The Political Economy of Venice Carnival

by Berly

My first knowledge about Venice was from Donal Duck comics from childhood time. It is suppose to be a place where a romantic couple (even though Daisy Duck could be annoying some times) leaving a masked carnival to get into a gondola slowly moving in the canals while listening to the gondolier (yes, it’s how they are called) singing o’ sole mio.

So it is quite a disappointment to visit Venice and find the gondolier are not singing (by the way, you’ll need 50 euro for a ride) and gondola is just an over-glorified canoe/getek.

But the masked carnival is way underrated. Since my university organized a daytrip, I went there last week for the opening of the carnival.

Amidst all the captivating sights and hurly-burly of thousands of exuberance tourist, this extravagant carnival is a resulted from proper response to market failure.

Imagine your city has a long history of certain activity that can be re-enacted and bring tons of tourists (read: profit) but some money is needed to organize the festival. Those elaborate costumes, artist performances and massive stage do not come for free. Since the cost of organizing the festival is much less than the benefit from tourist then wouldn’t each citizen of the city (assuming all will benefit, quite true in the case of Venice) will hurry to contribute right?

Wrong! The benefit of carnival is felt to all through higher sales of handicraft gallery, souvenir shop, restaurant, etc (which Venice are full of) but each is better of if a carnival is set up without they are paying for it. Why not let others pay and just sit down waiting for the tourists to come?

This is a classic case of public good where the voluntary free market will not provide the best solution since the money collected will be below the optimal level. A public good is a something that once already set up (ex: bridge) can not limit the use only for those who pay for it (hence, free rider). The free rider problem is so severe that even neo-classic school (the poster boy of economics) is admitting it, albeit putting the topic in obscure last pages used to be skip by lectures catching deadline on covering more “important” topics.

Here is a description from the official website
“The Carnival of Venice officially began in 1296, when the Senate of the Republic authorized the carnival with an edict declaring the day before Lent as a day of celebration. After a break of almost two centuries, the traditions of the carnival were recovered by the Municipality in 1980 and since then the event has been held with great success each year”

So, it takes a government to start it all. There is roughly two ways to deal with public good, either to make it totally private or totally public. The government (except when under occupation, Venice always been a republic with elected government) has the coercive power to issue taxes and gather the needed money to cover the cost of carnival. Mancur Olson (The Logic of Collective Action) and Amartya Sen (Hunger and Public Action) have pointed out the possible divergence between private and public actions long time a go.

Another interesting feature of this carnival is the theme, which is “The Dragon and The Lion”. The Winged Lion is the symbol of Venice. The Dragon? You guess it right. It’s for China. Even a 710 years old tradition can not ignore the newly awakened economic power of middle kingdom.

Enjoy the weekend.. It’s carnival time… La dolce vita!