheless, among researchers who have addressed the question of tax incentives for
charitable contributions, there is no unanimity as to whether or not it is appropriate to use
the tax expenditure concept to study charitable contributions. The tax expenditure concept
is most comprehensively discussed in Stanley S. Surrey, Pathways to Tax Reform (Cambridge,
Mass.: Harvard University Press, 1973). The merits of this concept have been debated in a
number of articles: Boris 1. Bittker, "Accounting for Federal 'Tax Subsidies' in the National
Budget," National Tax Journal, 22 (1969): 244-261; Stanley S. Surrey and William F. Hellmuth, "The lax Expenditure BudgetResponse to Professor Bittker," National Tax Journal,
22 (1969): 528-537; Boris I. Bittker, "The Tax Expenditure BudgetA Reply to Professors
Surrey and Hellmuth," National Tax Journal, 22 (1969): 538-542; Alan L. Feld, "Book
Review of Surrey, Pathways to Tax Reform," Harvard Law Review, 88 (March 1975): 1047
1055; and Stanley S. Surrey and Paul R. McDaniel, "The Tax Expenditure Concept: Current
Developments and Emerging Issues," Boston College Law Review, 20 (January 1979): 225369. For an argument that the charitable contribution deduction is not a tax expenditure, see
William D. Andrews, "Personal Deductions in an Ideal Income Tax," Harvard Law Review,
86 (December 1972): 309-385. For a slightly different argument that exemptions from estate
taxes for charitable contributions are not tax expenditures, see John G. Simon, "Charity and
Dynasty under the Federal Tax System," The Probate Lawyer 5 (Summer 1978): 1-92 (also
available as Yale Program on Non-Profit Organizations Working Paper 5).
13. For a clear presentation of the differences between net and gross deeds of covenant,
see Michael Norton, Covenants: A Practical Guide to the Tax Advantages of Giving (London: Directory of Social Change, 1983), Chapter 3.
14. Interviews with Anthony Gray, Policy Division, Inland Revenue, July 8, 1983, and
with G. Norman Donaldson, Deputy Director, Charities Aid Foundation, July 11, 1983.
15. Bouuacrt, op. cit., 104.
16. An admirably clear description of higher rate relief can be found in Norton, op. cit.,
34-46.
17. Chanty Statistics 1982/83 (Tonbridge, Kent, England: Chanties Aid Foundation, 1983),
7.
18. National Council for Voluntary Organisations, Report of the NCVO Working Party
1982 (London: NCVO, 1982), 3, and interview with Francis Gladstone, Head of Policy and
Planning, National Council for Voluntary Organisations, July 12, 1983.
19. National Council for Voluntary Organisations, Press Release, "Charities Say: 20 Million Pound Tax Concession Isn't Working," August 13, 1982, 2.
20. For a more detailed discussion of Inland Revenue's perspective on the deed of covenant, see Schuster, "Tax Incentives for Charitable Donations," op. cit., 360361.
21. All of these schemes for circumventing the deed of covenant system are detailed in
Norton, op. cit., Chapters 39.
22. For a detailed discussion of corporate deeds of covenant, see Schuster, "Tax Incentives
for Charitable Donations," op. cit., 347350.
23. Correspondence from D. H. Parmee, Inspector of Faxes, Claims Branch, Inland Revenue, June 21, 1983.
24. "Alms and the Man in the Street," The Guardian, December 2, 1981.
25. Hamish R. Sandison and Jennifer Williams, cds., Tax Policy and Private Support for
the Arts in the United States, Canada and Great Britain (Washington, D.C.: British American
Arts Association, 1981), 62.
357
26. For a detailed description of these tax provisions, see Her Majesty's Treasury, "Capital
Taxation and the National Heritage" (London: Her Majesty's Stationery Office, July 1983).
Information pertaining specifically to works of art can be found in a brochure distributed by
the Office of Arts and Libraries, "Works of Art: A Basic Guide to Capital Taxation and the
National Heritage" (London: Her Majesty's Stationery Office, 1982).
27. Her Majesty's Treasury, "Capital Taxation and the National Heritage," op. cit., 1.
28. Ibid.
29. Correspondence from David Denton, Policy Division, Inland Revenue, October 4, 1983.
30. Pierre Guerre, "Interest-Motivated Patronage of the Arts and the French Legislation
of 1968," in Support for the Creative Arts: Three Examples (Canada, France, and Spain)
(Paris: UNESCO, 1978), 51-68.
31. Correspondence from David Denton, op. cit.
32. The criteria for determining if an object is of national importance for purposes of
granting an export license are in the form of three questions:
Is the object so closely connected with our history and national life that its departure would
be a misfortune?
Is it of outstanding aesthetic importance?
Is it of outstanding significance for the study of some particular branch of art, learning or
history?
Office of Arts and Libraries, op. cit., 1982, 1.
33. "Britain Stymies Getty Coup,"The Boston Globe, August 9, 1984, 43, and Robert
Lenzner, "A Getty Takes on the Getty Museum," The Boston Globe, August 16, 1984, 2.
34. Office of Arts and Libraries, op. cit., 1982, 2.
35. For many years the public collections deducted the full amount of the tax exemption
in arriving at a price for a private treaty sale. But it was felt that this gave owners no particular incentive to sell to the nation, so the practice developed of offering a higher price, giving
the seller the benefit of a part of the exemption. This practice was supported by the Waverley
Committee in 1952. In 1957 the policy of offering 25 percent of the forgone taxes was set
out in a Treasury Circular, and that practice has been followed ever since.
36. All the arguments concerning level and flexibility of the douceur are nicely summarized
in House of Commons, Minutes of Evidence Taken Before The Education, Science and Arts
Committee, Supplementary Memorandum Submitted by the Department of Education and
Science, Office of Arts and Libraries (London: Her Majesty's Stationery Office, February 4,
1981), 78-82.
37. Norton, op. cit., 37.
38. House of Commons, op. cit., p. 78.
39. Correspondence from David Denton, op. cit.
40. "Le Marche de 1'Art Moderne en France," Cahiers du Travailleur Intellectuel, No.
133, second trimester, 1979.
41. Ibid. The right of retention gives the government control over the exportation of works
of art by deceased artists, created more than 20 years before the date of the exportation
request. The government can prohibit exit, stopping exportation without changing the ownership of the work, or purchase the work at the value declared by the exporter in the case of
a sortie definitive. This right has been criticized for having reinforced the differences between
national and international prices for artworks and for having driven the international art
trade underground.
42. House of Commons, Third Report from the Education, Science and Arts Committee,
Session 1980-81, "Public and Private Funding of the Arts: Interim Report on Works of Art:
Their Retention in Britain and Their Acquisition by Public Bodies," paper 275 (London: Her
Majesty's Stationery Office, April 6, 1981).
43. At one time the Conservative Political Center, in a pamphlet, Government and the
Arts, explicitly went on record as opposing such a twofold incentive:
We are not in favor of this country following the American example of allowing individual
358
citizens to set against their income tax liabilities (some or all of) the money spent on buying
works of art [for eventual donationl.
... It enables very rich people to buy works of art for their personal enjoyment during
their lifetime more or less at the taxpayer's expense. The national collections should be added
to by curators, not by business tycoons. Its introduction in America has had the effect of
forcing up the market value of works of art throughout the world, and of making it harder
for all of our collectors, both public and private, to retain or purchase the world's masterpieces. This is a piece of artistic snobbishness we cannot afford.
Quoted in John E. Booth, Government Support to the Performing Arts in Western Europe,
Prepared for the Special Studies Project, Rockefeller Brothers Fund, Inc., February 19, 1964.
44. Law Number 68-1251, December 31, 1968, Paris.
45. Pierre Cabanne, "Le Fabuleux Heritage du Fisc," Matin Magazine, June 18, 1983.
46. "Le Marche de 1'Art Moderne en France," Cahiers du Travailleur Intellectuel, No.
133, second trimester, 1979.
47. Jacques Michel, "La Strategie du Moindre Risque," Le Monde, December 31, 1980
and Pierre Cabanne, "Le Fabuleux Heritage du Fisc," Matin Magazine, June 18, 1983.
48. For a detailed technical discussion of taxation of artists' income in the EEC see Ignace
Claeys Bouuaert, Fiscal Problems of Cultural Workers in the States of the European Economic Community, Commission of the European Communities, XII/1039/77-EN, August 1977.
49. Correspondence from M. Dowling, Office of the Revenue Commissioners, Dublin,
Ireland, April 10, 1984.
50. Dorothy Walker, "Artists and Irish Taxes," Art in America, May-June 1971.
51. It is also interesting to compare the indirect subsidy of the artist in the Irish incometax to a broad direct aid program such as the 'Artists' Scheme" in the Netherlands. See R.
Gerritse, Money for Artists, Institute for Research into Government Expenditure, Study commissioned for the Dutch Ministry of Culture, Recreation and Social Work, undated, 15-21.
52. Correspondence from M. Dowling, op. cit.
53. 30 Jours d'Europe, No. 216-217, July-August 1976, 14, quoted in Bouuaert, Fiscal
Problems of Cultural Workers, op. cit., 30.
55. Dorothy Walker, "Artists and Irish Taxes," and Tom McGurk, "Tax-Free Artists,"
Ireland Today, Bulletin of the Department of Foreign Affairs, No. .902, February 15, 1977,
6-7.
56. 30 jours d'Europe, op. cit.
57. Dorothy Walker, op. cit.
59. Ibid.
60. Secretariat d'Etat a la Culture, "Les Aides Publiques a la Creation Artistiquc en Italie,"
Notes d'Information. October 1976, 7.
61. Elias Newman, statement at Public Hearings on General 'Tax Reform, United States
House of Representatives, Committee on Ways and Means, 93rd Cong., 1st sess., April 11,
1973.
62. Correspondence from Aadrian Kieboom, Dutch Ministry of Culture, Recreation and
Social Work, January 29, 1980.
63. Raymonde Moulin, Public Aid for Creation in the Plastic Arts (Oslo: Council of Europe, 1976).
64. For a more complete discussion of permanent capital taxes in the European Economic
Community, see Bouuaert, Taxation of Cultural Foundations, op. cit., 105117 and 135
138.
65. Bouuaert, Taxation of Cultural Foundations, op. cit., 1 15.
66. Howard Becker, Art Worlds (Berkeley, Calif.: University of California Press, 1982),
172, paraphrasing Raymonde Moulin, Le Marche de la Peinture en France (Paris: Les Editions de Minuit, 1967), and Gerald Reitlinger, The Economics of Taste: The Rise and Pall of
Picture Prices 1760-1960 (London: Barrie and Rockliff, 1961).
359
67. Hugh Jenkins, The Culture Gap: An Experience of Government and the Arts (London: Marion Boyars, 1979), 140-162.
68. Ibid. 149.
69. To get a flavor of the debate in the French press on this issue, turn to any of the major
newspapers or newsmagazines published during late October and early November 1981. A
particularly clearly reasoned article in English is Souren Melikian, "Taxes and Art in France,"
The International Herald Tribune, November 10, 1981.
70. Nadine Descendre, "Les Marchands Exultent: Pour Faire de 1'Or en Art," Nouvelles
Litteraires, November 26, 1981.
71. Gerritse, op. cit, 85.
72. House of Commons, Third Report from the Education, Science and Arts Committee,
Session 1981-82, "Public and Private Funding of the Arts: Interim Report on Value-Added
Taxes and the Arts," paper 239 (London: Her Majesty's Stationery Office, March 3, 1982),
iiiiv.
It may be misleading to look only at VAT rates for cultural services for purpose of comparison because various countries have additional taxes that they levy on concert, theatre, or
film admissions. Occasionally these are entertainment taxes, which may be discontinued when
the VAT rate is raised from a reduced rate to the standard rate, leaving the total level of
taxation roughly constant. Other times these are special taxes that are levied for self-financing
within a particular cultural sector, e.g., the TSA, a "Special Additional Tax" on admissions
to French films, which raises money that is fed directly back into the French film industry.
73. For a brief summary of these arguments, see Ibid. For the government's response to
the third point, see "Public and Private Funding of the Arts: Government Response to Interim
Report on Value-Added Tax and the Arts (HC Paper 239)" (London: Her Majesty's Stationery Office, June 29, 1982), paragraph 8. See also Harold Baldry, The Case for the Arts
(London: Seeker & Warburg, 1981), 70. A useful summary of this debate is contained in
Clive Priestley, The Financial Affairs and Financial Prospects of the Royal Opera House,
Covent Garden Ltd., and the Royal Shakespeare Company, a report to the Office of Arts
and Libraries (London: Her Majesty's Stationery Office, October 1983), 65-66.
74. House of Commons, "Public and Private Funding of the Arts: Interim Report on ValueAdded Taxes and the Arts," op. cit., iiiiv.
75. "Public and Private Funding of the Arts: Government Response to Interim Report on
Value-Added Tax and the Arts (HC Paper 239)," op. cit.
76. Ibid. The irony of this quote lies in the fact that at the same time both the Conservative Party and the Liberal Party in their election manifestos were calling for reductions in
VAT for the arts.
77. "Fiscalite et Culture," Research Note DT/500, Service des Etudes et de la Recherche,
Ministere de la Culture et de la Communication, Paris, October 1979, 4.
78. The Council of Europe has sponsored a substantial amount of research on the problems facing the cultural industries. For a discussion of the role played by VAT, see Cinema
and the State, Report of the Committee on Culture and Education, Document 4306-E (Strasbourg: Council of Europe, 1979), xxiv-xxxi and 33-35, or Committee on Education and
Culture, Council for Cultural Cooperation, Cultural Affairs, The State's Role Vis-a-Vis the
Culture Industries (Strasbourg: Council of Europe, April 1980), 149, 156. See also Les Industries Culturelles, Notes et Etudes Documentaires 4535-4536 (Paris: La Documentation
Francaise, Nov. 12, 1979), 157.
79. High rates in certain countries have contributed to piracy of records and tapes. See
Gillian Davies, Piracy of Phonograms, report XII/235/80-EN, a study for the Commission of
the European Communities presented at a conference, The State's Role Vis-a-vis the Culture
Industries," op. cit. Other information on VAT and the record market can be found in L'Economie du Disque en France, Notes et Etudes Documentaires (Paris: La Documentation
Francaise), and in "Une Affaire D'Etat: La TVA et le Disque," Diapason, 24, January 1978.
80. Sir Anthony Lousada, "Tax and the EEC with Special Reference to VAT," in Arts and
the EEC, proceedings of a conference of the Institute of Contemporary Art, London, 1979.
For an argument that artworks are not consumer goods and, therefore, should be con-
360
sidered as being outside the field of application of VAT, see Bouuaert, Taxation of Cultural
foundations, op. cit., 148-152, and Fiscal Problems of Cultural Workers, op. cit., 82-86.
81. Bouuaert, Taxation of Cultural foundations, op. cit., 160166, and fiscal Problems
of Cultural Workers, op. cit., 8890, "Fiscalite et Culture," op. cit., 5; and Gerritse, op. cit.,
p. 88.
82. For a more detailed presentation of how this might happen, see Feld, O'Hare, and
Schuster, Patrons Despite Themselves, op. cit., 207-209.
83. Charity Law and Voluntary Organisations: Report of the Goodman Committee (London: Bedford Square Press, (976), paragraph 128.
84. Baldry, op. cit., 70.
85. Interviews with staff, Arts Council of Great Britain, July 1983.
Index
ABC (American Broadcasting corporation),

