Tuesday, March 30, 2010

Why Government Spending Stimulus Often Fails to Stimulate 

Niels Veldhuis and Charles Lammam, responding to political criticism on a study they wrote on Canadian government stimulus attempts, have written an useful piece on why many economists think government spending tends to have a multiplier that is less than one (via fellow TSE blogger John Palmer).
In another 2009 study published in the prestigious American Economic Review, Stanford University professor John Taylor reviewed the evidence over the past decade on fiscal stimulus and concluded “there is little reliable empirical evidence that government spending is a way to end a recession or accelerate a recovery.”

A 2008 study, “What are the Effects of Fiscal Policy Shocks?” by University of London professor Andrew Mountford and University of Chicago professor Harald Uhlig, assessed and compared the economic impact of various cases of deficit-financed spending, deficit-financed tax cuts and tax-financed spending from 1955 to 2000. They found that spending related measures are the weakest ways to stimulate the economy and that both deficit-financed and tax-financed spending have the effect of discouraging private investment.

The International Monetary Fund (IMF), which Prime Minister Harper has cited as an authority, recently surveyed fiscal stimulus initiatives in advanced and emerging economies and concluded that the average effect of discretionary fiscal policy “does not provide strong evidence of countercyclical effects.” Simply put, the IMF concluded that fiscal stimulus is generally not an effective way to combat recessions.
Aside from the obvious macroeconomic angle, what's the sports angle here? The article helps explain why sports economists consistently find that stadium construction subsidies fail to generate much, if any, "economic impact" in local markets in terms of metro-area wide employment and income. First, stadium construction tends to crowd out other forms of construction since construction resources can't be working on two separate projects at exactly the same time, indirect evidence for which I found in my 2002 Journal of Urban Affairs article on construction industry employment and wages. Second, spending at sports events that comes from locals crowds out spending on other activities such as dining out and attending movies. Third, sports subsidies are financed with debt instruments and/or taxes. The debt crowds out other types of investment spending while taxes discourage economic activity.

If there's a consensus among sports economists, it's that sports subsidies are poor uses of taxpayer money*.

*Update: Rod Fort correctly notes in the comments that there are externalities associated with sports, both positive and negative, that are being addressed by sports economists and should be included in any cost-benefit analysis. I should have been more explicit in that last sentence and said that sports subsidies are poor uses of taxpayer money to increase employment and income.

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Friday, February 19, 2010

Vancouver Olympic Blitz 

Paragraph 4 of this from the Sports Business Daily is priceless.

Can you say substitution effect? Or, as Craig Depken calls this particular example, the "skedaddle effect".

Thanks to Craig for alerting me to this article. Here is what he had to say at Division of Labor.

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Friday, January 22, 2010

The "Tiger Effect" and Economic Impact 

The Buick Open this year will be without Tiger Woods who is out with his well-publicized, but self-inflicted, "injury." So what effect does this have on the Buick Open and specifically the local economy of San Diego?

According to an economic impact study published by the tournament, the 2007 and 2008 Buick Opens, each won by Tiger Woods, both attracted roughly 45-55,000 out-of-town visitors and generated economic impacts of around $30 million for the city. Out-of-towners represented 26% of the crowd in 2007 and 37% of spectators in 2008.

"Tigerless" tournaments generally attract 10-25% fewer spectators than those with the sport's premier player. Taking the economic impact numbers at face value, an admittedly unusual move here at The Sports Economist to be sure, if the reduction in attendance is evenly distributed between locals and non-locals, Tiger Woods' absence means a reduction in economic impact for the city of 10-25% or roughly $3 to $7 million.

But there is ample reason to believe his absence is not uniformly distributed. Even without Tiger, the Buick Open is a fun event for locals to attend right in their own backyard. However, the tournament may no longer be worth a long trip for the serious golf fan. Indeed, tournament officials have hinted that out-of-town visitors may comprise fewer than 10% of spectators this year. Since out-of-towers represent the only real source of potential economic impact, this represents a possible reduction in economic impact of 60-75% or a fall of $18-22 million from the previous $30 million figure.

Looks like Tiger might owe an explanation to all of the poor economic analysts in San Diego.

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Thursday, January 21, 2010

Why Are Economic Models so Complex? 

We sports economists have become accustomed to inflated economic impact statements made in documents used to support subsidies for sports. Economists Craig Depken and J. C. Bradbury have recent posts on their blogs about this issue. First, in a post over at Division of Labour, Craig posts an excerpt from a Miami Herald article on the economic impact of Super Bowls in Miami.
Advocates of the Super Bowl as an economic engine dismiss its academic skeptics as using complicated formulas to obscure the obvious. And they note that the reports bashing NFL figures bring the professors coveted media coverage as the big game approaches.
Simplicity? You want simplicity? J.C. has a story about simplicity over at his Sabernomics blog. He writes about a call he got from a reporter regarding the economic impact of the Richmond (Va.) Flying Squirrels. An executive with the Flying Squirrels claims that the team generated $40 million in economic impacts in the Richmond area. J.C. wondered how they could come up with such a big number, so he asked the reporter about the methodology used in the report. The reporter responded:
"That figure, he said, is based on a Minor League Baseball formula that takes the amount of revenue generated by the organization and multiplies it by five."
It doesn't get much simpler than that.

The US Bureau of Economic Analysis uses input-output modeling to calculate multipliers for specific products in a whole host of geographic locations. You want the multiplier for butter in Columbia, Mo.? The BEA has one. Are you interested in a multiplier for the state of Minnesota? The BEA has got you covered. From my experience in using these multipliers, most of these BEA multipliers are around 2.

But we must account for the fact that spending on sports largely comes from within the local region. Such spending represents spending redistribution, not creation, and the resulting multiplier is closer to 0.

But, of course, the economist's methodology is so complicated that it obscures the obvious.

I do not deny the complexity of our models. One reason that they are complicated is that observable economic outcomes, whether we are talking about ticket prices, personal income measures, employment numbers, etc. are the product of a complicated process. Just like a tornado is the product of an extremely complicated atmospheric process, so economic outcomes are the product of extremely complicated market processes.

Another reason our methods are complicated is that we are dealing with samples, samples often not under our direct control. When we try account for the random process inherent in these samples, the process gets even more messy. Yes, our models are complicated. But that's because the world is a complicated place.

Maybe next time we should multiply our numbers by 5 and be done with it and wait to see our names in the papers.

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Tuesday, December 22, 2009

More on the Economics of Bowl Games 

Inside Higher Ed reports that a number of teams participating in bowl games will not be taking the marching band, as well as reducing the number of cheerleaders and the size of the "official party" of administrators, faculty and staff that often travel with teams to bowl games. Boston College and Nevada will leave the band at home; Minnesota will reduce the number of band members and cheerleaders traveling to the Insight Bowl in Tempe. The reason? The bad economy, and the high cost of travel. Airfare (or charter flights), hotel rooms, food, practice facilities at the bowl site for the team and band all add up to large travel costs associated with playing in bowl games.

