The document discusses whether there is a definable "creative sector" and what it might constitute. It summarizes that while standard economic classification systems may not fully capture emerging industries, there are signs that a new creative sector is developing, characterized by: 1) A stable, global rise in demand for cultural goods and services. 2) A qualitative reshaping of industrial structure around flexibly specialized, high-tech production of differentiated, cultural products and services. 3) The rise of cities as locations for clustering and agglomeration economies in the new paradigm of small-run, customized creative production.

1. Is there a Creative Sector?
Alan Freeman
GLA Economics
LSE 15 December 2003

2. Culture, creation and intervention
 Commodification has redefined ‘culture’
– ‘Creative Sector’ is treated as ‘Culture that makes Money’
– Provoked search for evidence to inform policy
– But: one policy, many policies – or no policy?
– Is there in fact a single ‘thing to intervene in’?
 DCMS uses ‘standard’ economic classification systems
– Standard Occupational Classification: what the workers do
– Standard Industrial Classification: where they do it
 What does ‘Sector’ mean?
– No-one distinguishes it from ‘industry’
– So we will study the two terms interchangeably
– Unfortunately, ‘industry’ is no better defined than ‘sector’ …

3. Where are we in the research cycle?
Analysis
Data
Action/
Observation
Hypothesis: a new phase of cultural
commodification
Use standard classifications to
study commodity-producing
activities (Art, Fashion, software)
They have something in common: but what?

4. Thesis
 There is no such thing as a ‘science sector’
 There is no such thing as a ‘knowledge sector’
 But there may be a ‘creative sector’, with
– common market
– common processes of production
– (a?) common supply factor(s?)
 And moreover
– agglomeration externalities (clustering)
– and extensive market interconnection

5. What weknow,1: a stable,qualitative, domestic and global, across the
board rise in demand
5%
7%
9%
11%
13%
15%
17%
19%
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Leisure goodsand servicesasshare of household expenditure
Advertising share of service exports
Audio-visual share of service exports

6. London’s output growth
1995-2000
What weknow 2: a qualitative reshaping of industrial structure
Jobs growth
Output growth

7. What we know 3: a new regional pattern of growth
jobs
growth

8. London: CI job
growth 1995-2000
Including in London itself

9. Borough      
Havering 2,744 4,147 6,610 281 3,866 4%
Barking and Dagenham 1,948 3,587 5,074 461 3,126 9%
Waltham Forest 6,566 6,900 11,726 1,740 5,160 15%
Harrow 10,517 8,443 16,466 2,494 5,949 15%
Greenwich 7,688 4,939 10,851 1,776 3,163 16%
Bromley 16,098 9,654 21,558 4,194 5,460 19%
Newham 7,072 4,295 9,417 1,950 2,345 21%
Bexley 5,003 3,337 6,848 1,492 1,845 22%
Hillingdon 9,961 9,420 15,874 3,507 5,913 22%
Ealing 17,849 14,523 26,446 5,926 8,597 22%
Croydon 12,256 12,713 20,149 4,820 7,893 24%
Enfield 8,638 6,544 11,844 3,338 3,206 28%
Kingston upon Thames 11,237 9,657 16,153 4,741 4,916 29%
Hounslow 9,536 5,094 11,300 3,330 1,764 29%
Redbridge 7,432 8,338 11,953 3,817 4,521 32%
Merton 9,995 8,905 14,089 4,811 4,094 34%
Lewisham 10,726 10,557 15,780 5,503 5,054 35%
Sutton 9,549 7,337 12,435 4,451 2,886 36%
Brent 12,721 10,794 17,068 6,447 4,347 38%
Richmond upon Thames 18,232 13,535 22,736 9,031 4,504 40%
Wandsworth 27,495 22,574 35,658 14,411 8,163 40%
Barnet 20,093 15,791 25,479 10,405 5,386 41%
Tower Hamlets 9,434 9,121 12,912 5,643 3,478 44%
Westminster 21,213 15,893 25,479 11,627 4,266 46%
Lambeth 20,237 17,561 25,767 12,031 5,530 47%
Hammersmith and Fulham 19,341 14,931 23,344 10,928 4,003 47%
Hackney 11,467 10,285 14,756 6,996 3,289 47%
Kensington and Chelsea 18,410 14,641 22,243 10,808 3,833 49%
Southwark 15,146 14,390 19,565 9,971 4,419 51%
Camden 24,555 19,257 28,665 15,147 4,110 53%
Islington 15,426 12,234 17,854 9,806 2,428 55%
Haringey 18,169 13,750 20,495 11,424 2,326 56%
Is there a
pattern of
specialisation?
I= working inCreative industry
O= inCreative Occupation
O I= TotalCreative Workforce =
industry +occupation(DCMSdefinition)
OI= ‘specialist’ workforce (anycreative
occupationalsoworking increative
industry)
OI/O  I= ‘Creative Factor Utilisation’
indicator

10. The Standard Classification: a
conceptual geology
 In theory, analytical categories evolve. But do they?
 The standard taxonomy has accumulated over time
and each age deposits a stratum
– Agriculture - Physiocrats
– Manufacturing – Industrial and classical Economists
– Services - Financial Economists
 A fossil record: strata are buried, not reconstituted
 Eg: where does GM food ‘fit’?
– SIC makes it a branch of agriculture
– Pragmatically, it is a branch of pharmaceuticals

11. Principles used in constructing NACE and followed in SIC 2003
(from the manual)
1. The main criteria employed in delineating divisions and
groups (the two and three digit categories, respectively) of
NACE concern the characteristics of the activities of the
producing units. The major aspects of the activities are:
(i) the character of the goods and services produced,
(ii) the uses to which the goods and services are put, and
(iii) the inputs, the process, and the technology of
production.
11. An activity is said to take place when resources such as
equipment, labour, manufacturing techniques, information
networks or products are combined, leading to the creation of
specific goods or services. An activity is characterised by an
input of products (goods or services), a production process
and an output of products.

