Economic reasoning and creative industries progress

Abstract

ABSTRACTThis article offers a theoretical discussion on how major neoclassical economic theory assumptions blur the understanding of creative industries. By distinguishing between creative-rational and creative-intuitive industries, with different compositions of commercial and cultural attributes, we particularly show how the latter sector has characteristics and dynamics that are incompatible with a theory based on preference rationality, profit maximisation and equal access to information among actors. When customer utility is composed of economic, as well as aesthetic, spiritual, social, historical, symbolic and authenticity values, then all these will affect customers' willingness to pay, and a single monetary standard based on preference rationality is difficult to establish. In addition, when artistic integrity is a central aspect of creative production, prices will have a limited impact on supply. We identify three types of market failure in creative industries due to information asymmetries, namely ‘lemon markets’, ‘concentration markets’ and ‘speculator markets’. We propose further research on subjective reasoning among buyers and how prices are set; how artistic and economic logics of producers relate to business performance; and how creative industries' growth can be facilitated, not least in poor economies with a high need for employment creation.