SPORTS ARE NOT AS ELEGANT FOR THE ECONOMY AS IT MAY SEEM
A common perception of adding a sports team to a city is that the franchise will increase the spending in the area due to more merchandise being sold. While this is correct, there is more to the story than that. In fact, according to Christina Headrick of the St. Petersburg Times, “individuals’ income in the cities rose by $67, due to increased spending after the stadiums were built. But taxes also went up by $73 as a result of the public financing for the arenas” (Headrick). People living in cities that get new stadiums essentially get a reduction in personal income due to such a large tax increase to fund the arena.
New stadiums are also commonly correlated with a boosted economy. This association is not a good one, however, because a new venue actually has no impact on a city. Garrett Johnson, a professor at the University of Denver, writes that there are three reasons that stadiums have no economic impact on their cities, one of which is the existence of the substitution effect (Johnson). The substitution effect, as defined by businessdictionary.com, is an effect caused by a rise in price that induces the consumer to buy more of a lower-priced good and less of a higher-priced good. In this case, the substitution effect suggests that sports franchises do not cause economic growth because people are spending the same money they would be spending, just in a different place. Fans are not shelling out money for games that they would not ordinarily spend; rather they are paying for tickets instead of going to bowling alleys or to miniature golf.
The substitution effect is also in effect when a team drafts, signs, or trades for a great player. When asked how LeBron James’ decision to sign with the Cleveland Cavaliers would impact the city, Victor Matheson, a College of Holy Cross sports economist said, “So the main issue is what were these people doing when James wasn’t there? They didn’t just hole up in their apartments, lights out, not eating, not drinking, not breathing. They were doing something with that money, and the extra money they’re spending on the Cavs has to come from somewhere” (Waldron). The addition of a great player to a team has a very similar impact on the economy that a new stadium does, in that more people will be willing to pay for tickets for a game rather than spend money on other extracurricular activities.
While adding a sports team or building a new stadium sounds amazing or may look great, the fact is, sports teams actually cause a reduced personal income to people living in the city. The substitution effect is just one of several ways to prove why sports franchises do not cause any economic growth for the city, regardless of what the perception of them is.
Works Cited
Headrick, Christina. “Does Subsidizing Baseball Pay Off?” St. Petersburg Times. 17 August 2000. Web. 31 Mar. 2015.
Johnson, Garrett. “The Economic Impact of New Stadiums and Arenas on Cities.” University of Denver Sports and Entertainment Law Journal (2011): 6. Print.
Waldron, Travis. "No, LeBron James Won’t Bring $500 Million A Year To Cleveland’s Economy." ThinkProgress. ThinkProgress, 15 July 2014. Web. 3 Nov. 2014.
New stadiums are also commonly correlated with a boosted economy. This association is not a good one, however, because a new venue actually has no impact on a city. Garrett Johnson, a professor at the University of Denver, writes that there are three reasons that stadiums have no economic impact on their cities, one of which is the existence of the substitution effect (Johnson). The substitution effect, as defined by businessdictionary.com, is an effect caused by a rise in price that induces the consumer to buy more of a lower-priced good and less of a higher-priced good. In this case, the substitution effect suggests that sports franchises do not cause economic growth because people are spending the same money they would be spending, just in a different place. Fans are not shelling out money for games that they would not ordinarily spend; rather they are paying for tickets instead of going to bowling alleys or to miniature golf.
The substitution effect is also in effect when a team drafts, signs, or trades for a great player. When asked how LeBron James’ decision to sign with the Cleveland Cavaliers would impact the city, Victor Matheson, a College of Holy Cross sports economist said, “So the main issue is what were these people doing when James wasn’t there? They didn’t just hole up in their apartments, lights out, not eating, not drinking, not breathing. They were doing something with that money, and the extra money they’re spending on the Cavs has to come from somewhere” (Waldron). The addition of a great player to a team has a very similar impact on the economy that a new stadium does, in that more people will be willing to pay for tickets for a game rather than spend money on other extracurricular activities.
While adding a sports team or building a new stadium sounds amazing or may look great, the fact is, sports teams actually cause a reduced personal income to people living in the city. The substitution effect is just one of several ways to prove why sports franchises do not cause any economic growth for the city, regardless of what the perception of them is.
Works Cited
Headrick, Christina. “Does Subsidizing Baseball Pay Off?” St. Petersburg Times. 17 August 2000. Web. 31 Mar. 2015.
Johnson, Garrett. “The Economic Impact of New Stadiums and Arenas on Cities.” University of Denver Sports and Entertainment Law Journal (2011): 6. Print.
Waldron, Travis. "No, LeBron James Won’t Bring $500 Million A Year To Cleveland’s Economy." ThinkProgress. ThinkProgress, 15 July 2014. Web. 3 Nov. 2014.