9.1.1 Scope

Technological change leads to changed cultural consumption. The purpose of this chapter is to examine this process using neoclassical and evolutionary frameworks of economic analysis. We find that technological change, particularly in digital computation and media technologies, has multiple effects on the quantities, mixes, and varieties of cultural consumption, and even on our preferences over types of cultural consumption. Technological change does not just mean more, but also means different.

How new technology effects cultural consumption is – perhaps surprisingly, given its ubiquity – a little-studied branch of economic analysis. Although the conditions of demand for arts and culture has received considerable attention (e.g. Throsby, 1994; Blaug, 2001), as has the question of how new technologies affect the supply of arts and culture (e.g. Caves, 2000; Baumol, 2006), there has been a deficit of attention in the economics of arts and culture to examining the connection between new technology and changed patterns of cultural consumption. The default assumption has for the most part been that new technology primarily affects arts and cultural production, which then flows through to changed consumer behavior by shifts in relative prices or new goods and services, or by feedback effects operating on changed consumption opportunities. The effect may also be understood as operating directly from new technology to new consumption behaviors. Or it may work in the opposite direction, when changed cultural consumption affects the incentives associated with new technologies. There is a great deal of research to be done and what follows in this chapter is only an outline of the key dimensions of that task.

There are two obvious starting points: broadly, ‘creative industries’ or the ‘cost disease’, depending upon the nature of new technologies’ impact on cultural consumption. In the creative industries model, new technology is the powerful trajectory associated with epochal changes in digital new media and its transformative impact on cultural consumption (e.g. Howkins, 2001; Hartley, 2005). This focuses on large falls in price including to zero (Anderson, 2009) associated with the crisis of business models in some domains (music, film, newspapers), increased propensity to pay in others (subscription TV, mobile telephony), and radical segmentation of markets (divergence) in the context of technological convergence. Driving this are new technologically driven opportunities over cultural consumption possibilities, particularly in respect of digitally mediated socially interactive possibilities. This ‘new media’ line focuses on the rise of the amateur (Leadbeater and Miller 2004; Leadbeater, 2008), consumer co-creation, and ‘convergence culture’ (Banks and Potts, 2010; Jenkins, 2006), among other factors. Wider economic analysis of this approach to the effect of new technology on patterns of demand can be found in Cowen (2002, 2008) and Potts (2011), both of whom also connect this to a context of globalization and economic evolution. Sections 9.3–9.5 draw on this interpretation of new digital technology, and its implications for cultural consumption in re-shaping patterns of demand and preferences.

A second way to connect new technology to cultural consumption analytically is via a generalization of the ‘cost disease’ model from its initial analytic domain in the live arts to consideration of a broader production context (Baumol and Bowen, 1966; Baumol, 2006). Baumol’s argument was that new technology has a lesser productivity effect on live cultural production than most other sectors. This raises the real cost of such production (in Baumol’s example, a string quartet performance) and therefore the price, leading to reduced consumer demand (Felton, 1994; Heilbrun and Gray, 2001, p. 139; Preston and Sparveiro, 2009). The ‘cost disease’ model makes specific conjectures about the relative strength of income and substitution effects. It has found a range of empirical support in certain classical or core segments of live cultural production (Throsby, 1994; Blaug, 2001). Yet Cowen (1996) argues that the model does not account for the positive effects on cultural consumption of new technology in cultural production, particularly in distribution and embedding in other products. This point was readily conceded by Baumol (2006).

Thus, we have a model in which technological change affects cultural consumption by lowering its price and furnishing new consumption possibilities, and also a model of new technology affecting other sectors to a greater extent than culture, raising the relative cost and price of cultural consumption. So, does technological change increase or decrease the marginal price of cultural consumption? The answer depends upon which parts of cultural consumption we refer to. Technological change affects the relative price of cultural consumption, but also the relative price of cultural substitutes and complements. It offers new cultural consumption possibilities and shapes new cultural preferences. Technological change and the dynamics of cultural consumption are perhaps therefore best understood as co-evolving.

This chapter outlines the standard model of how technological change affects cultural consumption as a normal good with special features (Throsby, 1994; Caves, 2000). It also examines the co-evolution of technological and cultural economies, considering endogenous preferences, entrepreneurial opportunities, and broad shifts in behaviors, including those associated with risk. This advances an evolutionary economic approach to how digital and new media technology effect cultural consumption and vice versa.

