Friday, May 6, 2016

Sports Lockouts

The effect of sports on the economy is an interesting problem that I had never considered until I started looking more in sports lockouts. While they can affect the excitement and enjoyment of the fans and the team’s rank that season, lockouts can have a positive impact on the economy. In a paper by Coates and Humphreys, it states, “An examination of the impact of past work stoppages in professional [sports] can shed some light on the potential impact of ... professional sports as engines of economic growth in cities.” (Coates and Humphreys 2001, 737) You would think that having a sports team coming into town would increase the influx of money into a given city, boosting the economy, at least temporarily. But Coates’ and Humphreys’ tentative findings seem to indicate otherwise. "Although imprecisely estimated, the parameters on the strike variables suggest that real per capita income rises in SMSAs during years that the professional sports teams in these SMSAs are on strike. ... Several possible explanations exist for our results. One is substitution in private spending. Fans could alternatively go out to dinner and a movie of go bowling during a sports strike. If these activities have higher local spending multipliers than does spending on professional sports, then income could be higher during strikes.

Differences in the impact of public and private spending represents a second explanation. Professional sporting events increase metropolitan government spending by driving up spending on public safety, crowd and traffic control, and so on. I this category of public spending declines during a strike and the metropolitan government either borrows less or collects fewer taxes or fees as a result of this decrease in spending, then additional money will remain in the pockets of private citizens. Furthermore, if the marginal impact of these additional private dollars exceeds the marginal impact of these dollars in public hands, then total income in the metropolitan area would increase. There would also be a decrease in deadweight loss in this case." So it’s possible that, rather than one of professional sports’ many flaws, professional sports itself is the problem, in the case of economy. That’s not to say that all of our country’s debt could be wiped away by killing all professional sports. The per capita income increase recorded in Coates’ article was less than 1%.

There’s no real way to ‘solve’ the decrease in average income when a sports event is happening. Professional sports culture has been ingrained in American culture since at least the 1940s. However, it is interesting to note that sports aren’t the economic stimulator that most people could assume that they are.

Coates, Dennis, and Brad R. Humphreys. 2001. “The Economic Consequences of Professional Sports Strikes and Lockouts”. Southern Economic Journal 67 (3). Southern Economic Association: 737–47. doi:10.2307/1061462.

No comments:

Post a Comment