The inefficiency of markets

Slaves to some defunct economist

Jun 11th 2009

THE financial crisis that has engulfed the world in the past two years is not just, or perhaps even mainly, a tale of greed run riot; it is the result of an idea that failed. That idea, which over the past four decades became the dominant belief among those generally regarded as the savviest participants in the financial system, was that the market is rational and efficient. So much for that.

The idea first took hold among a generation of economists repelled by the heavy government oversight of financial markets imposed during the New Deal era and by evidence of widespread irrational behaviour by participants in these markets. At the same time they were excited by the advances in mathematical economics and the computing power that allowed market data to be analysed like never before.

Justin Fox’s description of how the idea evolved and conquered is fascinating and entertainingly told. A statement of investor impotence—an attack on the bold ones (“idiots”, said Larry Summers, a distinguished economist) who think they can beat the market—soon became a near-religious belief. Nobel-laureate preachers, such as Milton Friedman and Merton Miller, proclaimed from the pulpits of the University of Chicago that the market could do no wrong.

Somewhere along the way, what started as a critique of the wrong ways people tried to profit from the market turned into a source of new techniques for making money. The “efficient market hypothesis”, the Nicene Creed of the market rationalists, inspired a wave of innovative financial products, such as derivatives and securitised subprime mortgages, that believers claimed would allow users to exploit the wonders of the market. This gospel was embraced so enthusiastically by the markets that these products soon accounted for trillions of dollars of trades. Then it turned out that the market was not rational after all. Trillions were wiped out and, as one of the cheerleaders for rationality, Alan Greenspan, the former chairman of the Federal Reserve, put it, “the whole intellectual edifice collapsed.”

By then, mainstream academic economists had long ago lost faith in market rationality, at least in its purest form. Especially after two of their number, Myron Scholes and Robert Merton, both Nobel laureates, lost their shirts when Long-Term Capital Management, a hedge fund based on their rational-market ideas, blew up in 1998. Indeed, the focus of academic finance has been shifting for at least 20 years towards theories that address the ways in which markets behave irrationally. To use John Maynard Keynes’s phrase, the market participants who in recent years bet trillions on these new efficient-market-inspired financial products were “slaves to some defunct economist”.

The only disappointment about “The Myth of the Rational Market” is that it does not say more about how the ideas that shape financial markets will change in response to this catastrophic intellectual failure. But Mr Fox has written a worthy successor to “Capital Ideas”, the late Peter Bernstein’s 1990s classic on the emergence of the rational-market myth: bang up-to-date; alas, without the happy ending.

Cultural groups tap audiences via social networking

BY KEVIN JOY

THE COLUMBUS DISPATCH

June 15, 2009

Two weeks ago, the marketing director for the Columbus Symphony posted a notice on its Facebook page:

Coming this fall: A special guest will be swinging by Columbus on his "way to normal." We'll be "rockin' the suburbs" of C-bus!

The subtle hint, peppered with Ben Folds song titles, seemingly indicated that the popular indie-rock singer and pianist would perform with the revived classical ensemble.

Late last week, the orchestra made the announcement public: The Folds show is scheduled for Oct. 28 at Veterans Memorial, with seats on sale today.

The delay was intentional.

"We're trying to start a conversation, as opposed to just saying tickets are on sale," said Shawne Beck, marketing chief. "We wanted to tease the public."

Other central Ohio arts groups are doing the same.

The use of social media as a marketing tool is fast becoming a key means for cash-strapped organizations not only to spread the word about offerings but also to heighten their "cool" quotients and attract Web-savvy patrons who might otherwise view the groups as stodgy or impersonal.

BalletMet Columbus last year began using the social-networking Facebook and Twitter to post bite-sized updates, ranging from ticket specials and quiz questions (with prizes) to the breed of dog -- a schnauzer mix -- used in the production of The Great Gatsby.

"We're not who you think we are," said Matt Holsinger, marketing manager for BalletMet. "We're not high and mighty, and stuffy."

In the fall, Opera Columbus hosted a Tweet-up gathering for Twitter users in the Ohio Theatre -- including a dress rehearsal of The Pearl Fishers.