9.1.2 Definitions

Cultural consumption has its standard meaning in the economics of arts and culture. This is narrower than the anthropological and institutional definitions of culture as all things humans do (e.g. Jones, 2006), referring mostly to the discretionary arts and cultural consumption. Still, our definition needs to be sufficient to cover cultural consumption as circumscribed by Galbraith (1960) and Baumol and Bowen (1966), and as implicit in the Journal of Cultural Economics or, for example, in Blaug (1976), Throsby and Withers (1979), Frey and Pommerehne (1989), Throsby (2001), Heilbrun and Gray (2001), and others. This includes visual and performing arts, music, film, and other cultural outputs broadly understood as ‘high culture’ – with a lower bound that crosses into ‘popular culture’ (Cowen and Tabarrok, 2000). This defines culture in a way that emphasizes positive externalities in consumption. We will extend this to also include commercial culture (Caves, 2000; Cowen, 1998, 2002), which brings us closer to the DCMS (1998) model of creative industries. This may be represented by, for example, Throsby’s (2008) concentric circles model of the cultural industries. The social network markets model of Potts et al. (2008) also spans this definition, as do models of the experience economy (Pine and Gilmour, 1999; Andersson and Andersson, 2006).

Cultural consumption implies preferences and a market, even when such ‘markets’ may operate with zero monetary prices. This occurs when factors such as time, reputation, identity, and so forth enter the utility function, causing changed behaviors in cultural consumption that are not a direct response to changed prices and incomes. Significantly, cultural goods and services are both information goods and experience goods (Hutter, 2008). Depending upon technological and institutional factors, cultural goods may be rivalrous or non-rivalrous and excludable or non-excludable. Cultural consumption occurs over the space of information and experiences with cultural content, in the sense of being about people, life, society, meaning, and aesthetic experience, or more broadly about social consumption of new value propositions.

A new technology adds to the stock of technology (Romer, 1990), but the definition of new technology here is close to that of general-purpose technologies (Lipsey et al., 2005), where digital media are such a driver (Bresnahan and Yin, 2010). Arthur (2009) outlines a general framework of technology as a self-creating space of capabilities, where each new technology builds on and recombines previous technologies. This defines technology as a space that enables some transformation possibility, which is a useful definition because it works on both the producer and consumer side of analysis. Transformative technologies also tend to arise at the intersection of several domains of knowledge. However, we will abstract from other considerations, such as differences between routines, knowledge, and technology (Nelson and Winter, 1982; Mokyr, 2001), and from the rule-based model of technology (Dopfer and Potts, 2008), and from social constructionist definitions of technology in science and technology studies (Pinch and Bijker, 1984) and in economic sociology (Callon, 1987).

The standard operationalization of technological change is a shift in the function connecting inputs and outputs, and ultimately with general equilibrium price effects on both inputs and outputs. Technological change is therein defined as a shift to a lower isoquant or to a higher product transformation curve (i.e. production possibilities frontier). Under market competition, this lowers consumer prices. Technological change improves consumer welfare as a shift along the demand curve to a new equilibrium of higher consumption at lower prices.

A Schumpeterian definition of technological change examines how new goods are introduced by entrepreneurs reacting to new technological opportunities (Schumpeter, 1942; Nelson and Winter, 1982; Dopfer and Potts, 2008). This focuses on how new ideas are introduced into markets and offers a model of technological evolution in which some technologies are earlier or more well understood, with others more experimental and uncertain. The set of technologies forms a complex co-evolutionary relationship in which ‘new technologies’ refers to the frontier of a technological discovery process and its development in markets. New technology may be an addition to a stock of technology (shifting the production function and supply curve) or part of a technological trajectory (creating new supply and demand curves). We will interpret both cultural consumption and new technology broadly.

9.2.1 Theory

Technological change shifts the production function for cultural goods and services outward. More cultural output can be produced for the same input cost or the same output for lower input cost. In a competitive model this shifts the supply curve downward along the demand curve for cultural consumption. Assuming that preferences and the set of cultural goods and services remain unchanged, technological change is predicted to increase consumer surplus as relative prices fall and income and substitution effects occur, leading to changed patterns of cultural consumption.

