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Betting on an Economic Impact

According to an article at ESPN.com, "MGM Mirage Inc.'s chief executive does not want the NBA All-Star Game to return to Las Vegas, saying Thursday that the casino's first-quarter earnings were potentially hurt by the rowdy crowd that turned out for the league's showcase game."

While none of us here at The Sports Economist would stoop so low as to say "we told you so", we did tell you so.

The article states that the All-Star game visitors crowded out Asian gamblers during the the weekend (which happened to overlap Chinese New Year.) Furthermore, the sports fans tended to spend less money at local businesses (like casinos) than regular visitors. "Crowding out" and "leakages" are two of the three primary reasons why us dismal economists tend to discount claims of large economic impacts from sporting events.

Furthermore, while boosters often claim intangible benefits such as advertising for the city as a benefit of mega-events, MGM's CEO clearly infers that Las Vegas' image suffered harm from the crowds and congestion associated with the game.

So what was Las Vegas Mayor Oscar Goodman's response to the negative economic impact of professional sports on his city? He wants to bring an NBA franchise to the city permanently. That way mainly locals will be going to the games instead of rowdy out-of-towners. Of course spending by locals on NBA games limits consumers' ability to spend on other goods and services in the local economy. Well, at least this gives us economists a chance to bring up the substitution effect, the third primary reason why we reject claims of large economic impacts from sporting events.