About 30 guests kept their thumbs busy, Tweeting their impressions by iPhone or BlackBerry throughout the performance.

Such digital initiatives represent a boon for the company, which last year eliminated a full-time position and canceled The Mikado to avoid a deficit.

"The most rewarding thing was hearing people say (online), " 'I've never been to the opera before; I love it' or 'I'm so surprised,' " said Lisa Minken, director of marketing. "We can look at how many people are talking about us."

"Viral" grass-roots chatter is essentially free -- beyond the time used by staff members to monitor and maintain the content.

(And the practice is increasingly common: A recent study by a California consulting group found that 85 percent of nonprofits are relying on social media for marketing and fundraising.)

"There's absolutely nothing more powerful than a friend's recommendation," said Matt Slaybaugh, artistic director of Available Light Theatre.

After curtain calls at Available Light shows (including God's Ear, through Saturday at Columbus Dance Theatre), cast members ask audiences to mention the troupe via Twitter, Facebook or blog.

Other promotions are on the table, too.

The Columbus Museum of Art has a YouTube channel, with in-house videos containing sneak previews of exhibitions.

The museum is considering discounts or programming just for its 1,137 Facebook fans -- taking a cue from museums in Cleveland and Indianapolis -- and heavier advertising online and, soon, on Internet radio, spokeswoman Nancy Colvin said.

After the recent Columbus Arts Festival, the Greater Columbus Arts Council encouraged visitors to post photos to Flickr, with prizes for the best submissions. The council also tracked Facebook comments.

And the Wexner Center for the Arts recently started presenting live video feeds of panel talks, artist interviews and event announcements.

Its Web site, meanwhile, features "mix-tape" podcasts of bands booked for shows.

Like the museum, the center is using direct advertising on Facebook.

Tiny on-screen ads are targeted -- by age, sex, geography or other personal data -- to appear on selected profiles among the 200 million users worldwide.

In the span of a few months, Wexner Center ads for everything from the Andy Warhol exhibit to a Jenny Lewis concert tallied more than 31 million "impressions" (the number of times that the ads were seen on Facebook pages), according to marketing director Jerry Dannemiller.

And the center soon plans to double its budget for Facebook promotions.

The old-school crowd needn't fret, however: Traditional advertising (from print and radio ads to fliers, brochures and mailed postcards) will still be used, said all 12 organizations surveyed by The Dispatch -- such as the King Arts Complex, Phoenix Theatre for Children and ProMusica Chamber Orchestra.

"There are people who just want to read our print calendar," Dannemiller said. "On the other end, you've got people who need to be updated every five minutes. We have to adapt to that."

Moreover, arts groups acknowledge a difficulty in determining the extent to which digital followers become bodies in seats.

A fan on Facebook doesn't equal a season-ticket holder.

"We don't know how to define success with social media yet," said Bryan Knicely, president of the arts council -- whose 2009 marketing dollars have been cut in half, according to a spokeswoman.

"We feel we (already) market to our target audience very well. This is an (added) means."

Yet the frontier, all agreed, is one that shouldn't be ignored.

Minken, of Opera Columbus, writes a blog under the alias "Mimi," a stuffed cow.

The blog features a way to make donations online -- reflecting an effort to cover a $90,000 deficit -- and a button to "re-Tweet" the fundraiser.

Discounts are offered to online followers, providing another way to gauge Web traction.

Other methods are also distinct.

Beck, of the symphony, sent a Twitter post in April to encourage followers to shout "Tweet, Tweet, Tweet" among the black-tie masses before an Ohio Theatre performance -- in return for a free ticket to a future show.

Several patrons complied.

Don't forget the cultural economy

Razia Iqbal

BBC NEWS

15 June 2009

Could the creative industries provide innovative models which will make this sector not just resilient in the current economic climate, but allow it to flourish?

There are economists who think this is happening already. Recent research from the National Endowment for Science, Technology and the Arts (Nesta) suggests that the cultural sector will grow by 4% between 2009 and 2013 - double the estimate for the rest of the economy.

