I tweeted on this article, "In an era of austerity, reasons to fund the arts," from the Art Newspaper a while back, but it's worth repeating, I think. Written by Robert Hewison, a London, UK, professor, it focuses on British case studies, but makes some very applicable general arguments too:
Culture creates social capital, expressed as trust generated by a shared understanding of the symbols that the arts generate, and a commitment to the values they represent. It sustains the legitimacy of social institutions by ensuring that they are accepted, not imposed. Societies with an equitable distribution of cultural assets will be more cohesive, and more creative. Wellbeing, which is the true end of economic activity, depends on the quality of life that culture sustains. The word “culture”, after all, means “growth”.
Social capital—like economic capital—requires both regulation and investment. That the educated and well-off have greater access to the arts is not an argument for abandoning intervention to secure a more equitable distribution of cultural experience. Rationally, the government should be putting more funding into the arts because of the social capital they generate. There is a sound economic argument that when the market fails to provide certain kinds of goods thought useful, then it is necessary to intervene—health and education are the usual examples. The economics of the arts are particularly prone to market failure, for it is not easy to make the advances in productivity that technology facilitates in manufacturing. A symphony played on a synthesiser is not an efficiency gain.
Of course, one my points of frustration with our cultural institutions has been is that even when they do get influxes of money from the government, they don't always pass that on to the public in terms of access. Last Friday I discovered that both the ROM and AGO's admission fees quietly increased on July 1st. It's now $24 for general admission to the ROM for adults and $19.50 for the AGO. Both institutions are chalking the increase up to the introduction of Ontario's Harmonized Sales Tax on July 1st. Interestingly, some Ontario institutions chose not to raise their admission fees with the HST, examples being the Gardiner Museum and (at least according to their website) the National Gallery of Canada.