Subsidy games

Dr Eric Crampton
Insights Newsletter
5 May, 2023

In 1983’s classic film War Games, computer-whiz Matthew Broderick hacked into Pentagon supercomputer WOPR - almost starting World War 3.

WOPR had been programmed for war gaming. After playing with Broderick, WOPR decided that it could, and should, win a game of Thermonuclear War against the Soviet Union.

As WOPR was about to launch America’s nukes, Broderick told it to play tic-tac-toe against itself. It learned that some games cannot be won. The only winning move is not to play.

Great movie for lovers of videogames. And a great lesson about a game with far lower stakes: videogame subsidy wars.

The New Zealand Game Developers Association wants the government to subsidise companies making videogames.

The idea seemed ludicrous when it was first pitched last year. And the more you look at it, the crazier the whole thing gets.

You see, the gaming industry didn’t come up with this one all on its own.

MBIE aims for transformational change, targeting ‘weightless service exports.’

Other service exports, like tourism and international education, took a bit of a hit thanks to MBIE’s management of the MIQ system. Service exports need rebuilding, and MBIE always knows best.

So, in some kind of partnership with the game developers, MBIE commissioned work from international consultancy Nordicity on the videogame sector and subsidies.

Nordicity does a lot of work assessing the economic impact of cultural industries like film and videogames. They recently found that a British Covid-recovery film subsidy scheme had a 115:1 benefit-to-cost ratio. It’s amazing that all government spending doesn’t get redirected into film and videogame subsidies on these kinds of returns.

Unsurprisingly, the commissioned study pointed to great successes of videogame subsidies abroad. So New Zealand should have them too. And without any hint of self-interest, the local industry has insisted we need subsidies to keep up with Australian videogame subsidies.

But there’s an obvious problem. Film subsidies and videogame subsidies are an arms race. If you want to keep up with other countries, you have to keep adding to your stockpile, forever.

Governments and countries cannot win this game. Taxpayers internationally obviously lose. The only winners are the subsidised companies.

But there’s a better move than not playing. A move that’s obvious to those of us old enough to remember War Games – and the era’s nuclear arms reduction treaties.

New Zealand should lead disarmament agreements banning these kinds of subsidy games.

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