There are parts of this sector which are clearly feeling the effects of the recession, such as architecture and advertising. But others, like the video games industry, are burgeoning. There is a skills shortage, however, which means companies such as RealTime Worlds, in Dundee, run by Dave Jones (he created the original Grand Theft Auto), are having to look abroad for employees. Yet the currently available University courses on video games technology are over-subscribed. Surely, this is an area where the government should be looking to invest?

I've been talking to Lord Puttnam about this and he is a passionate advocate of investing in the creative industries. He thinks they are where young people want to work and argues that the government dismisses their potential at its peril. This goes to the heart of an argument that historically presents the arts community as whingeing luvvies. In fact, the reality is that the creative industries will by 2013 employ 1.3 million people and the wealth generated by these industries could reach £85 billion. It is the economic case for the arts that those in the creative industries need to make.

The National Campaign For The Arts has launched its arts manifesto today which includes a section on the economy: "To maximise the sector's potential, governments should commit to investment over a longer funding cycle of five years, more in line with established business planning". That's one thing, but the creative industries also need to make a case for funding connected with private investment. If the state funding diminishes, so will private sponsorship, so it's in the interests of the state to maintain investment.

The UK is uniquely good at creativity and innovation. Even in difficult times, institutions such as the National Theatre are innovating. Their NT Live project, which will project Racine's Phedre with Helen Mirren, live into 70 cinema screens around the UK, creates a new model to increase audiences.

For many bold enough to say so, the creative industries can be part of the solution to get the economy out of recession.

At times of crisis, fairs should take a more “curated” approach

A curator's opinion

By Paco Barragán

THE ART NEWSPAPER

Published online 12.6.09

The blurring of the boundaries between the art fair and the biennial or that type of international survey exhibition is almost historical: in 1895 Venetian mayor Ricardo Selvatico saw the first Venice Biennale as an opportunity to promote the city as an international meeting place; in 1955, curator Arnold Bode modelled Documenta in Kassel after the commercial 1913 Armory Show in New York, and hoped its first exhibition, “European Art of the Twentieth Century”, would be integrated into the infrastructure of the German Federation Horticultural Show. Decades later, the Arco art fair in Madrid started the “biennalisation” of the art fair with the creation of an accompanying curatorial programme and an intense international schedule of panels, conversations and discussions with major contemporary art figures such as Okwui Enwezor, Hans Ulrich-Obrist, Octavio Zaya and Barry Schwabsky—a model which since has been copied by the major art fairs. The result is the entangled and complicated dividing lines between the commercial art fair and “non-commercial” biennial.

Both Art Basel and its sister fair, Art Basel Miami Beach, have become known for their extensive roster of special projects, commissions, lectures and discussions. Increasingly other fairs are also turning to the curator—Frankfurt-based critic and curator Amanda Coulson at Volta (the Basel edition runs until 13 June), former Flash Art critic Andrea Bellini who now directs Turin’s art fair, Artissima (scheduled for 6-8 November), or curator Neville Wakefield at London’s Frieze Art Fair (scheduled for 15-18 October)—to inject curatorial values into the commercial fair. Slowly but progressively more curators are finding places in fair selection committees, partly stemming from a desire for “transparency” over the gallery selection process which can sometime draw criticism.

Meanwhile, we are witnessing a new development in the curatorial practice, with curators expanding from museums and academic institutions, towards a more commercial sphere. For curators, art fairs have become not only places of trade, but places for cultural experiences which economists Joseph Pine and James Gilmore have called the “Experience Economy”. This concept, developed in the late 1990s, states that businesses must constantly provide customers with fresh and new “experiences”. And as such, art fair directors increasingly come from an artistic rather than an entrepreneurial background, which in turn is a response to the emergence of increasingly knowledgeable art collectors.

It’s a common complaint that many fairs lack a “focus”. In this process of transformation the curator, together with the artist and the gallery owner, can provide new perspectives on contemporary art practices and trends and redefine the art fair artistically. The fair benefits from the prestige, know-how and contacts of the curator and, in exchange, the curator gets a new curatorial platform.

