Chapter 11 The Stadium Mess

1
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? Continued
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Chapter 11The Stadium Mess
Ken Griffey, Jr. No. The people of Seattle
built it. Theyre 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.
3
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.

4
Introduction

• I believe the citizens should have a say in this
  issue. If the voters pass this, we will move
  forward. If the voters dont pass this, we will
  still move forward.
• - Jay Tibschraeny, Mayor of Chandler, AZ.

5
Remember A Pretty Big Deal

• Subsidies are large.
• Best work recently, Long (JSE, 2005).
• Remember our subsidy results from last week.
• Includes land/infrastructure, net annual public
  expenses, foregone property tax.

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Remember A Pretty Big Deal

• Subsidies (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.

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Remember A Pretty Big Deal

• Total for 99 major-league facilities 17.3
  billion.
• PV 2001 x 1.17 2007 20.2
  billion.
• The only examples where subsidy is .LE. 0
• Minneapolis HHH Metrodome.
• Boston/Foxboro Foxboro Stadium.

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Remember A Pretty Big Deal

• 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
• Lets figure out why.

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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.

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Rational Actor Explanations

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

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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.

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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

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Rational Actor Overview

• The proportion voting, Vm/E must jump some
  hurdles
• Register if Eligible.
• Get to the Booth.
• Cast a vote, Vm.

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Rational Actor Overview

• A Contributing Factor
• Rational ignorance
• It is expensive to be informed.
• Being uninformed can lead to reduced
  participation.

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Rational Actor Result, Pt. 1

• The level of voting can be quite small
• Hurdles and Rational Ignorance.
• Distinct minorities may actually determine the
  outcome!

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Rational Actor Result, Pt. 2

• 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.

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A Descriptive Diagram

• The reelection constituency on any given
  political issue gets its way.
• The general constituency sits on the sidelines
  and pays the costs.

18
Owners As Beneficiaries

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

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Owners As Beneficiaries

• Its 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 dont.

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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.

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League Role in the Stadium Mess

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

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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.

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Explaining the Stadium Mess

• 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.

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Following Our Diagram

• Owners and politically powerful supporters
  influence the electoral chances of those choosing
  stadium policy.
• General taxpayers left on the sidelines.

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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.

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Following Our Diagram

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

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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.

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Does Direct Democracy Help?

• But these high hopes run into the weakness of
  direct democracy
• Biased turnout.
• Biased information.
• Ballot issue control.

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The Evidence on Direct Democracy

• 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.

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Altering the Stadium Mess

• The stadium mess is a political outcome.
• It will take altered political payoffs to change
  the outcome!
• Those interested in altering the outcome must
  become a political force to be reckoned with.

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Altering the Stadium Mess

• Hurdles
• Education.
• Free riding behavior.
• Carry out successful lobbying.

32
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.