Sentences of the Day

by on March 2, 2011 at 7:07 am in Economics, Film | Permalink

Michael Kinsley on Movie Math.

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.

I do hope MR readers will find this amusing.

Mark March 2, 2011 at 4:38 am

Using the same logic, we could raise median incomes by all becoming NBA players; they average about $2.5 million per year. Or by the same token, send more people to college.

Andrew March 2, 2011 at 4:55 am

"Why does almost no-one point out how ridiculous that logic is?"

We try to point it out around here, but otherwise people don't have a good handle on zero-sum versus positive sum accounting.

Andrew March 2, 2011 at 5:20 am

"But why does this orthodoxy exist?"

Same answer: because people don't have a good handle on zero-sum versus positive sum accounting. That and I suspect the interest groups established before we got to the point of diminishing returns. The orthodoxy exists because the orthodoxy exists.

I'm in grad school and I've tried to explain to my wife that taking the first job offer I get may not be the best ROI. She thinks not getting a job immediately will be a waste of time. I dare not say "what do you think I've been doing the last 5 years."

kiwi dave March 2, 2011 at 6:27 am

Thanks, Seth

Rahul March 2, 2011 at 6:50 am

A non-college plumber might work as well as a college-educated one; but for the country's sake I prefer more educated plumbers.

Personally, I feel higher education opens up a lot of people and makes them better ones to be around. But maybe I am prejudiced. Are there scientific studies on this? Any correlations between of higher education (or lack of it) and attributes like xenophobia, homophobia, extremism, fundamentalism, etc.? I like to think that college-education makes a man better but not sure if this is just my prejudice. Or maybe it is a selection effect?

AnotherPhil March 2, 2011 at 6:55 am

The Math of Film Subsidies:

Film Subsidy=Hollywood Political Contributions.

I guess the politicians figure if people are stupid enough to pony up all kinds of money to watch Hollywood fantasy, including treating the annual circle jerk of the Academy awards as an important cultural occurrence,

they won't mind the economic fantasy that underlies the "film subsidies will bring jobs" rhetoric.

I wondered why I hadn't heard Jeff Daniels pitching the virtues of Michigan a couple times every morning on my ride to work (in Pennsylvania) lately.

Somewhere Juvenal (bread and circuses) is smiling that his quip holds true millenia after its utterance.

kiwi dave March 2, 2011 at 6:56 am

Rahul:

Personally, I feel higher education opens up a lot of people and makes them better ones to be around. But maybe I am prejudiced.

No doubt this is true, but do you really think that this “opening up” is worth, say, 200k of direct cost (born in some combination between student and taxpayer) + the opportunity cost of removing people from the job market for at least four years at the peak of their youthful strength and energy? I very much doubt this is true, especially at the margin.

Dan Weber March 2, 2011 at 7:04 am

Eivind, I think saying that education is zero-sum overstates the case. For things like engineering, law (assuming the entire field of law isn't zero-sum), architecture, or medicine, I think it does improve human capital.

However, a lot of our "go to college" mindset measures and rewards the mere "going to college," not actually learning anything or improving human capital.

Cyrus March 2, 2011 at 7:12 am

dave: (iii) is not clearly zero-sum. Networks lower transaction costs.

phatty March 2, 2011 at 7:19 am

there is no marginal benefit to the individual or society net of costs

So there is no such thing as an indirect subsidy?

JP Cousteau March 2, 2011 at 7:23 am

Given the spread of film tax credits(the graphic here: http://www.taxfoundation.org/blog/show/26229.html shows it well) over the last 8 years or so, looks like they are.

kiwi dave March 2, 2011 at 7:24 am

Cyrus:

You're right, but I think the effect is still closer to zero-sum than positive-sum.

Andrew:

Exactly – the current orthodoxy isn't arguing about where diminishing returns sets in, it simply refuses to admit there is one, and treats every 18 year old who doesn't go to college as a failure and an indictment on our society. Which is craaazy.

Rahul March 2, 2011 at 7:31 am

(ii) can be good too. Good signalling leads to most efficient identification of the smartest person for a difficult job.

Besides, (ii) is inbuilt in most human endeavorers. How does one prevent a person from trying to shout "hire me and not my neighbor"?

Slocum March 2, 2011 at 7:42 am

I wondered why I hadn't heard Jeff Daniels pitching the virtues of Michigan a couple times every morning on my ride to work (in Pennsylvania) lately.

I think he's too busy lobbying right now trying to keep the gravy train going for his industry:
http://blogs.wsj.com/in-charge/2011/02/25/hollywo

IVV March 2, 2011 at 7:52 am

Is a network positive-sum and not zero-sum? It's positive-sum, but the benefits of the positivity accrue solely to the network and create a cost on the out-group. Thus, in-network gains a lot, and out-network loses some. From the out-network, the network is best perceived as zero-sum and therefore justifiable to dismantle, because the out-network does in fact suffer from the in-network exclusion.

Zach March 2, 2011 at 8:12 am

I love Bill, but I sort of wonder how much money the state would’ve saved had he spent 8 years governing instead of alternatively running for President, getting chased out of the cabinet, courting Hollywood, and shooting things into space. It would probably have been probable to get $4B more in direct Federal spending in NM (play the BRAC game better, increase DOE funding, etc) with a bit more work.