Whether conceiving special sections for the fair: Black Box at Arco, Art Statements at Art Basel; or curating special shows like Filip Luyckx’s “Ephemeral Fringes” at Art Brussels (April 2008) or Salima Hashmi’s “Desperately Seeking Paradise” at the 2008 edition of Art Dubai 2008; or by organising one-day thematic exhibitions using the art pieces on display at the fair as happens at “In the Spot” at Circa Puerto Rico; the curator can facilitate a certain narrative in a context where conception, selection, production, exhibition, inauguration and social interaction are all compressed into a period of between one and five days.

It is especially true that in times of economic crisis, commercial galleries and artists may be keen to participate in curated project rooms at art fairs providing a solo, more coherent, and arguably more attractive presentation of the artist’s work. Conversely, art fairs are challenging environments in terms of pressure on space and hectic installation schedules requiring a degree of speed and concentration that we curators are not always able to match. But that does not mean that we should not contribute and aspire to make art fairs more intellectually challenging: after all, for many people they offer a more democratic and less intimidating access to contemporary art that the environments in which most of us traditionally work. Isn’t the art fair similar to some degree similar to Malraux’s “Museum Without Walls”? Isn’t an art fair a “cultural house” that takes art from city to city?

Paco Barragán is a freelance curator and author of The Art Fair Age, 2008, CHARTA, Milan

We no longer fully understand the web

<< Web science is already happening. People are studying the effect of the web within disciplines like social science, economics, psychology and law. Our Web Science Research Initiative aims to bring that research together. There are converging web-related issues cropping up, like privacy and security, that we currently have no way of thinking about. Nobody has thought to look at how people and the web combine as a whole - until now. [...]

The web is now a massive system of connected people and technology and we have to study it as one. It connects people as they make and follow hyperlinks to a degree that results in complex properties no one expected. It has something like 1.000.000.000.000 web pages in it and there are a similar number of neurons in the brain. The brain is something very complicated we don't understand - yet we rely on it. The web is very complicated too and, though we built it, we have no real data about the stability of the emergent systems that have cropped up on it. >>

Tim Barners-Lee interviewed by Paul Marks, The New Scientist, 5 June 2009

Survival Strategies for the Arts

By John Killacky

blue avocado (www.blueavocado.org)

May 30, 2009

John Killacky photoJohn Killacky, artist and arts funder, not only knows that we need the arts now more than ever, but gives us ten survival strategies for arts organizations and one for audience members -- and reminds us that all of us are audience members.

The arts are where hope lives. And right now, as the very tenets of civil society are being re-written, and as health and human service needs rise, there is legitimate concern about whether the arts will survive, how the arts can thrive.

The arts, like every other nonprofit sub-sector, are being challenged by significant contribution losses from government, corporations, foundations, and private donors. Box office and gallery admissions are also eroding as discretionary dollars evaporate. Almost everyone agrees funding problems will become more acute in the upcoming three to five years. Adaptability is replacing growth as a barometer of success.

There's no question to me but that the arts organizations that have dynamic, interactive, authentic relationships with their constituents, audiences, and neighbors are the ones that will come out of this maelstrom stronger. Here are ten ideas for organizations and a potpourri of options for audience members.

1. Do more with less by doing something different. Groups are mounting four plays instead of six, sharing co-production costs, presenting biannual seasons instead of annual, shortening performance runs, mining permanent collections, and altering gallery hours to allow for higher production values, deeper engagement, and higher audience satisfaction. Capitalize to mission delivery, not sustainability. Michael Kaiser from the Kennedy Center is adamant: "We mustn't be scared into thinking smaller. Small thinking begets smaller revenue that begets smaller institutions and reduces excitement and involvement."

2. Place matters. Make sure the neighborhood feels your building is their community center or assembly hall. I loved when Yerba Buena Center for the Arts hosted an election night party last November -- a wonderful cultural celebration.

