Why film incentives don’t work

As recently as 2009, 44 U.S. states were providing incentives for film production. Only six states weren’t. Now up to 16 U.S. states are not doing film incentives.

Recent research published by Prof. Michael Thom of the University of Southern California found no impact of motion picture incentive programs’ [MPIs] on their states’ economies or industries.

Thom discussed several factors why film incentives programs failed to register any economic impact for their states:

  • They are highly targeted economic development programs that primarily benefit content producers and existing industry workers (and I note in Agenda 2014 that film production companies benefit even if they don’t produce here because our incentives “bid” pressures other states to increase theirs, and vice-versa)
  • Many have little accountability
  • They show disregard for clear market signals as they pertain to permanent relocation of film productions
  • They result from policymakers moved to act because other states are doing it and because they “also suffer from an ‘action bias’ wherein they feel compelled to act regardless of circumstances” (e.g., the “leap before you look” mentality of appearing to provide leadership when uncertainty calls for circumspection)
  • They encourage rent-seeking behavior, included “an extortive political economy” (as Thom puts it, “Economic development history is replete with policymakers’ acquiescence to relocation threats lest subsidy demands are met” — which happened with “House of Cards” in Maryland and is also at work, of course, with some HB2 activism)
  • They rely on “flawed cost-benefit or economic impact analyses written by special interest groups or the entertainment industry” — specifically mentioning “IMPLAN-style analyses
  • Subsidization may “encourage inefficiency” in the target industry, therefore not benefitting its development over the long term (q.v., The Economist’s concern about renewable energy subsidies’s effect on the solar industry)

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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