Take Us Out of the (Subsidy) Ballgame

In my sports economics classes I contend that to the general public, the common notion is that because of their local prominence, sports stadiums generate economic activity.  The events held in them attract thousands of people and, particularly the sporting events, are featured in the local and national news.  How could something so prominent not generate thousands of jobs and millions of dollars in income?

A video from Reason TV (via Skip Sauer at TSE) nicely summarizes, in just a couple of minutes, why sports stadiums are not net generators of economic activity.  It begins with interviews of people outside a ballpark - the brand new Washington Nationals ballpark, on opening day no less -  who give the answer you'd expect the "man on the street" in front of a brand new stadium to give:  damn straight this is good for the community.  They see thousands of people milling about a new stadium, a new stadium placed in a formerly dilapidated area, and reach what seems an obvious conclusion.

But a survey of people outside a ballpark is not a random sample (nor is it intended to be in this video).  It's a sample of self-selected people,  people who specifically came to the ballpark, who's optimal choice out of many was to come to the stadium to see a game.  A random sample, on the other hand, would draw from the entire local economy in one way, shape, or form.

Then the video features an interview with Dennis Coates, professor of economics from the University of Maryland-Baltimore County, an economist who has made a nice career of studying the impact of sports and stadiums on local economies.  Coates, who has been instrumental in forming what is a consensus among economists, summarizes it: sports stadiums don't generate new economic activity (i.e. jobs, spending, income, etc.) and they may actually be a net drag on such economic activity.  Quite the contrary, stadiums drive a redistribution of economic activity from disparate parts of the local economy to the people lucky enough to get the subsidy.  The net effect is no new spending, no new jobs, no new income: just a redistribution of activity.

Dennis along with Brad Humphreys have written extensively on the subject of public subsidies for stadiums.  Here and here are some general articles on the subject written by Coates and Humphreys.  Here is an interview with Brad.  Here's the video.