When I go to the theatre I ask myself: why is this theatre presenting this piece at this time in this community? Through your marketing materials, your programs, your audience involvement, make sure your audience can answer that question. Audiences will respond when they know why you are presenting a particular play/exhibit/dance. Eric Chinski of Farrar, Straus, & Giroux offers a potent reminder of relevance: "The word necessary comes to mind for me. BeMark Rietmeijer photo by Akbar Simonseyond a good story, beyond good writing, does the novel feel necessary?"

3. Invite the public in. Expand gallery labels. Dramaturgical notes are needed in every discipline. Pre-concert talks frame and empower audiences. Cultural contextualization translates, bridges, and illuminates artistic expression for both the cognoscenti and the general public. Visual artist provocateur Marcel Duchamp got it: "The closer the ratio is of what the artist sees versus what the audience thinks they see, the greater the artist.

Be transparent and frank about challenges. Ask for help. When the New York Times ran an item on the financial plight of San Francisco's Magic Theatre, an anonymous benefactor from Manhattan (with no previous history of support) stepped up with a major gift.

4. Let audiences co-author meaning: experiment with social media. Link young professionals into your company's social networks. Trendies can then see who is attending opening night, at intermission tweet friends on how fabulous and sexy the new dance is, and do a post-mortem chat on Skype with the artistic director. Find genuine ways for audiences to contribute and find meaning -- before, during, and after events. Try something small and see how it goes; find what's right you're your organization. Arts consultant Holly Sidford reminds us, "Participation is the most important renewable resource."

5. The middle class can save the arts. Consistently, 75% of private donations come from individuals and another 7% from bequests (GivingUSA). Religion garners one-third of this largess; arts, culture, and the humanities only receive 4%. None of us minds tithing to our mosque, temple, synagogue, or church. In the arts, we too offer transformational experiences, so let's operationalize the "church ask." Start with the people you know: audiences, volunteers, donors, and neighbors -- and ask for modest gifts, often. The Obama campaign proved the power of this kind of fundraising.

Does this mean passing the plate in the audience? Well, why not? Keith Hennessy has a free night in every run of his Circo Zero troupe, where the audience is thanked for coming and then asked to pay what they can. He reports contributions on free nights are higher than the usual box office per night.

6. Support the little league players. Sports teams know that the first sport we play is the one we follow -- that's why little leagues are integral to professional sports marketing. Arts researcher Alan Brown found 74% of orchestra subscribers sing or play an instrument. Similar correlations exist in dance, visual art, and theater. His conclusion: "Supporting personal practice is audience development."

Dance and theater companies that have schools guarantee a built in audience, as well as diversified income. Further, The Nutcracker and other holiday staples prove putting kids on stage is good for business. Getting back to the sports analogy, open rehearsals including informal meet and greets with artists are like pre-game warm-ups and autographs: they connect the amateur practitioners with the highest version of the art.

7. The First Global Generation. Pollster John Zogby finds Americans adjusting to the economic realities by "living witBangladeshi painting photo by futureatlas.comh less, embracing diversity, looking inward, and demanding authenticity." These meta-movements are shared equally by Baby Boomers and what he calls the First Global Generation of 18 to 29 year olds.

Both generations are looking for meaningful experiences. They don't want to be told everything is "extraordinary;" but they do want to know what they will encounter and how they might feel. The arts community is perfectly situated to appeal to these roving bands of "secular spiritualists," but needs to speak directly without hyperbole.

8. Risk failing. Nonprofit arts organizations are not supposed to be commercial presenters; they are meant to provide genuine alternatives. As the sector looks to increase earned income, both mission drift and diluted impact are concerns. Commercial entertainment does not do very well chasing after blockbusters. Under-capitalized nonprofits will never be able to compete, so let's not try. Arts organizations need to be counter-intuitive in their offerings, truly providing alternatives in our community. Samuel Beckett's words from Worstward Ho are apt: "Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better."

9. Have the Conversation. Small businesses seldom survive decade after decade. Do you still have a unique and necessary role in the cultural ecosystem? Imagine strategic partnerships, joint ventures, and back office collaborations to improve economy of scale, as well as efficacy of program and service delivery. Merger, consolidation, and sunsetting should also be examined. A rigorous analysis of internal strengths and weaknesses and external opportunities and threats is called for.

