NFL Gets A High Price for Intangible Benefits
Professional sports do not make or break a city’s economy, but they certainly affect its image.
A Key reasons that our local leaders are rushing to finance a new NFL football stadium is to avoid the label of 2-time loser. Having been abandoned by the National Football League’s Cardinals in Y 1988, the thinking goes, we can’t afford the ignominy of being jilted by the Rams too.
There is also the glitz factor: Some local tub-thumpers argue that the city gains priceless visibility whenever national sportscasters mention its name. And at least some local fans feel happier because they live in an NFL city.
In economic terms, all of these intangible benefits — morale, publicity, image and so on — are positive externalities. They are created by the presence of a team, but they accrue to the community at large, not to the team’s owner.
These positive externalities are Gov. Jay Nixon’s best argument for why we need to keep the Rams, or at least the NFL, in town. His proposal envisions Missouri and St. Louis taxpayers funding $388-M of the estimated $998-M cost of a new stadium.
That is a lot of money for the NFL intangibles.
To be sure, stadium backers also tout tangible benefits, but their arguments fly in the face of decades of evidence.
“The actual amount of new money coming into a community from a typical football game is going to be less than you’ll sometimes hear,” says the director of the sports business program at Washington University.
That’s because most Rams fans come from within, or close to, the St. Louis Metro area. They are spending money, to be sure, but they would spend it on other entertainment if the Rams were not here.
Victor Matheson, an economics professor at College of the Holy Cross in Worcester, Mass., has studied cities that have gained or lost teams, and he’s confident that the Rams’ decision will have no effect on St. Louis’ economy.
“Aside from a few unhappy football fans, there is no demonstrable effect on employment, income, taxable sales or any other variable economists can imagine looking at,” he says.
Still, fans’ happiness is an externality, and cities and states use externalities to justify subsidies to all kinds of businesses, from shopping centers to aircraft manufacturers.
The problem with pro sports is that the price tag is high, and the benefits are hard to measure.
“There are all sorts of other industries that make places nicer to live, including restaurants and movie theaters, but we don’t heavily subsidize them,” Matheson says. “At some point, somebody has to pay the bills.”
Robert Baade, a professor of economics at Lake Forest College in Illinois, also has done comparative studies of cities with and without big-league teams.
“It’s simply not an investment in a community’s economic future if you devote too much of your capital resources to professional sports,” Baade said.
Cities and states that spend heavily on pro sports often find themselves cutting back on more traditional forms of public spending. Wisconsin, for example, just approved $250-M for a new basketball arena in Milwaukee, weeks after reducing higher education funding by the same amount.
Education and infrastructure spending, as it happens, do have a measurable positive effect on a region’s economy. Now, if only we could make our schools and bridges to the glitzy level of the NFL enough to be mentioned weekly on ESPN.
Paul Ebeling, Editor
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