Economics
Free exchange
Industrial policy
Moving the movie business
Mar 2nd 2011, 15:02 by R.A. | WASHINGTON
THIS (via Alex Tabarrok) is pretty amusing:
[Former New Mexico Governor Bill] Richardson says that the film and TV subsidy has brought "nearly $4 billion into our economy over eight years" and has created 10,000 jobs. By "our," he means New Mexico. He says every state should emulate this success.
The joke, I'm sure I don't need to explain, is that not every state can succeed by poaching productions from other states, since what's made in one state can't be made in another. But that's not quite right. A subsidy allows a business to cut prices and artificially raise demand. Given generous enough subsidies, many more movies would be made, and each state could, potentially, have a thriving film industry. This is how higher education works, more or less. New Mexico has state universities just like California and Iowa and Alaska. These schools are understandably viewed as foundations of the local economies in which they're located, as well as important cultural institutions. And we obviously view the subsidisation of the production of college graduates as a worthwhile contribution to long-run growth, again, understandably.
Yet it's worth thinking about why it's absurd to argue that every state should try to subsidise up a local film industry but not crazy to support local universities. Certainly, there are huge efficiencies being sacrificed by duplicating administrative capacity all around the country. And academics benefit from close proximity to those working on similar problems; the efficacy of research is reduced when it's spread more thinly around the country. If America had fewer, bigger states, it would probably have fewer, bigger universities, and that might well be a very good thing.
We're all attached to our hometowns and want them to succeed, but efforts to spread economic activity out artificially are costly. It would be better to move more people to the growth than growth than growth to the people.
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I like the new theme on this blog.
I don't think it is exactly obvious why higher education should be subsidized either. We have too many people going to college, producing absurd situations such as jobs that require a BA to be an administrative assistant. Subsidies also contribute to spiraling tuition. Both movie and education subsidies are market distortions that need to be eliminated.
"We're all attached to our hometowns and want them to succeed, but efforts to spread economic activity out artificially are costly."
Ever been to the Pullman, Washington campus of Washington State University?
It's the poster child of putting a university in the middle of nowhere, and then moving a few folks to live around it.
And, with the wind howling around the stadium, seems even more obvious in winter...
It would be better to move more people to the growth than growth than growth to the people.
Is this why Europe attracts so many illegal immigrants, that the growth in the EU is much higher than African or Middle East countries?
In the US:
People have to sell thier underwater homes, pack up and move (an expense), purchase/rent a new place (hoping the new house doesn't lose value, or the landlord isn't in arrears; the new area isn't crime-ridden), then find a job.
Don't forget about turning on utilities costs and 1 month's rent plus 1 month for deposit.
Hopefully to a job that is full-time, and will last a few years.
Maybe the gov'ts will give tax cuts to those who do so, otherwise wages in the growth area will rise. Is that such a bad thing?
As for the movie industry, it's just Game Theory the states are playing. Does the 1st mover win?
Regards
Come to my medicine show, moving and tax cuts will cure all that ails you.
"not every state can succeed by poaching productions from other states"::Not every state can be successful in any one particular industry.
The joke (if there is one) is the subsidy cost/job per year.
It would certainly be more efficient to move people to the growth than growth to the people, but efficiency is not all. I'd prefer a slightly weaker economy and the ability to live and work near where I grew up and my family is. GDP is not the sole consideration.