That's just the tip of the iceberg. An article in the San Diego Union-Tribune exposes the dirty little secret of bowl games: on average, schools lose money when they participate in bowl games. Although participants in the BCS bowls will each receive $18,000,000 this year, some of that revenue must be shared with other conference members, reducing the payday to individual participants. Also, all bowls require participants to purchase a certain number of tickets, usually more than 10,000, to the game, no matter how many they actually sell to fans. Last year, Western Michigan was stuck with over 10,000 unsold tickets to the Texas Bowl, costing the university over $400,000. The Union-Tribune article claims that unsold ticket guarantees cost bowl participants over $15 million last year, and expects the cost to rise this year as fewer fans travel to bowl games across the country.

Bowl games are viewed as local economic development projects by host communities. The losses incurred by many participating institutions suggest a subsidy flowing from college football fans to cities that host bowl games. Worse, the existing evidence indicates that college bowl games actually do not actually generate much local economic benefit for host cities.

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Friday, December 18, 2009

The DH and Broken Windows Fallacy 

Frederic Bastiat's broken windows fallacy: if a window maker breaks windows to increase business, he certainly benefits (if he doesn't get busted, of course). But society is made worse off. Resources used to fix broken windows support window repair jobs, but would have been used in alternative ways and would have supported other types of jobs. Moreover, we'd expect that if fixing broken windows were optimal, people would have gone out and destroyed their own windows.

What the H-E-double toothpicks does this have to do with sports? This:

We've heard a lot over the past year about job creation. Everything is jobs, jobs, jobs. Such rhetoric is typically followed up by policy proposals (whether from right or left) that are nonsense, nonsense, nonsense. But since we're on the topic, the crack staff at the Tax Foundation has come up with one policy that would definitely create a lot of good-paying American jobs:

"The N.L. Should Be More Like the A.L. Act of 2009," which would "mandate that the National League enact a designated hitter rule or MLB lose its anti-trust exemption; and that the total number of roster spots increases by one. "

At first, this would create 16 new jobs (number of N.L. teams). But think of all the other jobs. There will likely need to be more balls and bats produced because a D.H. is more likely to break a bat or foul a ball off during a plate appearance than a pitcher batting. This will increase the demand for wood and forestry products. Think of all those jobs. We may even need another bat boy. Pitchers will wear out faster, thereby compounding this issue. And pitchers will probably be more likely to be hurt during the season due to more wear and tear (every 9th batter won't be essentially a free pass). Therefore, more replacement pitchers will be needed. Plus, this wear and tear will create more jobs for medical trainers. That can only be a good thing. More uniforms will need to be produced—more jobs! And Chuck Schumer will be sure that those uniforms are produced in America by a hard-working American as opposed to some "foreigner." The multiplier effects of this policy are just off the charts.

I realize this is sarcasm, but let me note that the broken windows fallacy applies. MLB roster spots are fixed in number. When a team places a DH on the roster, it comes at the expense of another player's roster spot, resulting in no new net jobs in MLB.

Moreover, the DH doesn't play in the field, so he doesn't need a glove. That means fewer jobs for the craftsmen and women who make baseball gloves. What will they do? They'll starve or be forced to eat their pets (ew!). Oh, the huge manatee!

HT to Kip via Doc.

Cross-posted at Market Power

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Tuesday, November 24, 2009

Evidence that I am an Obstacle to Civic Progress 

The public debate about a new arena for the Oilers has been going on for some time up here. Last weekend, the local paper, the Edmonton Journal, published several articles about the proposed new hockey arena in downtown Edmonton. One of the articles, "Blue Lines & Bottom Lines" discusses, in detail, the pro and anti arena subsidy arguments. The article contains quite a bit of detailed information, and generally does a good job of presenting the two sides of the debate, in my opinion.

I was especially amused by the comments made by Patrick LaForge, president of the Oilers, about me, and my well known anti sports subsidy position:

LaForge says Humphreys and economists like him have it all wrong, that their fixation on certain economic measures misses the bigger picture of what makes a city thrive.

"To a large degree, it's people with Humphrey's view that prevents us from building the next Eiffel Tower, the next Peace Arch, the next CN Tower, because people who think like him can't find the economic rationalization to do it.

"I think that sports and entertainment is a unique industry and it adds value to a city. ... You can't replace it with a refinery or a pulp mill. They might have similar economic impact, but it's not a substitute for entertainment for the masses.

"It's people like him (Humphreys) that are going to prevent the world from being a place of entertainment, arts and culture. And I said that to him. It's not that people have to buy into my thinking 100 per cent, either, but he represents a view that I just 100 per cent disagree with."

Yep, that's me. Slavishly devoted to sucking the joy and happiness out of urban life as we know it in North America, one article and blog post at a time. I'd like to write more about this, but I am busy trying to get the Edmonton Opera shut down.

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Wednesday, November 18, 2009

Here's Yer Intangible Effect - Right In the Kisser, Alice! 

Assessing the intangible impact of sports has become an important area of research in the past few years. Most research tries to document, or value intangible positive benefits like "world class city" status or the sense of community created by sports teams. A new NBER working paper by economists David Card and Gordon Dahl takes a different approach and finds an intriguing result. Here's the abstract:
Family violence is a pervasive and costly problem, yet there is no consensus on how to interpret the phenomenon of violence by one family member against another. Some analysts assume that violence has an instrumental role in intra-family incentives. Others argue that violent episodes represent a loss of control that the offender immediately regrets. In this paper we specify and test a behavioral model of the latter form. Our key hypothesis is that negative emotional cues – benchmarked relative to a rationally expected reference point – make a breakdown of control more likely. We test this hypothesis using data on police reports of family violence on Sundays during the professional football season. Controlling for location and time fixed effects, weather factors, the pre-game point spread, and the size of the local viewing audience, we find that upset losses by the home team (losses in games that the home team was predicted to win by more than 3 points) lead to an 8 percent increase in police reports of at-home male-on-female intimate partner violence. There is no corresponding effect on female-on-male violence. Consistent with the behavioral prediction that losses matter more than gains, upset victories by the home team have (at most) a small dampening effect on family violence. We also find that unexpected losses in highly salient or frustrating games have a 50% to 100% larger impact on rates of family violence. The evidence that payoff-irrelevant events affect the rate of family violence leads us to conclude that at least some fraction of family violence is better characterized as a breakdown of control than as rationally directed instrumental violence.
The typical negative external costs associated with professional sports include traffic, trash, and nuisance crimes like public intoxication. This result is similar to the one in a paper by Rees and Schnepel that appeared in the Journal of Sports Economics issue from the NAASE sessions at the WEAI conference.

I hope someone tells the Governator of California about this before they try to attract a new NFL team to LA.

Hat tip to Tyler at Marginal Revolution.

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Thursday, November 05, 2009

Tour Operators and Mega-events 

The displacement of normal business by events such as the Super Bowl or the Olympics has been a staple issue in academic economists' analyses of economic impact. These warnings from the ivory tower are typically been derided by local commercial spokesman, as if we are imagining things.

