Valuing museums as economic engines: Willingness to pay or discounting of cash-flows?

Abstract

GLobal Art MUseums as Economic Re-activators (GLAMUR) infrastructures are characterized by global media visibility and sheer presence in the communications environment; outstanding architecture by a superstar architect; big blockbuster exhibitions and a large number of visitors; being magnets for tourists; requiring large capital costs (initial construction costs plus ongoing investments) and large operating budgets; expensive advertising and commercialisation strategies; a huge operative risk; and a hope for substantial impact on the local economy. The economic value of cultural assets is defined as the extent to which they generate benefits for society. The aim of this article is to shed light on the valuation of GLAMUR infrastructures and why, and then to valuate the Guggenheim Museum Bilbao (GMB). In fact, the author of this paper argues that economic valuation through an estimate of the Willingness to Pay (WTP) (e.g. contingent valuation), is clearly an insufficient method for valuating a GLAMUR. One possible accurate method could be to calculate the Discounting of Cash-flows (DCF), followed by the discounting of the WTP estimates.