Special supplement to the Journal of Cultural Economics. Selected papers presented at the conference L'economie du Spectacle Vivant et L'audiovisual, Paris, France, October 15-16, 1985. My variations of this theme of resource allocation begins with a commentary on the cost disease thesis which, as Hilda and Will Baumol remind us, is often misunderstood. I shall supplement some of their own remarks from my own experience of how such misunderstanding arises. Following the lead of M. Dupuis, I shall consider its application to the position of the individual cultural firm,and particularly its position vis-a-vis the government. I shall end my commentary by considering some of the implications for policy problems which arise through the interface between the subsidized theatre and music and governments.

The Baumols explain very clearly and succinctly the meaning of the cost disease and what I have to say is an amplification, but, I feel, a necessary one. It is perfectly true, that once a piece of music or a play is written, and the number of players or actors and the number of notes or words are specified, then labor saving innovations in a particular work of art cannot be introduced. So long as the particular piece of music or play is in the repertoire, or similar works are in the repertoire, then the cost disease problem is clearly discerned. Two comments are in order about this situation First, a not unimportant part of the standard music repertoire, Baroque music for example, does not specify in precise detail the number and even the instrumentation of the musical product. This must allow some element of factor substitution without the audience perceiving this substitution as a destruction of the product.

Secondly, the virulence of the cost disease is a function of the composition of the musical or theatrical repertoire. The rational response to the cost disease by the composer or playwright whose works will not be played because they are too expensive to produce, will be to consider how costs can be reduced; e.g. by requiring fewer players. It cannot be assumed that artistic quality is purely a function of the number of musicians or actors, so that economy in labour input need not imply a falling off of quality. Therefore in a dynamic situation in which the repertoire could change, cost reductions per unit of output can be made.

It will be noted, however, that once the product is produced, labour saving innovations are not possible, as Baumol's law stipulates. This observation highlights an important difference between the operation of Baumol's law in the theatre and in the concert hall. The Baumols demonstrate this very clearly in showing how the average cast size has declined over time in Broadway straight plays, a development made possible by the turnover in the repertoire. However, the turnover in the serious music repertoire is much stickier. The number of new works is a very small proportion of the repertoire stock which is dominated by 19th Century music. The result is that cost reduction through cast reduction is severely limited, and the full force of the cost disease must be felt.

CONTENTS
Introduction.
The cost disease: What it is and what it is not.
Deficits and subsidies.
Implications for public policy.
Footnotes.

Special supplement to the Journal of Cultural Economics. Selected papers presented at the conference L'economie du Spectacle Vivant et L'audiovisual, Paris, France, October 15-16, 1985. My variations of this theme of resource allocation begins with a commentary on the cost disease thesis which, as Hilda and Will Baumol remind us, is often misunderstood.