Is California’s Film Loss Our Gain?

Governor Richardson and advocates of massive taxpayer subsidies to the film industry just don’t understand basic economics. According to the New Mexico Independent, Richardson is touting a new study on the decline of the film industry in California and its move to other states.

In a press release, Richardson stated “This study illustrates the value of our film initiatives from the point of view of a state that has lost significant numbers of jobs and revenue because of intense competition from places like New Mexico.” This is supposed to be taken as a justification for New Mexico taxpayers picking up the tab for 25% of film production costs and interest-free loans. The problem is that ANY industry would move to New Mexico given such largess. That doesn’t mean that it is a net economic benefit for the state (or taxpayers).

Let me explain it this way. If we give enough money to a particular industry, we will see increased activity in that sector. Where Richardson and his cronies fall down in their analysis is in assuming that the $60+ million for the fiscal year that just ended would not have resulted in even more jobs and wealth creation than the film subsidies. Richardson naturally assumes that he knows best, but as Nobel Prize-winning economist FA Hayek pointed out, central planners always face the problem of inadequate information relative to their counterparts acting in a free market.

Whatever the studies show, it takes a great deal of faith in the forecasting abilities of Bill Richardson to believe that central planning on behalf of the film industry makes economic sense.