The increase in consumer surplus may occur in several ways depending on own-price and cross-price elasticities of demand (Heilbrun and Gray, 2001, p. 5), and income elasticity of demand associated with the new technology-induced fall in price. Evidence of substitution effects can be found in econometric estimates. In a survey of price elasticities in the performing arts, Bruce Seaman (2006, p. 431) concludes that the evidence ‘could suggest that the arts do indeed have lower price elasticities than other goods and services when evaluated at comparable prices’. Estimates on income elasticities also conform to this same assessment, but with greater variability and ambiguity (Pommerehne and Kirchgassner, 1987; Felton, 1992; Throsby, 1994). While sensitive to levels of aggregation, econometric evidence weakly finds that demand curves are indeed negatively sloped; namely, that the performing arts (where estimates of arts demand curves concentrate) are normal and not luxury goods, and that positive cross-price elasticities exist (Seaman 2006, p. 476). So, technological change does indeed increase consumer surplus in the aggregate.

In a general equilibrium model of Hicks-neutral technological change, any new equilibrium will have higher consumer surplus by either increased consumption of cultural goods or increased consumption of other goods with cultural consumption unchanged. Which way this goes depends on how diminishing marginal utility sets in with any particular bundle of cultural goods and how other constraints become operative. For example, a common marginal constraint in cultural consumption is time as opportunity cost or complementary goods and services such as travel costs. Technological change may also increase the price of a cultural good, as associated with a significant increase in quality or owing to bundling of multiple cultural goods into a single more valuable experience (e.g. the recent generation of smartphones).

Yet the positive effect of technological change on consumer surplus does not necessarily hold for producer rents. The new technology of movable-type printing lowered the incomes of some scribes, photography lowered the income of some portrait artists, and home printing and photo-editing software has lowered the incomes of some professional photographers. The forces of Schumpeterian creative-destruction tend to concentrate on the producer side of the market. However, this does not negate the positive effects on the consumer side; indeed, it is part of the mechanism by which lower prices increase consumer surplus, whether by lowered transformation costs, lowered transaction costs, or both.

New technologies may also affect particular segments of cultural production, but with less impact on substitutes. The relative price of substitutes thus changes, inducing a new equilibrium in cultural consumption that may yet leave aggregate consumption unchanged. We might consume an hour of music per day, for example, but how we do it may change in consequence of new technological possibilities. A classic example is live versus recorded music, as imperfect substitutes (Heilbrun and Gray, 2001, pp. 119, 145–148; Throsby, 2001, pp. 118–119). Before modern recording technologies, to hear music required experiencing it live by attending concerts, waiting for troubadours, or playing it yourself. By the early twentieth century, however, new recording and broadcasting technology changed this completely, lowering the relative price of recorded over live music. A further effect was that the quality of recorded music rose in relation to live music, changing the substitution tradeoff (or equivalently making live music relatively more expensive from an opportunity cost perspective (Earl, 2001)). This led to a complex effect, increasing the quantity of music consumed by offering a lower-cost substitute and also to a mix in the way music was consumed by offering a higher-quality substitute for live music. In short, the real cost of listening to music, along with many other forms of culture, has fallen substantially due to technological change, resulting in increased consumer demand driven by higher quality and lowered price.

9.2.2 Examples and Welfare Effects

The pattern by which technological change affects the relative price of substitutes within each domain (e.g. music, story-telling, visual and performing arts, etc.) can be widely observed across cultural consumption. The most common effect shifts demand toward the particular substitute most affected by the new technology, which invariably means toward lower price and increased access. This increases demand for the lower cost substitute and also, importantly, lowers the opportunity cost to entrepreneurial experimentation with that substitute. Technological change in artistic and cultural consumption possibilities will therefore tend towards increased distribution, access, and mass consumption of the artistic or cultural product. This increases consumer surplus by lowering the marginal cost of consumption. In the nineteenth century, for example, choice among wall-hangings centered on hand-painted options, even when reproductions. However, as printing technologies improved, artworks for home decoration became much cheaper, increasing demand. Consumers with preferences for art on their walls, but previously priced out of the market, could now enter. This pattern repeats in stories (e.g. free-to-air broadcasts, blogs), music (e.g. iTunes), fashion (e.g. prêt à porter), books (e.g. Penguin and now e-books), and so on.