Homer Simpson March 2, 2011 at 8:25 am

"You know those little flags you put on your antenna to find your car? Every car should have one of those!"

Rahul March 2, 2011 at 9:17 am

@h

Ignore the multiplier, but $2.5B is still real though? Question is, what subsidy did it cost to get that. If a relatively modest one then it seems a worthwhile improvement.

kiwi dave March 2, 2011 at 9:33 am

Same answer: because people don’t have a good handle on zero-sum versus positive sum

It’s interesting, because it’s a two-way thing. People often think zero-sum benefits are in fact positive sum (further education, tax credits to lure businesses, building gigantic stadia to lure professional sports team) and think that positive-sum transactions are actually zero sum (especially international trade, but more generally market transactions, especially those that make some people very rich). As bad as the former is, the latter is probably worse. And the political leadership — on both sides — openly encourage both fallacies (viz. “winning the future,” “our Sputnik moment” etc.)

Right Wing-nut March 2, 2011 at 9:43 am

Rahul: Given these statements:

"A non-college plumber might work as well as a college-educated one; but for the country's sake I prefer more educated plumbers.

Personally, I feel higher education opens up a lot of people and makes them better ones to be around. But maybe I am prejudiced. Are there scientific studies on this? Any correlations between of higher education (or lack of it) and attributes like xenophobia, homophobia, extremism, fundamentalism, etc.? I like to think that college-education makes a man better but not sure if this is just my prejudice. Or maybe it is a selection effect?"

It sounds to me that you view the college as the last bastion of indoctrination in values which you support–you are probably correct. But that is an argument AGAINST college, not for it. There are much better ways for almost anyone to spend their time than being indoctrinated.

Not a bad way to spend someone else's time (if you approve of the indoctrination).

Some companies do bond their new employees for the training that they receive when they arrive. BUT you point out that they do this only for the brighter students. Essentially all of our brighter students are already attending college. As I explained before, the last thing we need is for more money to be pumped into the system–the suppliers will devour it all.

Slocum March 2, 2011 at 9:50 am

The new governor in Michigan is in the middle of a fight to pare back Michigan’s film production subsidies that provide up to an insane 42% of production costs:

http://detnews.com/article/20110224/BIZ/102240344/Fight-to-let-Michigan-film-credits-roll-is-set

The sheer stupidity is really depressing. You might ask proponents, “If the film subsidies are more than paying for themselves, why cap the annual amount at all? If we uncapped it, at 42%, Michigan could buy the whole damn industry and be rich, rich, rich!” Or, “What’s special about movies? If paying a company 42% of the cost of producing its products to locate in Michigan makes us richer, why not offer the same 42% to all industries and become wealthy beyond our wildest dreams!” You can ask, but it doesn’t seem to make a dent…

stubydoo March 2, 2011 at 10:38 am

Rahul,

Plenty of American companies do pay for graduate school for employees – though in some cases its more of a employment perk rather than an investment in the workforce, and you get only minimal bonding rules (where I used to work it was just 6 months).

There might be less of it at undergraduate level because of the lack of worthwhile candidates who wouldn't otherwise be attending college anyway. (And also because of the low ratio of worthwhile material to useless stuff that tends to get mandated into the structure of bachelor's degrees these days).

Rahul March 2, 2011 at 10:44 am

kiwi dave / Andrew:

Do you mean to say higher ed is always a zero sum game for society as a whole? Or for some people? Are you dissuading policy planners from targeting education or individuals?

I agree that a lot of jobs don’t need college education. But isn’t the point of education making sure that someone else does those jobs and not you? In a best case scenario, maybe even someone outside the country?

Andrew March 2, 2011 at 12:13 pm
chris March 2, 2011 at 1:13 pm

Isn't it fairly simple to prove that if there is a *college* wage premium (and not, say, a being-born-into-a-wealthy-family wage premium that just happens to correlate with college attendance) that, over a lifetime, exceeds the cost of college, then we haven't yet reached the point of zero productivity return on college education, if employers are still willing to pay that much more for college-educated workers?

Either that, or the employers are just being dumb credentialists. Which might be true, I guess.

Jeff March 3, 2011 at 12:35 am

Homer Simpson wins the thread. That was really funny, and perfectly on point.

Rahul March 3, 2011 at 3:19 am

I sense generalization. “College” versus “K12″ is simplistic. The marginal student, even if encouraged by policy, is not ending up at Ivy League schools. Colleges vary. A lot. I feel there is a market for marginal colleges, however much we may mock their quality.

For comparative economics, it is misleading to use the costs of education at top universities. A marginal student is often getting a cheaper college education, albeit lower quality.

It is not a choice between “college” and “become a great plumber”. Many marginal students lack motivation or a work ethic, and good luck being a workman with that. I think of it as “For whatever reasons, you screwed up at K12. Here’s another chance.”

With K12 the student himself doesn’t have full choice controlling his fate. The quality of my school is predicated by where my parents chose to buy a house, and not much I can do about that if they made a horrible choice. College is a chance we give marginal students to escape this. Robust systems need to be forgiving to a degree.

tom March 3, 2011 at 8:17 am

Mike Huben,

Is all competition between suppliers a foolish beggar-thy-neighbor strategy? Why is state competition for business any different?

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