Thursday, December 16, 2010

The Private Value of Public Investment

One thing I find disappointing about web-based journalism is the comments that often follow the article. Mostly, I no longer read them but there was one that followed the article on Bridger Bowl that appeared in the Billings Gazette this morning (read it here). The commenter asks, in an inflated tone of indignation, why his tax dollars should subsidize the operations of a local ski area. It’s a good question and goes to the heart of our current debate over the economy, taxes, and public investment.

In his book, The Affluent Society (1958), economist John Kenneth Galbraith points to the irrationality of the distinctions we make between private and public goods: “We view the production of the most frivolous goods with pride. We regard the production of some of the most significant and civilizing services with regret.“ Of course, he is talking about the perceived virtues of most any private good over the necessary evil of public production. Galbraith makes the argument that public goods production is really an investment for the production of private goods. After all, the small marginal tax we pay for a public police force protects a very large amount of private wealth.

A public subsidy for Bridger Bowl in the form of lower taxes (because they are a 5013c nonprofit) and low cost use of leasing public land does seem like a strange form of public good. After all, skiing and outdoor recreation is by and large an activity for the financially well off and most could certainly afford marginally higher lift tickets.

Let’s look at what we get for that subsidy and others like it. In direct terms, we enjoy high quality recreation opportunity near the community, a certain amount of ecosystem services are preserved we might otherwise lose to timber harvest, habitat is preserved; some local employment is created. Less directly, Bozeman receives a great deal of free press when BB is mentioned in national ski publications. People are attracted to the region for our outstanding scenery and quality of life. That creates jobs, new business, and expanded opportunities for our citizens. For BB, that amounts to about $12 million in economic impact. I would argue that because largely intact public lands surround Bozeman, our community is a better place in which to live and do business. I think that’s a pretty good return on investment.

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