252, 255, 282
Access, 69, 76, 82, 88, 89, 186, 245
increase of, 82, 83, 88, 184
increased through Federal Theatre Project,
142, 143, 146
limited, 76, 185, 189, 221
in relation to tax exemption, 332-33, 34546
Adams, Henry, 56, 58, 62n.54
Addington's Act, 235
Adler, Kurt, 179n.5
Adorno, Theodor, 41
Aesthetic goals, 9, 10, 22
Agassiz, Louis, 51, 56, 57
ALI-ABA (American Law Institute-American
Bar Association), 217, 232
American Art Union, 42
American Association for Adult Education,
115
American Association of Fund Raising Counsel, 75, 77, 137n.2
American Association of Museums, 115, 214,
220, 222
American Council of Learned Societies, 127
American Federation of Arts, 115
American League for Peace and Democracy,
154
American Social Science Association, 50
American Symphony Orchestra League, 81,
166, 176, 178
Anderson, L., 144
Andrews, R. Emerson, Philanthropic Giving,
116
Appleton, Thomas Cold, 56
Architecture, 126, 172
Arian, Fdward, 86, 167
Arnold, Matthew, 86
Art and the Law, 177
Artists Equity Association, 342
Arts Council of Great Britain, 330, 352
Arts Management, 3-4, 183n.67