This growth of consumer surplus is composed of lowered prices of cultural goods as well as improved access and distribution. Better transport and communications technologies allow cultural goods to be increasingly offered to global markets, whether as physical objects (as Amazon ships books) or digital information (e.g. file downloads). New technologies of transport, logistics, and communication also lower the real price of cultural consumption (Cowen, 2002). A wider example may illustrate. Consider the commercial jet-airliner. This lowered the real price of travel for cultural consumption of goods and services in places previously too expensive. However, this new transport technology also enabled visiting the Louvre, for example, to be more affordable. Now the Louvre is free by virtual tour. Technological change makes visiting the Louvre cheaper, moving it down the demand curve and generating increased levels of consumption.

The welfare effects are increased consumer surplus (with preferences unchanged). That people in the nineteenth century did not decorate their houses, listen to music for hours each day, or experience the world’s great museums and galleries was not because they lacked a preference for these cultural goods and services (McCloskey, 2006), but because at the prevailing prices and incomes of the time very few such transactions occurred. Technological change enables an increase in economic welfare as cultural consumers are able to enter markets and make transactions that were simply not available to them before, owing to a very different constellation of relative prices. Two effects follow.

First, other constraints may start to press, the obvious one being time or opportunity cost. If much of the world’s art can be viewed online, it becomes possible to spend many hours a day consuming art at low or near-zero marginal cost. Yet this takes time away from other activities, such as work, family, sports, or other leisure activities. Even when free, we would still expect cultural consumption to be bounded by the choice to equalize marginal utility with other substitute activities.

A second welfare effect accrues to consumers not affected by technological change where the value dynamic turns on substitution possibilities, such as when the value of the original work shifts from direct aesthetic value to a status or positional good, where value accrues to the unique or genuine qualities of the cultural good or experience (Hutter, 2010). Technological change may amplify demand for cultural consumption that remains unaffected by technological change because as these forms become increasingly exclusive and expensive they function better as social signals. This is a pathway by which cultural consumption becomes strategic and elite.

9.2.3 Other Effects

As new technology lowers the price of cultural consumption, shifting market equilibrium to higher demand, markets for complementary goods will also be affected. First, most cultural goods are consumed with other goods. Paintings or prints are complementary with picture-frames and lighting, movies are complementary with popcorn and reviews, recorded music is complementary with stereo equipment, and visits to cultural sites are complementary with local food and accommodation. New technology that lowers price and increases demand for a cultural good (e.g. paintings, movies, museums) will increase demand for complementary goods. These complementary industries will benefit, whether they experience technological change themselves or not.

A second mechanism is mass consumption. Here, it is not simply complementary demand (e.g. a print requires a frame), but the effect of scale at which the complementary good can be produced due to higher demand (e.g. frames made in factories rather than by hand). This increase in demand opens the possibility of further specialization and division of labor (e.g. parts of the frame made in one country with other parts elsewhere and distributed globally). This scale effect harnesses the technologies of industrial production and distribution to lower the costs of complementary goods (as a form of induced technological change), further lowering the total cost of cultural consumption.

As new technologies lower the price of cultural consumption they also lower the costs of experimentation in innovative cultural production, as well as the consumer risks associated with novel cultural consumption. A lowering of the cost of inputs into creative production (e.g. a fall in the price of paint, musical instruments, or editing software) lowers the cost of experimenting in those artistic domains (Hutter, 2008; Potts and MacDonald, 2010). This enables amateur artists and musicians to try new things at lower marginal cost, potentially enabling a new supply of entrants that may have been previously blocked by experimental cost barriers to entry. A lowered-cost-of-experimentation effect is also likely on the consumer side. As the price of cultural goods falls, so too does the opportunity cost of experimental sampling or browsing over forms of cultural consumption with which the consumer may have had little or no previous experience. They will be in a state of uncertainty about whether the new information fits with their preferences (Earl and Potts, 2004). As the price of cultural goods falls in consequence of new technologies, the opportunity cost of increased consumption of goods the consumer already enjoys falls, but so does the cost of sampling previously unexperienced cultural goods. Falling prices facilitate consumer ‘entrepreneurship’ or discovery of new sources of utility. Lowered prices can mean more (moving down a demand curve), but can also mean different (moving to new demand curves). Preferences for culture shape early and accumulate slowly as we further invest in the skills of appreciation (Stigler and Becker, 1977). Yet at the same time they are heavily conditioned by social network effects that trail from an ongoing personal heritage of the preferences of family and friends.

