A Stitch in Haste

(Guest-posted previously at Freespace.)

The politics of pull seem to have degenerated into the politics of pull-out regarding the relocation of the Montreal Expos to Washington, D.C.

The president of Major League Baseball last night called the District’s legislation for a new stadium “wholly unacceptable” and halted all business and promotional activities for the Washington Nationals until further notice.

What exactly was “wholly unacceptable”? The last-minute requirement by the District’s Council that a new stadium for the team be at least 50% financed by — gasp! — the private sector:

Baseball officials, who are trying to sell the Washington Nationals, oppose the council’s new plan because the uncertain nature of the private financing structure could lower the team’s sale price. The pact Williams negotiated with baseball in September calls for the stadium to be funded largely through a gross receipts tax on large city businesses.

…The council’s legislation instructs Natwar M. Gandhi, the city’s chief financial officer, to solicit bids for private financing proposals and forward any plan that is certified to the council for consideration. If a financing plan is not approved by the council by June, the stadium project would die.

Which is, of course, exactly how it should be.

Meanwhile, New York City’s athletocrats (how’s that for a new word?), led by ultra-liberal Republican (!) Michael Bloomberg, continue to promise the moon regarding a new stadium — not just in New York City, but in Manhattan — for the New York Jets (and, of course, for the mayor’s vanity boondoggle, the 2012 Olympics). Total estimated cost: $1.4 billion; total taxpayer cost (city and state): $600 million.

Why?

It’s when the central planners try to answer that question that it really becomes fun. I addressed that issue in a post at my blog, A Stitch in Haste, on November 10, 2004, entitled “Sports Stadiums and the Pseudo-Economics of ‘Rooting’“:

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Marginal Revolution:

New York City…is considering building a $1.4 billion stadium to bring the Jets back across the river from New Jersey, where they share quarters with the Giants. New York city and state would ante up $300 million each even though NFL football teams only play eight home games a year. Are communities crazy to do this kind of thing?

Not necessarily, according to economists Jerry Carlino and Ed Coulson, whose highly readable recent paper on the subject tries to take account of the intangible value people derive from sports teams. “We found that once quality of life benefits are included in the calculus,” they write, “the seemingly large public expenditure on new stadiums appears to be a good investment for cities and their residents.” The authors liken having an NFL team to having an old-growth forest — it’s something people enjoy even if they never visit. This is to say nothing of the pleasure and unity they derive from rooting, discussing, etc.

Yes, you read that correctly: the very fact that many people will not use the stadium is a perfectly valid reason to make them pay for it through public subsidies. Or, if you prefer: it is perfectly permissible for the government to impose a “fan tax,” even on those who never actually attend, or even watch, a game (i.e., who are not “fans”).

It’s interesting that one of the sections in the Carlino and Coulson paper is titled “External Benefits to the Rescue.” Rescue from what, exactly? Of course, from the real-world economics of such projects, which never live up to the economic hype.

Welcome to modern academic economics — now you have an idea why I fled it for the (relative) sanity of Wall Street and the law. Professional football is not the space program, and spectator sports are not a public good (they are perfectly excludable). Just because something is big doesn’t mean it has to be publicly provided — think “Empire State Building,” “airliners” or “Lord of the Rings.”

If the stadium has to rely on such ephemeral, de minimus selling points as “increased rooting,” then that’s a pretty clear sign that the project, qua public undertaking, is destined to be a dud. And as for the “intangible” benefits of increased “rooting,” how about its very tangible costs (e.g., lost productivity at the water cooler every Monday morning; empty law school classes in October)? And Los Angeles and Detroit might have something to add about whether “extra rooting” is a good thing.

(SIDEBAR: As a libertarian, I certainly would defend the stadium qua private undertaking: If the Jets or anyone else can raise the money to build their stadium without public subsidies, then let them build it — regardless of any local NIMBY whiners.)

Meanwhile, for their silly math, Carlino and Coulson get an official A Stitch in Haste “Goomba Goom!“

ADDENDUM: Great minds think alike — the good folks at Reason’s Out of Control (not to be confused with Reason’s Hit and Run) uncover more pseudo-economics trying to justify light rail in a think tank’s report:

Academics are taking note too. Rail, they say, lends itself to socializing. “A mode of transportation like a train is much more of a social mode than a car,” said one. “When you are in a train, you have to interact with other people.”

Reason’s response is comparable to mine. A short must-read in conjunction with this post.

For Discussion: How might the Broken Window Fallacy also be at work here?

UPDATE: James Joyner of Outside the Beltway has a TCS piece challenging the libertarian opposition to publicly-financed stadiums:

While libertarians rightly bemoan the notion of forcing taxpayers to subsidize wealthy team owners, they should understand that the market works both ways. If sports leagues have the leverage to demand public financing of stadia as a precondition for moving a franchise to a city, they would be foolish not to use it.

Joyner has it exactly backwards. It’s the very fact that the teams have no economic leverage whatsoever that compels them to rely instead on political leverage and campaigns of ignoring (or distorting) the economic realities of stadium finance, which are never on their side.

(Cross-linked at Outside the Beltway.)

Similar Posts:

• Can It Be? A Private Stadium for Private Teams?
• Sports Stadiums and the Pseudo-Economics of “Rooting”
• West Side Stadium: “How Can We Compete with Competition?”
• Economics of Convention Centers Debunked
• Sic Semper Center

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