Tracing consequences both seen and unseen.
Christine HarbinThe Show-Me State Needs More Snooki*
Posted at 6:32 pm on November 9, 2010, by Christine Harbin

A Saint Louis production company is planning to focus on reality television series, and it is looking into tapping the Missouri film tax credit program to do it. According to an article in the St. Louis Business Journal:

Coolfire Media, the St. Louis production and design studio behind Budweiser, Maybelline and Verizon Wireless ads, has spun off a separate company to develop ideas for reality TV shows and scripted comedies.

The minds behind Coolfire Originals say they will specialize in offering Midwest storylines, characters and actors as a niche — and a cheaper alternative — in a world of coast-centric programs. [...]

Coolfire Originals hopes to tap into some of the $3.5 million in Missouri tax credits still available this year for the TV and film industry and the $4.5 million in state tax credits available next year, Breitbach said.

First, there is a fiscal problem. The state government in Missouri is facing historically low revenues, and has to make cuts to services that are arguably more important than reality television — such as education and public safety.

Second, there is a fundamental problem: This program diffuses the cost of reality television production onto the taxpaying population, and concentrates the benefits on reality television producers. Missourians will pay a marginally higher amount of taxes as a direct consequence of this policy.

I have many questions. Will Brett Michaels ever find love, and will he find it in Missouri? How much money in state incentives will it take for the “Rock of Love” bus to park in the Central West End of Saint Louis?

Additionally, what is the economic multiplier on reality television production? I know that contestants on dating shows like “The Bachelor” and the “The Bachelorette” purchase a considerable number of restaurant meals, so I suspect that it may be high. Similarly, if Kate brought her gaggle of Gosselins to Missouri, she’d probably buy a lot of diapers and children’s clothes in state.

Coupled with a lower marginal tax rate on income relative to other states, will this policy incite reality television stars to move to Missouri? Perhaps Snooki would consider moving to Missouri because the top marginal state income tax rate in New Jersey is 8.97 percent, whereas it is only 6.0 percent in Missouri.

Could a producer receive tax credits for making a reality television show about an activity that is also financed by state tax credits? Perhaps ”Extreme Home Makeover: NorthSide Saint Louis” could feature a large private development that uses tax credits for historic preservation, low-income housing development, and/or brownfield remediation.

For the purpose of this post, I tried to brainstorm a list of titles of Missouri-specific reality shows that the state could subsidize with its film tax credit program. I encourage our blog readers to leave additional ideas for titles the comments section of this post.

  • Who Wants to Marry a Missourian?
  • Mississippi Shore
  • The Hill**
  • Pimp My Tax-Exempt Yacht
  • The Real World: Chillicothe, Mo.
  • The Real Housewives of Osage County
  • Grundy County’s Got Talent
  • Top Chef: Kansas City Barbecue
  • Iron County Chef
  • Are You Smarter than a Saint Louis Public School Fifth Grader?
  • East Saint Louis High School Musical
  • I’m in the Missouri Bootheel, Get me Out of Here!
  • Poplar Bluff’s Next Top Model
  • Survivor: Lake of the Ozarks Party Cove***
  • Branson Idol

* Title reference here.

** A reality show that follows the personal lives of several Italian-American young adults living in the Hill neighborhood of Saint Louis.

*** David Stokes tells me that a reality show about the Lake of the Ozarks’ Party Cove would make the stars of Jersey Shore look like participants in the Algonquin Round Table, and I concur.

[Cross-posted at Amateur Philosophy.]


Filed under: Culture, Government Spending, Politics, Taxes
Comments: None
 

Christine HarbinAnother Way the Private Sector Can Influence Behavior
Posted at 7:30 pm on April 16, 2010, by Christine Harbin

As component of its Make a Difference campaign, Starbucks gives its customers a 10 cent discount if they use a reusable travel mug. This is another example of how the private sector can encourage certain behaviors without direction from the government, such as environmental stewardship.

Corporate Social Responsibility (CSR) initiatives like Starbucks’s are preferable to government mandates because they respect individual choice. If, for whatever reason, a person does not want to use a reusable mug, he or she can still purchase coffee.

Consumers win because they pay a lower price for the product and also because their choice is unrestricted. Companies like Starbucks win because they can reduce their material and inventory costs. The environment wins because fewer paper cups go to landfills.


Filed under: Economic Theory, Environment, Market Efficiency
Comments: 2 Comments
 

Christine HarbinHow the Private Sector Can Influence Good Behavior
Posted at 9:04 am on April 9, 2010, by Christine Harbin

Earlier this week, the Wall Street Journal published an article that explained how NBC Universal is using its television programming to send a subtle message to viewers to improve their lifestyle. From the article:

The tactic—General Electric Co.’s NBC Universal calls it “behavior placement”—is designed to sway viewers to adopt actions they see modeled in their favorite shows. And it helps sell ads to marketers who want to associate their brands with a feel-good, socially aware show.

This illustrates how the private sector can address problems like global warming and encourage healthy behavior simply by setting a good example–not by legislating or by nudging via choice architecture.

