November 26, 2004
Do the Colts Add to the Economy?
It is always nice to be on the same side of an issue as your friends. Human beings are social animals, and we all like to be liked. Disagreement for many of us is unpleasant, and when those disagreements are deep-seated, they can end friendships.
For many of my friends in the business community, then, these next words will be unpleasant. Because in my cold, rational mind, I cannot find any reason why the taxpayers of the city of Indianapolis – or of the state of Indiana, for that matter – should subsidize the operations of the Indianapolis Colts.
I am a football fan on the weekends, certainly, and have personally enjoyed watching and attending Colts games. But on weekdays I am an economist, and we keep score in an entirely different game. And the argument that having squads of professional athletes strap on helmets and knock each other around on Sunday afternoons is a boon to the local economy has always been a difficult one to swallow.
That’s what some studies of the impact of sports franchises on regional economic performance purport to show. The fact that those studies are commissioned by advocates of public underwriting of sports facilities is not, for me at least, especially troubling. If funding professional sports really produces a net gain for the economy, who else would we expect to bring that fact to our attention?
It is the assumptions that lead to that result that trouble me. The idea that spending by local residents on anything – gambling in casinos, buying cars, or attending sports events – can propel the overall economy to greater heights is something we should all be deeply skeptical of.
The overwhelming evidence in regional economics is that increases in such spending – say, as a result of a team’s relocation – inevitably produces a displacement in spending on something else. In order to realistically assess how a sports team’s operations impact the economy, we have to think very hard about what that “something else” is.
Unfortunately, such assessment is rare in most impact studies performed to date. They simply look at the spending by those who attend games on restaurants, parking, hotels, concessions, and tickets as if it came bundled up under the Christmas tree.
It is strange, but true, that from an impact point of view, the best thing for the Colts would be to have no local fans whatsoever.
If the stadium were filled in 1984 with fans who traveled here from Baltimore, then their spending could genuinely be considered as new and directly attributable to the presence of the team here.
If that sounds strange, then I should tell you that this was precisely the assumption used in a study of the New England Patriots aborted move to Hartford, Connecticut that would have been financed, in part, by taxpayers of that state. If tens of thousands of Foxboro fans would have extended their trips down to Hartford for each home game, then the economy of that city and state clearly stood to reap a net gain.
The principle of spending displacement applies to the public sector as well. If public funds are expended in support of the Colts, those monies are not available for other uses.
There’s more to this issue than will fit in this space, of course. The so-called intangibles of having a major league franchise, the appeal of luxury boxes at sports stadiums to corporate executives, and the impact of athletes as role models in the community are all frequently used to justify dipping into the public purse to support what is essentially an entertainment product. But if someone tells you that the economy will benefit, my advice is to be skeptical.
About the Author
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