Robert Baade and Victor Matheson, “The Paradox of Championships: ‘Be Careful What You Wish For,’” Working Paper presented at the Western Economic Association, Denver, July, 2003.
Professor Robert Baade (Lake Forest College, Lake Forest, IL) is the leading critic of public subsidies for the support of sporting events and/or sports facilities. The view of naïve politicians is that these events/facilities generate substantial benefits for a local economy. Baade hammers home again and again the point that impact studies of economic benefits for local economies typically fail to account for displaced opportunities (opportunity costs).
In this paper, Baade and Professor Victor Matheson (Williams College, Williamstown, MA) take a broader view of new stadium construction in Major League Baseball (MLB). They offer a critical evaluation of the recent wave of new stadium construction in MLB. Their paper focuses on the relationship between new stadium construction and team performance.
Overall their conclusion is that building a new stadium is not a guarantee that the owners will or can field a championship-caliber team. The authors point out that MLB is a zero-sum game with expected win percent for each team equal to .500 and eight playoff spots for 30 teams. Given these fixed constraints, as more and more teams build new stadiums, a smaller portion of these teams must necessarily win playoff spots/championships. The Brewers, Tigers, Pirates, and Reds are having a much more difficult time replicating the successes of the Blue Jays, Indians, and Orioles.
Further, even if championships accompany a new stadium (e.g., the Toronto Blue Jays), there are costs that must be considered in an economic assessment of this strategy for winning. First, the direct construction costs of the new stadium are compounded by the disruptions and dislocations that accompany urban construction. Second, fans keep paying for their champions in the following season. Ticket prices for World Series champions were increased almost 45 percent faster than the average MLB team.
Also, championship events like the World Series have minimal benefits for local economies. Even though revenues are large, economic analysis usually concludes that these events crowd out other entertainment activities leaving a net impact on local economic activity of approximately zero,
This paper is very accessible to intelligent non-economists. It presents an excellent overview of the reasons that economists typically cast a cold suspicious eye on public subsidies for sports.
Reviewed by: Lawrence Hadley
University of Dayton
Dayton, OH 45469-2251
Copyright © 2003 Larry Hadley. All rights