Pro Sports and the Unwinding of a Popular Fallacy
“Academic economics is primarily useful, both to the student and to the political leader, as a prophylactic against popular fallacies.” Henry Simons.
It’s long been popular to suggest that local economies benefit from professional sports. However, the suggestion is a fallacy. Nearly all academic economists looking at the evidence agree: pro sports have little, if any, positive effect on a city’s economy. In fact, the evidence reveals that pro sports have actually been a drain on local economies in some cases.
It’s easy to understand why people used to think pro sports might be a boon to local economies. The amount of money involved in the market is staggering. Moreover, so-called “economic impact” studies that hypothesize positive effects have often been trotted out (and sometimes paid for) by those in favor of government subsidies for pro sports. Straightforward logic though clarifies why pro sports are unlikely to have much impact on a local economy — and why they might even be detrimental.
Pro sports doesn’t create economic activity out of thin air. It crowds out non-sports entertainment. Moreover, the cost associated with the lost economic activity may be greater than the benefit added. That means the net effect of pro sports can actually be negative. Indeed, one of the most recent studies confirms what we’ve known for some time — pro sports are frequently associated with declines in per capita income.
If pro sports constituted a boon for local economies, government subsidies might be justified. The evidence clearly indicates though that pro sports are no magic development elixir.
None of this means that pro sports aren’t fantastic and fun and well worth having (even if costly). What it means is that there is simply no economic rationale for government subsidies (implicit or explicit) for pro sports.
The absence of an economic rationale in turn means there’s a moral case against subsidies. People understand that in well-functioning societies, individuals take care of themselves — and they certainly pay for personal fun and entertainment out of their own pockets. We help the vulnerable and the poor, to be sure. We even choose to collectively support goods like parks, zoos, and museums, because of their public benefits — benefits that the evidence indicates don’t exist for pro sports. But we don’t ask our neighbors to subsidize our personal pro sports fun and entertainment. It’s not the right thing to do.
People in St. Louis, MO are currently engaged in a debate over the role of a pro football team in the region. If that debate is any indication, the once popular fallacy that pro sports benefit local economies is beginning to unwind. There are still a number of voices calling for government to get in the game and provide subsidies (in various forms) to support a pro football team. Increasingly though, the conversation reflects an understanding of the simple truth that there is no economic case for government involvement. Moreover, many people are taking the moral high ground and standing up against asking their neighbors to fund their personal fun and entertainment.
I hope St. Louis will be the city and the region that leads by example and chooses to play ball by the right and fair rules — without government subsidies and with fans and business leaders who put their own private skin in the game they love and enjoy so much. I hope other cities will follow suit.
The NFL has a role to play here as well. The NFL should take a moral stand against crony capitalism in the business of pro football, and amend its constitution to strictly limit the begging of special favors by league members, and to encourage good sportsmanship within its own association.
Bonnie Wilson, Associate Professor of Economics, Saint Louis University