Since NBC’s effort encourages other companies to adopt and be affiliated with corporate social responsibility, I would not be surprised if this had a larger “behavioral” multiplier than the public sector’s efforts.

[Cross-posted at Amateur Philosophy.]


Filed under: Uncategorized
Comments: 2 Comments
 

Christine HarbinUnintended Negative Consequences of ‘Extreme Makeover’
Posted at 8:44 pm on April 6, 2010, by Christine Harbin

In an article published today, the Wall Street Journal describes some unintended negative consequences of the television show Extreme Home Makeover.

(more…)


Filed under: Unintended Consequences
Comments: None
 

Christine Harbin“Homeowner” Bailouts and their Unintended Consequences
Posted at 10:16 pm on April 3, 2010, by Christine Harbin

In an op-ed published on Thursday, the editorial board at the Wall Street Journal criticizes Washington’s latest attempt to bail out homeowners. They argue that this intervention will be as ineffectual as the those that preceded it, and that homeowners would be better off if the government hadn’t intervened. From the editorial:

Here’s a heretical thought: What if Washington had simply let housing prices fall on their own to find their natural bottom? The pain would have been more severe more quickly for some owners who bought more expensive homes than they could afford. But the pain might also be over by now as housing markets cleared faster, and housing might be contributing to a healthier economic expansion.

The practice of bailing out homeowners has several unintended negative consequences. The following are among the most egregious, in my opinion.

(1) Bailouts discourage employment.

Just like any other type of unemployment benefit, payments to homeowners decrease an individual’s incentive to be employed. This contributes to a higher and longer-lasting unemployment rate.

(2) They penalize individuals who borrowed responsibly, and they encourage people to live outside of their means.

Why put 20% down for a cramped ranch-style when you could buy a McMansion and have the taxpayers pay for it?

(3) Many people bought houses that they couldn’t afford anyway, and they will foreclose on them in the future. For many people, a bailout is just delaying the inevitable.

As described in a relatively recent article in the New York Times:

As a result [of Obama's Making Home Affordable program], desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

(4) They cause housing prices to be artificially high.

Here is a Washington Post article on the subject. The latest proposal, like many of its predecessors, inflates home prices. Additionally, the $8000 homeowner tax credit allowed individuals to buy a more expensive house than they could otherwise afford.

(5) There is a moral hazard problem. If a person knows that they are likely to be bailed out, then they are more likely to assume risk.

I oppose bailing out people who bought houses that they couldn’t afford, and I disagree that the government should encourage homeownership. When a person invests her money, she assumes risk. Higher returns are supposed to be the payoff for accepting larger amounts of risk. Buying a house is just like any other investment outside of Treasury Bonds — there is a possibility that the individual will lose money. In some aspects, real estate is riskier than stocks because houses are not diversified (i.e., in the event of a natural disaster, a person’s entire investment is wiped out). A person should do thorough research before she makes what will be one of the largest financial decisions of her life.

I recommend the article “5 myths about home sweet homeownership” by Joseph Gyourko, chairman of the real estate department at the University of Pennsylvania, in the Washington Post. It repudiates the commonly-held idea that homeownership is a investment that has good returns and no risks. To me, the following is the most eye-opening statistic in the article:

Between 1975 and 2008, the price for houses of comparable quality and size appreciated an average of about 1 percent per year after inflation. You would have earned well over 2 percent per year after inflation had you invested in Treasury bills over the same period.

[Cross-posted at Amateur Philosophy.]


Filed under: Government Spending, Market Efficiency, Uncategorized, Unintended Consequences
Comments: None
 

Christine HarbinInefficaciousness: Hot New Trend?
Posted at 10:48 pm on March 30, 2010, by Christine Harbin

[NOTE: Since the original publication of this blog entry, the classification "libertarian paternalism" has been corrected to "liberal paternalism."]

I recently had a conversation with my good friend Justin who lamented that he had received his third parking ticket this year from the city of Madison, Wisconsin for violating the alternate side parking rule. “Alternate side parking is a racket designed to part the citizens of Madison with their hard-earned cash,” he told me.

I think that Justin is onto something, and this raises an additional concern that I have about aggressive ticketing and selective taxes: liberal paternalistic policies frequently fail to accomplish their official purpose.

The parking tickets haven’t changed Justin’s behavior; he continues to park on the side of the road that is arbitrarily wrong. The city’s alternative-side parking rules are so confusing and difficult to appeal, even smart people like Justin get trapped. Of course, that’s OK with the city; they’ll receive a steady revenue stream from parking tickets.

Selective taxes on fatty food and soda are another example of liberal paternalism that doesn’t accomplish their official purpose, which is to trim waistlines in aggregate. In this example, there is not a scientific consensus on whether they will accomplish that which they allegedly intend. In a recent piece on the Huffington Post, Dr. Pamela Peeke explains how many studies that prove the contrary are being ignored.

