Film that created the most wealth?

October 30, 2008 at 12:27 am

Writing in Financial Times, on 16 May 2008, John Authers reported on the Film that Crated the Most Wealth. According to Nobel Prize in economics winner Prof. Robert Mundell (pictured here receiving his award from from King Carl XVI Gustaf of Sweden in 1999), this is supposed to be Martin Scorsese’s Taxi Driver (1976).

According to Mundell:

” Taxi Driver is the most important movie ever made from the standpoint of creating GDP. It’s the movie that made the Reagan revolution possible. That movie was indirectly responsible for adding between $5trn and $15trn of output to the US economy.”

How did it do it? Reporting from the annual gathering of the CFA Institute of chartered financial analysts in Vancouver, Authers describes the line of thought that Mundell follows in making this claim.

John Hinckley, the deranged would-be assassin who attempted to kill US president Ronald Reagan in 1981, claimed that he was inspired by it. He said that his action was an attempt to impress Foster. (The movie features a scene in which a mohawked De Niro attempts to assassinate a politician.) According to Mundell, the wave of sympathy for Reagan that was engendered by the assassination attempt deterred Democrats in Congress from voting against his proposed tax cuts. Because of this accident of history, the US administered a big fiscal stimulus at the same time that Paul Volcker at the Federal Reserve was administering tight money. This, for Mundell, was vital in creating the era of prosperity that followed.

I wish I had been in attendance in order to find out more on the cognitive method that underlines this line of reasoning. On the one hand, it sounds like a fascinating deduction (or maybe induction?), and it is constructed so neatly that it could be turned to a movie. It has certainly impressed me sufficiently to make me keep Authers’ articles on file for months until I got the chance to come round and write on it today. On the other hand, I wonder how stable are the assumptions on which the argument is based? Don’t we tell students in our teaching that most of the studies on influencing through the media have shown that there is no conclusive evidence that someone can be influenced one way or another by the novies? Haven’t barristers fought over the years against the use of such presumptive judgment on the actions of their clients in court? I remember a controversy involving a ban on The Godfather in some country, as it had allegedly inspired a mafia-style assassination; the move triggered serious objections that argued no direct causation between the workings of the criminal mind and the cinematic narrative to which it has been exposed could ever be established with full certainty. Why is it then that an even more daring construction like this one (involving a number of assumptions related to the film, the killer, the victim, the sympathy, the Congress, and at the end the tax policy and wealth) would be acceptable and newsworthy?

Prof. Mundell is a top league economist and I am sure he has got much better evidence on how things have evolved back in the 1980s regarding tax policies and wealth accumulation. But I admit feeling somewhat uneasy seeing an increasing number of writing from economists who use material from the realms of popular culture in a way in which they would not use material from within their own disciplines. In the area of economy of culture there is a Tyler Cowen, who has made a name for himself with statements that appear knowledgeable but are often fairly speculative. Most of all, however, I experience these doubts and unease when reading the witty but ultimately contrived arguments offered by writers such as Tim Hartford in the UK and Steven Levitt in the USA.

© Dina Iordanova
30 October 2008