The economic impact statements written by consultants for sports subsidy seekers describe research that goes something like this:
Assume that the total amount of direct spending that will happen if, say, a stadium is built is X and the multiplier is M. The total of direct and indirect spending that will therefore occur is X*M. There are similar multipliers for jobs and the process of calculating a jobs number is exactly the same as in the expenditure calculation.
One problem with this type of study is that it makes use of assumptions about the future which may or may not be rooted in historical fact. But that's not a fatal problem even though making assumptions about the future is always going to involve some sort of forecast error (as the good folks in Kansas City are finding out the hard way (Via Eric Parsons)).
The fatal problem with this type of research is that there is nothing to compare it to, no control group. It's like running a research trial on a new drug with no placebo. If everyone in the drug study gets better, how do we know it's the drug and not something else? Because of the lack of a comparison group, such studies should be looked at with skepticism, even when a respected economist/government advisor performs the study.
It may be that the last people in America who believe that the $862 billion economic stimulus of February 2009 created millions of net new jobs are Vice President Joe Biden and the staff economists in the White House. Yesterday, President Obama's chief economist announced that the plan had "created or saved" between 2.5 million and 3.6 million jobs and raised GDP by 2.7% to 3.2% through June 30. Don't you feel better already?
...All of these White House jobs estimates are based on the increasingly discredited Keynesian spending "multiplier," which according to White House economist Larry Summers means that every $1 of government spending will yield roughly $1.50 in higher GDP. Ms. Romer thus plugs her spending data into the Keynesian computer models and, presto, out come 2.5 million to 3.6 million jobs, even if the real economy has lost jobs. To adapt Groucho Marx: Who are you going to believe, the White House computer models, or your own eyes?
Or, as Milton Friedman used to say, "there's no such thing as a free lunch." The money government spends does create some jobs—the folks working on road projects, say—but that money has to come from somewhere, which means taxing or borrowing it from areas of the private economy that are nearly always more productive. This doesn't mean that government spending is always a bad idea, but it does mean that government spending as economic stimulus is fanciful.
The same goes for government subsidies for sports. If a sports project is so good for an economy, why does it need government help to get started? There should be plenty of private interests lining up to get a crack at such a great investment.
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