The ability to be a wide-ranging cultural omnivore was once more costly than it has recently become, owing to the lowered costs and greater potentials of new media technology. In consequence, fewer people sought such eclectic patterns of cultural consumption (Peterson and Kern, 1996; Cowen, 2008). New media technologies, in particular, have made the sampling of perhaps exotic or rarefied forms of arts and culture only a mouse-click away. In decades past, to experience Mongolian throat music or Polynesian pahu drumming, short of traveling to these faraway places, you needed to spend considerable time and pay premium prices for hard-to-find recordings. Either way, effortless sampling was inconceivable. However, with YouTube, for example, you can experience these art forms at very low cost. The falling price of experiential sampling lowers the opportunity cost of doing so, enabling cultural consumers to wander further from familiar zones of cultural consumption. Cultural consumption can occur at lower risk in terms of expensive commitments, meaning once again that it can be not just more but also different. This does not suppose new goods or new preferences, just a lowering of the cost of cultural consumption in sampling an experience good to the point where costs become negligible. New technology can thus also affect the variety of cultural consumption, as discussed further in the next section.

9.3.1 Theory

New technologies can increase the space of cultural consumption possibilities. This happens in two ways: (i) through the introduction of a new technology such as print, paint, or film, for example, that introduces new goods as inputs into cultural production that were previously unknown or little experienced (Eisenstein, 1980), and (ii) it may occur through new technologies that increase access to wider cultural goods and services, such as through expanded markets (Cowen, 1998, 2002). In both, the cultural consumer experiences technological change as increased variety and diversity in cultural consumption possibilities. Unlike the above model where new technology increased the utility from cultural consumption by lowering price, this model makes fewer assumptions about price effects (it may rise, fall, or remain the same), but instead turns on a better matching to diverse and perhaps idiosyncratic preferences and from the proliferation of niche markets. Aspects of this model are developed in Potts (2011), who presents an evolutionary economic analysis of co-evolution of new technologies and new patterns of cultural consumption. Observe that in the neoclassical model, technological change first affects the supply side, increasing output productivity; then affects the demand side only by lowering relative price under competition, inducing a shift down a demand curve. However, in an evolutionary model it is the demand curve that changes, either by changing shape or by entirely new demand curves appearing associated with new markets. The increased variety of cultural goods and services may arise as new technologies open new artistic possibilities (e.g. chemical advances make possible new pottery glazing, or computational advances make possible CGI-animation). Or new technologies may enable access to a larger collective stock of cultural capital due to increased storage and access (a particular capability of digital technologies) as well as search technologies to navigate this much larger space. A larger stock of accessible cultural capital would be expected to function in the same way as the Romer (1990) model in relation to the stock of ideas, driving increasing returns. Even recognizing that new digital technologies commonly converge in both technological and cultural dimensions (Jenkins, 2006), the result is further expansion of the space of cultural consumption possibilities. An example of this is the rapid rise of the genre of fan fiction (Hellekson and Busse, 2006; Schwabach, 2011), made possible by the combination of the Internet, social networking sites, and low-cost editing and production software. This amateur production remixes and sometimes entirely recreates new works as homage to artistic production (e.g. remixing Star Wars or Harry Potter). This serves as a new genre for consumption in itself, often greatly enriching the cultural space about any particular work of creative art.

Increased variety is met by each consumer as a new potential adoption process in the face of increasingly abundant cultural novelty. The consumer experiences a novel cultural good as a flow of information that will be of uncertain value, but which also may be recorded, reproduced and even recombined in various ways. The challenge in dealing with technology-induced novelty for the consumer of culture is not simply that of a rational agent recomputing a preference map then reconfiguring optimal actions. The deeper challenge lies in assessing the value of such novelty, and in developing appropriate rules for the origination and adoption of the novel cultural variety (Stark, 2009). This begins the process of changed preferences for cultural consumption by adaptation of underlying rules for choice (Earl and Potts, 2004). A further consequence is that changed patterns of cultural adoption differentially affect the structure of the knowledge-base of the economy, driving economic evolution. New cultural adoption processes flow through to changed patterns of demand for the underlying technologies that facilitated these possibilities. Consumer selection in the markets for various technologies, industries and factor markets drives an evolutionary process of ‘creative-destruction’ that can be a further source of new technologies (Mokyr, 2001).

