Wynne government’s giant rubber duck—the economic effects

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Appeared in the Ottawa Sun, July 12, 2017
Wynne Government’s Giant Rubber Duck - The Economic Effects

For Canada Day, Premier Wynne's government spent about $120,000 to help bring a giant rubber duck to Toronto. 

The decision drew criticism from opposition politicians and advocacy groups who saw it as a waste of money.  Progressive Conservative MPP Rick Nicholls described the episode as an “absolute cluster duck.”

When Canada Day arrived, lots of people turned out to see the attraction, which meant big bucks for businesses nearby. Water taxis, nearby restaurants, and coffee shops cleaned up. 

Eleanor McMahon, Ontario's minister of tourism, culture and sport, pointed to these windfalls for nearby businesses as evidence the duck was, in fact, a wise use of public money. “The crowds lining up to see the duck and the economic boost for local economies indicates that our investments are effective,” she said.

This argument should be treated with skepticism because it makes one of the most common mistakes in economics—it focuses entirely on economic benefits that are easily visible while ignoring costs that are harder to see. This problem was spelled out by the 19th Century economist Frederic Bastiat in his classic work “That Which is Seen, and That Which Is Not Seen.”

Bastiat used an example to illustrate this point. He imagined a store where the owner's son broke a pane of class. Some observers, Bastiat wrote, would view a silver lining to the owner's misfortune—it would mean work for local glaziers, and therefore more economic activity.

The problem with this analysis, Bastiat taught us, is that it ignores all the other ways the shop owner might have spent the money had his window not been broken. For example, he could have bought new shoes or upgrade his facilities to boost store sales. If we focus only on the visible effects of the window-smashing (the hiring of a glazier) we miss its unseen effects including a range of foregone transactions between the shop owner and other townsfolk. 

Which brings us back to the duck. Surely the duck brought more business for nearby restaurants and water taxis. And that's great for them. But it would be a mistake to simply conclude that the duck therefore unambiguously boosted the economy. 

It's important to recognize that all the people who participated in duck-adjacent economic activity would not have otherwise burned the money allocated to their entertainment budgets. They would have spent it on other activities such as dinners out, trips to the movies or sporting events.

The duck contributed to a big spike in economic activity in a specific location and time, and so this effect was highly visible. Smaller negative effects for a larger number of business owners scattered around the region may be less visible but are just as real. 

Similarly, when assessing statements about the benefits created by government expenditures on the duck, it's important to remember that the associated taxpayer dollars could also have produced other different benefits had they been spent on other priorities. These “opportunity costs”—the best available options foregone to fund the duck—must also be weighed before making a final determination on the wisdom of renting the giant waterfowl. 

Bastiat wrote that the ability to consider unseen effects is “the whole difference” between good and bad economists. Recent developments in Toronto provide an opportunity to reflect on his teaching. After all, there are few things more easily seen than a six-storey rubber duck.