budget maximization in, 172
centralized, 200-212
change in, 56, 910
education for, 164-65, 173-75
impresarial form of, 162-64
problem of cost in, 16869, 176
professionalization of, 17578, 182n.62
promise of cooperation in, 199-213
through arts administrators, 16475
Association of Art Museum Directors, 220
Association of the Netherlandish Theatre, 293
Atkins, Charles, 144
Atkinson, Brooks, 130
Atlanta College of Art, 202, 208
Atlanta, Georgia, 81, 129
Audience, expansion of, 22, 26-27, 29, 3031, 33-34, 35-36
Australia, 300, 301
Austria, 84, 289-91, 292, 298, 300-302
Ayers, Ann, 144
Bachetti, Thomas, 202, 204
Bach, J. S., 168
Balanchine, George, 264, 265
Baltzell, E. Digby, 55
Barnouw, Erik, 251
Barnum, P. T., 42, 59n.11, 87, 179n.1, 29394
Baron, James N., 174
Baryshnikov, Mikhail, 264, 265
Baumol, William J., 6, 38n.21, 84, 168, 176,
307
Bean, Cal, 171
Beckwith, Ethel, 147
Belgium, 324, 343
Benton, Jess, 147, 148
Bernstein, Basil, 59n.l2
Bing, Rudolph, 164
Black, Ralph, 166
362
Blame, John, 170
Blau, Peter M., 180n.24, 186
Boisturc, Robert A., 172
Boorstin, Daniel, 324
Boston, Massachusetts, 41-46, 48-58, 101
129, 164, 179n.1. Sec also Museums,
names of; and Orchestras, names of
Brahmins in, 42, 45, 48, 49, 50, 55-58, 295
Bourdieu, Pierre, 43, 196n.4, 198n.27
Bouuaert, Ignace Claeys, 344
Bowcn, William G., 6, 38n.21, 168, 176
Brahms, Johannes, 7071
Brainard, Edward, 147
Brazil, 176
Brewster, Kmgman, 90
Brimmer, Martin, 56, 57
Brustein, Robert, 172
Bryan, Thomas J., 228
Burke, Kenneth, 69
Burkhauser, Richard V., 308
Bun, Marlow, 203, 205, 206
Business Committee for the Arts, 105, 106,
176
California, 116, 127, 129, 166, 179n.5,