While this co-evolutionary mechanism can operate via market feedback, it may also occur directly when consumers interact with producers; for example, through discovery of new uses of cultural elements, which we might expect producers to monitor, that in turn feed back to the trajectory of a new technology. Such consumer co-creation is particularly evident in, for example, new social media and the games industry (Castronova, 2005; Burgess and Green, 2008; Cowen, 2008; Banks and Potts, 2010). This process tends to knit together different technologies and devices toward increasing interoperability through the evolution of interface standards and modular development. Cultural consumers select from the increased variety generated by new technology, feeding back into the further evolutionary development of new cultural variety, ad infinitum. Cultural preferences, cultural markets, and ‘cultural technologies’ all co-evolve.

9.3.2 Examples and Dynamics

An example of new technology increasing cultural variety is YouTube cartoons. This is not simply a channel for searching and experiencing the past stock of cartoons produced by a Hollywood studio, for example, but rather a long tail of genre-rich cartoons where you can be surprised, delighted, and even offended. More than that, using suites of software technology (e.g. flash animation and java scripts, or increasingly via platform-specific apps) you can make your own cartoons to share with others who might further contribute or sample. This illustrates two points about technology-culture interdependence: (i) technology is generative of new culture in a neutral way (there is no technological constraint on what is cartooned or its meaning) and (ii) technology shapes how ideas are expressed (e.g. linear visual narratives are obviously favored in this case). There is no long-run equilibrium between these tensions. Technology supervenes on cultural ideas and vice versa. Technological variation can explain why certain cultural ideas exist at a point in time, just as cultural selection can explain why certain technologies exist. The economics of these observations relates to how preferences over cultural consumption change. The evolutionary approach supposes that both preferences select on new technology and that technology selects over new preferences. This co-evolutionary process can grow in complexity and in scale. For example, the expansion of artistic consumption from an elite and privileged group to a mass phenomenon is a major consequence of new technology, raising the scale and scope of cultural experience. Baumol (2006, p. 345) calls this ‘the dissemination revolution’ that has, in the context of the new economy, ‘made all forms of art accessible to a degree beyond anything previously experienced’ (p. 344). Increased variety thus drives preference evolution.

What is the effect on utility and welfare? For individual utility, the effect of technology-induced increases in cultural variety is the possibility to explore new or little-experienced preferences. Depending on specific preferences and associated price vectors, the net result could send consumer surplus in various directions. Increased variety increases consumer utility only under certain conditions. Consider the interaction of cultural capital investment and adapted cultural competencies under the adoption experience of cultural novelty. In one outcome cultural consumers quickly adapt to the new cultural forms generated by the new technologies. In another they might not, getting stuck along the way, amortizing cultural capital while failing to adopt the new rules or understand the new possibilities. These latter consumers experience a net decline in cultural consumption due to the apparent drift away from their own habituated rules for choice and technological mediums of cultural consumption. Changes in relative prices may exacerbate this situation, making a particular cultural consumption form increasingly expensive without necessarily inducing adaptation to evolutionary drift under increased variety.

Economic analysis of how new technology and cultural consumption interact is best focused on the adaptation processes on the consumer side as much as on the competitive process on the production side. This suggests a specific focus on the co-evolution and adaptation of new preferences over cultural consumption.

9.4.1 Theory

There are pathways by which new preferences for cultural consumption can emerge in consequence of new technology. Existing preferences previously inoperative may be activated or new preferences developed. If preferences are exogenous, then new cultural goods simply meet them or not. This plays out in an ongoing evolutionary game of creative proposal and market selection. Preferences can also shape more slowly, perhaps intergenerationally, through cultural and institutional forces. These commonly extend outward from the family through broader sociocultural and political institutional pathways. We will here recognize the significant extent to which preferences are ‘given’ in the sense of Stigler and Becker (1977) and in evolutionary psychology (Dutton, 2009).

However, we can also drop the assumption of exogenous preferences and allow that preferences evolve, in that they are themselves a kind of ‘utility technology’. New preferences co-evolve with new technologies in a complex sociocultural space. This does not say they are socially constructed, because that implies a dominating or centralized mechanism. However, such social learning or preference evolution is properly understood as a decentralized and self-organizing process. New technologies change the opportunity space and selection environment of these preferences and their realization in cultural consumption.

