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Public Funding and Economic Impact

23/2/2021

 
By John Considine
Picture
This website started in the middle of 2013.  One of the first Journal of Sports Economics (JSE) articles reviewed was written by Nola Agha and examined the economic impact of teams and stadiums (here).  It was unusual in finding a positive impact.  Now, in 2021, Agha returns to the pages of the JSE in a paper that highlights the difficulties finding a positive impact.  The reference to the 2013 paper is shoehorned in as a sentence in the conclusions.  This change in emphasis was the latest in a series of readings that prompted what follows.
 
A decade ago I was struck by a sentence in Stefan Szymanski’s brilliant Playbooks and Checkbooks.  The sentence is "Here is a roll call of some of the hero-economists who have dispassionately reported the evidence on the impact of major sporting events, without fear or favor, often suffering personal abuse, and frequently denying themselves the opportunity to line their own pockets for the price of what the politicians would like to hear”.
 
When it comes to telling politicians what they would like to hear in return for monetary gain, there is a long queue of professional firms, employing economists, that are willing to do so.  Should we call these the anti-heroes?  Maybe we should consider the distinction made by Daniel Drezner in his 2017 book called The Ideas Industry.  Drezner is mainly concerned with ideas in the area of foreign affairs and he distinguishes between what he calls “public intellectuals” and “thought leaders”.  The latter are second-hand dealers in ideas who package these ideas and sell them for direct financial gain.  They provide the intellectual justification for actions that the politicians may wish to take.  When it comes to major sports events, there plenty of thought leaders that will provide economic justification for a course of action.
 
While Drezner can be critical of the thought leaders, he does highlight the areas that they can do superior work to the public intellectuals.  A prime example is their access to industry financial information that is not publically available.  In addition, they can be more open-minded whereas some ideas held by the public intellectuals are elevated to ideology.  Moreover, it should also be pointed out that public intellectuals can gain indirectly from their ideological position, e.g. peer esteem and associated promotions.
 
More recently, I was reviewing a number of textbooks in sports economics.  Many of the testbooks accepted that there may be a theoretical case for public spending on sport but they struggle to provide concrete examples.  Here is a quotation from one of those textbooks, “while a coherent theoretical case can be made for public sector investment in sports, the evidence in support of this case is weak, and suggests considerable caution and planning is required to harness the spillover effects from the investment”.  Reference to public goods, externalities, and merit goods arise in the textbooks but very few unambigious concrete examples are present.

It was suggested that my review of the sports economic literature showed a bias and it was overly critical view of public funding.  If there was bias then is it mine or is it present in the literature?


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