In 1966, American researchers William Baumol and William Bowen turned their attention to the arts and culture sector, and more specifically to the performing arts. They observed the very limited potential for productivity gainsand a predominance of fixed structural costs over variable costs. This situation ultimately leads to structural deficits for artistic and cultural organizations.

Sometimes referred to as the “cost disease“, this economic condition is further exacerbated by societal expectationsplaced on the arts and culture. However, it tends to underestimate the capacity for innovation within artistic and cultural organizations, as well as the potential for ancillary revenue streams arising from concerts or performances, such as merchandising.

Finally, the model fails to account for a wide range of economic and non-economic externalities generated by these activities.