18
costs. Tullock (1980) argues that profits are not handed back to consumers, and should be added to the
social costs of monopoly. Producers lobby to get and maintain a monopoly. They continue with wasteful
rent seeking until they have dissipated all monopoly profits. True cost of the monopoly is then the
welfare loss triangles plus wasted profits.
Some argue that the value of arts is (like human life) infinite. Rembrandt's Night Watch is
priceless, but people have tried to vandalise it. By paying for security one reduces the chance of attack by
vandals. From that one can infer a value of the Night Watch. Noonan (2003) offers an instructive meta-
analysis of many empirical contingent valuation studies of willingness to pay for cultural goods as local
TV, opera and UNESCO World Heritage Sites. On the latter Maddison and Mourato (2001) study
willingness to pay for Stonehenge and Carson et al. (2002) do the same for the Fés Medina.
Arts Councils are often asked to use 'quality' as the prime criteria. But who decides what 'quality'
is? Is it artists themselves, expert members of an arts council, art critics or the public? Is culture the
Western canon of established high culture or the culture offered by newcomers and other civilisations? Is
'quality' high culture or dumbed-down culture? Does quality only become meaningful in the
confrontation with a public? Obviously, one must safeguard established arts, but also support innovative
art forms and art for the masses. High culture for selected audiences is valuable, but also low culture for
mass audiences. The optimal level of quality requires the marginal cost to equal marginal benefit of
quality. Maximum quality occurs where government ensures zero marginal cost of extra quality, but that
is not necessarily socially optimal. Critics argue that productions should be executed at the highest
possible level, particularly if it is paid for by the tax payer.
Stocks of cultural goods need an intertemporal approach to value. A crude estimate by directors of
Dutch museums of the market value of their collections was - depending on the current prices of Van
Gogh paintings - 20 billion euro. Roughly 5 per cent of museum assets is on display. The rest is in
storage. Nevertheless, museums strive for bigger collections and buildings. Bookkeeping of museums
ignores the opportunity cost of their collections in their accounts. Museums act as if their collection, their
most important production factor, is almost free. Hotelling's arbitrage principle for exhaustible resources
suggests that one is indifferent between selling the assets and investing the proceeds and keeping and
displaying, loaning or storing the collection:
expected net gains in the value of the collection plus
net gains from exhibiting the collection on a permanent or temporary basis plus
returns from loaning the collection to other museums, companies or the public plus
gifts from sponsors, donors and friends to help with purchase of new items and exposition minus
cost of storage minus