Market Power

Musings by an academic economist on the power of markets and the power over markets.

Friday, November 12, 2004

Millionaire Owners

Opponents of sports subsidies often point to the wealth of those asking for the subsidy. Here’s one example with the following statement found approximately two-thirds towards the end:

" "The fact that major league sports are subsidized is sinful," (Steve) Khalil says. "You have billionaire owners, you have millionaire players, and they stick their hands out to taxpayers for subsidies. It's just not right." "

Even economists use this rhetoric. Skip Sauer at The Sports Economist links to this editorial by Dennis Coates originally appearing in the Washington Post and now posted by the Cato Institute. Prof. Coates quotes a statement allegedly made by P.T. Barnum, “There’s a sucker born every minute,” and writes:

“How else to explain people's willingness to believe politicians and millionaire (emphasis added by me) sports team owners' claim that spending millions of taxpayer dollars on a baseball stadium will lead to economic growth for the community?”

Why, in the economic argument against sports subsidies, is it important that sports team owners (and player) are m(b)illionaires? The argument for subsidies for some activity is that it generates external benefits – good things that are felt by people who do not engage in the activity. Proponents of stadiums frequently point to the jobs and income generated externally by sports teams. Economists have soundly debunked that myth. Now much of the current economic research focuses on “commonality” and “quality of life” externalities – sports teams draw people together and makes the local community more enjoyable.

Externalities are externalities – by definition they are felt those who do not engage in an activity. If the local millionaire comes up to me and blows smoke in my face, it impacts me exactly as smoke blown in my face by the third baseman on my softball team. It matters not how much money either has in his bank account or wallet.

There are plenty of reasons to dislike subsidies for professional sports teams, but the fact that owners are m(b)illionaires is not one of them.