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What is the Ultimate Economic Impact of Sports?

2011 October 13
by Phil Miller

The economic impact of sports is usually framed in terms of how many jobs it generates and how much spending it generates.  But this misses the point.  Here’s commenter bobby on my most recent post (on jobs and income creation with sports!) here at The Sports Economist:

i find it mildly distressing that almost all of the discussion about economic impacts of sporting events is about rectangles with rarely if ever a discussion of triangles. i was always trained that welfare was measured by consumer and producer surplus, not expenditures, but then what do i know?

and, to make matters worse, i was always taught that if bundle B was chosen when bundle A was available that it could be concluded that A was better than B. i guess i’ll have to go back and study some more, someday.

i guess the idea that people are happier with a baseball game than a movie doesn’t mean much anymore, and its downright silly to suggest that a baseball game makes a place better off because people could have gone to a movie instead.

i think i’ll go drink a beer, eat a hot dog, and polish it off with some apple pie, now that i realize how silly i was to believe in revealed preference, consumer surplus, and consumer choice. oh well.

He’s exactly right.  Any discussion of the ultimate economic impact of sports, government policy, whatever should not be about how many jobs are created, how much people spend, etc.  It should be on the overall well-being that activity generates in terms of producer and consumer surplus.  That is the ultimate economic impact.  Jobs and spending numbers do little more than obscure that fact.

Cross-posted at Market Power

One Response
  1. Dennis permalink
    October 17, 2011

    Bobby is quite right that the question of surpluses is largely ignored in the debate about the impacts of sports events, stadium construction, and lots of other public policy issues.

    Rarely do proponents of hosting events or building stadiums argue that the net gain in consumer and producer surplus justifies the public subsidies. Those proponents do regularly argue that the subsidies are good public policy because they create jobs, raise incomes, increase local tax revenues, or are an indicator that the city is “world class”. Debunking such arguments is, I think, an important and useful activity. All the more so, if at the same time we work to convince people, policy makers and general citizens, that the real issue is about the subsidies relative to the real, but largely unmeasured, benefits to consumer and producer surplus.

    Our job, it seems to me, is to educate policy makers and citizens, both how the answers provided by the proponents are wrong and what the right answers are. So far, it seems, to me anyway, we have been fairly unsuccessful about the former and have made relatively few attempts at the latter.

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