180n.l9, 231
Calvinism, 293
Canada, 300, 301, 315, 317n.33, 324
Carnegie, Andrew, 223
Carnegie Commission on Educational Television, 248
Carr, Beauchamp, 202
Carter, Jimmy, 66, 80-8 I
Carter, Morris, 61n.70
Cavendish, Elizabeth, 8-9, 140-58
CBS (Columbia Broadcasting System), 65,
164, 246-47, 252, 264, 265, 282
Ccsnola, Luigi Palma Di, 162-63, 164, 174,
179nn.2,3
CETA, 65, 80, 81, 90, 90n.3, 9 l - 9 2 n . 3 8
Cezanne, Paul, 339
Charteris, Leslie, 341
Chicago, Illinois, 10, 91n.27, 164
Christopher, Warren, 268n.29
Civil War, 161, 162, 294, 295
Clotfelder, Charles, 75
Coleman, Laurence Vail, The Museum in
America, 214
College Art Association, 1 1 5 , 122
Commission on Private Philanthropy and
Public Needs, 324
Community Service Grants (CSGs), 248, 253
Index
Comprehensive Education and Training Act,
65
Condon, Richard, 341
Conference Board, 78, 98, 99, 106
Connecticut, 140-58, 205, 206. See also Federal Theatre Project
Connecticut Public Television (CPTV), 11,
246, 249, 250, 252, 253, 257, 259, 260,
266, 2 6 7 n . l 1 , 268n.28
Conservation of artworks, 69, 76, 80, 82,
83, 86, 117, 118, 1 3 1 , 136, 215, 306
Corporation for Public Broadcasting (CPB),
246-48, 260, 263, 264
Couch, Stephen R., 167
Council for Financial Aid to Education, 105
Courtney, Ward, 148
Coward, Noel, 86
Cowen, Allen, 208
Cox, Meg, 172
Cultural capitalists, 43-44, 46-47, 47-49,
58, 59n.11
Culture, 44, 45, 68, 69, 70-71, 88, 94, 289
corporate funding for, 9 3 1 1 2
four prescriptive models for support of,
7 1 -73
high, 45, 49, 68, 86-88, 90n.8, 1 16, 185,
187, 314-15
high versus popular, 7, 12, 41-42, 43, 44,
47, 290, 294, 308-9
in relation to economic market, 68, 8389
through Federal Theatre Project, 141, 146
Cy pres doctrine, 11, 228, 229-30, 231, 232,
233, 234-35, 237, 238
Dana, John Cotton, 5
Dance, 4, 66, 76, 80, 84, 117, 126, 127, 128,
136, 167, 168, 287
Atlanta Ballet, 204
Dance in America (DIA), 262, 263-64,
265, 266
Ford Foundation support for, 115, 1 1 6 ,
117, 121, 123
funding of, 121, 126, 128
Hartford Ballet, 205
Joffrey Ballet, 128, 200
Louisville Ballet, 203, 204
Milwaukee Ballet, 201
New York City Ballet, 201
San Francisco Ballet, 201
on television, 250, 262, 263-64, 265, 266
Davis, Peter, 256
Death of a Princess, 261, 266, 268n.29
DeGroot, Adelaide Milton, 222, 224
Deighton, Len, 341
Index
Denmark, 324, 325, 343, 347, 348
Deviation, doctrine of, 11, 226-29, 230, 235,
238
Devrient, Edward, 289-90
Dibble, Vernon K., 167
Dickens, Charles, 43, 86
DiMaggio, Paul, 3-13, 41-61, 65-92, 11339, 170-71, 179n.l, 183n.67, 191, 295
Dobbin, Frank, 174
Dobbs, Karen, 208
Donations, 17-22, 26, 34, 37n.6, 75, 252,
296, 305, 307, 309, 355n.l2. See also
Funding, private; Subsidies
decline of, 74-75, 307
function, 23
increase of, 76
subsidies, 31-34
tax incentives for, 20, 31, 65, 75, 296,
305-6, 321-31
Don Dero, Gertrude, 143-44, 145, 146
Donleavy, J. P., 341
Dos Passos, John, 148
Dubois, William, 143
Dunlap, William 294
Dwight, John S., 45, 48, 51, 52, 55
363
Entrepreneurship, 41-61, 88
definition of, 44
Ermann, David S., 251
Ethiopia, 145
Excellence. See Quality
Fabius, Laurent, 346

Fairchild, Countess, 147-48
Federal Communication Commission (FCC),
245, 272, 282
Federal Republic of Germany, 84, 288, 28991, 294, 296, 298, 300, 301, 302, 314,
315
taxes in, 304, 305-6, 324, 343
theatre in, 298, 300, 317n.43
Federal Theatre Project, 9, 115, 140-58, 295
accused of communist tendencies, 141, 149,
150
censorship in, 14546
diversity of, 141-42
struggle for legitimacy in, 14654
tensions in, 141, 143-46
Fcldstein, Martin, 75
Flanagan, Hallie, 141, 144, 145, 151
Fleischmann, Ernest, 166, 180n.l9
Forbes, John, 56
Forsyth, Frederick, 341
Eastern Educational Television Network, 254 Foundation Center, 124-25, 126-27, 128,
129
Economic market, 7, 68, 88
commercial television sensitive to, 245
Foundations, corporate, 8, 10, 7980
culture in relation to, 83-89
Foundations, names of
declassifies culture, 45
Ahmanson Foundation, 118, 127
and journalism, 27983
Andrew W. Mellon Foundation, 114, 117,
as separate from art world, 161
127, 129, 133
Economic Recovery Plan, 66, 68
Atlantic Richfield Foundation, 127, 128
Education, 4, 10, 49, 58, 118, 192, 194, 289
Barnes Foundation, 218-19, 221
for arts management, 164-65, 173-75
Brown Foundation, 127, 128
corporate funding for, 94
Carnegie Corporation of New York, 113,
as goal of foundations, 115, 129
115, 116
as goal of museums, 58, 184, 186, 187
Cullen Foundation, 127
problems of, in museums, 189, 192-94,
Don and Sybil Harrington Foundation, 127
195, 196
Ford Foundation, 4, 72, 39n.37, 113-19,
Education Law (New York), 232
121, 123, 127, 128, 133, 137, 138n.l8,
Education, Science, and Arts Committee
139n.23, 250, 295, 300, 301, 305
(U.K.), 338
Frank Lloyd Wright Foundation, 172
EEC (European Economic Community), 324,
Getty Foundation, 1 18
347, 353
Heritage Foundation, 72, 338
Efficiency, 10, 28, 36, 82
Hewlett Foundation, 1 18, 128
Eliot, Charles W., 56, 57
Houston Foundation, 128
Eliot, Samuel, 56, 57
JDR 3rd Fund, 118, 130
Eliot, T. S., 86, 141
John Simon Guggenheim Foundation, 118
Ellis, Charles, 164
Juilliard Foundation, 1 15
Endicott, John, 56, 57
Krannert Charitable Trust, 127
Enlightenment, the, 289, 291
Kresge Foundation, 117, 127, 128
364
Index
Foundations, names of (continued)

