Of Passports & Broken Windows

January 23, 2007

Today’s Broken Window Fallacy - as reported in WSJ:

“Passport Rules to Help Destinations”

To recap: the new passport legislation requires valid passports for all travel between the United States, Mexico, Canada, and a host of other formerly free-to-travel countries like the Bahamas. This ham-fisted rule, according to idiots everywhere, will spur growth and profits in U.S. destinations like Puerto Rico and the U.S. Virgin Islands - because tourists don’t need passports to visit those island locales.

And while it is true that these places might receive more tourism than they otherwise would have, it is not necessarily true that this makes anyone better off, and it is almost a certainty that the tourists are worse-off for it. When no passport was required to visit the Bahamas or the USVI, the revealed preference of some tourists was to visit the Bahamas. Effective immediately, this option is more expensive. Of course, most of these tourists probably already have valid passports - but that’s not the only burden. Additional scrutiny at airports (coming and going), lines at customs, and so on. Someone, somewhere, on the margin, is deciding to go to Puerto Rico, even though his first preference was the Bahamas, or Cancun.

The passport rule amounts to a tax on tourism - and like any other tax, it begets either less tourism, more consumption of near-but-not-so-good substitutes, or a combination of the two. And like any tax, the policy is plagued with cronyism manifested through exemptions (like P.R., who receives federal welfare dollars, but pays no taxes).


Here in Detroit - probably the only place in the country where one must travel South to get to Canada, border-crossing is habitual. Our teenagers go there to take advantage of their drinking age (19), our gamers go there for the casino (not so much, since Detroit built a few of her own), our outdoorsmen go there to hunt, fish, snowmobile, camp &c. And of course, the Canadians come here to buy cheap(er) cigarettes and enjoy our luxurious fashion malls. Not to mention the thousands of Michiganders and Canucks who commute daily across the border for work. All of these people who previously had no need for a passport, will need a passport today in order to maintain the same standard of living.

The money (and time) spent on the passport and its procedures are no different than the francs spent on repairing Mr. Bonhomme’s broken window. It’s money and time that we’d prefer not to spend, an expense that in no way improves our standard of living. Instead, it just gives us back the window that shouldn’t have been broken to begin with.

The glaziers are happy. But nobody else is.


Posted in: Potpourri

Comments

2 Comments so far

  1. Anonymous January 23, 2007 8:34 pm

    I’m not sure it’s a case of BWF so much as a new premium/discouunt phenomenon, as I describe in this post.

  2. Anonymous January 24, 2007 5:44 pm

    The analgoy of the broken window is particularly appropriate.

    The glaziers are happy. But nobody else is.

    I work in foreign currency and we’re already seeing a backlash. Travelers having to cancel trips because they can’t get their passports in time.

    My bottom line has already been affected by the travelers returning their purchases of Canadian dollars for the trip. I can’t even begin to estimate losses stemming from those who just don’t even call me now.

    Just can’t wait for the land and sea restrictions to go into effect in 2008. :: sarcasm ::

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