If You Subsidize Something with Tax Dollars, You Get More Of It, Even If Costs Far Exceed Benefits

Nov. 23 (Bloomberg) -- "Michigan taxpayers foot the bill for the most generous movie subsidies in the U.S. Since 2008, the state has allotted $282 million to lure the filming of Hilary Swank’s “Conviction,” Clint Eastwood’s “Gran Torino,” George Clooney’s “Up In The Air” and more than 120 other productions.

Now the governor-elect, Republican Rick Snyder, wants to curb the largesse. A state agency found the price of the program -- which covers as much as 42 percent of local expenses -- exceeds the economic activity generated. Jobs created in 2009 cost the state about $193,000 each, the agency estimated."

MP: Economic lessons to be learned here:

1. From Thomas Sowell: "The first lesson of economics is that we live in a world of scarcity. There is never enough of anything to satisfy all those who want it.  The first lesson of politics is to ignore the first lesson of economics."

2. Public Choice Economics: In their short-sighted self-interest to get re-elected, politicians will always favor programs that have immediate benefits that are easily identifiable, even if the long run costs are much greater than the benefits, especially when the costs are hard to identify.  Film subsidies are a perfect example. It would have been cheaper for the state of Michigan to simply pay people in the film industry salaries of $50,000 per year not to work, than to fleece taxpayers almost $200,000 per job in the film industry.  But there's no political payoff to pay people $50,000 not to work, compared to the huge political payoff, though illusory, of "putting people to work in the Michigan film industry" at a cost of almost $200,000 per job. 

HT: Tom Hemphill