NOM Gets Economics Wrong. Again.
May 30th, 2013
The UCLA Williams Institute (I’ll call them “WI”) is predicting an economic boost of $54-103 million in new spending for Illinois if the state legalizes same-sex marriage.
NOM’s Dr. Jennifer Roback Morse does not agree:
The people and legislators of Illinois should not count on extra revenue as a benefit from redefining marriage. These forecasts are based on an elementary economic error as well as highly dubious forecasts. That is why the “Gay Marriage Economic Miracle!!!” predictions have not worked out so well in the past.
I’ve learned Dr. Morse doesn’t have strong analytical skills, but this is her field, so I hoped for more this time. She did not deliver.
Dr. Morse describes the “elementary economic error”:
The same-sex couples of Illinois would have spent that money on other things: vacations, theater tickets, home decorating, pets, cars, doctor bills. Every dollar spent on weddings is a dollar taken away from some other industry!!
Not…exactly. Despite the italics and double exclamation.
Morse’s point is based on simple economics — simplistic economics, rather. The idea is that when people receive income, they either spend it or they save it, and if they save it, then banks lend those savings out to businesses and other consumers to spend. So every dollar is spent one way or another, and every dollar of income spent one way is just a dollar that can’t be spent some other way.
But consider this: What if the economy’s not so great? In a climate of fear and uncertainty, households usually try to cut back their spending. And businesses have little incentive to invest or expand. Dollars go unspent. You end up with usable but shuttered storefronts, functional but empty factories, and qualified but unemployed workers.
Economists call this the liquidity trap. A perfectly sensible decision by consumers and and businesses to spend less and save more (be more “liquid”) results in lower spending overall, “trapping” the economy in a recession unless we somehow find a way to boost spending back up.
A few signs can tell you if you’re in a liquidity trap. When interest rates plummet, it means businesses must not be competing hard for bank loans to finance expansion. That’s the situation now. Also, it’s not a good sign if businesses are sitting on mountains of cash rather than putting it to productive and profitable use. That, too, is our situation now.
The experts at the Williams Institute, however, do understand the liquidity trap. First, they estimated the number of same-sex couples likely to marry, factored in the average cost per wedding in Illinois, and then made this adjustment:
Also, only spending that comes from couples’ savings would truly be “new spending” for the State’s businesses, rather than money diverted from some other expenditure. To take these factors into account, as in previous studies by the Williams Institute, we estimate here that same-sex couples spend one-quarter of the amount that different-sex couples spend on wedding arrangements.
Emphasis added. In other words, they figured same-sex couples would use savings to pay for about a quarter of their wedding costs, and this is the only spending they counted.
[Note to Dr. Morse: When you're rebutting someone, and they've already preemptively struck down your primary objection, then you need to deal with that instead of pretending it's not there. Failing to do so is either dishonest or sloppy.]
- In 2008, WI predicted 2917 Iowa same-sex couples would marry in the first three years after it became legal, but in 2011 reported that only 866 had done so in the first year.
- In 2008, WI predicted sales tax revenue of $2.7 million per year for the first three years, but in 2011 reported it was only in the range of $850,000 to $930,000 for the first year.
As Dr. Morse says:
In addition, the gross but unacknowledged discrepancy between the inflated prediction of 2008 and the ecstatic report of success in 2011 cries out for explanation.
Fair enough. I’m disturbed that WI didn’t explain or even acknowledge the discrepancy, too. But Dr. Morse continues:
That explanation is simple: the Williams Institute seriously over-estimated the number of same-sex couples who would marry.
Well, it’s not quite that simple, especially if you’re trying to discredit the Illinois predictions.
First, as Dr. Morse should recall, the economy tanked a few months after WI issued its 2008 report. Marriage rates fell across the country (from 7.3% in 2007 to 6.8% in 2009), and it’s not unreasonable to think long-established couples delayed their ceremonies until the world settled down. In addition, the average spent per wedding dropped in Iowa, too.
I suppose it’s possible we’ll have another once-in-a-lifetime meltdown next year, but unless Dr. Morse is counting on it, those factors don’t apply to Illinois.
What WI really got wrong in 2008, though, was wedding tourism — the number of non-Iowans who would come to the state to marry. WI thought 54,723 out-of-state couples would do that, and this number was so far wrong it’s almost comical.
With some trepidation, then, I checked to see how much wedding tourism WI had factored into its Illinois forecast, and the answer is…
That’s right, zero. WI learned from its mistake, and this year when it predicted a $54-103 million boost from legalizing same-sex marriage in Illinois, it didn’t factor out-of-state couples into its calculations.
That’s a huge correction from the Iowa analysis. Now, you’re free to remain skeptical of these estimates (as a former Ph.D. candidate in economics, I’m skeptical as hell!) but at least be an informed skeptic. Who knows whether Dr. Morse doesn’t understand that this correction occurred, or she understands but is ignoring it to buttress a false case against the Illinois forecast. It’s the standard NOM question: incompetence or deception? All we can know for sure is that if you want a rigorous, well-informed analysis…don’t go to Dr. Jennifer Roback Morse.