Saturday, April 5, 2014

Let's Make Subsidies History, not History Subsidies

Dear Editors,

I hereby nominate Marietta Councilman Stuart Fleming as this month's man on the margin. A crucial concept in economics is that all change takes place on the margin. For a camel hauling ten thousand straws, it may take only one additional straw to break the camel's back. Last month, Councilman Fleming grossly misjudged the marginal impact of highlighting boarded, blighted properties. However, his recent effort to evaluate how the city subsidizes entities such as the history museum is potentially revolutionary. Not only is the subsidy for the museum significant, but historical tourism is a primary focus of the city's economic development program.

In debating Councilman Fleming's question, the City Council really has two issues to consider. First, should the city be subsidizing tourism (or any economic activity) in general? Is it a valid function of government to take from one group of citizens (property owners and taxpayers) to give to other groups (business owners). Conservatives tend to prefer a limited role for government and favor the emergent growth resulting from allowing taxpayers to make their own decisions on how to spend their dollars. Liberals tend to prefer a broader role for government and favor taking dollars from taxpayers to be spent more appropriately by government officials. Historically, Marietta has taken the liberal route when it comes to economic development. Perhaps Councilman Fleming will be the marginal vote to change that approach?

Second, only if the answer to the above is yes, should the city then consider the best ways to subsidize economic activity. Which subsidies do the most good for the least amount of harm? How does the subsidy for the history museum measure on an absolute value, and relative to the city's other options? On this point, the issues unique to museums are considerable. Most incorrectly assume a museum's customers are the viewers of the art or artifacts, when in reality, the true customers are the donors. Museums exist to provide legacy benefits (as well as tax, networking, and social goods) to donors. The current museum subsidy assumption is that the museum will be a marginal factor for visitors deciding to come to Marietta. In reality, visitors make those decision on other factors, and those who do visit may partake in the museums because they are here for other reasons. The serious fans of history are willing to spend significant resources to consume their hobby. However, they often do so in the private marketplace. Instead of spending time and money to travel and stare at a wall, they spend time and money to purchase artifacts for their own collections. In short, the beneficiaries of the city's subsidies to the history museum are local donors. This may be a valid use of public funds, but it is an ineffective way to achieve economic development.


Respectfully,

Russ Wood

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