A news service for the people of Michigan from the Mackinac Center for Public Policy

In The Detroit News, the presidents of the University Research Corridor schools argue that a dollar of state appropriations for their institutions returns $17 in economic benefits. But this analysis, regardless of accuracy, does not justify the appropriation.

These multiplier analyses are meant to show the economic impact of spending in one area compared to another. For instance, this 17-times spending multiplier is awfully close to the returns promised from spending on early childhood education, where advocates argue that spending a dollar generates $16 in economic activity, despite evidence to the contrary.

An even greater claim, using the same form of analysis, would be the 40-times spending multiplier claimed by state tourism advocates for the Pure Michigan campaign.

But these analyses don't answer the important question: Where does the appropriation money come from? In this case, it comes directly from taxpayers, who may already have ideas on how to best use their money.

You can't spend a dollar without it having an impact somewhere. But you shouldn't take a dollar from someone because you think it'll have a bigger economic impact when spent by someone else.

St. Lawrence University economist Steven Horwitz discusses how the minimum wage was used to block immigrants from taking scarce jobs during the depression era. See more at "Raising the Minimum Wage, Lowering Opportunity."


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