The giveaway economy

Two stories caught my attention today — both dealing with governmental giveaways. The first reported on the Motion Picture, Television, and Entertainment Revitalization Act currently under consideration. This legislation would support our domestic film industry. The second is lottery program initiated by Mayor Mamdani in New York, whereby free tickets will be distributed for opera performances by the Metropolitan Opera. I’m unclear about many of the details of both programs, but I am clear about their respective economic implications — and, in my opinion, they’re not good.

Let’s first consider the effort to help the film industry. The U.S. film industry has largely dominated the world market, but its dominance is under threat by non-U.S. producers. Clearly, economics underlies this evolution. That is, in large part the migration of this activity to other countries can be attributed to the power of incentives, where those activities migrate to areas where the profit potential is the greatest, which is often areas where the cost of doing business is least. The fact is that Hollywood and other domestic production centers don’t seem to be enjoying the kind of comparative advantage that they once had.

While I don’t want to be accused of being uncaring about all the jobs at stake or the dislocations and personal difficulties that would undoubtedly occur if this industry were to shrink in size, a bigger principle is involved. Ultimately, the objective of federal subsidies for any domestic industry is an example of a protectionist orientation. It’s not so different from imposing tariffs on our foreign competition, and we all know what a stupid idea that is! It has the effect of elevating prices for consumers; and let’s be clear, while the program will likely sustain production and employment in the affected industries, when the subsidies come in the form of tax credits, the most immediate beneficiaries of the subsidy are the owners of the businesses involved. The film industry is notorious for operating with a star system where those at the top of the industry — whether it’s the actors or the production company heads — are among America’s highest paid. Something sticks in my craw about further compensating this class of Americans. It seems like there ought to be a better way.

Turning to the free opera tickets …. The details about this program are limited. The plan is to distribute 70,000 tickets to Met operas over the course of the year by lottery. Any New Yorker who has not purchased an opera ticket since 2019 is eligible. The press release on the NYC website makes no mention of who will actually be paying for these tickets. The city? The Met? Philanthropists? Not clear, but it doesn’t really matter. Presumably, if the Met isn’t directly compensated for these tickets, the price of their other tickets (i.e., non-lottery) will have to be raised to compensate for their lost revenue. If the city is buying those tickets, the taxpayers are footing the bill for the lucky lottery winners. In the last instance, if philanthropists want to spend their money that way, I don’t have a problem with it. In that case, however, I don’t see how or why the city should get involved.

For the most part, I have no confidence that this program will provide the “economic justice” that Mamdani promises. Rather, I’d expect a fair portion of those who sign up for the lottery to be capable of buying the tickets. There are myriad instances where items for sale are “unaffordable” to many. Why not have lotteries for food, gas, airline tickets, etc.? This program is gratuitous and ill-considered.

The political advantages of policies that target particular groups as beneficiaries are obvious, but they are also corrosive. Once government begins dispensing such favors, more groups inevitably line up for their share, each claiming a special need or cultural value. The better direction is to move to a more level playing field across all endeavors, with as limited a financial involvement by the government as possible. If we support the operas, why not support sports teams? If we support the film industry, why not support energy companies? The slope is not merely slippery — we’re already halfway down it. It’s time to draw a line.