motivated by social responsibility, 949.5
Lilly Endowment, 127
professionalization of, 95, 96-99, 104,
Louis Comfort Tiffany Foundation, 230
109-11
Mabel Pew Myrin Trust, 118, 128
for public television, 247, 25052
MacArthur Foundation, 118
in relation to company income, 94, 9798
National Foundation on the Arts and Hurole of chief executive in, 95, 99-105,
manities, 295
109-10, 111
Palo Alto Systems Development Foundathree models of, 78
tion, 127
Funding, federal, 65-66, 72, 170, 182n.60,
Pew Memorial Trust, 127
301. Sen also National Endowments for
Rockefeller Foundation, 79, 1 13, 1 14, 1 15,
the Arts and Humanities; Reagan ad117, 1 1 8 , 128, 129, 133, 134, 137,
ministration; Works Progress Adminis182n.62, 250, 295
tration (WPA)
San Francisco Foundation, 127
compared to other countries, 84
Starr Foundation, 128
increase of, 83
Steimkc Foundation, 128
for public television, 24749, 272
Theater Unie (Foundation], 315
reduction of, 65-66, 77, 80-81, 83-84,
Twentieth Century Fund, 114
272
William Penn Foundation, 127, 128
Funding, private, 8, 67-68, 72-73, 74, 249Foundations, private, 8, 79-80, 83, 113-39,
52. See also Donations; Foundations,
301
private
compared to corporate funding, 7980, 113 Funding, public, 67-68, 82, 137n.l, 140concentration of grants from, 12728
58, 170, 194, 249, 295-96. See also
constraints on, 13134, 136
Funding, federal; Funding, state
education as goal of, 115, 129
for performing arts, 287319
flexibility of, 129-31, 136
Funding, state, 81, 82, 249-50
growth of, 114-15, 119
pluralism of, 90, 1 3 1 , 134, 136, 137
problem of information in, 13436
Galaskiewicz., Joseph, 78
support established institutions, 114, 133, Gardner, John Lowell, 57, 61n.70
136
Gardner, I.ee, 43, 57
support public television, 247, 250
Gareis, Don, 203, 205, 206
under Reagan administration, 1 26
Gasset, Ortega y, 70
Fragonard, Jean Honore, 339
General Education Board, 1 15
France, 84, 88, 174, 287, 288, 289, 294, Gersuay, Carl, 167
296, 297, 298, 300, 301, 302, 304, Getz, Malcolm, 308
317n.42, 324, 332, 336
Girard, Augustin, 88
Ministry of Culture and Communications, Giulini, Carlo Maria, 180n.l9
88, 297, 318n.63, 350
Godfrey, C., 302
Ministry of Eonomy and Finance, 350
Goehringer, Will, 232
right of preemption law in, 336
Goethe, Johann Wolfgang von, 289
Societe Ouvriere de Production, 29798
Goody, Kenneth, 79, 129
taxes in, 304, 306, 318n.65, 324, 339-40, Goya y Lueicntes, Francisco Jose de, 339
342-43, 345, 346-47, 350, 351
Graff, Wilton, 144
theatre in, 297-98, 305, 315, 31811.58
Grana, Cesar, 189, 190, 192
Freedman, Marc R., 10, 199-213
Grants. See also Foundations, corporate;
French Revolution, 288
Foundations, private
Friedkin, Rebecca Jo, 11, 245-69
challenge, 71, 72
Friedman, Milton, 254
given to established institutions, 133, 136
Friel, Brian, 341
increase in, 119
Funding, corporate, 4, 8, 10, 7779, 93matching, 31, 36, 71, 96, 248, 249, 324
112, 1 1 3 , 251
for music, 128
changing philosophies of, 77-78
private foundation, 8, 79-80, 1 18-26
growth of, 93, 109
reduction of, 123
influence of other firms on, 95, 1 0 5 - 9
tax supported, 301
365
Index
Graupner, Gottlieb, 42, 87
Great Depression, the, 115, 137n.l, 143, 155,
176, 182n.60, 236
Great Performances (GP), 251, 262, 265
Greece, 324
Green, Martin, 44, 55
Grossman, Lawrence, 262
Handel and Haydn Society, 42, 44, 46, 52,
53, 294
Hansmann, Henry, 6, 13n.l, 17-40, 216,
2l9, 232, 3l2-13, 3l9n.67
Harding, George F., 218
Hart, Philip, 178
Harvard Musical Association, 42, 46, 52, 53,
54
Harvard Pierian Sodality, 42, 46
Harvard University, 42, 44, 46, 51, 52, 53,
54, 57, 165, 191
Haughey, Charles, 340-41
Hendon, William S., 172
Henschel, George, 52, 53, 54
Higginson, Frances W., 56
Higginson, Henry Lee, 44, 45, 51, 52, 55,
56-57, 61nn.54,69,70, 87
criticism of, 53, 54-55
Holmes, Oliver Wendall, 70
Houston, Texas, 127, 129
Howells, William Dean, 56
Impressionists, 70-71, 221
Innovation, 69, 76, 82, 88, 89, 140, 350
lack of, 76, 79, 80, 81, 83, 245
in public television, 250, 265-66
supported by foundations, 90, 117, 130,
131, 133, 134, 250
Inter-regional Program Service (IPS), 254-55
Ireland, 324, 325, 340-41
Italy, 162, 324, 342
James, William, 56
Japan, 191
Jarves, James Jackson, 45, 48
Jencks, Christopher, 11, 279-83
Jenkins, Hugh, 345
Jennings, P. Devereaux, 174
Jong, Erica, Fear of Flying, 72
Journal of Arts Management and Law, 177
Journalism, 279-83
Judson, Arthur, 163-64
Juilliard School of Music, 115
Katzman, Natan, 253
Kcmball, Moses, 43
Kcppel, Frederick, 115, 116