Well, here's a change of pace. Today comes news from the European Tour Operators Association, who claim that the London Olympics will have a measurable negative impact on their business. From BBC News:
The ETOA report, which said benefits of 2012 Games were "wholly illusory", looked at tourism figures for the past six Olympics, including Athens in 2004 and Sydney in 2000.

Whilst some of the events saw a peak in demand during the games, all saw a major disruption to their normal tourism market and none showed any obvious signs of tourism growth.

Beijing, the last city to host the Olympics, showed international visitor arrivals plummeted by 30% in the month before the games, compared with the previous year.

In the months after the games, the tourism slump continued with international arrivals down by more than 20%.

Beijing fared considerably worse than the rest of China in 2008, which was not a strong year in general for tourism in the Asia-Pacific region.

Following the Sydney 2000 Olympics, the city's tourism lost "significant ground" to other Australian and New Zealand cities, it added.

"We have yet to have a games where tourism has not been disrupted, and disrupted in a way that causes real harm," said ETOA executive director Tom Jenkins.

"Even in the case of Athens, where they carefully restricted new capacity, there were considerable losses before and after the games both in the capital and throughout Greece," he added.
How about that!

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Wednesday, November 04, 2009

New Stadiums as Black Holes 

A common and important point made by economists when critiquing economic impact claims is that most of the expenditures are realized by the teams themselves. The rationale for stadium subsidies depends on the indirect effects of spending on the ballgames. We know these can be significant (I see them every football weekend in Clemson), but they are notoriously difficult to measure properly, and as a result lend themselves to being overstated in the pitch for subsidies.

A key feature of the amenity-laden modern stadium is the incorporation of numerous opportunities for fans to spend on food, drink, and apparel. As stadium design has morphed around this concept, the intended but little noticed consequence is that a chunk of the indirect spending associated with a sporting event disappears, and is captured by the team itself.

This interesting article in the NY Times focuses on the disappointing revenues of merchants around the new Yankee Stadium. Diversion of expenditure from restaurants and other vendors to operations inside the stadium appears quite evident:
On Monday, about an hour before the start of the Yankees-Phillies game, about a dozen customers were eating and drinking in the Hard Rock Cafe built into the southeast corner of Yankee Stadium. Less than a block south, the steel security gates were pulled down at Stan’s Sports Bar and Stan’s Sports World, longstanding businesses that catered year-round to the crowds drawn to the old stadium.

The city’s Economic Development Corporation estimated that each home playoff game produced $15.5 million in economic activity, including $6.7 million in spending on hotel rooms and taxi rides and in restaurants, bars and stores.

But on River Avenue in the Bronx, merchants said that very little of that money was trickling their way. Mr. Alawy, who said he had pulled about $30,000 out of savings to cover his costs this year, wistfully recalled the bounty that his family reaped during the 1996 World Series, when the Yankees played the Atlanta Braves.

While working in his father’s souvenir shop up the block, he recalled, there was no time to fold the T-shirts before selling them. Customers were lined up three and four deep at the counter yelling out orders and tossing wads of bills.
The story has many other interesting anecdotes. It suggests to me that the models used to estimate indirect expenditures (such as that of the Economic Development Corporation) should be revisited, in light of the strategies employed by teams to capture these revenue streams.

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Wednesday, October 07, 2009

Skyboxes for me, but not for thee? 

This story from Mobile, Alabama, brings to mind movie scenes of Roman emperors, seated in the prime seats of the Coliseum:
In late August, when the Mobile City Council and Mayor Sam Jones first toured the $2.5-million addition to Ladd-Peebles Stadium, including 11 new skyboxes, District 6 Councilwoman Connie Hudson said she was surprised to hear the city council would have a suite separate from the mayor’s, which is located just between the 40- and 50-yard lines.

“It was announced to me on the day we toured,” Hudson said. “We’ve always shared, like we do with the Baybears.”

The 11 new skyboxes bring the total at city-owned Ladd-Peebles Stadium up to 14, as three were built in 1997 in part of the press box addition. In addition to the two skyboxes available to the city, the Mobile County Commission also has a suite, which brings the total of skyboxes for local government use to three, or 21 percent of the skyboxes in the 61-year-old stadium.

Speaking generally, and taking into consideration the differences between facilities in other cities, Bud Ratliff of the Mobile Bay Sports Authority says most stadiums have only two skyboxes reserved for city and county use, but doesn’t see a problem with the current arrangement at Ladd-Peebles.
Silly, me, until reading this I had not considered the possibility that public officials themselves were direct beneficiaries of the public investments made in commercial sports facilities. The story is titled "Skyboxes at Ladd-Peebles Could Provide Huge Economic Impact." There is nothing in the story that remotely supports that contention. Rather, the story is entirely consistent with the public choice analysis of stadium subsidies, with the caveat that we add direct benefits to the politicians themselves to the analysis. As one spokesperson said, this setup "is standard across the country." Don't you just love the political class?

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Thursday, October 01, 2009

Kansas City's Sprint Center Still has No Permanent Major Leauge Sports Tenant, And That's No Big Deal 

The Sprint Center in Kansas City was opened in 2007 to much fanfare. A gorgeous facility built in a struggling downtown area, one of the hopes was that the Sprint Center would attract and NHL and/or an NBA team. Neither has yet happened, but according to the Kansas City Star, that's no big deal.

Kansas City is expected to cash in on a rocking year of concerts and events at the Sprint Center to the tune of $1.8 million.

The surprise boost comes from a profit-sharing section in the development agreement between the city and the arena’s operator, Anschutz Entertainment Group.

The surprise boost comes from a profit-sharing section in the development agreement between the city and the arena’s operator, Anschutz Entertainment Group.

Here's an interesting bit regarding sports at the arena

Any professional team would likely demand big chunks of the facility’s revenues from luxury suites, concessions and sponsorships. That would cut the arena’s ultimate profits.

“The economic model of this building is quite successful,” said Leiweke, who was in town for a preseason NHL match Tuesday night between the Los Angeles Kings, owned by AEG, and the New York Islanders.

“The last thing we or the city want to do is throw away that model and make the arena a loss leader with another tenant,” he said.

“It’s a tougher scenario with a professional team,” he added. If there were a team there now, “I’m sure we wouldn’t be able to write a check to the city for $1.8 million.”

While landing a professional sports team as an anchor for the arena remains the ultimate goal for AEG, Leiweke said the presence of a team also could diminish its popularity as a concert venue. Now, the arena has an abundance of options to offer concert promoters.

This is not good news to any proponent of public funds for sports stadiums. It also affirms the notion that using public funds to generate a positive city-wide economic boost does little good. The economic impact that comes from sports in a stadium flows mainly to fans and to owners, leaving little or no externalities.

Cross-Posted at Market Power

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Tuesday, June 02, 2009

Post-season college baseball & economic impact 

This story from Tallahassee reports on the economic impact of hosting a regional and super-regional series in the NCAA baseball tournament. Like most media coverage on economic impact, the story is written as if the local dollars that are generated by the sporting event are significant. No doubt they are, for the businesses impacted. If I were selling Florida State t-shirts and ball caps I'd be delighted: sales at the Garnet and Gold Stores were up a reported $10,000 to $15,000 last weekend. Restaurant sales at a place named Po' Boys -- no doubt a favorite hangout for local sports fans -- were 20% ahead of normal.

