(Source: stuff.co.nz) Tom Greally of Weta Digital, the New Zealand visual effects company, says it employed up to 900 people at the peak of Avatar’s production. Averaging that figure out shows that each of the Avatar jobs cost the taxpayer at least $50,000.

Regardless of how good Weta’s work is (and it is excellent), there is no principled argument to be made for taxpayers subsidising jobs in the film industry and paying film industry salaries, as opposed to any other. Why are those involved in film-making more deserving than those at a forestry mill that might close? Or a rural hospital that could be kept open?

It is an inequitable situation.

Greally and Penelope Borland, CEO of the Screen Production and Development Association of New Zealand (Spada), claim the subsidy is needed to compete, because other countries such as Australia, and most US states, subsidise films being made there. This is true, but recent research from the US-based Tax Foundation suggests that an “arms race of incentives” is developing between competing film locations (especially in the United States), with dubious claims about economic benefits. And in any case, just because subsidies will get films made here is no argument for why one should be made here.

This leads to another major point: opportunity cost. Any resource used for one thing is an opportunity forgone to use it for another. So what if New Zealand misses out on a few films produced here because it doesn’t give subsidies to the industry? Those resources will be used elsewhere in the economy – perhaps for something more profitable or sustainable. An international “race to the bottom” will result only in a higher price to “buy” films and a greater opportunity cost for each one bought.

This is why Brownlee is missing the point when he claims the subsidy is a good idea and that it has helped New Zealand tourism.

Even in cases where New Zealand scenery is showcased (one would imagine Avatar would increase tourism only to Pandora, its mythical planet), the “encourages tourism” argument is a bit disingenuous. Sure, it might encourage tourism (although, Lord of the Rings aside, reliable evidence for this is scant), but it does so at the opportunity cost of resources being employed in other economic activities.

Think about it: the New Zealand government has given $45m to the highest-grossing movie of all time; and this represents a direct wealth transfer from the people of New Zealand to Fox Studios.

I’m not sure the Na’vi people from the planet Pandora would approve.

Full Press:     http://www.stuff.co.nz/entertainment/film/3326306/The-high-price-of-subsidies

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