12. Ceci n’estpas une pipe:
A health warning about Hierarchical Classification
8%
28%
36% tractors
52% is in Section D
but…
and…
largest share of D
Is food machines
21%
therefore…
Classified as 29.53, manufacturer of food machinery

13. Where did industrial classification
come from?
 Physiocrats – physical reproduction
 Marx – social reproduction
 Marshall – origin of products
 Leontieff – industrial reproduction

14. Leontieff on industry
 ‘any national economy can be described as a
system of mutually interrelated industries or – if one
prefers a more abstract term - interdependent
economic activities…
 ‘the whole system has been subdivided into 50
sectors comprising
– agriculture,
– various extractive and manufacturing industries,
– electric public utilities,
– three kinds of transportation,
– trade
– and other types of service industries.’

15. Some problems
 Why?
– Is agriculture one industry? (manufacturing is many industries,
so are utilities – so why not landed production?)
– Are there ‘three kinds’ of transportation? (Do cars have more in
common with trains and horses than aeroplanes and ships?)
 And what about?
– Wood (construction, materials, or agriculture?)
– Moonboots and slippers – one product?
– Chemicals - one process?
– Services – is banking really the same as communication?
 Yet
– Leontieff was pragmatic and close to what he described
– His classification ‘worked’ in practice
– USA fastest-ever mobilisation and demobilisation (cf Kennedy)

16. Other agendas, other taxonomies
 Complexity and production runs (Woodward)
 Innovation and the use of science (Pavitt, National
Systems of Innovation)
 ‘Knowledge’ industries (OECD, etc)
 Socio-economic paradigms (Perez)
 Agglomeration externalities (Porter)
 ‘Creative class’ (Florida)

17. Caution: why isn’t there a science
industry?
 Science is a component of everything
– So is land
– So are buildings
– So is power
– So what?
 Science is not commercialised as a product
– ‘Tacit’ knowledge
– Public goods
– Not abstractly transferrable
 There are few if any ‘science factories’
– Research lab is typically either public or subsidiary

18. Guidelines for cautious classifiers
 History matters
– The past worked, or we wouldn’t be here
– Trends matter
– History repeats, but each time it’s different
 It may not be perfect but it’s there
– Don’t knock pragmatism
– Observe what is really going on
– Don’t expect one scheme to fit all
 Follow the money
– The bottom line: an industry is an organised system for buying
something and selling something else
– New industries present themselves (Steel existed for 2,000
years but Bessemer made it an industry)

19. Howeversomechange can’t be avoided…
Woodward, 30 years on
???
?
??

20. An attempted escape: ‘innovation’ as a
modern universal (Pavitt)
 ‘Science-intensive’ firms are now found in all ‘sectors’
– GM (agriculture)
– Bioscience, nanotechnology (manufacturing)
– Tropical fish and fresh flowers (retailing)
– Electronic money (finance)
 ‘Industry-based’ classification cannot capture this
– Need ‘cross-cutting’ taxonomy
– Suggested ‘reconstruction’ of existing taxonomy
– But in practice this seems to be a supplementary classification
 Two possible deductions
– Industrial classification may be outmoded, or
– ‘Innovation’ may not be a ‘sector’

21. Actually-existing industry
K-waves as creative destructors
 New ‘core’ industries as they actually arrive are…
– centres of innovation
– drivers of productivity
– attractors of capital
– and inputs to all other industries
 …and they therefore
– transform the organisation of work
– transform the organisation of society
 and so create new universal concepts
– The Age of Manufacturing = ‘the factory’
– The Age of Steam and Railways ‘technology’
– The Age of Steel and Electricity ‘power’
– The Age of Computing – ‘information’

22. A new technological paradigm?
● Small runs, big bucks: mass producing difference
The end of the market in sameness
What matters: on spec, and on time
● Birth of a new industrial structure
Capital flows into optimising small unit production
Flexible manufacturing becomes a universal technique
Design becomes a universal factor of production

23. Redefining production
 Redefining the city
– Economies of scale no longer a property of the unit
– Agglomeration as such is the source of economy
– The city is the new location for agglomeration economies
 Redefining human capital
– ‘Knowledge’ and ‘information’ imply once-for-all transfer
– If so they cannot be a ‘factor’ of production
– Creativity is ever present in production because each
project is new
– Capacity to ‘transform to a vision’
(produce to an incomplete spec)

24. Summary: what the Creative Sector
might be
 New market, both domestic and global
High value-added, short-run, differentiated consumer services
and products
 New production paradigm
Flexibly specialised hi-tech delivery of services, or products
which are close substitutes for a service (eg films, videos)
 New factor of production
Creative capacity
 Organised through specialist productive units
–Using the new factor of production
–in the new production paradigm
–to produce commodities to the new market

25. Acknowledgements
Thanks to:
Daniele Archibugi
Carlota Perez
DCMS