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A Beehive (State) of Activity?

I know this might get old to readers, but if sport teams stopped producing bogus economic impact numbers, and if the press stopped blindly parroting the figures, we wouldn't have to repeatedly talk about economic impact here at thesportseconomist.com.

Here is the latest example of bad economics, this time from Real Salt Lake of Major League Soccer who hosted the second leg of the CONCACAF Champions League final on Wednesday in front a sell-out crowd of over 20,000 fans at Rio Tinto Stadium. The headline from ABC News of Salt Lake City, is that the "Biggest soccer game in Utah history boosts economy," relying on an estimate of economic impact of $2 million from Real spokesman Trey Fitzgerald. The story's reporter, Noah Bond, doesn't seem even faintly aware of the fact that RSL may wish to publish large estimates of economic impact to justify the controversial $35 million subsidy the team received to build their stadium.

That being said, it's not fair to accuse RSL of any economic missteps without evidence, so what do the numbers say? The article gives the impression that the $2 million figure was arrived at by simply multiplying the 20,000 fans by a guess of roughly $100 spending per fan.

Supposing one accepts that assumption, 20,000 fans each spending $100 at the game only equals $2 million in economic impact for the state if those 20,000 fans were visitors to the region. Otherwise they are simply local residents spending money at Rio Tinto instead of elsewhere in the economy.

For example, the article mentions that nearby Crown Burger had a great night, but it's not like the people eating there would have fasted in the absence of the game. The spending at Crown Burger simply came at the expense of other food establishments in the region unless the game actually brought new people to SLC.

This is a elementary economic error, but one that is all too common in the popular media, and it's an error that is encouraged by local sports franchises that are hungry for public subsidies. In this case, I think the majority of the blame must be sqaurely placed on the media. Team spokemen are supposed to do what team  spokesmen are supposed to do. Reporters are just not supposed to fall for it.

2 Comments

  • Avatar Of Sportsglutton
    sportsglutton April 29, 2011

    “For example, the article mentions that nearby Crown Burger had a great night, but it’s not like the people eating there would have fasted in the absence of the game. The spending at Crown Burger simply came at the expense of other food establishments in the region unless the game actually brought new people to SLC.”

    I don’t necessarily disagree with what your saying in the article, but isn’t the counterpoint above based on the assumption that on that night x amount of people (or to be specific 20,000) were committed to spending money on food outside of their homes? Do you really believe that all 20,000 were going to be eating at local restaurants, etc that evening? Additionally, shouldn’t there be some accounting for the increased amount of money people spend going to a sporting event vs. going out for dinner (I’m not an economist, but I’d say that’s a fair bet)?

    Just a few thoughts.

  • Avatar Of Jeff Baird
    Jeff Baird May 2, 2011

    Good points, glutton. They probably all did spend more that night than they would otherwise. I would say, though, that people who live in a region have a certain monthly or annual budget for various things. Over the course of the month or year, they’ll spend a given amount of money on entertainment. Many chose to spend their money that night at the game and restaurant. Perhaps the alternative was to eat at home that night for $25, so by going to the restaurant, they spent an extra $75. However, the “extra” $75 may have been shifted from a planned activity next month.

    It would be a total positive economic impact if the family withdrew all $100 from their savings and spent it at the game.* But that is not how consumers work in practice. Chances are, if they spent $100, they probably reduced the amount of money they spent on other things throughout the year to make up for it.

    This is not to deny that big sports events have an economic impact, often positive, but the boosters no longer even pretend to make a sober accounting of the true costs and true benefits.

    (*Maybe not totally positive, if the wealth effect depresses their spending by a minute amount the next year. But I digress)

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