It would seem to me important for economists and finance professors to be clear when they are using concepts like the economic multiplier in the public domain. In this column, J. Colin Dodds, president of Saint Mary’s University and a professor of finance in the Sobey School of Business, makes the following statement:
To reinforce the economic argument, let me use the data from the CAMET report: For 2009/10, international students contributed $175 million new money to the Atlantic economy with multiplier effects across the economy with a total impact of $565 million. To be specific, for every $1 spent by Atlantic provincial governments on international university students, the rate of return averaged $2.68 of new money.
I know what he is saying, but to the average joe, it would seem that he is saying for every $1 taxpayer dollar in there are $2.68 new tax dollars in. That is not what he is saying here (at least based on this narrative). He is saying for every tax dollar in (spent by provincial government) you get $2.68 of ‘new money’ – which is economic activity not new tax revenue. I don’t know what the tax take is on the $2.68 but it somewhere far less than $2.68.
So if $1 of tax payer dollars in = less than $1 in new tax revenue + the increased cost of government services for the international students (albeit this is a low cost).
The case for international students in Atlantic Canada, based on this analysis, shouldn’t be primarily an economic one. It should be partially economic, partially a workforce feeder system argument, partly an intellectual horsepower argument, etc.
But if governments want to make a pure economic case, they need to find investments where $1 tax dollars in generates $4 or $5 tax dollars out. $1 in for $2.68 in ‘economic activity’ out doesn’t cut the mustard as an economic argument.
The lesson here is for the broader economic development efforts. We aren’t measuring at all right now so it is a moot point but if we were it has to be “for every tax dollar invested, we get $5 new tax dollars in revenue over time.