Is Creativity an Industry?

Alan Freeman

GLA Economics

LSE 15 December 2003

These slides present the findings and methodology of Creativity: London’s Core Business, the first Greater London Authority report on London’s Creative Industries, which can be found at http://www.london.gov.uk/mayor/economic_unit/docs/create_inds_rep02.pdf.

They supplement a second presentation, also on Slideshare, which contains all the colour graphics from the report.

The information in this presentation is mainly for historical interest.

There have been four subsequent updates on London’s creative industries, which supersede the data presented here. They will in due course be posted at the author’s open access repository page on http://ideas.repec.org/e/pfr102.html

Why it matters

Culture, creation and interventionCommodification has redefined ‘culture’

Creative Industry: ‘Culture that makes Money’ Search for an evidence base

– Uses two ‘standard’ economic classification systems Standard Occupational Classification: what the workers do Standard Industrial Classification: where they do it

But what does ‘Industry’ mean?

The research cycle

Analysis Data

Action/Observation

Where we are at

• Industrial Classification (SIC)

• Occupational Classification (SOC)

• An ‘initial hypothesis’

• A new phase of cultural commodification

• (A) new branch(es) of the division of labour

• Something in common – but what?

A qualitative rise in demand…

UK cinema admissions

Trade in computer and information services

Trade in audiovisual and related services

Leading to a qualitative reshaping of supply

London’s output growth (per cent per year, 1995-2000)

And a new regional industrial structure

jobs growth

London: CI job growth 1995-2000

Borough

Havering 2,744 4,147 6,610 281 3,866 4%Barking and Dagenham 1,948 3,587 5,074 461 3,126 9%Waltham Forest 6,566 6,900 11,726 1,740 5,160 15%Harrow 10,517 8,443 16,466 2,494 5,949 15%Greenwich 7,688 4,939 10,851 1,776 3,163 16%Bromley 16,098 9,654 21,558 4,194 5,460 19%Newham 7,072 4,295 9,417 1,950 2,345 21%Bexley 5,003 3,337 6,848 1,492 1,845 22%Hillingdon 9,961 9,420 15,874 3,507 5,913 22%Ealing 17,849 14,523 26,446 5,926 8,597 22%Croydon 12,256 12,713 20,149 4,820 7,893 24%Enfield 8,638 6,544 11,844 3,338 3,206 28%Kingston upon Thames 11,237 9,657 16,153 4,741 4,916 29%Hounslow 9,536 5,094 11,300 3,330 1,764 29%Redbridge 7,432 8,338 11,953 3,817 4,521 32%Merton 9,995 8,905 14,089 4,811 4,094 34%Lewisham 10,726 10,557 15,780 5,503 5,054 35%Sutton 9,549 7,337 12,435 4,451 2,886 36%Brent 12,721 10,794 17,068 6,447 4,347 38%Richmond upon Thames 18,232 13,535 22,736 9,031 4,504 40%Wandsworth 27,495 22,574 35,658 14,411 8,163 40%Barnet 20,093 15,791 25,479 10,405 5,386 41%Tower Hamlets 9,434 9,121 12,912 5,643 3,478 44%Westminster 21,213 15,893 25,479 11,627 4,266 46%Lambeth 20,237 17,561 25,767 12,031 5,530 47%Hammersmith and Fulham 19,341 14,931 23,344 10,928 4,003 47%Hackney 11,467 10,285 14,756 6,996 3,289 47%Kensington and Chelsea 18,410 14,641 22,243 10,808 3,833 49%Southwark 15,146 14,390 19,565 9,971 4,419 51%Camden 24,555 19,257 28,665 15,147 4,110 53%Islington 15,426 12,234 17,854 9,806 2,428 55%Haringey 18,169 13,750 20,495 11,424 2,326 56%

Is there a pattern of specialisation?

