Buchanan, Tullock, Peacock, rent-seeking, cognitive dissonance: The movie industry case

The interconnection between Buchanan and Tullock's public choice approach and Ronald Coase's microeconomics and the fruitfulness of combining them with the free-market political economy of Alan Peacock are clear for the European "cultural exception" and particularly for the financing of movies in Italy, by public aid on the supply side and by incentives oriented to the demand side. Buchanan and Tullock's theories of rent-seeking and Tullock's theory of cognitive dissonance may be integrated with Ronald Coase's transaction costs theory as for the inefficient rent-seeking. On the other hand, Buchanan gives a different interpretation than Tullock of the case of rent-seeking by cognitive dissonance, considering the different distribution of the costs of financing by private initiatives and by the public hands. In this second case the voter may share the costs with the other taxpayers in a way different from the case of the individual contribution or consumption. On the other hand, Alan Peacock maintains that public incentives to cultural goods should be given on the demand side to help the consumer to improve the individual appreciation of these goods as merit goods.

While state aid for the production of movies considered as a cultural good according to the EU rules did not produce substantial improvements in the Italian movie industry and was a net cost for taxpayers, the three new methods of financing by tax incentives for the investors, by regional governments for the localization of movies in their territories to advertise touristic attractors and local products and by "product placement" were successful for tourism, for "made in Italy" and for the renaissance of the Italian movie industry. This case validates both the theories of rent-seeking and cognitive dissonance of Buchanan and Tullock (integrated with Coase's transaction costs) and the efficiency of Peacock's principle for the financing of culture.