As usual, however, the dismal scientist doesn't see that there is much to crow about in these figures. Some fans who bought a t-shirt at the regional are likely to wear it to next fall's football game. The purchases in an otherwise dull sporting period for FSU substitute from the much larger mass of purchases that stem from the crowds at home football games. Once again, the unseen is more difficult to detect than "the seen." The same goes for most of the po' boy sandwiches sold last weekend. Some of those dollars were not spent in Tallahassee grocery stores, Tallahassee restaurants more distant from the stadium, and locations in Florida from where some FSU fans traveled. Unseen, and hard to measure, but doubtless a significant offset.

The largest figure mentioned in the article is the $102,000 that FSU bid to get next weekend's super-regional (the bid for the last weekend's regional was $92,000). As stated by FSU's sports information director, any sales by the University over and above the bid are kept by FSU, and the NCAA collects the bid amount, if accepted. Now, if you are Florida State and interested in gaining national television exposure by competing, and winning in the NCAA championship, you will have to take into account the value of this exposure, and the fact that Arkansas, their competitor for the super-regional, is interested in the same thing. Competitive bidding should push bid prices to a point where the expected profit (inclusive of the value of exposure) in increasing the bid falls to zero. How much does that leave FSU?

The stadium at Florida States "seats" about 6500 (at some venues, staff, the grounds crew, and even the ballplayers are counted as those in attendance, so a hard count of actual paying customers is not easy to come by). Tickets are sold as both singles and as a block for the entire tournament. At Clemson's regional last weekend, the tournament block cost $70 for the seven scheduled games. (Note: Clemson also "seats" about 6500, and reported attendance of 6217 for Monday's championship contest, after two competitors, Alabama and Tennesee Tech had been eliminated. No doubt Alabama's fans were long gone by then.) Assuming a sell-out and comparable prices, gross ticket sales would be about $455,000. Subtract the NCAA's fee, the marginal costs of cleanup, staffing, groundskeeping, and umpiring, and a rough guesstimate is that FSU might have cleared between $200,000 and $300,000 on ticket sales. Add some additional profit from concessions, perhaps a bucks or two per attendee (as opposed to tickets sold, as FSU only played three games en route to their championship), and perhaps the larger figure is the closer to the truth.

The bottom line is that the NCAA collects a nice chunk of change for lending its brand to the sixteen regional and eight super-regional contests during this two week period: something on the order of $2.4 million. (TV revenue should be tacked on to this). The hosting schools, depending on ticket sales, might bring in enough net revenue to cover the costs of the baseball season, which in the past has not been a revenue-generating sport. The food and t-shirt sales are nice for a few local vendors, but small potatoes in the larger scheme of things.

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Thursday, March 26, 2009

Spring Training & Economic Impact 

Here's a great piece by Charles Fountain, focused on the Grapefruit League. One highlight is the exchange of verbal blows between USF's Phil Porter and a local promoter. Porter wins on points, as the promoter trots out the seeing is believing fallacy, which always overstates the impact.

Here is where Porter nails it:
The only way to be certain of its real impact, Porter believes, is to look at what happens when spring training goes away. “Wait until somebody moves,” he says. “These are the things that provide natural tests for whether or not spring training provides the economic kick it is said to provide. If a team moves out of Winter Haven, say, what happens to Winter Haven? If next year it’s business as always with the same sort of sales and income and employment, then you gotta conclude that the presence of the team didn’t add anything to the community, because its absence didn’t take anything away.”

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Monday, December 22, 2008

Baseball in the depression 

Some important facts on the link between the economy and sports are reported by Patrick Saunders at the Denver Post:
In 1929, before the market crashed, major-league baseball ticket revenues were $17 million. By 1933, gate receipts had plummeted to $11 million. A big-leaguer made an average of $7,000 in 1929. That dwindled to $4,500 by 1936.
Obviously, the impact of the depression on the finances of a baseball team was severe. They were fortunate to operate under the reserve clause in those years, which limited the duration of player contracts to one year, making adjustment to declining demand much simpler.

A key quote in Saunders' article is from Wharton's Kenneth Shropshire:
"There is a level of sports exuberance that doesn't go away. The apocalypse will come when we see an on-the-field impact for one of the big-three sports, and we haven't seen that yet."
This is key. If you love sports, the great thing about it is that the best players will remain on the field of play whether their value is $10mm per year or $2mm per year. In contrast to the monetary figures, baseball attendance held up well during the depression. This is because teams lowered prices in response to declining nominal demand. [Note that the aggregate price level dropped 25% between 1929 and 1933.]. This should not be taken as evidence that sports are "recession-proof" since the financial side of the operations are inextricably tied to the aggregate economy. But the primary monetary cost for the major pro sports is in the form of player talent. Since the players earn such large rents over their next best alternative, the games will go on as scheduled, with the same cast of characters. Provided price adjustment takes place, the on-the-field-impact should be minimal, at least for the big three.


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"Economic reality deals sports jarring hit" 

I've talked with a number of reporters recently on the subject of the impact of the economy on sports -- the reverse of the usual question. Perhaps the growing recognition that sports is dependent on the larger economy, and not the opposite, will put a dent in the vast overstatement of sports' economic impact ..... naah, we'll get through the economic downturn and things will get back to normal. I'm sure. ... Well, maybe not so sure. Let's hope we get through the recession intact, at least!

Anyway, the conversations have interesting, and fun. At FoxSports.com, Greg Boeck captures more than a sound bite of my views in an article that is, I think, spot on. The money quote:
"Sports have been riding a tide of economic growth and tremendous growth in media-based revenue," says Sauer. "You didn't need to pay much attention to what was going on to make money owning a franchise. You go along for the ride, whether you are a bad manager and put a bad product on the field or a good manager with a good product. You can always sell out to someone who wants to love the team."

Not anymore.
Not sure that I said the word "love" (cellphone signals can get sketchy at times), but that will do.

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Tuesday, December 02, 2008

Policy Makers and Economic Analysis 

The Bush administration has earned the reputation for ignoring policy advice from economists, for better or for worse. From the sound of this story, Bush's crew have company across the pond, in England. In this case, the issue is whether there is an economic case for hosting the Olympics. Our own Stefan Szymanski can count himself among those whose studied opinion was solicited but ultimately ignored:
Ministers ignored evidence from their own experts who found scant social or economic justification for bidding for the 2012 Olympics, The Times has learnt.

A 250-page strategy document, signed off in December 2002 by Tony Blair as Prime Minister but selectively distributed, found little support for the claim that the Games would produce significant economic returns or more people playing sport.

The Game Plan document, whose findings are not widely known even in sport’s upper echelons, has emerged as Games chiefs meet today to agree funding cuts for Olympic sports such as basketball and hockey.

...Researched for nearly a year by ten experts, Game Plan was intended as a framework for sports policy for the next decade – in particular, whether Britain should bid for events such as the Olympics and the World Cup.