9.4.2 Examples and Welfare

Key examples accrue to how technology-enhanced social interaction affects preference formation. Consider, for example, how social network markets (Potts et al., 2008) shape the evolution of new preferences (Earl and Potts, 2004) and specifically in a context of evolving market institutions through the adaptation of market devices (Karpik, 2010). These create viable new local economic orders. A particular example is Facebook interaction. On this media platform, cultural consumers interact in a real-time social environment to share each other’s experiences and value judgments that shape ‘friend’ preferences through mutual instantiation. This is a model of a decentralized process by which local information about cultural experiences can affect others. These may be other people, aggregates of people, or market devices that facilitate both. Any innovation that changes the way we are influenced or changes our access to information can change our preferences and thus the consumption choice set.

Consider four implications. First, we should recognize the social information role of advertising, fashion, fads, and the growing role of social network markets as a major source of new value added by new technologies. The economist’s information concept of a competitive market and the game theorist’s concept of common knowledge are inadequate representations that do not account for the social technologies involved in making choices over new goods requiring new preferences and rules for choice.

Second, new technology adoption is in part driven by the diffusion of preferences concordant with that technology. This co-evolutionary feedback may occur as new technologies meet the selection pressures advanced by cultural consumers. Technological possibilities and cultural possibilities can meet and interact. The result is predictably chaotic with an outcome the result of unpredictable self-organization. The impossibility of prediction here is not so much because we do not know what is technologically possible, but rather because we do not know what consumers will like in response to new opportunities. Individual preferences over cultural consumption can be significantly influenced by the drift of social learning (Bentley et al., 2004). Social dynamics, and social learning, in particular, should be central to the study of how new technology affects cultural consumption.

A third line on technology-induced new preferences is the margin of risk. New technologies can change the level of risk that consumers of culture find acceptable, enabling experience of higher levels of consumption risk, both as sampling and adoption. New technologies enable increased sampling of cultural elements, changing not only the space of cultural consumption but the level of risks cultural consumers might take. Cultural consumption is an experience good (Hutter, 2008) and what Karpik (2010) calls a ‘singularity’. Novel cultural consumption is inherently risky and of uncertain value. It relies on various rules, institutions, and market devices to ascertain value and therefore demand. However, new technologies can change the profile of risk-taking in cultural consumption by advancing more easily into wider cultural consumption spaces than previously explored or known. New technologies can enable cultural consumers to extend their domains of cultural consumption by lowering their thresholds of risk associated with novel consumption. Lowered risk preferences will increase experimental consumer demand, and market niche development.

A fourth observation concerns how new technologies affect consumer capability, not just in finding and experiencing culture, but also in producing it. New information and computational technology has made it possible for amateur cultural producers (i.e. those who produce for themselves, not for a market) to achieve, across a wide range of artistic forms, far higher levels of capability than in previous times. One explanation is that amateurs now use many of the same technologies as are available to professionals, as underlying devices such as cameras increasingly become mass-produced commodities. It is important to recognize how unusual this is in a modern economy. Pharmaceutical drugs and cars, for example, are produced with sophisticated technologies that are inaccessible to pill and car consumers. Cultural consumers, however, increasingly have access to many of the high technologies available to producers of arts and culture.

One outcome of this trend is that the amateur/professional distinction blurs as cultural consumers attain high levels of proficiency, acquired as a result of direct learning through popular media (books, TV shows, Internet, etc.) and experimentation and support provided by social feedback from other enthusiasts. Developments in information and communications technology (ICT) have made these sorts of social learning networks far easier to form and access (Shirky, 2009). An example is ‘canon rock’ – a micro-culture in YouTube of self-filmed amateur solo guitar videos with highly stylized arrangements. It is a cultural consumption community that challenges each other in virtuosity and display of new techniques and in feedback. Yet it is possible that none of the members of this micro-culture have ever met. Similar things happen on Flickr, where amateur photographers post and discuss each other’s work. This sort of new-technology-mediated involvement in a community that produces and consumes culture can enable a higher level of cultural proficiency and experience than any individual might achieve operating alone. New technologies can thus change preferences by extending the range of competently consumable experience.

It should be noted of course that this explosion of amateur and consumer-driven variety does not necessarily imply an increase in quality. It can be argued that it is more difficult now to discover quality, due to the avalanche of quantity and variety loosened by new technology. Still, however, this depends upon perspective. It is reasonable to conjecture that average quality has declined. This is certainly true at the lower tail of the distribution, but it is an open question whether this has also occurred in the upper tails where lowered access costs may in fact have brought forth more amateur genius, even at the cost of lost attention to experienced professional artists. The nature of this balance and its cultural implications remains a key question for further research on the cultural effects of new technology.