Policy Market Blog

Nine out of Ten Economists Don’t Like the Average Stadium Deal

Martin Kennedy - Thursday, September 06, 2018

… the tenth is the economist who conducted the economic impact study to promote the deal. 

From a 2017 poll of economists:  83% said “providing any new state and local subsidies to build stadiums … is likely to cost the relevant taxpayers more than any local economic benefit guaranteed.” 

A knee-jerk response from grumpy economists?  Maybe, but the instincts and thinking are about right. 

Evaluating the economic impact of something…

… a policy, an event, or an investment… is both art and science.  A study conducted on behalf of an interested party -- The Boyd Business and Economic Research Center (BERC) at UTK for the MLS owners --  can involve great artistry.  Common in (promotional) impact studies…

  1. The stadium project is considered in isolation, not alongside alternatives – hiring more cops, merit pay for teachers, or building another greenway etc.  A reasonable posture, but the ‘it will create jobs’ argument should be seen for what it is, economic argle bargle. 
  2. Substitution is de-emphasized or ignored outright.  Market activity in and around a stadium is mostly a substitute (for that activity occurring somewhere else).  Dining near the stadium comes, in part, at the expense of restaurants in Bellevue, Sylvan Park, or Madison.  For that matter, the game itself is largely a substitute.

On the other hand…

… a project or event has a real economic impact. 

There is an ‘export’ effect.  A fan from Madison, Wisconsin is not like a fan from Madison, TN.  Fans coming not from Bellevue but from Buffalo stimulate the local economy.

The ‘public good’ or positive spillover impact is also real but far more difficult to quantify. 

The problem with stadium deals is…

… that sports leagues are monopolistic in nature.  The NFL for example exists to maximize the benefit of their member teams.  Any Joe Billionaire can’t just start up a franchise.  The league controls entry.

They keep the number of franchises somewhere below the number of cities large enough to support a franchise.  Owners, with implicit support from the league, then go on to extract as much economic surplus as possible from the city / fans.  In short, they go for the best deal they can get. 

It would also be better if the economic impact studies weren’t so biased… which might account for distaste for stadium deals among economists. 

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