Instead it was quietly forgotten when it did not present a strong case for a bid. Civil servants watered down the findings but the final draft was still unhelpful to bid champions within the Government, an unnamed source told The Times.

“This was a robust report that showed why we should not bid for the Olympics but it was an inconvenient truth. Almost the moment the ink was dry, there was a volte-face,” said Stefan Szymanski, a professor at Cass Business School.

“The justification for bidding should have been based on evidence placed in the public domain. Instead key evidence was suppressed or ignored.”

The revelations raise the question of why ministers backed a bid citing reasons dismissed by their own experts.
Our politicians are disturbingly consistent on this point -- ignoring the advice of the very experts whose opinions they solicit. What a strange old game!

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Monday, September 22, 2008

New York PILOT Decision, Part II 

I was in Washington DC last Thursday testifying in a hearing that is part of the ongoing investigation by the House Committee on Government Reform, Subcommittee on Domestic Policy into the financing of the New Yankee Stadium in the Bronx. For those who have not been following this controversy, here's a brief summary:
  • 1986: Congress passes a law (the Tax Reform Act) that says sports facility construction projects can only be financed with tax exempt bonds if the principal and interest are paid using tax revenues.
  • 2006: The IRS issues Private Letter Rulings that allow New York City and the Yankees (and later the Mets) to finance the construction of two new baseball stadiums using tax exempt bonds and pay off the principal and interest on these bonds using payment in lieu of taxes (PILOTs), and not tax revenues collected by New York City or the State of New York. This ruling effectively guts the 1986 Tax Reform Act. The rationale for this decision was that these stadiums would generate significant positive economic impact in the community, and thus serve the public interest.
The Subcommittee web page has a lot of information on this issue, including video of the hearing and the written statements of all the witnesses. A lot of interesting information came to light in this hearing, including the fact that the justification given by the City of New York for pursuing this course of action was that both teams threatened to leave the city if they didn't get what they wanted, and that the City fudged the assessed value of the New Yankee Stadium significantly in order to make the project qualify for PILOTs.

The PILOT issue is interesting for several reasons: it's a clear example of the tensions that arise between the people who make the laws (Congress) and the people who implement the policies that are dictated by those laws (the IRS in this case); it makes for great political theatre, as the parties involved are high profile organizations; and as Dennis Zimmerman pointed out in his testimony at the March 29th 2007 hearing, the PILOT decision has a desirable, although probably unintended consequence of forcing the one group of taxpayes who benefit most from the new stadium (sports fans) to pay for the majority of the financing.

Somewhat predictably, the Yankees and NYC have stuck to their orginal claim that the tangible economic benefits justify the ruling, rather than the more creative position that, despite the bad intentions surrounding the PILOT decision, it actually results in almost good economic policy. I say almost good because the lower interest rates on those tax exempt bonds represent an implicit subsidy from every taxpayer in the United States to baseball fans in New York City.

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Thursday, August 28, 2008

The Economic Impact of the 2008 Women's Final Four 

Here.

“The Women’s Final Four has once again shown it is a proven winner on and off the court,” said Sue Donohoe, NCAA vice president of Division I women’s basketball. “Our corporate champions and corporate partners enjoy the strong outreach provided by our championship, and our loyal fans continue to support our game.” The $19.1 million economic impact includes $16,655,769 in visitor spending; $2,399,936 in organizational spending; and $1,835,927 in taxes and charges (including hotel taxes, car rental taxes, sales tax, and airport passenger facility charges). Overall, there were 22,595 visitors to the Tampa Bay area at the Women’s Final Four, the Time Out in Tampa event and Hoop City. Of this total, 21,067 were considered “valid visitors,” when excluding those who switched a planned trip to the host city to coincide with the Women’s Final Four; and those visiting for other reasons. Valid visitors stayed an average of 4.2 days and spent an average of $208 per day in Tampa, according to the study. When spending on merchandise is adjusted to account for only 20 percent of those funds staying in the host city, the average daily total spending by valid visitors was $190. The $190 spending figure includes $63 on food and beverage; $53 on lodging; $42 on transportation; $15 on retail shopping; $12 on non-NCAA entertainment; and $4 on merchandise.

I looked for the document on the Performance Research website, but couldn't find it. It seems that the researchers rightly tried to exclude what I call "rearranged spending", spending that would have occurred in the local area in the absence of the tournament. For instance, the article notes that they did not count attendees who had planned to come to Tampa anyways but switched their plans to attend the Final Four.

But it's not clear whether they deleted any implicit or explicit public subsidization from the overall impact. It's also not clear if any measures were taken to account for any folks who may have not come to or stayed in Tampa because of the Final Four. That's not surprising since the survey was given to those who actually attended Final Four events. But it's still part of the overall picture.

So without these numbers, I take this as an estimate of the gross impact.

Cross-posted at Market Power

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Wednesday, August 13, 2008

About that economic impact... 

Shocking news in a front page article in today's Washington Post: There aren't many tourists in Beijing this month.

"Business is worse than at this time last year," said a receptionist at a 22-room hotel in Beijing's Chongwen district, where rooms cost $28 a night. "It's the season for traveling and last year the hotel was full. The Olympics should have brought business to Beijing, but the reality is too far from the expectation."

In addition, despite "selling every ticket" the venues aren't full, and the organizers are scratching their heads. When I point out that things like this happen, people call me an idiot. When Victor Matheson publishes a paper that shows no economic impact from mega sports events, non-economists say he is clearly wrong, because millions of tickets are sold to these events, and that must generate economic impact. This outcome is consistent with a lot of empirical evidence from Sydney and Athens that suggests little tangible direct economic impact was generated by those games.

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Tuesday, August 05, 2008

Olympic-sized crowds? 

Less than one week away from the opening ceremonies of the world's largest sporting event, the Beijing tourism bureau predicts that the city will attract nearly half a million visitors this month. This is a a huge number, no doubt, packing a gigantic economic wallop. In fact, tourist numbers in Beijing haven't been this large since, well,... last August.

According to USA Today, "(security) restrictions on those attending the Games — or at least concerns about them — appear to have virtually eliminated any boost in tourism here from the Olympics. Beijing's tourism bureau predicts up to 450,000 visitors in the city this month — about the same as last August."

Combine this with the fact that China is temporarily shutting down hundreds of factories and curtailing automobile use during the Games, and it is hard to see how China will not end up losing a huge amount of money on its $40 billion investment.

(Thanks to Ron Gecan for forwarding the USA Today article.)

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Sunday, July 27, 2008

Sydney 2000, in hindsight 

The Olympics was touted as the flame that would cast fresh light on the city and lure planeload after planeload of curious foreigners Down Under. Sydney's recognition soared and the tourists flocked, but the effect was a one-off.

In the three years after the Games foreign tourism to New South Wales rose less than for Australia as a whole, the Centre of Policy Studies at Monash University in Melbourne said. There was no debt legacy, but neither was there a multibillion-dollar windfall forecast by its political cheerleaders. The state's auditor-general says that the financial result was a net cost to the public finances of at least A$1.5billion (about £720million).