Last September, the New England Journal of Medicine published a policy report by a group of distinguished experts that called for taxing sodas and other sugary drinks to fight obesity. The news media gave a lot of attention to the report. But last month, the press did not give much attention to a group of letters from prominent doctors published in NEJM noting that the report failed to cite any scientific evidence showing a tax would reduce the cumulative weight of Americans.

Furthermore, slapping selective taxes on soda will be inefficacious at reducing obesity because an individual’s risk of obesity is not a direct function of the amount of sugary beverages that she consumes. Dr. Peeke argues that it is the result of many factors instead — some relating to genetics, others to lifestyle choices.

Government actually has an incentive for these taxes to be inefficacious, because then it can continue to generate revenue from them. I consider this to be further evidence that the primary purpose of new taxes to raise more tax revenue to support the government’s spending habit. Just like the indoor tanning tax, selective taxes on sodas and fatty food would be a revenue generator first and a behavior deterrent second. These taxes would easily generate a considerable amount of income for state and local governments. In a previous post on Show Me Daily, I used a revenue calculator for soft drink taxes from the Rudd Center for Food Policy and Obesity at Yale University to determine that Missouri could generate $285 million in 2010 if it taxed sugar-sweetened beverages at $0.01 per ounce, or over $460 million if this tax were expanded to include diet-beverages.

[Cross-posted at Amateur Philosophy]


Filed under: Health Care, Nanny State, Taxes
Comments: 7 Comments
 

Christine HarbinThe Indoor Tanning Tax: Behavior Deterrent or Revenue Generator?
Posted at 10:40 am on March 27, 2010, by Christine Harbin

The 10% tax on indoor tanning services is the government’s latest effort to save us from ourselves. From an article on CNNmoney:

An indoor tanning tax will therefore “serve as a signal from the federal government to young people that indoor tanning is dangerous and should be avoided,” said Dr. William James, president of the [American Academy of Dermatology].

This tax represents an unfortunate and disturbing trend in public policy: it’s disguised as a means to “nudge” people into improved behavior, but its primary purpose is to provide an additional revenue stream. This 10% tax on indoor tanning will generate a considerable amount of money: $2.7 billion over ten years. How could a politician resist? State and local governments are facing large deficits, and they are understandably trying to account for their expenses. Government wants individuals to stop their bad habits, but not completely, because then it will generate no revenue from them. If all Americans switched to spray tanners and vitamin D pills as a consequence of this tax, then Congress would have something else to exploit tax.

Moreover, these selective sales taxes assume that the government/”choice architect” actually knows what the “right” choice is for other individuals. Whether something is healthy is subjective; it depends on who you ask and when. Some herald indoor tanning as healthy because it is a source for vitamin D; others say that it is unhealthy because it increases an individual’s risk of melanoma. Also, government is notoriously swayed by the interests of lobbying groups instead of the interests of their constituents — corn syrup is not very nutritious, but it certainly secures a significant amount of assistance from the U.S. government.

I don’t know who to believe — the rent-seeking lobbyist trying to save his industry from an imminent leftward shift of the demand curve, or the U.S. senators who just want my tax money to fund their pet projects to please their constituents to secure their re-election. I’ve made the decision that the risks associated with indoor tanning outweigh the benefits for me personally, and I know that other individuals may come to a different conclusion in their cost-benefit analysis. As a libertarian, I disagree that it should be the role of government to tell individuals how to behave.


Filed under: Health Care, Nanny State, Taxes
Comments: 9 Comments
 

Christine HarbinThe Lesson Applied to My Car Window
Posted at 9:22 am on March 26, 2010, by Christine Harbin

On Monday I experienced Bastiat’s parable of the broken window in the most literal sense: somebody smashed the front passenger window on my car while it was parked in the (gated!) lot at my apartment. I played in the role of the storekeeper whose window was broken, and I can attest that no wealth was created for myself or the Saint Louis community.

Ce qu'on voit!

In chapter 2 of Economics in One Lesson, Henry Hazlitt explains:

Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit.

When I went to bed that night, I had a passenger car window again, but I was about $500 poorer. In addition to the $250 that I spent on replacing the car window, I will have to pay to replace the items that were stolen too, including: a 16 GB ipod Touch ($250), a universal car phone charger ($18), ipod case ($15), the cost of gas for driving to auto glass changer, and lost productivity. Like the storekeeper, I have to be content with the window only.

If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

In my case, the Saint Louis community lost an Apple iPad that would otherwise have been bought. Ce qu’on ne voit pas. If I didn’t have to pay to replace that window, I would have used the money to buy one. Or, I could have saved the money in my bank account, where it would generate interest, and I would spend it at a later date. I cannot spend the money that I spend at the window repair shop in any other way.

Some people would argue that, had nobody broken my window, the window repairer would be out of a job. This is fallacious because it ignores the fact that the window repairer could develop skills or apply his existing skills to a different activity that would actually encourage productive economic growth. He could work at an Apple store, for example, and sell me an iPad.


Filed under: Economic Theory, Unintended Consequences
Comments: 1 Comment
 

Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson
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