Classic Film ‘Ghostbusters’ Offers Lesson in Economics

Published November 5, 2014

Just in time for Halloween, director Ivan Reitman’s classic film “Ghostbusters” marks its 30th year in the American zeitgeist. A rags-to-riches tale of a band of plucky ghost-hunters saving the world from a pagan god resembling David Bowie and an oversized confectionary mascot, “Ghostbusters” has inspired a cinematic sequel, two animated cartoon spinoffs, and at least three video games.

Perhaps one reason “Ghostbusters” has become a classic film is that it exemplifies and glorifies the American entrepreneurial spirit, something few Hollywood movies do these days.

After the parapsychology department’s academic funding is ended, professors Peter Venkman, Raymond Stanz, and Egon Spengler decide to forge a path in the private sector, mortgaging Stantz’s home to raise seed capital.

Contrasting their academic lives to their proposed new path as businessmen, Stantz notes the university “gave us money and facilities. We didn’t have to produce anything!”

To make money and survive in “the real world,” the trio has to produce services and goods that meet real needs and desires in the marketplace.

In one scene, the Sedgewick Hotel’s manager balks at the price the protagonists quote for removing a ghost, but when the ghostbusters threaten to return it to his hotel ballroom, he quickly realizes the removal of the “class-5 free-roaming vapor” is worth at least as much to him as the price quoted. The scene exemplifies the free negotiation of values that is at the heart of the market system and is missing.

The manager benefits from the ghost’s removal, as do the ghostbusters, check in hand—a classic example of Adam Smith’s observation, “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

Demand for the team’s services increases, and they realize they need to invest in additional human capital to be able to continue to trade their skills for money. Without asking for tax abatements from city council or corporate welfare from the New York General Assembly, the ghostbusters create a job, hiring Winston Zeddemore.

Led by Environmental Protection Agency (EPA) bureaucrat Walter Peck, however, the government ransacks the ghostbusters’ private property and shutters their operation, claiming violations of environmental regulations. Peck, however, does not have any evidence they are actually off-loading negative externalities—evil spirits and the like—onto their neighbors. In fact, the ghostbusters have been doing nothing but good.

Ordering the deactivation of the containment unit, Peck ironically creates major negative externalities himself, in the form of an innumerable horde of spooks set free to terrorize the people of New York City. Even worse, the EPA’s actions summon Gozer the Gozerian, a terrifying spiritual being bent on destroying the environment Peck is supposed to protect.

As Milton Friedman said, “one of the great mistakes is to judge policies and programs by their intentions rather than their results.” Peck’s actions, not his intentions, cast the overbearing regulatory state as the film’s antagonist, over whom the plucky heroes eventually triumph.

As we go about our daily lives, we interact with an uncounted number of small businesses, all seeking to fill a niche through free exchange, just as the ghostbusters did in this American film classic. If only our—and their—interactions with government were so beneficial.