Why Does It Matter How Wealthy They Are?

I was delighted when Skip Sauer invited Phil Miller at Market Power and me to join him here at The Sports Economist blog. I have a high regard for both of them and for their work. Also, this blog has been one of my favourites, ever since I came across it nearly a year ago.

For my first posting, I would like to raise the issue of the economics of greed and envy. I’ve selected this topic because I have found myself quite uncomfortable with some of the support I have received over the years when challenging gubmnt subsidies for professional sports teams. My arguments have always been along the lines of pointing out that the local multipliers for spending on professional sports are small (or negative, as Dennis Coates and Brad Humphreys have found; see here for a good summary of their work). I also argued here that the positive externalities are small and that people supporting the subsidies often overlook the negative externalities of having a professional sports team in town.

What concerns me is one reaction I get when I appear on talk-shows, discuss the topic in sports bars, or that I often see in the mainstream media (MSM). People are jealous of the wealth of the owners and players at the major league levels. They say, “Why should we support those rich guys, making millions of dollars a year? The players should take a pay cut, and the owners should build their own stadia, like in the old days.”

Peter Mork comes perilously close to saying the same thing, writing in his recent posting about the San Diego Chargers:

It always shocks me that millionaire players and billionaire owners feel the need to take money from everyday people to fund their line of work. You would think it would be commonsense that if these stadiums were such great deals, they could finance them on their own and wouldn’t need taxpayers subsidies.

When I face such remarks on talk shows, I try to let them slide and readdress the topic from a different perspective. And I understand that Peter Mork’s primary point was that the voters of San Diego are much more likely to support a winning team than a losing team.

The question of whether taxpayers should support professional sports is a valid one. If it is efficient to support them, if there is a net social gain to supporting them, then it should not matter how well-off the owners and players are, unless we openly acknowledge that we would be happy to sacrifice some economic efficiency just to keep rich franchise owners and highly paid players from becoming richer.

Of course, if you want to allow interdependent utility functions (see here and here) to dominate in our policy choices, let me tell you about the weights I’d like attached to the utility functions of some of the people I do and do not like….

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Author: John Palmer

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