Saturday, May 31, 2008

Municipal Self Promotion

Every once in a while, I receive a comment from a post made several months ago, which I suspect to be the result of a google search of a particular topic, rather than a routine check for new content. In any case, I recently received a comment about the Capital Arts and Entertainment District, and I have cleverly designed a way to use the comment to launch into a philosophical rant about the role of government, which of course is my ultimate goal every Saturday. I think the best way to do it is to break the comment into sections, using the tried-and-true method of publishing Patrice D's comments in bold, and my counter-comments in plain font.

(Edit: As I got to writing this post, I perceived that it comes across harsher than I originally intended. Let me announce that I appreciate the comment and the chance to discuss.)

HERE is the original post referenced by the following comments:

There are two obvious themes to your post: One is what seems to be the ineptitude of the city government, and two is the (to use your word) appallingly narrow-minded, dollars-only view that a bill to form an arts district is inane.

Before you go using my words, remember--actual events have been "extremized" for satirical, humorous, and entertainment purposes. But yes, you have the general concept correct.

Thank goodness the bill passed and there is an opportunity to create a more well-rounded community. Who says supporting one profession means excluding another?

Since real property in Annapolis is a finite quantity, and the diversity of professions of residents of Annapolis approaches infinity, I would certainly say that supporting one profession excludes another. I would further say that specifying only one (broad) profession is highly exclusionary. I would even further say that I wish the special district was for weathermen, as I needed more of a warning that 6 thunderstorms would collide with a warm-front from the Gulf and cause the Apocalypse to pass over Annapolis earlier today.

I'm sure you noticed that the tax credits are temporary.

Toll booths were supposed to be temporary too. And welfare.

The idea is to BUILD the district - not support artists forever. I'm glad for you that you are an economic genuis, but generally in towns that are experiencing economic growth it is because there is something to SEE and something to DO that is interesting, different, attractive. It then follows that people go to SEE and DO that interesting, different and attractive experience.

Things to see and do might be reasons why tourism flourishes, perhaps even population growth, but to attribute overall economic growth to it is likely a stretch. I'm going to stick to my guns for the proper economic growth policy:

1. low property taxes
2. streamlined permitting process
3. conspicuous and predictable long-term planning and zoning

With gas prices the way they are, people are looking to explore closer to home - secondary cities are becoming more of a destination than ever before.

That will actually be an interesting experiment to witness. I've always wondered how sensitive gas demand is to gas prices--most of us can only change (or only wish to change) our gas behavior slightly, but you and I both know that if gas was $1000 per gallon, there would be extreme lifestyle changes. For example, I would write this blog inside my house rather than in my car while idling in my unpaved driveway.

I also wonder to what extent Annapolis is a secondary city. Will people living in Hagerstown cancel their trip to Disneyworld and come here instead? Or do most tourists make Annapolis one of their destination cities?

And it will require a unified effort; a spirit embraced by the community - the a&e district alone won't bring in droves of tourists on its own, of course. I won't argue that we will need good oversight to work with the state and ensure the area grows in a way that enhances the entire area and city of Annapolis.

Only problem is, the government should not be trying to bring tourists to the city.

I suppose that sounds counter-productive, and I will admit that I was slightly tormented in ascertaining that conclusion. Let me elaborate. Government has useful and noble purposes--in addition to fundamental responsibilities such as maintaining order, it is appropriate for government to provide public goods. A public good is one that is non-rival and non-excludable, meaning that a good, once provided, is freely available to the public and consumption of the good by one person does not prohibit its consumption by another person.

Promotion of a city, in fact, is a public good. Let's say that I spend a million dollars on a nation-wide publicity tour advertising how nice the houses are in Murray Hill because I want more rich people to move there so I can sell food to them. Even if I am successful, I am not the only one who benefits from this. Gas stations, grocery stores, perhaps interior decorators--indeed any number of businesses benefit from me spending money to attract residents, and there is nothing I can do about it even though I spent the money on the advertising. Knowing this ahead of time, I would not spend said money, nor would any other business. Advertising of the city therefore falls victim to the free rider problem, and must be provided by the government if at all.

So, if the A & E district is a form of promoting the city, why shouldn't the city do it? Two reasons:

Reason #1: I am not convinced the city needs promotion. I am quite sure that the city's population is the highest it's ever been. Longtime Annapolitans recall when travelling Forest Dr. actually involved a drive through a forest. People who work in Baltimore or DC make Annapolis their home, as evidenced by the construction of I-97 and Aris T Allen Blvd, and their perpetual traffic jams. Businesses are attracted here as well--I believe the mall is the biggest in the state, and inner West St along with Parole have seen major investment. Even downtown, where business turnover might be mistaken for a bad business environment, there seems to still be a supply of businesses willing to give it a shot.

Reason #2: Unintended Consequences. For any aspiring free-market folk, this is the go-to reason why government should not be involved in the private market. The economy is the summation of infinite dynamic decisions being made by every person in the world. A government cannot possibly understand or replicate such a process. Government involvement distorts incentives, an eliminates the safeguard whereby every voluntary economic transaction necessarily benefits both parties.

To be specific, let's say that the economic goals of the A & E district are achieved, and the city becomes more desirable to businesses, tourists, and residents. Now what? Rents go up in the city. We already have a rent problem, especially downtown, and literally every business now becomes either a bar or a t-shirt shop. So we have successful artists, but 20 businesses downtown are now out of business and we lose diversity, which was a main goal of the district. The city then decides that it needs to do something about the diversity of the businesses downtown, and tries to plan the market house. Since the city has no expertise at this, the tenants get fed up with nonsense and abandon. This process continues, and soon the city has even more problems.

Bottom line: because of unintended consequences, the level of government intervention will never be static--it will always be increasing or decreasing, depending on the government's attitude towards the effect it may have on market problems. It is my position that the movement should be away from regulation. Let the market sort itself out--it doesn't always produce the perfect result, but over time, it's pretty damn close.

If your accounting of the council process is an accurate representation of how they usually operate, then of course there is cause for concern. But let's not throw out the baby with the bath water. It's in place. Let's embrace it, contribute to it's success, and use to the benefit of the entire city.

To the extent that the council cannot reverse the program, I'm with you here. No sense in beating ourselves up--let's see what we can't make of this.

PS -Thank you for posting the map -it clears up the confusion - slightly.

"If I turn out to be particularly clear, you've probably misunderstood what I've said".

Ultimately, one has to decide the purpose of this A & E district. If the purpose is to attract visitors or spur economic growth, perhaps I have provided adequate reason to doubt its effectiveness. If the purpose is to create a more rounded and/or diverse community, one must be prepared to support the government's prerogative to discriminate and redistribute resources. If you are so inclined, Patrice D, then your support for the district is well placed.


Ivana Socialize said...

market forces are very slow to react. The human mind and intervention would have served us better at this point in the US economy. We could easily have done something about the current recession and inflationary period if only the free-market morons would develop common sense

Brian Gill said...

You are crazy if you think that any human mind or any group of human minds could spur the economy by doing anything other than removing restrictions.

Even if slow to react, it is self-correcting. Given time, it always moves in the correct direction, which is more than you can say about politicians.

Ivana Socialize said...


You have just shown that common sense is not that common.