Sports and Human Capital

Mark Rosentraub, author of  Major League Losers: The Real Cost Of Sports And Who’s Paying For It has changed his tune a bit lately.  Yesterday at the Sports and Society Conference being held in Green Bay, Wisconsin, Rosentraub gave a talk “How (and why) Cities Needs Sports and Culture for Economic Development.”  Here is the abstract of the talk:

Cities and civilizations have built sports and cultural facilities and used sporting events to attract people to cities across several millennia.  Why?  This paper argues that the answer is to be found in the role these institution, facilities, and events assume in the attraction and retention of human capital.  That human capital is what leads to advances in economic and social development.Those areas with the greatest concentration of skilled human capital are the ones that generate the most wealth.  The paper first explores the importance of the attraction and retention of human capital for economic development.  After that analysis, which focuses on classical works from economic and social theory involving theories advanced by  Marshall, Ricardo, Schumpeter, and the urban planner Jane Jacobs, among others, then turns to and exploration of the economic and social forces that have changed development patterns (and why) and the resulting movement of development away from many central cities.  The third part of the paper focuses on the ways in which sports facilities designed as part of urban neighborhoods can revitalize urban areas and change the focus of economic development.  Careful attention is focused on successful development strategies through an analysis of outcomes from projects in Los Angeles, San Diego, Indianapolis, Columbus, and Cleveland.

It’s obvious that large agglomerations of talented people demand sports.  But it’s not clear that city planning has much, if anything to do with this.  London is a quite successful city, despite the absence of  subsidized soccer  stadiums and integrated sports development, for example.

Rosentraub’s presentation is discussed in this story in the Green Bay Press Gazette:

Building residential developments around sports and other entertainment has proven effective, especially in redeveloping downtowns.

“Downtown housing stocks are in demand,” he said.

Rosentraub points to Indianapolis as an example of a community that used sports to help rebuild its downtown, investing millions of dollars in homes for the Pacers, the Colts and the NCAA headquarters, and then marketing them to the nation.

“You have to make deals happen. Indianapolis plays a lead role as entrepreneur,” he said.

He said communities such as Las Vegas and Orlando have used entertainment to build effective tourism economies, but they aren’t attracting the idea generators.

And even university towns, such as Columbus, Ohio, have a hard time battling the brain drain.

I’m  skeptical of this argument. Suppose one concedes the claim that Indianapolis is a successful example of economic development built upon integrated sports and city planning. Can this model be replicated? If so, in how many cities across the land? Is the model scalable downward? I doubt it.  Moreover, the idea of using sports as a magnet doesn’t work if every municipality is doing the same thing.

Finally, I don’t get the example of Columbus. The Ohio State Buckeyes provide major entertainment for the state of Ohio, along with the city of Columbus and the university itself. Consider this experiment: what would be the impact of Columbus and Cleveland swapping their football and basketball teams? My guess is that the economies of Cleveland and Columbus would tick along just as they have been, although Ohio State itself might take a hit.  The first order impact is likely to be on the asset value of the Browns and Cavaliers, which would take a hit from playing in the smaller market in Columbus.

Rosentraub’s new book is “Major League Winners: Using Sports and Cultural Centers as Tools for Economic Development .” I look forward to giving it a read, even though I’m not likely to buy the argument.

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Author: Skip Sauer

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14 thoughts on “Sports and Human Capital”

  1. As a frequent visitor to Indianapolis, their downtown is great. But it is also the state capitol and my understanding is the Circle Center mall is heavily subsidized (the developer is based in Carmel) and the downtown area is heavily dependent on government support.

    As a visitor the room rates at the Hyatt or Westin were reasonable so maybe Indy is doing it right. But without knowing all the details of public support I’m not sure every city can duplicate what they have. After all, if 25 cities need the NCAA tournament to make investments pay off, most of them will be disappointed.

  2. Oddly enough, I was working for the city of Indianapolis as an economic development planner in the late 1970s, when the focus on sports as an economic development tool began. The emphasis was initially on amatuer sports, but quickly enough shifted to professional sports. One of my last assignments–which I managed to stall long enough to get hired back into higher education–was to “prove that building a domed (football) stadium is a good idea.” Nothing like assuming the outcome.

    And Indy (helped along by private foundation money) spent a lot on a lot of facilities, from the old football stadium to swimming facilities, tennis facilities, and a bicylce racing track. And most recently a jewel of a minor league ballpark, a new basketball facility (although the Pacers are requesting a rent reduction–to zero–or they might consider moving) and, or course, the new football place. Indoor, of course.

    The impression that people have, I think, is that this all worked. And that gets reflected in some of the comments about the “revival” of the downtown. And there has been some change, especially on the west side of downtown (althoug most of that, I think, has been driven by the new state office buildings, by two museums, and by the development of space for the zoo, not by sports). There’s been some new housing development, but that’s actually something common to many older downtowns.

    But to the east, things don’t look so good. The area between the City-County Building and the psychological center, Monument Circle has not redeveloped; it has, if anything, deteriorated somewhat. Further east (and west, for that matter) on the main east-west street (Washington St.), things remain dicey. The city has continued, overall, to decentralize.

    It’s easy, if somewhat facile, to credit all the good things to the sports strategy and overlook all the bad things. But that’s not really the way to make an assessment of the outcome. I continue to be unconvinced.

  3. “Cities and civilizations have built sports and cultural facilities and used sporting events to attract people to cities across several millennia. Why? This paper argues that the answer is to be found in the role these institution, facilities, and events assume in the attraction and retention of human capital.”

