And I thought squirrels were a problem

Now, our good friend Phillip Henslowe might say something like this:

Too cvre Baumol's coste dissease: boyle iij heds of spinacke or cabbages for ij houres til skuishee then meddle withe heted treakle & presse yt to the forhed xiij timmes on a sheafe of tosted brown bredde.

Unfortunately, like many of Henslowe's other cures, this one may be found wanting when confronted by Baumol's Cost Disease. In their groundbreaking study on the economic structure of the performing arts, Performing Arts, The Economic Dilemma, William J. Baumol and William G. Bowen describe how the primary input of performing arts - labor - is not scalable. An example of cost disease:

Compare the change in the cost to perform the Molière play "Tartuffe" in 1664 and in 2007 with the change in cost of calculating a large number of sums from an accounting ledger. In 1664, you needed two hours and twelve actors to perform Moliere's play, and it would take, say, twelve accountants working for two hours to add up all the sums in an accounting ledger. In 2007, a single accountant with a $10 calculator can add the sums in 20 minutes, but you still need two hours and twelve actors for the Moliere play.

What Bowen and Baumol reveal in Performing Arts, The Economic Dilemma, is that while the general inflation rate tends to hang around 3%, the cost of producing theatre inflates at a rate of about 6%. The same problem effects other industries with large professional labor inputs: health care, education, and government services. There is no way to drive these costs down without compensating professionals at a rate lower than general inflation.

Managing the finances of a theatre requires us to at least mitigate this disease. The book (sadly hard to find and apparently out of print) was published in 1966. Since then, certain parts of the performing arts operation have gained a degree of scalability. Some are cost-reducing - PCs, email, desktop publishing of programs, newsletters, bulk email; some are revenue enhancing - merchandising, sale of recorded proprietary material, larger houses (if you can keep them filled). Free labor is essentially immune to inflationary pressure, so maximize your volunteer capacity when appropriate.

Ultimately, this is a fundamental structural challenge - and a heady one - but one that we must be able to describe to our boards, donors, and legislators.