Economists see stadium subsidies as a losing proposition, St. Louis Fed report says

More than 80 percent of economists surveyed oppose using government subsidies to build new sports stadiums, according to a report on the economics of subsidizing stadiums published recently by the Federal Reserve Bank of St. Louis.

“The idea that sports is a catalyst for economic development just doesn’t hold water,” sports economist Robert Baade said in the piece.

The report, written by Scott A. Wolla, a senior economic education specialist for the St. Louis Fed, suggests that building a sports stadium brings potential economic impact; however, estimations of that impact are often exaggerated because people tend to overlook the opportunity cost of spending taxpayer money on a stadium.

Supporters argue that stadiums generate not only jobs during their construction phase, but also other jobs and revenues that benefit the local community in the long run, according to the report. For instance, a new stadium for the Los Angeles Rams in Inglewood, California, is expected to cost $3 billion to build but also bring 22,000 construction jobs to the area.

A new stadium might also spur additional development in the community where it’s located, even leading to the revitalization of a blighted or underdeveloped area, the piece says. And a stadium could also serve as a marketing tool to boost a city’s image, it adds.

However, in a 2017 poll by the Initiative on Global Markets, 83 percent of the 33 surveyed economists agreed that providing subsidies to professional sports franchises “is likely to cost the relevant taxpayers more than any local economic benefits that are generated.”

Michael Leeds, sports economist at Temple University, said the economic impact of a sports stadium is very little. He studied Chicago’s professional sports team, including the Bears, Bulls, Cubs and White Sox, and he concluded “if every sports team in Chicago were to suddenly disappear, the impact on the Chicago economy would be a fraction of 1 percent.”

Economists emphasize the importance of considering opportunity cost, or the loss of potential gains from other options when one option is chosen.

The essay goes on to suggest that government spending on infrastructure and education have the promise to bring bigger benefits, as investments that increase worker productivity do more to increase the rate of economic growth and the standard of living.

Economists also argue, the report says, that taxpayers would likely spend their money on other entertainment, such as movies and concerts, in the absence of a sports stadium and team.

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