Reimagining the Economics of Culture

By Mariana Mazzucato

Brazil’s Carnival, the greatest party on earth, ended last week. For those who have never been, no description does it justice. The blocos playing in the streets, the samba schools parading through Rio de Janeiro’s Sambadrome, the drumlines, the costumes, and the collective joy of millions of people constitute a spectacle unto itself. In dark and divided times, Carnival reminds us that participation, creativity, and shared celebration are not peripheral to economic life. They are part of what economic life is for.

And yet, financial support for arts and culture is often treated as a cost, not an investment. Whenever governments face fiscal pressure, these budgets are the first to be cut, while finance, technology, and defense are protected as engines of the ‘real’ real economy.

This prioritization reflects a conceptual failure. Culture is not a sector in the way that manufacturing or construction are. It is a pervasive force that shapes the skills, creativity, and social fabric on which all economic activity depends. In London, the Notting Hill Carnival is too often discussed in terms of crime, disruptions, and policing costs, at worst, or visitor receipts and tourism revenue, at best.

The event generates roughly £400 million ($536 million) in direct economic value. Similarly, in Brazil, Carnival attracts 1.36 million foreign visitors and generates an estimated US$2.2 billion in direct tourism-related activity.

Yet in both cases, these numbers represent only the tip of the iceberg. As the artist Alvaro Barrington and I showed in 2024, the Notting Hill Carnival creates immense public value—through skills development, social cohesion, civic identity, and community infrastructure—that no standard cost-benefit framework can capture.

The musician and producer Brian Eno contends that Carnival is most successful when “the number of participants isn’t grossly outweighed by the number of spectators”—when people of all ages, backgrounds, and abilities are not just watching but joining in and contributing something of their own.

That is a description of co-creation, not mere consumption. But co-creation is exactly what our standard economic metrics overlook. When the official statistics show that Brazil’s creative economy generated $75 billion in 2025 (3.59% of GDP) and supported 7.8 million workers, they still miss the extraordinarily complex year-round production economy that sustains this activity. For example, in Rio’s City of Samba, the construction of Carnival carros alegóricos (floats), the design and fabrication of fantasias (costumes)—whose quality reaches the level of haute couture—the training of passistas (samba dancers), and the logistics networks that sustain it all are ignored in the standard impact assessment.

Part of the problem is that all cultural events and institutions, whether museums or carnivals, are assessed by ticket sales, not by the learning, well-being, and social connection they generate. Concert halls are evaluated by the revenue they generate, not by the creative industries they seed or the civic identity they sustain. As I demonstrate in a recent working paper, what we measure shapes what we invest in, and our current metrics systematically undervalue the dynamic, long-run returns that culture generates. Festivals like Carnival are both a powerful illustration of this failure and a powerful corrective for it.

Moreover, Carnival is not just a cultural event; it is a training ground for the state. In Bahia, civil servants and cultural leaders regard Carnival as a public platform for innovation: a real-world test of inter-departmental efforts to deliver high-quality outcomes under pressure. Pulling off a successful Carnival requires coordinating health, security, labor, transportation, and communications across many agencies, in real time, and on an enormous scale.

We should thus be investing in arts and culture to broaden opportunity and build a more creative economy, where culture drives the direction of overall growth, not just within ‘creative industries’. Brazil’s own Brasil Criativo program, developed with UNESCO, represents a big step in this direction, by framing support for culture and the arts as a driver of economy-wide spillover effects. It builds on the work of Paulo Miguez, Rector of the Federal University of Bahia, who in 2007 argued for the centrality of culture to all dimensions of economic and social life.

And as Rafaela Bastos, the president of Rio’s Fundação João Goulart and a former passista, put it to me: Carnival is a “structural laboratory for the public sector.” It trains governments to plan, listen, deliver, and learn. This is precisely the kind of dynamic public-sector capability that is so difficult to build and so easy to destroy through austerity and outsourcing. As my colleagues and I are discovering in work on a Bloomberg Philanthropies-funded project with cities around the world, an event like Carnival can serve as a sandbox for re-learning what the modern state is capable of.

This state-capacity argument comes with an important caveat, however. Capabilities must not overshadow equity concerns. In Rio, the camarotes – corporate VIP boxes lining the Sambadrome parade route – are a stark symbol of a wider risk. While communities from some of the city’s poorest favelas produce the spectacle, wealthy audiences passively consume it at premium prices. In Bahia, Carnival generates some $1.56 billion in tourism revenue, but a disproportionate share of it goes to the already wealthy. Value created collectively is too often captured privately.

This all-too-familiar pattern is not inevitable. Inequality and the commodification of Carnival are design choices. Governance could be structured to promote shared value, with returns flowing back to the communities that created it.
To that end, governments should heed three lessons. First, they should adopt dynamic metrics of cultural value, which means accounting for skills formation, social cohesion, civic trust, and state capabilities; not just tourism revenue. Second, community governance mechanisms and conditionalities are needed to ensure that the value generated by public support for culture and the arts benefits its creators. And third, policymakers should view culture as a lens through which industrial strategy, urban development, and social investment are imagined and designed.

A collaboration between Brazil’s Ministry of Culture and UCL’s Institute for Innovation and Public Purpose uses Carnival as a case study for how to improve measurement of the public value of arts and culture. The methodology we are developing—moving from static impact assessments to dynamic measures of public value—will, we hope, influence how we think about the economics of arts and culture globally. As the great Brazilian development economist Celso Furtado pointed out decades ago, “Culture is not a sector of development. It is the very foundation of development.” Economic frameworks that ignore this basic truth are failing us.

Mariana Mazzucato is Professor in the Economics of Innovation and Public Value at University College London and the author, most recently, of The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments and Warps Our Economies.