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During the past two years, tourism in Ocean View has increased, new businesses have
opened there, and Ocean View's tax revenues have risen by 30 percent. The best way to
improve Hopewell's economy, and generate additional tax revenues, is to build a golf course
and resort hotel similar to those in Ocean View."
In this memo HopeweU's mayor recommends that in order to stimulate the town's economy
and boost tax revenues HopeweU should build a new golf course and resort hotel, just as the
town of Ocean View did two years ago. To support this recommendation the mayor points out
that in Ocean View during the last two years tourism has increased, new businesses have
opened, and tax revenues have increased by 30%. I find the mayor's argument unconvincing
in several important respects.
First of all, it is possible that the mayor has confused cause with effect respecting the recent
developments in Ocean View. Perhaps Ocean View's construction of a new golf course and
hotel was a response to previous increases in tourism and business development increases
that have simply continued during the most recent two years. Since the mayor has failed to
account for this possibility, the claim that Hopewell would boost its economy by also
constructing a golf course and hotel is completely unwarranted.
Secondly, the mayor fails to account for other possible causes of the trends in Ocean View
during the last two years. The increase in tourism might have been due to improving economic
conditions nationwide, or to unusually pleasant weather in the region. The new businesses
that have opened in Ocean View might have opened there irrespective of the new golf course
and hotel. And, the 30% increase in tax revenues might have been the result of an increase in
tax rates, or the addition of a new type of municipal tax.
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