Cut another way, the Monash researchers say that the redirection of public money into relatively unproductive infrastructure such as equestrian centres and man-made rapids has since cut A$2.1billion from public consumption.

...A lack of political will and funding meant that, apart from the stadiums, the only significant civil infrastructure built for the event was a single dead-end railway line to the site of the Games in Homebush Bay, in the city's west. That 1,580-acre (640-hectare) site at the end of the line also represents a lost opportunity, Holliday said.

Now being developed for residential and commercial use, Sydney Olympic Park was long criticised as a white elephant; a long-term master plan did not appear until 2005. “The master plan is under way, but we're now 2008 and the Olympics was 2000 and we started planning for the Olympics six years before that,” Holliday said. “So we're talking a 15-year time period and the construction of that town centre is under way now. I think it will be successful, but there was a lost opportunity longer term.”
From The Times.

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Friday, June 20, 2008

Seattle Supersonics Trial - Do economists' opinions vary? 

I apologize for the length of this post at the outset. Given the interpretations and spins put on the testimony of Andy Zimbalist and Brad Humphreys regarding the economic impact of the Supersonics by the lawyers and the press, I feel it necessary to be clear on a few issues.

From comment #141037 we get this: "Overall, I'm thinking the economist's testimony is gonna get tossed out the window since they all contradict one another."

Here is Paul Lawrence, lead attorney for the city of Seattle responding to a question about the case in the Seattle Times being a battle of economists:
Lawrence: I think the reality is because there are so many varying opinions, that actually supports the city opinion that it's difficult to measure to the degree of certainty that you need to award damages, what the value to the community is of the Sonics playing in Seattle. The fact that you've got a wide range of opinions among economists just tells us it's a hard number to measure which is a fact that supports specific performance.
(italics added)

Below I insert large segments of the transcripts from both Andy and Brad. I have done very little editing to the exchanges between the lawyers and the witnesses. The transcripts are available on the Seattle Times website.

Here is Andy's statement on tangible benefits:
Q In general, what's the conclusion you come to about the
tangible benefits to a community from the presence of a pro
sports franchises, if it can be summarized?

A Yes. I come to the same conclusion that I think every
economist that has studied the issue comes to. That is, that
a community that is trying to attract professional sports
team or contemplating building a new sports facility, from
either of those that community cannot anticipate a positive
economic development benefit from that activity.
Here's Brad's answer:
Q Well, based on your work over the years and your studies
of various towns, have you reached any conclusions about
whether the departure of a pro sports franchises has any
economic impact on a city?
A Yes. I have reached a conclusion on that.
Q Tell us about that.
What did you conclude?
A I concluded that the departure of a professional sports
franchise from a city will have no detectible economic impact
on the economy in that city.
Q Wait a second. Sonics have a payroll of $60-odd million.
That payroll the will go to Oklahoma City.
Won't there be a $60 million hole in the economy?
A Well, it's important to recognize the difference between
economic activity that the Sonics generate. The Sonics
clearly generate economic activity. You can't go outside
KeyArena on game night and not conclude that Sonics are
generating economic activity.
But the question is, do the Sonics generate new economic
activity in the Seattle economy? And the answer is, no, they
don't. The Sonics are an entertainment business like many,
many other entertainment businesses in the Seattle area. And
so consumers spend their entertainment dollars on whatever
entertainment options they have that makes them happy.
And for Sonics fans that is spending it on the Sonics.
But when the team leaves, they don't take that consumer
spending with them. That spending remains in the local
economy. It simply gets spent on other entertainment
activities by whatever those consumers want to spend it on
all over the metropolitan area.
Those answers are not at all at odds with one another. It is not a matter of a divergence of opinion among economists. The divergence comes in the spin put on the testimony by the stakeholders.

But what about intangible benefits?

Andy Zimbalist:
Q How does the fact that this is a lame-duck team, with all that that implies, affect your analysis of the intangible
benefits?
A Well, basically, Counsel, my analysis is that even under
much more stable circumstances and knowable circumstances the
results that have come out of the existing scholarship that
tries to estimate the tangible benefits are highly variable.
All of those results agree upon one thing. That one thing is
that there are very significant substantial intangible
benefits that accrue to a community from a professional
sports team. They agree about that. But the magnitude of
those benefits is highly variable. So that when you throw in
some other variables, like the lame-duck status and the other
things that I mentioned, it becomes yet more problematic to
make that kind of an estimate.
Brad Humphreys:
Q And you would agree that it is difficult to put a money
value on those intangible benefits, would you not?
A People have done it. I mean in the research literature
people have done it. There are many such examples of --
Q Can you -- Sorry. Go ahead, finish your answer.
A -- putting dollar values on intangible benefits like that.
Q Can we see Page 68 of your deposition? Starting at Line 5
I asked you: "Would you agree that the -- trying to place a
money value on those intangible benefits is difficult?" And
you answered: "Difficult but not impossible."
Another key issue is the distribution of impact across the metropolitan area. First from Andy's testimony:
Q That general opinion about tangible benefits that you've
just expressed relates to an MSA, a larger --
A Correct.
Q -- geographic area?
A Yes.
Q Do you have any reason to believe the general conclusion
you just talked about, that the situation presented here
presents some differences from the general conclusion you
talked about?
A Insofar as we're interested in this case, or one is
interested in this case about the City proper of Seattle,
rather than the MSA of Seattle, then yes, there could be a
difference. Because insofar as there is relocation of
economic activity within the MSA towards the downtown area,
that is, to say if people travel from the suburb of Bellevue
or other suburbs into downtown Seattle to watch a Sonics
game, then that could bring new economic activity into the
City proper. But it's just relocating activity within the
broader MSA.
From Brad:
Q And your theory is that dollars -- if I have a
discretionary dollar to spend on the Sonics I will spend it
somewhere else?
A Yes.
Q And when you look at as big an area as King, Snohomish and
Pierce County there is a lot of places I can spend my dollars
if I don't spend it in Seattle and still have a net zero,
correct?
A But there is -- there are other transactions going on.
Q Is that -- Sorry. Go ahead.
A There is all sorts of -- there is quite a bit of spatial
complexity in economic transactions. I mean, people are
going across these political borders and buying stuff, goods
and services. It is impossible. We don't have the data to
answer that question. I don't know. You can make
assumptions. You certainly can. I don't think they would be
justified.
See also the latter portion of Brad's answer to the question of the existence of tangible benefits above.

Mr. Lawrence asserts there is a wide range of opinion among economists. However, there does not appear to be an attempt to rebut Brad's testimony on this precise point.
Q When you say it's an unusual consensus among economists,
what does that mean?
A Well, I think that economists typically have a -- the
general public has the perception that economists can't agree
on very much at all. Ask two different economists their
opinion on some issue, and you'll get three different answers
to that.
But in this case it's pretty clear, and there is a pretty
strong consensus among the academic researchers that work in
this area about this lack of economic impact from a departure
of a pro sports franchise.
Finally, there is also an issue of the impact study done for the city and an issue it raises about who is and who is not an economist.

