This week I spoke with a public official about whether to keep or redevelop an old exhibit hall. A consultant claimed that every dollar spent there had six dollars of impact. But with most of the spending from local people attending day shows, little of this “impact” was money new to the economy. The “impact” number was like the RPM on an animal chasing its tail, and not a measure of how far or fast it was actually traveling.
Pride and prosperity--real wealth--comes from adding value in making and selling something to the world. Several years ago the city manager of Port Townsend asked me to measure the economic importance of leading industries there, which include tourism and boatbuilding. The single largest local private company is Safeway, which enjoys a good business selling beer and charcoal briquets to tourists. Clearly, though, most of the money that comes in for this goes back out to pay Budweiser and Kingsford for the cost of goods sold, a REIT for rent, and Puget Sound Electric for power. Meanwhile, across town in the boatyard, about 70 percent of $500,000 repair contracts goes to local boatwrights, electricians, riggers, and naval architects. Where do you think more of the spending stuck? Which activity is really moving putting the food on the table for this place? In practice, it takes both, but we need to give special attention to the “traded sector” activities that really bring the money in.