Taking Note: Calculating Value Added by Arts and Cultural Industries
"My accountant says I did this at a very bad time. My stocks are down. I'm cash poor or something. I got no cash flow. I'm not liquid, something's not flowing. They got a language all their own." -Woody Allen in Manhattan, 1979
In the 1979 movie Manhattan, Isaac Davis (played by Woody Allen) decides to quit his job as a television writer to work full-time on a novel. Although he's initially excited by this decision, Isaac soon begins to worry about not having a regular paycheck. His concern is heightened because he is not "liquid," a term used by accountants who, in Isaac's opinion, have a "language all their own."
With the release of the U.S. Arts and Cultural Production Satellite Account (ACPSA), the NEA has delved deeply into the field of accounting, and we too have come across seemingly arcane accounting terminology. A top-line measure from the account, for example, is "value added," a term used by national income accountants to describe an industry's production from its own labor and capital, i.e., the industry's GDP.
To illustrate, the ACPSA, which was produced by the Bureau of Economic Analysis in partnership with the NEA, shows that arts and cultural production by "performing arts industries" contributed $42.5 billion to the U.S. economy in 2011. In that same year, arts and cultural value added by "information (electronic)" industries was nearly $153 billion.
As the first rigorous measures of the arts' contributions to U.S. GDP, the account's measures of value added by industry are momentous. Further analysis is warranted, however, to shed even more light on industries of consequence to the arts sector. For example, the account's estimate of value added by the performing arts industry combines production by theater and opera companies, dance troupes, and even circuses; "information (electronic)" covers production by a host of industries spanning motion pictures and sound recording to broadcasting and newspaper publishing.
To expand on these estimates, the NEA's research office merged data from the ACPSA with industry figures reported in the Economic Census and in the Nonemployer Statistics (both of which are produced by the U.S. Census Bureau) to calculate value added by detailed industry. Today, we are releasing these more detailed estimates in the form of an "ACPSA issue brief" (#7) on the NEA's electronic Arts Data Profile pages.
Using different methods from those employed in the ACPSA Brief #1, the new estimates show that information sector industries—telecommunications, broadcasting, motion picture, and publishing industries—along with advertising (its creative component only) and the performing arts, contribute the greatest value to arts and cultural production. (The value added by government is not included here.) In producing arts and cultural goods and services, these industries generated $228 billion, or 45 percent of all ACPSA value added in 2011.
Combining data from the ACPSA and the Economic Census also reveals production by the various industries that make up the performing arts, as well as their tax-exempt and taxable components. For example, we estimate that dance companies generated $526 million of value added in 2011; most of that value ($427 million) was produced by tax-exempt dance troupes.
Among "other music groups and artists," an industry comprising rock, country, and jazz bands (and independent musicians), most value added is contributed by taxable groups. In 2011, we estimate that taxable "other music groups and artists" generated $2.2 billion of value added.
Estimates of value added, as well as employment, by tax-exempt and taxable performing arts industries, museums, and fine arts schools are reported in ACPSA Brief #8, also released today.
As for Isaac Davis? Well, despite his accountant's warning of illiquidity, it appears that he made the right decision to quit his job to write a book. At the end of the film, Isaac announces that Viking Press loved the first four chapters.
Providing the first rigorous and comprehensive measure of the arts economy, the ACPSA is also a success. Although ACPSA users must acquaint themselves with terms like value added, we believe that a close look at the account is well worth the effort.
Note to Isaac: "Liquidity" refers to how easily or quickly an asset can be converted to cash.