Kutner, Stephen, 8, 77, 78, 93-112
Laderman, Ezra, 170
Lane, David, 145
Lane, Gardiner Martin, 56
La Rue, Charles, 146
Lawrence, Timothy Bigelow, 49
Leavitt, Thomas W., 165-66, 171
Lee, Henry, 56
Legal cases
AAUP v. Bloomfield College, 217
Application of Arms in re Louis Comfort
Tiffany Foundation, 230
Application of New York Law School, 233
Authors Club v. Kirtland, 223
City Bank Farmers Trust Co. v. Arnold,
235
Commonwealth v. Barnes Foundation, 221
Conway v. Emeny, 233
In re Estate of Hermann, 233, 234
Final Judgment in the Matter of the Application of New York Historical Society,
228
Gordon v. City of Baltimore, 235
Harris v. Attorney General, 227
Hobbs v. Board of Education, 237
Parkinson v. Murdoch, 227
In re Petition of Trustees of Hyde Collection, 227
Rowan v. Pasadena Art Museum, 219
Scott v. Silverstein, 218
Stern v. Lucy Webb, 219
Watkinson Library v. Attorney General,
228
Weigandv. Barnes Foundation, 21819
In re Will Goehringer, 232
Zehner v. Alexander, 217, 233
Legislation, and museums, 21442
Leonard, Hugh, 341
Lewis, Sinclair, It Can't Happen Here, 141,
144, 145, 148, 149, 154, 155
Light, Mark, 204
Lilla, Mark, 172
Lind, Jenny, 293
Lippi, Fra Filippo, 339
Living Newspaper, 141, 142, 148, 149, 154,
155
Lloyd, Norman, 117
Loring, Charles Greely, 5 1
Louisville Fund for the Arts, 203, 208
Lowell, Charles, 51, 56, 57
Lowry, W. McNeil, 72, 116
Luxembourg, 324, 34344
366
MacDonald, Uwight, 41, 70
MacNeilll.ehrer Hewshour, the, 252, 259
Magat, Richard, 3 17n.42
Manet, Hdonard, 339
Mankowitx, Wolf, 341
Martorella, Rosanne, 1 6 1 , 167
Marxism, 57
Marx, Karl, 185
Massachusetts Business Roundtable, 96
Massachusetts, corporate f u n d i n g in, 8, 93
1 12
Massachusetts Council on the Arts and Humanities, 10, 105, 106, 107
Massachusetts Cultural Alliance, 106
Massachusetts High Technology Council, 96
Masterpiece Theatre, 251, 254
McClellan, Godwin, 176
MeTaddcn, Elizabeth, 179n.2
Merenda, Michael, 101
Mcrola, Gaetano, 179n.5
Meyer, John W., 168
Michels, Robert, 168
Miller, Lillian, 294
Minelli, Liza, 254
Minnesota, 104, 110, 116, 12.9, 131
MIT (Massachusetts Institute of Technology), 50, 51, 127
Montebello, Philippe de, 214
Mitterand, Francoise, 346
Monet, Claude, 339
Montias, John Michael, 11-12, 13n.l2, 84,
287-319
Monty Python, 257, 260
Morgan, J. Picrpont, 163, 179n.2
Motherwell, Hiram, 145, 152
Moyers, Bill, 268n.26
Mo/art, Wolfgang Amadeus, 5 1
Museums Services Institute, 65, 81
Museums, 4, 5, 6, 10, 65, 66, 76, 79, 80, 84,
86, 87, 171, 172, 174, 189, 195, 336
ambiguous legal context of, 21620
complexity of, 167
definition of, 22021
dissolution of, 231-39
education in, 184, 189, 192-94, 195, 196
financially troubled, and the law, 21442
hierarchy of functions of, 19194
profcssionalization of, 1 16
reducing costs in, 22025
structural prototypes of, 18791
supported by foundations, 114, 12829,
136
tensions in, 10, 184-98
Museums, names of
Index
Akron Art Museum, 172
American Museum of Natural History, 190
Art Institute (Chicago), 189-90, 191, 194
Athenaeum, the (Boston), 44, 46, 48, 49,
50, 51, 53, 191
Baltimore Museum, 294
Barnes Foundation Art Gallery, 221
Boston Museum of Fine Arts, 43, 45, 49,
50, 51, 55, 56-57, 58, 87, 189, 190,
1 9 1 , 295
Brooklyn Museum, 225
Cleveland Museum, 228
Detroit Institute of Arts, 221
Fogg Museum, 164
George F. Harding Museum (Chicago), 218,
221-22, 224
Getty Museum, 334
High Museum (Atlanta), 202, 208
Hill Stead Museum, 227, 233
Metropolitan Museum of Art (New York),
3811.26, 162, 167, 179n.2, 189, 190,
191, 214, 215, 222, 224, 225
Museum Center of Fos Angeles County,
200
Museum of Modern Art (New York), 173,
174, 2 1 5 , 225
National Gallery (Washington D.C.), 131

Philadelphia Museum of Art, 127
Picasso Museum (Paris), 339-40
Science Museum, 330
Smithsonian Institute, 192, 214
South Street Seaport Museum (New York),
172
Vanderbilt Museum (Long Island), 222
Victoria and Albeit Museum (London), 330,
333
Music, 42, 45, 46, 52, 53, 54, 79, 88, 1 15,
121, 123, 126, 127, 128, 170, 287, 290,
292, 294, 295, 307. See also Opera;
Orchestras
appropriations for, 121, 123, 126, 128
innovation in, 88
Los Angeles Master Chorale, 200
Los Angeles Music Center, 201
Severns' Music Center, 200
Musical America, 163
Nashville, Tennessee, 171, 172-73, 175
National Arts Stabilization Fund, 127, 129
National Assembly of Community Arts
Agencies, 170
National Assembly of Slate Arts Agencies, 8 I
National Association of Public Television
Stations (NAPTS), 246
Index
National Endowments for the Arts and Humanities, 2, 3, 4, 31, 49, 65, 66, 71-72,
73, 78, 80-81, 82, 90, 92n.43, 104-5,
106, 107, 116, 129, 130, 137n.l, 169,
170, 176-77, 182n.62, 250, 272, 295,
301, 315, 317n.42
National Institute for Museum Services, 80,
214
National Institutes of Health, 249
National Public Radio (NPR), 171, 246
National Science Foundation (NSF), 72, 249,
267n.lO, 272
Netherlands, the, 84, 287, 292-93, 298, 301,
302, 304, 306, 307, 312, 314, 315
taxes in, 324, 342, 343, 344, 348, 351
theatre in, 298, 304-5, 307, 312, 315,
317n.43, 318n.49
New Deal, 65, 146, 192, 194
New Federalism, 104
Newman, Elias, 342
News, for profit, 279-83
New York, 45, 141, 142, 145, 150, 179n.l,
231-33, 261, 294
New York State Council on the Arts, 250
New York Times, 177, 268nn.26,29, 281
New Zealand, 300, 301
Niles, Charles, 148
Nixon, Richard Milhous, 248
Non-Profit Corporation Law, 231, 232
Nonprofit Corporations Act, 217
Nonprofit Organizations, 5, 7, 11, 12, 20,
21, 37n.l2, 41, 47, 66, 67, 68, 162,
307-8, 311
advantages of, 21
audience maximizing in, 2627
basic model for, 2325
budget maximizing in, 27
corporate funding for, 9394
definition of, 287-88
designing strategies of support for, 73-83
earned income in, 84-86, 300-301
in Europe, 288, 298
face financial cutbacks, 272
formal accountability in, 16183
goals of, 7, 22
and high culture, 47, 87
increase of, 74, 87-88, 167
quality-maximizing in, 2526
Norton, Charles Eliot, 56, 57
367
Connecticut Opera, 205
and the Ford Foundation, 116, 117
in France, 289, 300, 318n.58
in Germany and Austria, 289, 290, 291
increased complexity of, 167
Kentucky Opera Association, 203
New York Metropolitan Opera, 115, 127,
128, 131, 164, 167, 201, 295
San Francisco Opera, 179n.5, 201
Seattle Opera Company, 171
Orchestras, 4, 5, 7, 10, 45, 46, 76, 80, 81,
84, 86, 87, 89, 114, 115, 116, 117, 127,
128, 167, 292, 295, 296, 297, 301, 315,
316n.8, 317n.38
essential condition of, 52
and the Ford Foundation, 115, 116, 117
for profit, 17, 87
supported by private foundations, 114, 128
29, 136
Orchestras, names of
Atlanta Symphony, 202, 204, 208
Boston Philharmonic Society, 42, 5253,
87
Boston Symphony Orchestra, 43, 44, 49,
51, 52, 53, 55, 57, 58, 87
Buffalo Philharmonic Orchestra, 173
Chicago Symphony Orchestra, 193
Hartford Chamber Orchestra, 205
Indiana State Symphony, 127
Los Angeles Philharmonic, 166, 180n.l9,
200
Louisville Orchestra, 203, 204, 208
New York Philharmonic Orchestra, 46, 163,
167, 201
Philadelphia Orchestra, 86, 167
Pittsburgh Symphony Orchestra, 177
San Francisco Symphony, 201
Osborne, George, 205
Owen, Alun, 341
Paine, Charles Jackson, 56