Here's what Brad had to say about the RIMS model results presented by the city:
Q Let me ask you another question.
Among trained economists, is there a view one way or the
other about the reliability of these RIMS studies?
A I will say this: RIMS studies are never published in
peer-reviewed economics journals.
Q They never make the cut?
A No, they don't make the cut.
Q Why not?
A Because the methodology is flawed, is the consensus among
research economists. They're not -- they wouldn't be able to
get through the cut to make peer-reviewed journals because of
these methodological problems, which are well recognized. I
mean there are papers about the methodological problems in
regional input/output models.
The person describing the RIMS results is called an economist, an issue discussed by commenters on the Seattle Post Intelligencer blog. Reading the comments on the blog is interesting and both heartening and disheartening.

Comment #140770:
Was that "huh" sarcastic? Because he most definitely does not have a PhD in economics nor hold the title of economist. Typically, trial experts have advanced degrees in the field they claim to be an expert in. (italics in original identifying the comment of another person)

Show me where you have to have a PhD in economics to be considered an economist? From Wikipedia:

"While a lawyer, for example, may be generally defined as a person possessing a law degree and state license to practice law, there is not a legally-required educational requirement or license for economists. In some job settings, the possession of a Bachelor's or Master's degree in economics is considered the minimum credential for being an economist."

"A professional working inside of one of many fields of economics or having an academic degree in this subject is widely considered to be an economist, and any person within any of these fields can claim to be one[citation needed].
With this response in comment #140841:
Well I guess that makes me an economist too, since I have a bachelor's degree in economics, master's in business, and work in an applied economics field (real estate). In fact my training was specifically in urban economics and feasibility. I don't know anything about this guy's study except what I read of his testimony in the blog, but I did read portions of Beyers' study. One fatal flaw that both make is "crediting" half of the players' salaries as flowing back through the local economy. Beyers defended this assumption on the basis that half of the players have a permanent residence in the area. Even so, I sincerely doubt that more than a much smaller fraction gets spent here. Whether Gary Payton had a residence here or not, where is his $85 million? It's mostly with him, where it will provide for his retirement and family. Shawn Kemp's millions are in Peru (OK, cheap shot). The point is, the millions of dollars spent on player salaries doesn't "spend" the same way normal salaries do.

If Hatamiya said that dollars not spent on Sonics would disappear or be saved in a tin can in the backyard, he has an eccentric view that's not supported by any other professional economist I know of. The standard theory is that they will be spent on other leisure time activities.

No academic economist has ever, to my knowledge, shown any significant increase in regional wealth from pro sports. There's an army of these guys who can produce reports on demand showing robust economic benefits from a sports team, or a WalMart, or whatever "investment" some powerful business or political group wants to make. People can buy the study they want.
Concluding it all, what do we get? 1) Tangible benefits from a franchise are likely to be small or non-existent, possibly even negative. 2) The effects are dispersed over a wide area so changes with regard to sports franchises are likely to provide benefits to some areas in a region while imposing costs on other areas in that region. 3) Intangible benefits are difficult to measure, and there is little consensus on their size. 4) Regional input output models are generally not good tools for determining the net effects of changes in the sports environment.

From the testimony of Brad and Andy, the consensus among economists on those issues seems quite clear despite the assertions of the lawyers, bloggers, and others to the contrary.

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Tuesday, June 17, 2008

Economic impact of Euro 2008 

Hosting Euro 2008 is holding down crowds at the venerable Vienna Opera, "the oldest theatrical institution with an unbroken record of performing in the German-speaking world."
At Monday's performance of Verdi's "La forza del destino" (The Force of Destiny), only 71 percent of seats were filled, a near-disastrous showing for a house that regularly sells up to 99 percent of its seats on most evenings.

Indeed, the opera house said it had even decided to cancel a ballet performance (La Bayadere) scheduled for June 29, the day of the Euro 2008 final in Vienna.


...In the run-up to the Euro 2008 soccer championships being held in Switzerland and Austria, the State Opera had predicted that performances were unlikely to be affected, since opera-goers were not interested in football.
Lesson learned? Substitution of economic activity takes place on many margins.

To be sure, the city is teeming with soccer fans, so many that one hotel declared itself to be "Euro free," with signs in the lobby requesting that visitors not talk about the soccer championship.

Hat tip: Frank Stephenson at Division of Labor, who has commentary.

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Thursday, May 15, 2008

LA sports study 

Yesterday's post referred to Kevin Modesti's tongue-in-cheek article on sports and economic impact in Los Angeles. On further investigation, it appears that Modesti's story may have been prompted by the release of a "real" economic impact study for sports in LA. The study is discussed here, with pdf slides from the study available here. It was produced out of the Anderson School of Business at UCLA, but no professor's name is attached to it. Ok, then.

Here are some choice quotes, with contrasting views:
--"This is one of the strongest sports markets in the country, and the study shows what kind of an impact it has on the local economy," said David Simon, president of the L.A. Sports Council.

--That $2 billion industry employs about 3,385 people in full-time jobs, according to the study. That's less than the 4,500 employed by the county's mining industry, according to Jack Kyser, the chief economist of the Los Angeles Economic Development Commission.

--"I always chuckle when people say that sports have no economic benefit," said [John] Semcken [vice president of Majestic Realty]. "Before Staples, that neighborhood was full of run-down day hotels, and prostitution was the only local industry ... today it is one of the entertainment capitals of the country."
The article notes that Majestic Realty is owned by Ed Roski, developer of the Staples Center, who is backing the current $800m "plan it and the NFL will come" football stadium in LA. The LA Sports Council paid for the study.

Draw your own conclusions, but for me, this just makes Modesti's spoof that much funnier.

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Wednesday, May 14, 2008

Economic impact: the missing items 

Selected items carelessly omitted in economic impact studies, from an LA centric Kevin Modesti:
$743,000 to auto-body shops for repairs made necessary by fender-benders at exits from Dodger Stadium parking lot.

$249 million to tattoo parlors and hair stylists from David Beckham.

$24.9 million to tattoo removers from parents whose kids emulate David Beckham.

$76,000 in co-payments to HMO urgent-care facilities from patients requiring extractions of four-inch splinters picked up from Coliseum seats.

$6 million for extra fuel for traffic helicopters reporting on congestion stemming from major events at the Rose Bowl.

$954,000 to lawyers to defend city and county against Al Davis lawsuits.

$160,000 from USC football office to print "alternate" promotional material omitting name of Reggie Bush.

$27,000 to cardiologists for treatment of palpitations brought on by watching Angels bullpen lately.

$29.95 to commission studies showing that sports contribute a lot to the economy.

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A sober assessment from the Swiss 

Euro 2008 takes place next month in Austria and Switzerland. It is the most significant soccer tournament among national teams, save the World Cup. At least one reporter is throwing cold water on the idea that hosting the tournament will stimulate the Swiss economy:
Hundreds of thousands of soccer fans will spend millions of francs on beer, bratwurst and beds at Euro 2008 next month.

