Secretary Penny Pritzker’s visit to Missoula, Montana last weekcoincided with one of the community’s “First Friday Gallery Night” events. “First Friday’s” are part of a larger effort of the Cultural Council in Missoula to support the arts to benefit the community as a whole. These events include various art galleries, museums, and retail locations, and may feature musical performances, poetry readings, dance and lectures. The effort seem to be paying off, as one study found that Missoula’s nonprofit arts organizations are responsible for close to $40 million annually in local economic activity, from both the direct spending on arts activities as well as spending on related activities such as restaurant meals, and support more than 1,400 full-time jobs. Missoula is not alone in this; over the last three years, the U.S. economy has added 140,000 jobs in the arts and entertainment sector, as many communities recognize the benefits of a thriving artistic community.

It used to be that communities invested in the arts solely as a local amenity that produces value in and of itself. In times of tight budgets, this justification has not always been enough to continue support for the arts; however, research has found there are many ways in which the arts economically benefit communities. A framework for thinking about these benefits can be found in what is known as “new growth theory,” which is based on the idea that individuals, firms and governments make a conscious choice to invest in skills, knowledge acquisition and in innovative activities. With investment in skills and innovation comes the development of technology that enhances growth, and technological changes have been found to be responsible for most of the long-run growth in income per capita. Further, there are spillovers of knowledge between firms and individuals that are near each other, leading to clusters of knowledge-based industries.

Communities have begun to realize that spending on arts and cultural activities is another form of innovative investment that can clearly play a role in economic growth. These investments generate short -term benefits, for example those who attend arts events spend money in a community on both the event and related activities such as going to a local restaurant, generating a multiplier effect on local employment and income and leading to increased tax revenue. In the longer run, an active arts scene in a city can create a quality of life that attracts highly skilled workers, raising the productivity of the local area and fostering innovation. The arts themselves also generate income for workers while the spillover effects from clustering of arts activities can increase the productivity of the workers in a given artistic endeavor and perhaps even expanding across various disciplines, creating a “culture of innovation” in a city.

The precise ways in which the arts can lead to higher economic growth and the magnitudes of these effects are topics that continue to be analyzed. For example, last year the National Endowment for the Arts and the Brookings Institution held a daylong conference entitled “The Arts, New Growth Theory and Economic Development,” at which a dozen papers were presented on various topics in this area. Though there is undoubtedly more work to be done, the indications suggest that arts and cultural activities play an important role in driving economic growth.