What Is the Creative Economy?

How economists define and measure the creative economy, which industries it includes, and why it has grown in importance.

The creative economy refers to economic activity based on creativity, culture, knowledge and ideas. It includes industries whose main products are artistic, cultural or creative works.

Which industries

Definitions vary, but the creative industries commonly include:

Film, television and radio.
Music and performing arts.
Publishing, including books, newspapers and magazines.
Visual arts, crafts and design.
Fashion.
Architecture and advertising.
Video games and software.
Museums, galleries and heritage.

Why it matters

The United Nations Conference on Trade and Development, UNCTAD, has tracked strong growth in world trade in creative goods and services. Creative industries often employ many young people and freelancers, and they shape how countries are seen abroad.

Distinctive economics

Creative industries share some unusual features:

Uncertain demand: it is very hard to predict which film, book or song will succeed. Economist Richard Caves called this the “nobody knows” property.
High fixed costs, low copying costs: making a film is expensive; copying it digitally is almost free. This is why intellectual property, such as copyright, is central.
Superstar effects: a few hits earn most of the revenue.
Many freelancers and small firms, with irregular income.
Non-market value: culture contributes to identity, wellbeing and social connection beyond money.

Measuring it

Measuring the creative economy is tricky, since creative workers are found across many industries, and much creative activity, like amateur arts, is unpaid. Several countries, including the United Kingdom, publish official statistics on the creative industries.

Nobody knows

A publisher releases 100 new novels in a year. Most sell modestly, a few lose money, and one becomes a bestseller that earns more than all the others combined. The publisher cannot reliably tell in advance which book will succeed, so it spreads bets across many titles. This uncertainty shapes how creative businesses operate.

Thinking the creative economy is only about art for art's sake

Creative industries are major employers and exporters, and creativity also feeds into other sectors through design, advertising and software. They matter economically as well as culturally.

Key takeaways

The creative economy is based on creativity, culture and ideas.
It includes film, music, publishing, design, fashion, games, museums and more.
Uncertain demand, high fixed costs and superstar effects are distinctive features.
Culture also has non-market value for identity and wellbeing.