Paley, William, 164
Parrington, Vernon, 49
PBS (Public Broadcasting Service), 246-47,
253, 254, 256, 262, 263
Peabody, George, 56, 57
Peacock, Alan T., 302
Peale, Charles Wilson, 43, 87
Pealc, Rubens, 294
Ohio, 129, 172, 231
Performing arts, 10, 18, 19, 199-213, 287Opera, 4, 17, 21, 66, 79, 84, 287, 289, 292,
319. Sec also Dance; Music; Opera; Or295, 298, 300, 301, 315
chestras; Theatre
368
Performing Arts (continued)
financing of, in Europe vs. U.S., 298-306
economic behavior of, 17, 18, 19, 20, 2228
European organizations for, 296-98
retrospective analysis of financing of, 307
315
Performing Arts Centers, 175, 205
Atlanta Arts Alliance, 201-3, 204, 205,
208, 2 1 1
Brooklyn Academy of Music, 208
Centre Beaubourg (Paris), 3 18n.54
Civic Center of Onontlago County (Syracuse), 201
Denver Center for the Performing Arts,
208
Heinz Hall (Pittsburgh), 208
Kennedy Center (Washington D.C.), 65,
208
Kentucky Center for the Arts, 202, 203
4, 208, 21 1
Lincoln Center (New York), 1 17, 172, 201
Milwaukee Performing Arts Center, 201
Playhouse Square (Cleveland), 208
San Francisco War Memorial complex, 201
Tulsa Performing Arts Center, 208
Perkins, Charles Callahan, 50, 57
Perkins, Charles H., 56, 57
Peterson, Richard A., 3, 9, 161-83
Philanthropy. See Donations; Funding, corporate; Funding, private
Picasso, Pablo, 174, 339
Pissaro, Camille, 339
Pluralism, 70, 79, 82, 83, 89, 90
of Federal Theatre Project, 154
of private foundations, 90, 131, 134, 136
Posner, Ellen, 172
Powell, Walter W., 11, 170-71, 245-69,
270-78
President's Committee on the Arts and Humanities, 105
Price discrimination, 18, 19, 20, 21, 36, 38n.26
Professionalism, 10, 117, 152
Professionalization
of arts management, 169, 175-78, 182.n.62
of corporate funding, 95, 96-99, 104, 10911
of museums and orchestras, 116, 187
of nonprofit organizations, 162
of philanthropy, 78
Prussia, 289, 292
Public Broadcasting Act, 248
Publishing, 27078, 351. Sue also University
presses
Index
Quality, 69, 76, 79, 82, 83, 85, 89, 134, 140
as goal, 85, 259
maximizer, 29-30, 32-33, 35
as refinement of taste, 22, 27-28
Reagan administration, 65, 66, 67, 75, 77,
80, 89, 104, 125-26, 272, 331
Renoir, Pierre Auguste, 339
Ricardo, David, 274
Rodin, Francoise Auguste Rene, 57
Rosengren, William R., 167
Ross, Mathias Denman, 50
Rowan, Brian, 168
Rubens, Peter Paul, 339
Rudney, Gabriel, 75
Russia. Sec Union of Soviet Socialist Republics (USSR)
Sachs, Paul, 164
Salamon, Lester, 66, 8 I
Salem, Mahmoud, 171
Sarazin, Archie, 201, 206
Sawyer, John E., 129-30
Schuster, J. Mark Davidson, 11, 305, 32059
Scitovsky, Tibor, 314
Severns, William, 200
Shakespeare, William, 43, 45, 86, 87, 143,
148
Shepard, Karla, 118-24, 138n. 18
Sheshinski, E., 26
Shestack, Alan, 165
Shiverick, Nathan C., 60n.43
Simon, Norton, 219
Social Science Research Council, 127
Spain, 174
Spence, A. Michael, 26
Spooner, Cecil, 144
Station Program Cooperative (SPC), 253, 254,
255, 262, 263
Stein, Freiherr von, 289
Steinberg, Richard, 76
Stiglitz, Joseph, 136
Stinchcombe, Arthur L., 55
Stokowski, Leopold, 163
Subsidies, 6, 17, 28, 30, 31, 39n.37
cross-subsidization, 311
donation, 18, 3134
efficiency of, 28-31, 36
lump-sum, 29 (Fig. 1), 31, 34, 35, 36
through tickets, 34-36
Sweden, 84, 288, 291-92, 298, 299, 301,
302, 306, 314, 315, 317n.34
Index
369
in Austria, 289-91, 300, 301