10. Become a cultural citizen. Playwright Tony Kushner tells us, "When you don't act, you act; when you don't vote, you vote." Demand all politicians have an arts platform. Support only those that do. Hold house parties for arts friendly politicos. Invite them to openings and receptions and let them be noticed. When over 200 artists showed up in Oakland's City Hall to protest the proposed elimination the arts budget, City Council had no choice other than to reinstate. And better yet, run for school board to ensure arts are in every school, every day for every child. Claim your cultural agency.

P.S. Things audiences can do (and all of us are audience members). Go to Open Studios and buy art. Attend theater. Donate. Take salsa or tango lessons. Enjoy dance performances. Bring a friend. Donate. Sing with a chorus. Listen to live music. Donate. Write a poem, short story, or memoir. Buy a local author's book. Make art with your kids at home and at a museum's family day. Participate. Donate. Debate the merits of an independent film and then upload your own onto YouTube. Have a bake sale to support an artist residency in a nearby school. Host a season announcement, Tupperware-style, for friends. Commission an artist to commemorate a birthday or anniversary. When you love something, tell your friends. Word of mouth remains the best box office motivator.
Miniature horses photo

John R. Killacky is Program Officer for Arts and Culture at The San Francisco Foundation. He was formerly Executive Director of Yerba Buena Center for the Arts in San Francisco and Performing Arts Curator at Walker Art Center in Minneapolis. He most recently produced and co-directed a national PBS documentary on singer Janis Ian and, with his husband Larry Connolly, uploads videos about Shetland ponies onto YouTube. Click here for their latest (it's fun!).

Why must art magazines be so glamour obsessed?

I'm sick of the new breed of celebrity-struck art magazines feeding off a glamourous art world that doesn't exist

by Jonathan Jones

guardian.co.uk

Thursday 16 April 2009 13.48 BST

Art magazines operate in a sphere of journalism that knows none of the rules of logic, grammar, coherence or entertainment value that generally prevail in the world of the published. To get published in an art magazine you need to follow criteria that are almost the total opposite of what you need to write for general publications. Anything that might interest or enlighten the general reader - or any reader - is to be ruthlessly avoided.

This is why there is almost no crossover between such magazines and the mainstream press. But, amazingly, there has in recent years been a feeding frenzy in the bizarre media subculture of art magazines. The vogue for art has apparently convinced many publishing titans that there's money to be had in art fairs. What with all the idiots who've been buying art (until recently that is), there must surely be a market for an idiot's art magazine?

ArtReview, for example, having gone through innumerable changes of editor and style, now features big celebrity interviews that treat artists as if they were not so much gods as something much greater than gods - say, reality television stars. There's also one, I believe, called Art World (ugh) while Modern Painters has intensified what was always a fairly celebrity-struck gloss.

Other magazines have adapted to the frenzied popularity of art without entirely losing their souls. Frieze has obviously had a massive boost since its publishers founded an art fair. This is one that I actually wrote for. I've recently been reading it again - and have been amused by its funny pedantry. A piece I was looking at last night cited the old children's television programme Why Don't You? and some intern had actually checked the dates the series ran. Who knew it was on the air until 1995? And who says you learn nothing from art magazines?

I'm relieved that I haven't needed to fork out more than I have on magazines during a period of intense contemporary art research. Google goes a long way. One journal I have enjoyed looking at, however, is Afterall. This magazine is currently celebrating its 10th anniversary and I was pleasantly surprised that it kept me diverted during a train journey yesterday.

Afterall is the very opposite of the slick, ugly new breed of mags that try to feed off art's perceived glamour. It publishes essays rather than interviews, and the essays do try to explore real ideas. I found an article on the return of the "spiritual" in art pertinent and provocative. It pointed out something I hadn't quite noticed, that the vogue for the gothic in art so visible in a show like Mythologies at Haunch of Venison is related to the anti-Darwinian religious resurgence in society. Afterall seems aware that art exists within a larger world. That's much more worthwhile than offering pathetic secondary access to a glamorous "art world" that doesn't exist.