Market Power

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

Saturday, December 04, 2004

Clear as a Muddy, Cracked School-Bell

Section 163-031 of the Missouri revised statutes is the law that defines how much state aid each Missouri school district receives. It's a nice little bit of prose, with writing that makes me recall Flannery O'Connor's stories. Here is the first *sentence*:

"School districts which meet the requirements of section 163.021 shall be entitled to an amount computed as follows: an amount determined by multiplying the number of eligible pupils by the lesser of the district's equalized operating levy for school purposes as defined in section 163.011 or two dollars and seventy-five cents per one hundred dollars assessed valuation multiplied by the guaranteed tax base per eligible pupil times the proration factor plus an amount determined by multiplying the number of eligible pupils by the greater of zero or the district's equalized operating levy for school purposes as defined in section 163.011 minus two dollars and seventy-five cents per one hundred dollars assessed valuation multiplied by the guaranteed tax base per eligible pupil times the proration factor. "

Can you say "run-on sentence?" Paragraph 6 of the statute gives you a neat little formula, spelled out clearly, to use in your calculations. Here's the first part of the formula:

"6. State aid shall be determined as follows:
District Entitlement 1(a). Number of eligible pupils x (lesser of
district's equalized operating levy for
school purposes or two dollars
and seventy-five cents per one hundred
dollars assessed valuation) x (proration
x GTB per EP) ..................................... $....... "

There are about two dozen more calculations after this and they're as easy to read as this one is.

Oh, yeah, you don't see anything directly tying state appropriations to education quality until you get to paragraph 8 near the bottom of the statute:

" In addition to the penalty for line 14 described in subsection 6 of this section, beginning in school year 2004-05, any increase in a school district's funds received pursuant to line 14 of subsection 6 of this section over the 1997-98 school year shall be reduced by one percent for each full percentage point the percentage of the district's pupils scoring at or above five percent below the statewide average level on either mathematics or reading is less than sixty-five percent. "

If you are wondering where all the good teachers are, many of them have probably been assigned to figure out ways to increase the size of their district's entitlement!


Friday, December 03, 2004

The Demand to Watch a Good College Volleyball Team

This says it all.

BTW, the lady Tigers beat the lady Hawgs.


Thursday, December 02, 2004

Another Stadium Committee in Minnesota

Even with a $700 budget deficit, a new stadium committee is being formed in the state legislature to try to come up with ways to fund a new stadium for the Vikings.


Yale vs. Harvard

It's a little sophomoric, but this is funny as all hell. If you can, play the movie.


Thom Loverro Attacks Brad Humphreys!

Just read this piece on Skip Sauer’s blog. The columnist, Thom Loverro of the Washington Times, gets personal about Brad Humphreys, calling him a pencil-neck geek and a clown. Mr. Loverro takes exception to Brad’s use of Tropicana Field as an example of what is wrong with using a sports stadium as a catalyst for economic development. He says:

“Of all the possible examples, this clown picks the worst ballpark in baseball — a domed stadium that was outdated before the team played a game there, in a community with so many senior citizens on fixed incomes that it is the only place they take attendance before and after games. RFK Stadium would be a better draw than Tropicana Field.”

That’s pretty harsh. But Tropicana Field is not all by itself in being no draw for economic activity. There’s the Truman Sports Complex in KC. Around this site, there’s one hotel, a Denny’s, an office for the Fellowship of Christian Athletes, a gas station, a humongous parking lot, and a couple of interstates on which to leave. That's it. We have Busch Stadium, the Savvis Center, and the Edward Jones dome in downtown St. Louis. The areas around those venues aren’t exactly party central, unless you want to visit the Bowling Hall of Fame. The Metrodome in Minneapolis? There’s not much around there. The Xcel Energy Center in St. Paul? A few bars exist just south of Xcel, but that’s it - and not much of the activity going on in those places represents new spending in the community. Safeco Field in Seattle?

One question for Mr. Loverro: why was Tropicana Field "outdated" before a game was played there? Answer: it has something to do with the market power of sports leagues.


New Stadiums and Player Contracts

If you ever wondered about how sports teams and players account for potential new stadiums in player salaries, they do so in the contracts the players sign. In doing some research on this year’s crop of baseball free agents, I ran across this little ditty about Florida’s Mike Lowell contract.

Mike signed a $32 million, 4-year deal with the Fish before the 2004 season. The contract contained a clause saying that if no new stadium deal were in place by 10/31/2004, the final two years (2006 and 2007) of the contract would be voided and Mike would have an option for 2005.

This clause protects the Marlins from having to pay Mike more than his marginal value from playing in Joe Robbie Stadium. It protects Mike from having to become a free agent in 2006. If he becomes a free agent then, he probably won’t be playing for the Marlins (he wants to stay) and his expected marginal value for those years could be much lower than it is today. In other words, it’s basically a risk-sharing clause.

