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January 29, 2006
Super Bowl economics
The Wall Street Journal has a nice article on the economic impact (or non-impact) of the Super Bowl. (subscription required) Two blogging economists were quoted (King Banaian of SCSU Scholars and Craig Depken of Division of Labour)
"There are numerous studies by reputable economists showing that the Super Bowl has a significant positive economic impact on host cities," said NFL spokesman Greg Aiello, who's all too familiar with the critiques from Mr. Sanderson and other sports economists. "Businesses and city leaders know the Super Bowl draws thousands of people to their city who spend large amounts of money and that the Super Bowl gives the host city unmatched media exposure. Cities want the game because it has tremendous value. It's common sense."
Tell that to Phil Porter, a University of South Florida economist who has looked at the economic impact of six Super Bowls. He found that Miami-area hotel rates and occupancy levels increased only 4.4% for Super Bowl XXIX compared with the same period in the prior and following years. Similarly, he found that Super Bowl XXXIII, also in Miami, had no more than a $37 million impact on the South Florida economy. Economists Robert Baade of Lake Forest College and Victor Matheson of Williams College pegged it at $21 million to $32 million, about one-tenth of the NFL's claims.
...
The NFL's estimates, bought and paid for by the league, assume that every dollar spent around a Super Bowl is new money that stays in the community. But the economists argue that you can't merely look at the gross aggregate of Super Bowl-related spending.
"Most economic impact studies implicitly assume the hotel occupancy would have been zero without the event," says University of Texas economists Craig Depken and Dennis Wilson, who looked at the 2004 Super Bowl in Houston.
"The athletes, the chain hotels and restaurants receive money from the Super Bowl and take the money out of the area," notes King Banaian, economics chairman at St. Cloud State University in Minnesota. "This reduces the impact on the local economy."
Right. When these economists and others say that you can't just look at the aggregate, that's another way of saying that you have to understand opportunity cost. How else could the city have spent that money? How many people would have been in the hotels if they didn't have the Super Bowl? The list goes on.
Posted by William Polley at January 29, 2006 11:44 PM
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