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Chapter 11 The Stadium Mess To Accompany Sports Economics 2ED Rodney Fort (PrenticeHall, 2006)

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chapter 11 the stadium mess

Chapter 11The Stadium Mess

To Accompany

Sports Economics 2ED

Rodney Fort

(PrenticeHall, 2006)

USAToday: The excitement from that playoff run (in 1997), and the excitement you provided as a young superstar, saved baseball in Seattle. Do you feel in some way that Safeco Field is the House That Junior Built?

Ken Griffey, Jr.: No. The people of Seattle built it. They’re the ones who went out and said “yes” to keep this ballclub here. The 25 guys on the field helped, but it was eventually the people of Seattle who said they wanted the ballpark and wanted the team to stay. They could have said “no” and we would have ended up somewhere else.

overview
Overview
  • The rational actor explanation of representative democracy predicts that benefits will be concentrated and costs dispersed.
  • League control of team location gives owners the upper hand in stadium negotiations.
  • Stadium outcomes are characterized by concentrated benefits and dispersed costs.
  • Direct democracy has limitations that preclude it from curbing the stadium mess.
  • For any change to occur, fan interest groups must arise to offset current winners in the stadium subsidy process.
introduction
Introduction

“I believe the citizens should have a say in this issue. If the voters pass this, we will move forward. If the voters don’t pass this, we will still move forward.”

- Jay Tibschraeny, Mayor of Chandler, AZ.

remember a pretty big deal

Remember: A pretty big deal

Subsidies are large.

Best work recently, Long (JSE, 2005). Includes land/infrastructure, net annual public expenses, foregone property tax.

Subsidies equal (PV 2001):

MLB only: $6.1 billion.

NFL only: $5.5 billion.

NHL only: $2.2 billion.

NBA only: $1.7 billion.

NBA/NHL: $1.3 billion.

MLB/NFL: $0.5 billion.

Total for 99 major-league facilities: $17.3 billion.

PV 2001 x 1.17 = $2007: $20.2 billion.

remember a pretty big deal5

Remember: A pretty big deal

The only examples where subsidy is .LE. 0:

Minneapolis HHH Metrodome.

Boston/Foxboro Foxboro Stadium.

For comparison (PV 2001):

Comerica Park (2000-2001): $120 million.

Old Silverdome (1975-2001): $100 million.

The Palace (1988-2001): $30 million

Total Detroit subsidy: $250 million

(PV 2001 x 1.17 = $2007: $292.5 million

Let’s figure out why.

rational actor explanations

Rational Actor Explanations

If voters pursue self-interest, and politicians wish to garner their votes, then representative democracy typically will produce a predictable result:

Benefits will go to politically powerful special interest groups while the costs of providing these benefits will be dispersed over those without political power.

*If a group is not fighting for you on a particular issue, you will tend to pay rather than receive!

why turn to government
Why Turn to Government?

Market failure:

In sports, market power and external benefits.

Wealth redistribution:

Sometimes out of a sense of fairness, but also at times out of self-interest.

rational actor overview
Rational Actor Overview

Voting is at the heart of the idea, whether for policy directly, or for the representatives that design and implement policy. An important identity:

The proportion voting, Vm, had to Register, get to the Booth, and actually cast a vote on the particular issue or person.

*Rational ignorance dictates that the level of voting can be quite small so that distinct minorities may actually determine the outcome!

rational actor result
Rational Actor Result

Politicians know that only subsets of their constituency will ever vote in the first place. So politicians satisfy groups that figure prominently in reelection.

*Concentrated groups get the benefits of political actions. Rationally ignorant non-participants pay the costs.

a descriptive diagram

A Descriptive Diagram

The reelection constituency on any given political issue gets its way in the policy process while the general constituency sits on the sidelines and pays the costs.

owners as beneficiaries

Owners as Beneficiaries

Owners clearly enjoy an enhanced economic result from subsidies. Attendance improves, if nothing else.

It’s not so cut and dried whether subsidies increase team quality. On average, teams with new stadiums have won more games in the past.

But, in recent examples, some owners invest part of the subsidy in team quality and some don’t.

the league role in the stadium mess

The League Role in the Stadium Mess

Leagues maintain an artificial scarcity of teams. The league leaves believable threat locations open.

Existing owners are endowed with bargaining power for subsidies.

Build it, and they might come. Fail to meet subsidy demands, and viable threat locations will become new homes to unsatisfied owners.

explaining the stadium mess

Explaining the Stadium Mess

Detractors emphasize the costs, supporters overstate the benefits. Taxpayers are left only with information at the endpoints of the spectrum of possibilities. Rational ignorance rules the day.

Prediction: Politically potent beneficiaries, although a distinct minority, will tend to get the benefits of stadium policy. The rest of the taxpayers will pay the costs.

following our diagram

Following our Diagram

Owners and politically powerful supporters influence the electoral chances of those choosing stadium policy. They get more than the minimum subsidy required due to rational ignorance on the part of the rest of the taxpayers.

following our diagram15

Following our Diagram

Generally speaking:

At the very least, payment exceeds the minimum required to keep the owner in place.

At the very most, absurd public costs.

E.G. The Suncoast Dome (now Tropicana Field), Tampa Bay.

Over 1990-2000, when D-Rays actually occupied it, I calculate losses were upwards of $350 million (Sports Economics, 2006).

Over 1990-2001, Long (2005; PV 2001) calculates subsidy of $321 million ($375.6 million $2007)

does direct democracy help

Does Direct Democracy Help?

Direct expression and a more “hands on” process are expected to generate outcomes that are:

Viewed as more legitimate.

A better reflection of the “will of the people.”

But these high hopes run into the weakness of direct democracy:

Biased turnout.

Biased information.

Ballot issue control.

the evidence

The Evidence

Is spending lower when the vote is yes than if no vote occurs?

About the same in MLB, higher in the NFL, and lower for the NHL/NBA.

Is spending lower when the vote is no, but funding occurs anyway, than if no vote occurs?

In MLB and NHL/NBA, dramatically higher.

Is the public share of spending on a stadium lower if the project is put to a vote than if no vote occurs?

The lowest shares occur when there is no vote.

altering the stadium mess

Altering the Stadium Mess

The stadium mess is a political outcome. And it will take altered politics to change the outcome!

Those interested in altering the outcome must become a political force to be reckoned with.

Hurdles:

Education.

Free riding behavior.

Carry out successful lobbying.

summary
Summary
  • The rational actor explanation of representative democracy predicts that benefits will be concentrated and costs dispersed.
  • League control of team location gives owners the upper hand in stadium negotiations.
  • Stadium outcomes are characterized by concentrated benefits and dispersed costs.
  • Direct democracy has limitations that preclude it from curbing the stadium mess.
  • For any change to occur, fan interest groups must arise to offset current winners in the stadium subsidy process.