Economic theory of museums

[1] Firstly, a museum can be considered as an economic unit (like a business), viewed from the angle of the relationship between its inputs (collections, budget, employees) and its output (sales, exhibitions, media presence, scientific publications).

Even if, from 1880 onwards, they also began to take on an educational mission, the opening up to a wider public was slow in coming, and was viewed with great reluctance by a profession inhabited by an elitist conception of its function.

[5] As a result, the question of museum budgets remained essentially linked to their role in preserving artistic heritage, until the combination of declining public finances and rising costs (due to Baumol effect, see cost structure below) led to the re-emergence of the question of the economic justification for the existence of museums.

At the core of the relationship between resources and services, two issues stand out: the management of collections housed by museums and the pricing policy applied.

On a more concrete level, the existence of a museum generates visitor flows that benefit nearby businesses, as well as the image of the place in which they are located.

Methods based on contingent valuation, on the evolution of real estate prices in the vicinity of museums, or on natural experiments on the occasion of referendums, suggest that these values are not negligible.

[10] On the contrary, the marginal cost of an additional visitor is close to zero,[nb 2] except when there is crowding around certain artworks (such as the Mona Lisa at the Louvre) or during very popular temporary exhibitions.

As a result, allocated budgets do not take into account the need to make provisions for major works or new buildings (the notion of accounting depreciation), and more often than not underestimate the cost of maintaining architecturally daring buildings, as well as the real cost of organizing temporary exhibitions (sometimes financed at the expense of core conservation and research activities).

Europe has witnessed an increase in exhibition space, complete reorganization, and even the opening of new facilities as part of urban renewal plans (Museum Island, Tate Modern).

[2] In the United States, some of the major collections, along with their buildings, initial funds and objectives, originated with a single collector (Solomon R. Guggenheim, William Wilson Corcoran, Jean Paul Getty, etc.).

Similarly, spectacular acquisitions attract not only the public, but also funds to finance building projects that are a fitting showcase for their private collections (the Guggenheim Foundation's museum series is a case in point).

These interests naturally include their remuneration, but also the esteem and admiration in which they are held by their reference group (art lovers and other members of their profession), their working conditions, and job security.

The collection policy is geared towards connoisseurs with minimal educational apparatus, and related sources of income such as museum stores and restaurants are often overlooked.

In fact, in a financial context that encourages them to control spending, many public funders make their subsidies conditional on the pursuit of more or less formalized objectives.

Great attention is also expected to be paid to secondary sources of income, for example through the possibility of renting out premises for non-art events.

Similarly, these museums are more inclined to organize exhibitions that attract large numbers of visitors, using well-known works accompanied by a rich didactic apparatus.

Museums are often obliged to accept a range of donations of heterogeneous quality, without having the option of selling or not exhibiting the least interesting pieces, which imposes very heavy costs (both direct and opportunity).

On the other hand, they do have a strong indirect impact as a certifying authority: artists exhibited in a museum are a safe option, lowering the risk premium on their work and driving up demand and prices for their output.

For similar reasons, major museums are hostile to a price system to govern the temporary transfers of works required for thematic exhibitions.

A notable exception to this non-market system, which saves potentially heavy transaction costs, is Russian museums, whose chronic lack of funds justifies special treatment in the eyes of their colleagues.

In most cases, this policy takes the form of a two-part tariff structure,[24] with a single ticket on the one hand, and a subscription offering unlimited access to all or part of the museum's collections on the other.

Museums have historically depended on public authorities or wealthy patrons to fund their operating costs, in addition to income from admission fees.

Consequently, museums that rely primarily on their own resources have turned to accepting modest and numerous donations in exchange for a policy of openness to as many people as possible.

[26] Alternatives to free admission[nb 6] exist in the form of differentiated pricing, such as boxes with or without a suggested minimum donation, as well as unlimited access cards for a given duration.

Other types of discrimination are possible by varying the price according to the day of the week, the geographical origin of visitors (a discount for residents of the city or country, whose taxes help finance the museum), or even their age.

[28] Likewise, they represent a brand image that enables them to create branches in various locations (the Louvre Abu Dhabi, the Tate in Liverpool, while the Prado lends a third of its collections to regional museums).

As part of this competition, and to defend their status, they enter into a race for temporary exhibitions, spin-off activities, and spectacular buildings to reinforce their brand image.

What is more, the circulation, manipulation, and exposure to large crowds of particularly fragile works seem to run counter to a museum's mission of preservation.

These exhibitions, focusing on an author, a genre or a period, also have a greater capacity to attract the attention of art lovers outside the museum's usual area of influence.

Frey and S. Meier, while the growth of such exhibitions may slow down, they will continue to represent a significant part of museum activity and a factor in the partial integration of these institutions into a market logic that is open to the greatest possible number of people.

The National Air and Space Museum in Washington .
The Prado Museum in Madrid.
Guggenheim Museum Bilbao, designed by Frank Gehry .
Graz Museum of Modern Art .
The Musée de Bibracte , at the base of Mont Beuvray (France), is one of a number of museums founded at the end of the 20th century on an archaeological site,
The Getty Center , founded with the bequest of American oil magnate Jean Paul Getty in Los Angeles.
The Tokyo National Museum , the first museum to be created in Japan, in 1872, as an extension of the Ministry of Education, on the basis of imperial collections.
The National Gallery of Art in Washington , administered by the U.S. federal government .
The Metropolitan Museum of Art in New York City.
The Hermitage Museum in St. Petersburg , heir to the collections of the Tsars . Placed under the direct patronage of the President of the Russian Federation .
The Tate Modern in London.
New York's Museum of Modern Art . Like many museums, it is open free of charge one evening a week.
The Louvre Museum in Paris. B. S. Frey and S. Meier use it as a typical example of a superstar museum in the Handbook's chapter on museum economics.
Amsterdam 's Rijksmuseum . The museum's collection of Flemish paintings makes it a mandatory stop on any visit to the city.
The Pergamon Museum in Berlin. Its masterpieces, reconstructing the Great Altar of Pergamum and the Ishtar Gate of Babylon , are by their very nature indestructible for temporary exhibitions.