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policy: the allocation of the execution of cultural policy should be delegated to an independent Arts Fund.
The Minister of Culture can package cultural policies and make side payments to obtain a majority (see
(6)), but that can be done by the financial and cultural experts of the Arts Council as well.
Delegation of the execution of cultural policy to an independent Arts Fund does not deny a role for
the Minister of Culture. It is crucial that he or she defines a clear, yet broadly-defined mission for the Arts
Funds. In this White Paper the Minister should state its priorities and criteria and also the available
budgets. The Minister of Culture should not be allowed to change the rules of the game halfway through
the complicated process of granting subsidies or to decide on subsidies for individual cultural
organisations. The Minister of Culture should safeguard that the Arts Fund acts according to the
objectives stated in the mission and only interfere if the Arts Fund deviates from the mission. The
mission could state, for example, that more funds should go to cultural education, vouchers, cultural
diversity, the regions or international cultural policy, but not to which particular cultural organisations
unless no judgement of artistic quality is involved. Carpenter (2001) argues that the rise of the regulatory
state offers bureaucrats the chance to decide as well implement legislation. This also applies to Arts
Councils and Arts Funds. They can count on generous space in the press and are able to obtain support
for their case. In the absence of a strong and visionary Minister of Culture, there is a danger that the
Minister of Culture simple rubberstamps the proposals of the Arts Council or Arts Fund. Granting
cultural subsidies by an Arts Fund, bureaucrats or the Minister of Culture is not the only option. Another
system is to allocate cultural subsidies by referendum as in Switzerland. Schulze and Ursprung (2000)
analyse a public referendum for the Zurich Opera House, but governments of the European Union have
not used referenda in cultural policy.
6.1. An analytical example of delegation of cultural policy
Output Y is given by the sum of unobservable talent or ability A~N(AM, σ2), effort X, and noise ε~N(0, T),
that is Y=A+X+ε. Bureaucrats and experts want others to have a good perception of their ability, so their
reward is E[(E(A∕Y)]=AM + β E[A+ε+X- E(X)-AM] where β≡d7(σ+T) <1 is the signal-to-noise ratio. If
costs are convex in effort, i.e., C(X), C'>0, C">0, the Arts Council chooses effort level X=C'-1(β) and puts
in less effort if there is a lot of noise relative to the variance of talent. With imperfect monitoring,
bureaucrats and art experts put in too little effort which causes a loss of welfare. A Minister of Culture is
concerned with re-election, so his or her reward is Prob[y>AM+E(X)+ε]. This implies rational voters,
who assume that the alternative to the incumbent is a politician with average talent and who in
equilibrium puts in the same effort as the incumbent. It follows that the Minister of Culture sets C'-
1(X)=1∕√[2π( σ2 + T )]. Imperfect monitoring (τ>0) reduces effort of both the Arts Council and the Minister
of Culture. However, more uncertainty about talent boosts effort of the Arts Council and cuts effort of the