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A stadium whopper

The Jets want to move back to New York, and have their eyes on a site that connects to the Javitz Center, on the banks of the Hudson in Midtown Manhattan. Interesting location. The Jets are offering to pay $800 million towards a $1.4 billion cost. The figures come from this story, which does not make clear just what property rights the Jets obtain for their millions. The stadium proposal includes $600 million in public funding which, if solely for the purpose of the stadium, would set a record of its own.

Suppose there is no land ownership transferred (this appears to be the case), merely a lease tied to the stadium, and nothing more. If so, this implies that the Jets' $800 million expenditure is a measure of an NFL team's willingness to pay for a stadium. Public subsidies for stadiums elsewhere - where teams have spent a tiny fraction of this amount - thus appear to be wealth transfers to franchise owners. This simple notion echoes a point made at length in a recent paper by economists Marc Poitras and Larry Hadley of the University of Dayton.

How do owners get away with this? I call this the "franchise monopoly game." Monopoly leagues create artificial scarcity in the number of teams that can participate in the league. They control entry and to a great extent, location. The initial wave of public funding for sports stadiums began in the 1950s, when MLB spread teams from multiple team towns like Boston, Philadelphia, New York, and St. Louis, to new cities. Does your town want a team? Build us a stadium. If not, we'll go elsewhere. Since then, threats to relocate have been credible, and subsidies have increased dramatically. Some slides from a lecture I give on this topic are here. Russell Roberts links the political pitch on the economic impact of stadiums to Bastiat's broken window fallacy. Andrew Zimbalist, who wrote one of the seminal studies on this topic, comments on the Jets' proposal in this story. He's as puzzled as I am about the terms of the Jets' deal. This one bears watching.