A brief conceptual geology

‘Data’ is not neutral Taxonomy accumulated over time

– Agriculture - Physiocrats– Manufacturing – Industrial Economists – Services - Financial Economists

Principles used in constructing NACE and followed in SIC (2003)

1. The main criteria employed in delineating divisions and groups (the two and three digit categories, respectively) of NACE concern the characteristics of the activities of the producing units. The major aspects of the activities are:

(i) the character of the goods and services produced,(ii) the uses to which the goods and services are put, and(iii) the inputs, the process, and the technology of production.

11. An activity is said to take place when resources such as equipment, labour, manufacturing techniques, information networks or products are combined, leading to the creation of specific goods or services. An activity is characterised by an input of products (goods or services), a production process and an output of products.

A Health warning about Hierarchical Classification

Tractors or food?

Leontieff on industry

'any national economy can be described as a system of mutually interrelated industries or - if one prefers a more abstract term - interdependent economic activities

...the whole system has been subdivided into 50 sectors comprising – agriculture, – various extractive and manufacturing industries, – electric public utilities, – three kinds of transportation, – trade – and other types of service industries.

Some problems

Why?– are ‘Electric’ utilities different from any other?– is agriculture as a whole considered to be an industry?– Is manufacturing treated as a set of distinct industries? – are there three kinds of transportation and not two, or four?

Some problematic illustrations– Wood (construction, materials, or agriculture?)– Ships (coracles to supertankers)– ‘Oil’ - one product?– Chemicals process– Moonboots and slippers

Some other agendas

Innovation and the use of science (Pavitt,NSA) Use of information (OECD, etc) Agglomeration externalities (Porter)

Pavitt and innovation

Rejection of ‘industry-based’ classification Subject is ‘innovative behaviour’ Everywhere innovates

– GM– Flower-selling and tropical fish– Car industry

Industrial taxonomy is inadequate Need ‘cross-cutting’ taxonomy

Typical industrial sectors of Pavitt’s Categories

Category Traditional Emerging

Supplier Dominated Textiles, Foot-wear Tourism

Specialized Suppliers

Machinery and instruments

Software

Science-Based Chemicals, Electrical Bio-engineering, Space

Scale Intensive Automobiles Software, HotelsFood-chains

Information Intensive

Banking Retailing, Insurance

Where did industrial classification come from?

Marx – social reproduction Marshall – origin of products Leontieff – interrelations of purchase and sale

Kondratieffs and paradigms

Industries present themselves Specialisation is a driving force K-waves throw up new forms of organisation

– Manufacturing = ‘the factory’– The Age of Steam ‘technology’– The Age of Steel and Electricity ‘power’– The Age of Oil and Air ‘transport and communication’– The Information Age - ?

Period Successive Techno-Economic Paradigms

Industrial organisation

Typical industries Pavitt's category of firms

1770-1830 Early Mechanisation Growing importance of small manufacturing firms

Textiles, Potteries, Machinery

Supplier dominated

1840-1880 Steam power and railway

Separation been producers of capital and consumption goods

Mechanical engineering, Steel and Coal

Specialized suppliers

1890-1930 Opportunities associated to scientific discoveries

Emergence of large firms

Chemicals, Electrical machinery, Engineering

Science based

1940-1980 Fordist and Taylorist revolutions

Oligopolistic competition for mass consumption

Automobiles, Synthetic products, Consumer durables

Scale intensive

1990- Information and communication

Networks of firms, strong user-produces interactions

Microelectronics, Telecoms, Software

Information intensive

Why isn’t there a science industry?

Science is a component of everything– But so is land– And so are buildings (factories or offices)– So is power

Science not commercialised as a product– ‘Tacit’ knowledge– Public goods– Not abstractly transferrable

There are few if any ‘science factories’– Research lab is typically either public or subsidiary

Can there be a Creation Industry?

Product differentiation is all Tailored to exact specifications ‘One-off’ or short run Timing of the essence Planning newness Supply-dominated Human ‘capital’ as a universal resource

A technological reversal

Innovations are in short run production

• High tech, High complexity, Growing formalism

The New Economy of Agglomeration

• Principal investment = human capital

• Stone farming

Success is a product of failure

• Risk-pooling