Rationality of Investment on White Elephants: The Case of Public Investments in Tourist Facilities in Mexico

Abstract

In this paper we analyze the rationality that sustains the public investments on white elephants applied to the construction of tourist facilities in Mexico. The main result of this paper is that there exist two kinds of rationalities in the construction of white elephants. One is a similar rationality to that existent in the prisoner's dilemma, there is also a political rationality that involves politicians and social groups of individuals interested in exploiting tourist activities. If the winner of an electoral process is the same party that proposed the white elephant, then the construction is completed. Otherwise it is abandoned. This means that in the construction of white elephants, the political rationality prevails over economic rationality.

Keywords: Economic behavior, rationality of investment, white elephant, sustainable tourism

JEL Classification: H20, H50, H54, 020, L83