During the 1980s and 1990s a large proportion of the battle centred on the statistical techniques used. Then in 1995 a guy called John Shea entered the scene. His innovation came in the form of new data. He had data on 647 unionised households. Shea's American Economic Review paper represented a substantial new step in the research - although it did not settle the consumption question either way. Previous research tended to focus on more aggregated data. Shea addressed the question with more detailed household data.
An article in the current issue of the Journal of Sports Economics is similar to Shea's 1995 article. Kaitlyn Harger, Brad Humphreys and Amanda Ross ask "Do New Sports Facilities Attract New Business?". The answer is "no". Given the existing literature on sports facilities, this answer is not a surprise. However, the paper comes to this conclusion using firm-level data (much like Shea's use of household data). The authors use data from Dun and Bradstreet MarketPlace files. Examining the economic activity within 1-mile, 3-miles, and 5-miles of the new facility, the best case that can be made for the new facilities is that they affect "the earnings of employees in specific industries like bars and restaurants" and that it is possible that existing businesses expand their activities.
Like the Shea paper on consumption, the paper by Harger, Humphreys and Ross describes what happens at a disaggregated level. By providing further evidence on the lack of realised economic benefits, it shines a light on many related questions. Why do proponents of such projects continue to claim that there are economic benefits (without damaging their credibility)? Why do politicians support the projects with public funds? Why do voters sometimes vote for such projects?
These questions are attracting greater attention in the sports economic literature - as can be seen by some of the references in the Harger, Humphreys and Ross paper. Again, there is a parallel with the consumption literature. The current macroeconomics textbooks suggest the consumption issue can be resolved by appealing to the literature on behavioural economics. Specifically, the textbooks appeal to the pull of instant gratification. Roughly speaking, the pull of instant gratification suggests that individuals would like to consume out of permanent income but can't help themselves. Maybe we know that building new sports facilities, or hosting a mega event, does not usually make economic sense but we can't help ourselves in supporting such a proposal.
The behavioural explanation does not sit well with everyone. Some suggest that the decisions to develop new sports facilities, or host mega events, is the result of vested interests using their power to transfer resources to themselves. Regardless of the explanation we use, the Journal of Sports Economics paper shows, using new data, that it is hard to make the case on the basis of economic benefits to the local community.