The world's third-largest sports event will be no more than a drop in the ocean for the Swiss economy, however, and will not save the Alpine nation from following the rest of the world into slowdown.

"The economic effect is so small, it will be hard to detect in the statistics," said Urs Mueller, director of Switzerland's BAK Basel economics research institute.

Up to 1.4 million foreigner visitors will add business for hotels and restaurants and for retailers selling merchandise and food, and may create 7,500 jobs, though most of them will be temporary.

That could create an additional gross value added of up to 860 million Swiss francs ($813.6 million), a Swiss government study showed, making up less than 0.2 percent of the Swiss economy which has a size of some $420 billion.

..."The World Cup [Germany, 2006] has put millions in the coffers of FIFA and the German Football Association DFB but the economic impact of the sport event was very limited," concluded the German DIW research institute in a study last year.

Germany hosted four times more matches than Switzerland will, with 32 teams participating in the World Cup comparing to the 16 at Euro 2008.

Some sectors might get a boost from the world's third-biggest sports event after the World Cup and the Olympics.

Swiss hotels expect more than half a million additional overnight stays, coming on top of last year's record 36.4 million stays.
A fraction of the half million rooms might represent displaced visitors. But on net, if you own a hotel, an event like Euro 2008 should provide a significant revenue boost. Profits too, provided that the fans don't tear up the place.

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Monday, May 12, 2008

Some data on Glendale's Super Bowl 

Super Bowl wasn't a windfall
Glendale spent more on game than it made

Carrie Watters
The Arizona Republic
May. 12, 2008 12:00 AM
Glendale did not recoup what it spent to host Super Bowl XLII, according to a new study that showed out-of-towners here for the game added an estimated $1.2 million to the city's tax coffers.

The city laid out $3.4 million preparing for and hosting the Feb. 3 game.

Bottom line: The city spent $2.2 million more than its estimated take in connection with the game.

That deficit could be lessened by NFL spending or local visitors' spending, which were not part of the study by Scottsdale-based Elliott D. Pollack & Company.

City leaders have long said they did not anticipate that the city would immediately recoup its expenditures.

"You can look at it from getting the actual dollar back," Councilman David Goulet said. "But I think there is a bigger picture to look at than just the pure law of numbers."

He foresees a return on the investment over time as the game bolstered the city's image as a destination.

In two weeks leading up to the game, the city was mentioned in more than 5,000 broadcast stories, a publicity value that Cision, a media-monitoring company, pegs at nearly $27 million.
Worth what to whom? There is no way in hell that the citizens of Glendale would view $27 million of broadcast spending as an investment with positive returns.

There's much more in the story, including economic impact projections which might, if true, be worth cheering about. But the comment section suggests there are plenty of skeptical readers.

Thanks to Brent Stoddard for the link.

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Sunday, April 20, 2008

Taking It On the Chin Again 

Longtime readers of the Sports Economist may recall that I have taken my fair share of abuse from the print media in the past. I have been a critic of subsidies for professional sports facility construction for years, and this doesn't always sit well with people -- cough cough sports reporters cough cough -- who have a vested interest in subsidizing sports stadiums and arenas -- cough cough team owners cough cough. A couple of years ago, a Washington DC sports columnist called me a "clown" in his column after I pointed out that subsidies for the new stadium for the Nationals were a bad idea.

I have moved up here to Edmonton, in the Great White North, where the powers that be have decided it's time for a new arena for the beloved Oilers. Last Friday, I gave a lunchtime speech to the Economics Society of Northern Alberta with my usual spiel about the lack of tangible economic benefits from a new arena. Today, I was skewered in the Edmonton Sun by sports columnist John Short who seems to have taken offense at the idea that a shiny new arena for the Oilers on the public dime isn't the best thing since sliced bread. Among the gems in his column

He's an outsider and can't possibly know how much our pride and ego is worth.

Worse, he's an American. He can't know anything about hockey. Background knowledge in this case can't possibly count for anything.

Thanks for the warm welcome to town, John. I don't really feel at home somewhere until I have been pilloried in the local press by a sports columnist. It lets me know I'm still doing my job.

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Friday, April 18, 2008

If You Build It, They Will Come 

Maybe.

If they are subsidized.
The Minnesota Ballpark Authority is expected to announce today a $1 million fund to enhance the area around the Twins new ballpark.
Maybe.

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Sunday, February 10, 2008

Exciting News from the Sports Subsidy Crowd 

As a researcher working in the area of the economic impact of sport, I try my best to keep up with the "state of the art" in forecasting economic impact. Like many other fields, work in this exciting area moves forward at breakneck speed. It seems that every week brings fantastic new breakthroughs in sports subsidy technology. Consultants at the cutting edge of forecasting the expected economic impact of sporting events are continually "pushing the envelope" of economic impact estimates. In my professional opinion, it is only a matter of time before advances in multiplier technology and cutting edge assumptions about impact areas and daily tourist spending break through the legendary "billion dollar barrier" and usher in a new era in economic impact analysis.

The latest breakthrough comes to us from Washington state, where the 2015 US Open was recently awarded to a public golf course in Tacoma. According to this article, the local government "invested" $21 million in a new golf course, Chambers Bay, that opened a few months ago. This $21 million "investment" is a pittance compared to the estimated $100 million in economic impact that the community will receive from hosting the 2015 US Open golf tournament. Yes, that's correct, $100 million in economic impact from a week long event that will attract about 60,000 spectators. As astute County Executive John Ladenburg points out, that forecast makes those chumps in Seattle who only got a forecast of $50 million in economic impact for the 2001 MLB All Star game look like pikers.

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Thursday, May 24, 2007

Super bowl impact figures 

The local organizers have released a study of spending on Super Bowl 41 in Miami. Their bottom line, as reported by the Miami Herald: 112,000 visitors, spending $688 per day, for a direct spending infusion of $298 million. (The typical visitor spends about $200 per day - these are high rollers.)

Phil Porter has skeptical take on this:
Philip Porter, a University of South Florida economics professor, said $280 million in Super Bowl spending is too much for South Florida -- equaling 72 hours of total economic output throughout all of Miami-Dade County.

''In order to accomplish this, every sales line would have to double,'' Porter wrote in an e-mail. ``This is impossible. You'd have to sell twice as many cars, televisions, washers and dryers, etc., to accomplish this.''

Still, there's no doubt the game brought a major boost to the hospitality sector. Hotel taxes in Miami-Dade surged 15 percent in February and room revenues surged between 11 and 21 percent from Fort Lauderdale to Key West, according to state and industry data.
Porter's comparison is a useful reality check. It does miss the fact that hotel rooms and the like are fully priced during Super Bowl week. A decent chunk of the additional spending is a price effect rather than quantity.

Pat Rishe is also quoted: '"No question the Super Bowl attracted more [economic] activity than otherwise would have been the case in Miami that weekend," Rishe wrote in an e-mail. "But at the same time, Miami would not have been a ghost town either."'

The study was done by the Sport Management Research Institute, whose website has list of news references to their work, but no link to the study itself. A rather detailed executive summary is available via the Herald.

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