Broadway, 17, 20, 36, 37n.11, 38nn.24,
28
in early U.S., 293, 294, 295
fluctuation in support for, 123-24, 126
Talley, Ted, 86
in France, 288-89, 297-98, 305, 315,
Taste, 33, 184, 188
318n.58
refinement of, 22, 27, 28
funding of, 81, 84, 94, 121, 130
Tax deductions, donations as, 20, 31, 75,
in Germany, 289-91, 298, 300, 315,
304, 305-6
317n.43
Taxes, 75, 340-43
inreased complexity of, 167
in Belgium, 343
Little Theatre Movement, 115
capital transfer, 331-40
in the Netherlands, 292, 298, 304, 305,
deed of covenant, 325-31, 355n.l2
307, 312, 315, 317n.43, 318n.49
in Denmark, 343, 344, 348
in New Zealand, 301
in France, 318n.65, 342-43, 345, 346-47,
problem of subscription audience in, 85350, 351
86
in Luxembourg, 34344
supported by Ford Foundation, 115, 116,
in the Netherlands, 342, 343, 344, 348,
117, 121, 123
351
in Sweden, 298
in United Kingdom, 331-38, 348, 349,
Theatre Communications Group, 76, 81,
350, 351, 352, 354, 355n.l2
117
value-added, 347-53, 359n.72
in United Kingdom, 301
wealth, 343-47
Theatres, names of
in West Germany, 343
Alliance Theatre Company (Atlanta), 202Tax exemptions, 232, 288, 321, 332-34
3, 208
important in Western Europe, 3046
de Appel Theatre (The Netherlands), 292
of university presses, 278n.8
Baal Theatre (The Netherlands), 292
Tax incentives, 195, 221, 320, 336, 353,
Boston Museum Theatre, 43
355n.7
de Brakke Grond Theatre (The Netheracceptance in lieu, 336-38
lands), 318n.61
as arts policy in western Europe, 320-59
Chaillot Theatre (France), 297
and donations, 75, 296, 321-31
Comedie Francaise (France), 297, 300
in France, 339-40
L'Est Parisien (France), 297
in Ireland, 340-41
L'Odeon (France), 297
private treaty sale, 33436
Louisville Children's Theatre, 203
for publishing, 351
Mark Taper Forum (Los Angeles), 200
Taylor, Joshua, 192, 195
National Theatre of Germany, 290
Television, 195, 245, 246, 282. See also ABC;
Nederlandse Comedie (The Netherlands),
CBS; Connecticut Public Television; NBC;
292
PBS; WGBH; WNET
New Theatre (New York), 295
Television, public, 11, 246, 254
Nieuw Rotterdamse Toneel (The Netheradministrative constraints in, 25256
lands), 292
compared with university presses, 27273,
Satyr Theatre (The Netherlands), 292
277
Strasbourg Theatre (France), 297, 317n.36
funding of, 247-52, 261-65, 266-67n.5,
Tomato Action Group (The Netherlands),
272
312
organizational factors in decision making
de Twentse Schouwburg (The Netherin, 245-69
lands), 318n.61
Tharp, Twyla, 250
Thomas, Theodore, 179n.l
Thatcher, Margaret, 351
Theatre, 4, 17, 45, 66, 79, 87, 127, 131, 136, Thompson, James, 61n.63
287, 288, 289, 293, 294, 301. See also Thompson, Nancy L., 10-11, 214-42
Tompkins, Calvin, 167, 172n.2
Federal Theatre Project
Trover, Thomas, 172
in Australia, 301
Switzerland, .324
Symphony News, 166
370
Tuthill, Julian, 148, 150, 152, 154
Tweed, Boss, 191
Uniform Management of Institutional Hinds

Act, 217
Union of Soviet Socialist Republics (USSR),
289, 292
United Kingdom, 167, 262, 300, 301, 302,
325, 330, 331-38, 340, 348, 349, 350,
351, 352, 354, 355n.l2. See also Taxes,
in United Kingdom
acceptance in lieu, tax incentive in, 336
38
Arts Council of, 352
British deed of covenant, 3253 1
capital taxation in, 33138
Capital Taxes Office (CTO), 333, 336
Conservative Political Center, 357n.43
Department of the Environment, 338
Education, Science, and Arts Committee,
349
Office of Arts and Libraries, 338
University presses, 11, 27078
appropriate activities of, 27374
compared with public television, 27273,
277
obligations of, 27577
reputation of, 27475
Upstairs, Downstairs, 251, 254
Urban Institute, 66, 67, 81
Useem, Michael, 8, 77, 78, 93-1 12
Index
Veblen, Thorstein, I 85
Vilker, Barbara, 172
Voegeli, Henry, 164
Volunteer Lawyers for the Arts, 177
Wall Street Week, 252
Washington Week in Review, 248
Weber, Max, 45, 168
Weil, Stephen, 214, 222
WGBH (Boston), 253, 254
Wilson College, 217, 233, 234
Wirt, Ken, 253
Witt, Andrew, 202, 203, 204
WNET, 1 I, 246, 249, 251, 253, 254, 255,
256, 257, 259, 260, 261, 262, 263, 264,
265, 266, 267nn.11,12, 268nn.27,28
Woodruff, Robert, 202
Workers Alliance, 154
Works Progress Administration (WPA), 8-9,
137n.l, 140
World War 1, 290, 291, 292, 295, 307
World War 11, 74, 175, 291, 292, 307
Wright, Frank Lloyd, 172
Yale University, 149, 151, 165, 235, 3 16n.28
Institute for Social and Policy Studies,
317n.42
Program on Non-Profit Organizations, 3,
113
Yates, Charles, 202
Zolberg, Vera, 10, 184-98

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What is the book about?

What is the book about?

What publishing houses are mentioned?

What publishing houses are mentioned?

NONPROFIT ENTERPRISE

YALE STUDIES ON NONPROFIT ORGANIZATIONS

Other titles to be announced

New York Oxford

Oxford University Press

Copyright 1986 by Yale University

Printing (last digit): 9 8 7 6 5 4 3 2 1

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The primary purpose of this volume is to initiate a process of inquiry into

I am indebted to the Lilly Endowment, Inc. for a grant to the Program on

Andrew W. Mellon Foundation contributed greatly to the work, first with

Why Are So Many Arts Organizations Nonprofit?

2. Cultural Entrepreneurship in Nineteenth-Century Boston

3. Can Culture Survive the Marketplace?

4. Corporate Contributions to Culture and the Arts:

6. Public Provision of the Performing Arts: A Case Study of the

7. From Impresario to Arts Administrator: Formal Accountability in

8. Tensions of Mission in American Art Museums

9. The Elusive Promise of Management Cooperation in the Performing Arts

IV. Nonprofit Enterprise in Commercial Cultural Industries

11. Politics and Programs: Organizational Factors in Public

Elizabeth A. Cavendish graduated summa cum laude from Yale University

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to policy and management). Rather it is an effort to bring together some

the 1960s), reflected the patrons' antimarket ethos as much as it mirrored

least of serious culture, as problematic, historically changing, and a matter

of a system that gives privately governed arts organizations many doors

growth or increased complexity of the arts organization itself than of the

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The live performing artsincluding orchestral music, opera, theatre, and

Why Are So Many Arts Organizations Nonprofit?

income.3 Because, for reasons that I shall return to below, an organization

Nonprofit Enterprise in the Performing Arts

Why Are So Many Arts Organizations Nonprofit?

disappear. Indeed, it appears that roughly 40 percent of those who attend

Nonprofit Enterprise in the Performing Arts

Why Are So Many Arts Organizations Nonprofit?

THE ECONOMIC BEHAVIOR OF PERFORMING ARTS

Nonprofit Enterprise in the Performing Arts

The firm's objective function is given by U=U(n, q), Un 0, Uq 0,

Assuming an interior solution,31 the first-order conditions are (2) and

where NRq = NR/ q, etc., and is a Lagrange multiplier.

Why Are So Many Arts Organizations Nonprofit?

Firm Behavior and Welfare Optimization

This expression is at a maximum with respect to q and n when

Nonprofit Enterprise in the Performing Arts

The slope of the constraint, NR = 0, at the constrained social optimum,

Why Are So Many Arts Organizations Nonprofit?

For the audience maximizer Uq = 0; it therefore follows from (4) that

If Dq = 0, then (16) is equivalent to the condition shown by Spence and

Nonprofit Enterprise in the Performing Arts

If donations respond as in (1), and if <1, it is easy to show that, as

Why Are So Many Arts Organizations Nonprofit?