Tuesday, 31 March 2015

Hooton on Sports Econ 101

Matthew Hooton nails this one, with some help from Andrew Zimbalist:
I do know that the Cricket World Cup has been an outstanding success: Christchurch’s return as an international venue; the destruction of England at Wellington; the Auckland nail-biter against Australia; Ireland’s triumph over the West Indies at Nelson; Martin Guptill topping the batting with his 237 not out and Tim Southee the bowling with 7/33. The International Cricket Council must be bonkers to stick to its plan to cut the number of teams from 14 to 10 for 2019.
I also know we will soon be inundated with “studies” that the tournament has delivered a huge boost to the economy. The Ministry of Business, Innovation and Employment will be at the forefront. But what has been obvious anecdotally for a long while has been confirmed more systematically by Professor Andrew Zimbalist in his new book Circus Maximusreviewed in the Economist a couple of weeks ago: it’s all crap.
He shows that perhaps the one thing economists have proven beyond any doubt over the past hundred years is that major events never deliver any but the most fleeting economic benefits, if any at all. The overwhelming majority of events are a drain on GDP. The same is true of sports teams and new stadiums: none has ever delivered an improvement to employment or GDP. It would be remarkable were it any different for concerts, arts exhibitions, sculpture walks and the rest.
Oh, yes, there are plenty of analyses that show otherwise: those commissioned by the sports or arts associations who want the honour of hosting the event, the politicians and bureaucrats who want the front-row seats and tourism lobbyists who perceive they will gain financially, but even they’re usually wrong too.
Hooton later echoes a line I've often heard from Seamus Hogan, but that I'm not sure he's blogged [Update: here]: if you're going to run these things, justify them on the basis of their being a fun party and nothing more. Maybe the party is worthwhile; maybe it isn't. But don't pretend that it has big economic benefits.


  1. You can see more of National's 2005 Iwi/Kiwi style billboards here: http://www.electionads.org.nz/category/2005-general-election/?party=national-party&format=billboard

  2. "justify them on the basis of their being a fun party " - so right. The first month after we moved to Wgntn the City put on one of its occasional fireworks displays. From a hillside position, you got a fantastic 30 minutes of loud noises and bright lights. The next day, a few complaints in the paper about how the city had blown $100,000 in 30 minutes of extravagance. But anyone I spoke to said they were more than happy to spend a couple of dollars in their rates each year to have such a good time, so good value for money I think, without any pretense that it had a long-term economic value.

  3. Very interesting post. I'll put in an OIA request for any reports or research that refers to the work of Andrew Zimbalist

  4. In the US, where sports stadiums are often the sole domains of a single team, the owners, and local politicos regularly tout the supposed benefits to the surrounding area in order to gain public (read "tax payer") funding. It has long been my, and others, belief that if the stadium were such a profitable venture, why doesn't the team owner pay for it and reap the financial benefits for himself. He already knows the fiscal reality.

  5. Bread and circuses, nothing has changed

  6. I of course agree that subsidizing stadiums is silly, but a few nitpick points.

    There is now actually a real paper in SEJ arguing the 1996 Olympics did good: http://onlinelibrary.wiley.com/doi/10.1002/soej.12004/abstract

    Zimbalist is a sell-out a should not be cited (even setting aside the fact that his political economy and policy prescriptions in Baseball and Billions are ridiculous): http://www.fieldofschemes.com/2013/01/29/4452/zimbalists-rays-need-stadium-statement-made-while-under-contract-with-mlb/

    I'm actually pretty sure you can get plausible looking results "showing" a multiplier greater than one is commonplace for these types of things, but it's very rare in the literature because no professional economist is politically motivated to do it.

  7. Oh wow. Didn't know about the Field of Schemes stuff you've linked. Thanks!