“85% of economists agree that local and state governments should not subsidize professional sports”

The Freakonomics blog has a discussion about whether cities and states should help pay for professional sports arenas and the weight of academic evidence says no:

So we have two perspectives and one question: Do sports generate jobs and economic growth?

This is a question that has been addressed numerous times by economists.  And these studies – summarized by economists Rob Baade and Victor Matheson — tend to reveal two answers.  When the study is completed by paid consultants prior to the public money being spent, the benefits from sports are numerous are large. However, when independent researchers – who are not paid by professional sports teams or leagues – look for these benefits after the fact, evidence of more jobs and economic growth are hard to find…

Given these three effects, the empirical evidence suggests quite strongly that sports do not create many jobs or generate much economic growth.  And such evidence has proven to be quite persuasive.  In fact, a survey of economists by Gregory Mankiw noted that 85% of economists agree that local and state governments should not subsidize professional sports. Mankiw also notes that only five issues have more agreement among economists.

But with all of this evidence, why would the city of Sacramento recently vote to spend money to build a new arena so that the Sacramento Kings would stay in the city?

Such a story clearly suggests that the Kings used the threat of re-location to elicit a substantial subsidy from the people of Sacramento.  Although the Kings do not have much economic impact on Sacramento, the Kings do make basketball fans happy.  And if they departed, those same people would be very unhappy with Kevin Johnson.  Consequently, the Mayor has an incentive to do what he can to keep the Kings in Sacramento (although it not entirely clear if making the non-basketball fans unhappy is good politics).

I think this is correct: no one want to be the politician that allows the popular local sports franchise to leave town. The stakes are even higher in places like Sacramento where the Kings are the only professional franchise so if they left, the city isn’t even on the professional sports map. A politician who let this happen might be punished by opponents and by voters (though they too would then have to go against all of the evidence from studies). I think this is similar logic to what happens in tax breaks debates like the one recently in Illinois: while it is hard to justify giving wealthy corporations a tax break to stay in Illinois, who wants to be the politician who let several thousand good jobs go to another state?

I also think that while this can be studied in economic terms, i.e., does helping to build a stadium lead to economic benefits for the city, or in political terms, this misses some of the point: having a sports team is also about status. It makes a city feel like a major league city. While perhaps we could argue that Sacramento has enough going on being the state capital of the country’s largest state, the average citizen might connect more to the sports team. When national TV crews come to televise a game, fans feel like they are being recognized (see this post as an example of this). With a sports teams, politicians and business people can take big wigs to games, signalling that their city is really part of the big time, even if the economic data doesn’t necessarily bear this out. While I am skeptical of arguments that people in Cleveland are worse off because their sports teams haven’t won, having a big sports team can mask other issues or at least help people ignore them. This is more difficult to measure than economic benefits but this cultural dimension still matters when these decisions are made.

(This post was prompted by part of a TrueHoop post from yesterday.)

One thought on ““85% of economists agree that local and state governments should not subsidize professional sports”

  1. Pingback: Marlins’ publicly-funded stadium not the exception among Major League Baseball teams | Legally Sociable

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s