Art Carden  

Subsidizing Stadiums: Economic Losers are Political Winners

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A few weeks ago The Atlantic ran a great story about "How the NFL Fleeces Taxpayers" (HT: Reddit).

Stadium subsidies are a classic example of failure to appreciate "what it not seen." As Dennis Coates and Brad Humphreys point out in this survey of the literature, subsidies for stadiums and big events don't do much for a local economy. When you add in the costs of lobbying and schmoozing for subsidies, government-funded stadiums are almost surely a net drag on the local economy.

Stadium enthusiasts nonetheless might fall back on "civic pride" as a reason to have a stadium as having a Home Town Team might make the city a better place to live. If this were the case, it should be reflected in real estate prices, and I'm not aware of work that has looked at this. Second, there are already other possible providers of sports-related "civic pride." In Birmingham, for example, we have a new, subsidized downtown stadium for the Birmingham Barons even though colleges and universities like Samford, Birmingham-Southern, Miles, and UAB already provide lots of options for sports fans and, presumably, lots of opportunities to build civic pride and social capital.

But don't take my word for it. Here are Nick Gillespie and JC Bradbury with more.


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COMMENTS (8 to date)
ThomasH writes:

This shows the need for rigorous cost benefit analysis of public investments.

DougT writes:

"Concentrated benefits, disbursed costs." Along with lifetime season tickets. What's not to like?

David R. Henderson writes:

@DougT,
"Dispersed," not "disbursed."

MingoV writes:

@ThomasH: There always is a need for rigorous cost-benefit analyses of public expenditures, but politicians always find ways to hide or ignore such analyses. High-cost recent examples are the high speed train projects in California and Arizona.

Art Carden writes:

MingoV is right: a lot of projects are based on...well, let's just call them "optimistic" assumptions.

Higby writes:

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sourcreamus writes:

Sports generate huge consumer surpluses. If someone said pay 500 dollars a year or your favorite sports team ceases to exist I would pay. I think this is true for tens of millions of fans around the country. The teams only capture a part of this with tickets and merchandise sales. Getting cities to pay for stadiums is a way for teams to get some of the surplus. Politicians are stuck because a sports team owner has a monopoly. There is only one Washington Redskins team and if you lose it you will probably never get it back. Politicians are in the business of pleasing people and for them to make a decision which they know will disappoint millions is very difficult for them.
I think a solution is to build stadiums but with a provision that if the team ever moves they have to pay back the cost of the stadium. That way it is a one time shakedown instead of once a decade.

Higby writes:

This is about status and prestige, motives which eclipse all else.

This explains why cost-analyses are ignored, or biased to begin with.

Look at the mansions being built early in the last century, and yachts now. No one can justify such expense, yet it is an ongoing 'arms race' sucking down enormous resources.

In fact, status competition dominates most aspects of civic life. Look at your local colleges -- can they justify their most recent building expenses? No, not when brick-and-mortar has moved to the cloud.

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