    I would love to see the minutes from the Roman Senate discussion of building the Coliseum. I am sure they will document Emperor Vespasian suggesting the Coliseum necessary to attract people into the city from the countryside. I imagine he also argued that the fans and families of the gladiators from out of town will come and spend lots of money in the Roman hotels, inns, and baths.

  4. Dan and Donald,

    Isn’t the area around the Indianapolis Motor Speedway considered to be an eyesore? Granted, this isn’t downtown Indianapolis (it isn’t even Indianapolis technically), but 16th & Georgetown isn’t far from downtown. I know the track has purchased a lot of land around the track with the purpose of clearing eyesores. The old Steak & Shake and some old motels come to mind. There are aggressive plans for redevelopment, but the fact that a major sporting attraction like the Speedway can’t make the area nice could be conflicting evidence. On the other hand, perhaps clever planning, as Rosentraub suggests, will make that area more desirable. Then again, that could lead to a situation where two sports anchored entertainment areas in Indianapolis are in competition against each other.

  5. Without addressing the paper or presentation specifically, is there accountability for the opportunity costs associated with new stadiums in both implicit and explicit subsidies. Living in Ohio, I know that Buckeye football in the fall dominates the city and the city reaps the benefits of their success. Ohio State athletics – not sure on specifics but I believe this to be right – makes money and so the city ‘free rides’ off what the university provides.
    In the paper or book does the author address a ‘best sport’ investment? For example, baseball includes more home games but smaller crowds but a successful college team, like Ohio State football might be the biggest win for a city.

  6. Interesting post and comments. Along the way a few people have wondered if this can be downscaled. I’d be interested in understanding the economic and social impact of incorporating community sporting facility (sports fields, tennis courts, squash courts, local scale basketball stadia, clubrooms/community facilities) at the level of the local suburban development project.

    At face value, it seems these kinds of things may have been de-emphasised in a few too many suburbs constructed in the past 20 years.

  7. I think you miss the points on Cleveland and Columbus. In Cleveland the loss of tax revenues and the tax base in a city with a small footprint would be far different than for Columbus which annexed a good deal of the county. And the Arena District deflected a good deal of development downtown which was a policy priority for the city. This is the issue of where development occurs and not if; we know the answer to if, but if market conditions are followed the fiscal implications are cities are important. Even with annexation Columbus is still losing development to suburban counties, and the outmigration of economic activity from Cleveland is an issue that cannot be ignored.

  8. A.G.

    We only went to the speedway once on a Sunday morning. As I remember it, the area around the track was did not impress me as a center of economic activity. I was expecting something like the area around Wrigley Field and needless to say it was nothing like it.

    The problem with the speedway is that there is one big event there each year and a couple smaller ones with the GP and Brickyard 400. The NHRA dragstrip which is further out Crawfordsville Rd is similar to the area around the speedway and actually similar to every race track I’ve been to. Races are noisy, very noisy and the tracks capture most of the economic activity of race fans.

    Plus for a business, a lot of the fan traffic at a race are like people in New Orleans going to a Mardi Gras parade. They’ll come in and use the bathroom and maybe buy a soda but not much more. We would go to the SX race at the RCA Dome and spend a couple days downtown whereas my friends that have gone to the 500 drive in the morning of the race and don’t stay overnight after the race.

    In this economic environment I find it hard to see anyone coming up with the money to develop the area around the speedway. That’s a big track and there is a lot of space that would need to be developed. Since the politicians can’t see the track from the state capitol building it won’t be as easy to get government money as it was for the domes and fieldhouse.

  9. Not impressed with Mr. Coffin’s comments..What’s the upshot? What could housing development possible have to do with Peyton Manning’s NFL credentials?? Sports teams are touted as employment enhancers and community builders…I live in the San Francisco Bay Area and I can testify that those beliefs border on the delusional….

    Sports teams..and their successes..are bought into by a small percentage of the population of an area. I San Francisco a better place after 4 Super Bowl wins? It was infested with run aways and drug addicts from the Mid West in the 60’s and 70’s and the Niners failed to counterbalance those negatives.
    The Giants new stadium is a huge bonanza for fans…it is surrounded, however, by the desperate and homeless..drawn to San Francisco by more powerful political decisions than baseball ones. The fans? They get on the train or in their cars and drive home to more civilized communities like San Jose or Palo Alto.

    The upshot? College towns benefit the most from their teams and their schools. They don’t live under the Billion $ stadium hysteria that infects pro sports…and the schools provide a number of balanced experiences that keep sports (largely) in perspective. In fact, states like Indiana are a good example…Purdue and Notre Dame have created a beneficial total experience that makes a case for sport’s positive impact. Tell me the Raiders make Oakland better…or that Dallas benefits anyone other than a privileged elite that pay to dress up like NFL mannequins for Cowboy games.

  10. In the paper or book does the author address a ‘best sport’ investment? For example, baseball includes more home games but smaller crowds but a successful college team, like Ohio State football might be the biggest win for a city.

    If you’re comparing a MLB stadium to an NFL stadium there should be no comparison, as the former will host ten times as many games per season. Even if most games are not sellouts total attendance for the season will be considerably higher.

  11. Peter, does that mean that baseball is the best investment? It easily has the most number of games and stadium size could be small enough to be a ‘cozy park’ that people enjoy going to. I used to work for a minor league team that just built a new stadium and people really enjoyed coming to it. That said, it never did ‘revitalize’ the neighborhood. The city created a bus system that ran people to the park and then back to the suburbs.
    What about golf tournaments, again thinking of the Memorial in Ohio would a golf course be a better investment on a per/dollar basis?

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