This paper proposes an institutional environment suitable for encouraging artistic creativity and cultural innovation. Toward this aim, the paper first presents theoretical models of the cultural industries based on the approaches of Throsby (2001), Ikegami (2002), and Towse (2001), and offers a critical assessment of each. Second, the paper discusses the role of the cultural industries in local development on both the demand and supply sides. Third, the paper puts forward a behavioural model of artistic creativity based on Frey (1997), and discusses an institutional climate that encourages artistic creativity at the national and local levels. Finally, the paper offers conclusions.

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An area of public policy in which various agents should participate is the field of cultural policy. When observing various aspects of cultural policy at the local city level, non-profit organizations, private corporations, and their networks as well as local governments can be seen as the agents of cultural policy. The growing importance of the private sector as an agent of cultural policy can also be seen.

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Today the significance of creativity in economic activities is said to be increasingly rising, and on the other hand the control over the activities is strengthened and deepened. This essay have sought the implication of ‘culturalisation’ of economy in the power relation between intrinsic value and instrumental value, and tries to interpret the above situation in terms of the change in the relation between the 2 values. As a result, it is shown that creative activities are fundamentally based on intrinsic value and not subordinated to administrative demand, and that on the other hand instrumental rationality intensifies itself in instrumental activities, which sustain the creation of value by creative activities. That is, instrumental value sustains intrinsic value.

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Study terrain in the Hilly and Mountainous Areas (HMAs) treats Agricultural Economics. The emphasis changes from economic development to socio-cultural one in developing countries (DCs) from perspective of Development Economics. Cultural Economics accumulates case studies to extract the development principle. We consider the concept of Development Education (DE) in the HMAs through case studies like a welfare education and a world history one in Nagano Prefecture. Our aims lie in the methodology of DE both in DCs and in HMAs to form the Creative Capital for the future. The analysis rely both on the theoretical study and on my practice.

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