Mike’s new deal guarantees that he’ll receive the remaining $25.5 million left on his old contract. Why were Mike and the Marlins willing to sign this guarantee? Well, some new information has come out since the time the original contract was signed. Quote from the article:

“Florida has made strides toward securing that new ballpark, a 38,000-seat, retractable-roof facility that would be built adjacent to downtown Miami's Orange Bowl … at an estimated cost of $420 million. And like the team, Lowell is confident that a deal is on the way.”

Seems that Bayesian updating is at work in the baseball players’ labor market.


The Impact of a Hockey Game - Part Deux

Here is another article on the move of the Minnesota State University, Mankato Mavericks move of a home men’s hockey game to St. Paul (paid subscription required). It’s entitled “Businesses Bitter over Shift”. Here’s a nice quote from the article that sums up the feelings of some of the local beneficiaries of home hockey games:

“Mike Maes' reaction to the university's decision to move one of two Minnesota Gopher hockey games to St. Paul's Xcel Energy Center in January summed up the sentiment of several local bar owners.

‘I hope there's the biggest snowstorm ever and nobody can get there,’ the owner of Chevy's Sports Bar and Grill said. ‘Then we'll see what they think of their windfall.’”


Wednesday, December 01, 2004


The Astronomy Picture of the Day website has some extremely cool pictures of the earth and the cosmos. Check out this one of lake-effect snow off the great lakes.

I'm a bit of a stargazer. I first caught the bug as a twelve year-old after seeing Star Wars in 1977. APOD not only shows cool pictures, but gives interesting comments on what it is that we are looking at and provides many good links to further explore the subject.


The Impact of a Hockey Game

Kevin Buisman, the Athletic Director at Minnesota State University, Mankato has moved a home game of the Mavericks men’s hockey team from Mankato to the now-usually-empty Xcel Energy Center in St. Paul, the home of the Minnesota Wild of the NHL. The Mavericks will play the powerhouse Gophers of “The U”, the University of Minnesota, in their backyard instead of in Mankato’s Midwest Wireless Civic Center. Who’s PO’d? The local bars and restaurants, that’s who. See this article in the Minneapolis Star-Tribune. Here is a quote from the article:

The move of the game is “not sitting well with John Rauchman of McGoff's, across Hickory Street from Mankato's Midwest Wireless Civic Center.

‘That weekend, when the Gophers are in town, is No. 1,’ Rauchman said. ‘Shouldn't they look at the fact that they're a Mankato team that should support the businesses in town that support them?’”

That depends on their objectives. I’m sure Mr. Buisman doesn’t account for the local bars when making his decision.

Why is Mr. Buisman doing this? Here’s a quote from him:

“’We are working very hard to increase attendance at our home games and believe outreach to other areas beyond Mankato is vital to the future growth of our program,’ Buisman said. He thinks at least 11,000 tickets will be sold for the Jan. 14 game.”

I don’t disagree that more attendance at games will help the program, but I don’t see how playing 1 hockey game 90 miles away from your home rink is going to increase attendance in Mankato – especially when there is a more consistent WCHA power like the Gophers less than 5 miles away from downtown St. Paul.

The move will, however, allow another 6,000 tickets to be sold – the vast majority going to fans of the Gophers who don't want to drive the 90 miles down highway 169 to Mankato.

What’s the title of that Pink Floyd song?

BTW, I wonder who gets what cut of concessions.


Wanted - One Expert

The director of media relations at my university has asked me to be an “expert” on sports stadium issues for the local and regional press. Oh goody. Last time I did this sort of stuff, a reporter from the local paper (at that time, The Columbia Missourian) asked me about how an event could affect the local economy. Somehow, the Keynesian expenditure multiplier got turned into the Steamroller Effect.

Do you have any words of wisdom for me on being an expert?


How St. Louis Got the Rams

Today's St. Louis Post Dispatch has this article describing how St. Louis got the Rams to move from Los Angeles in 1995. It also describes why St. Louis gave public funds for the project.

A common way to drum up support for public funding for sports stadiums is to trumpet supposed economic benefits from the stadium - more jobs and higher wages. Contrary to how the public funding proponents for an NFL stadium in Arlington, Texas are going about it (and how it's usually done), the article plays up the externality-generating ability of a professional sports franchise with no attention to its ability to enhance the city's economy.

Here are some quotes from the article

From Allison Collinger, the Rams director of corporate relations: "I think you can't underestimate the esteem and prestige value that an NFL team brings to the community, whether you're successful or whether you're not. It's an important measure of the vitality of the region."

Beer distributor Jerry Clinton "We were feeling pretty much like losers here. People were talking about the days we lost the St. Louis Browns baseball club, and then we lost the St. Louis Hawks basketball team, and now we're losing the football team. I know what that can do to a community, it puts it on a negative spin, and it affects a lot of people in adverse ways."

Then-mayor Vincent Schoemehl: "It's the role of government to do things to make life a fulfilling and complete experience. Education, community activities, arts, sports - they make the quality of life in a community."
This passage is also telling:
Political operative Joyce Aboussie "had received a copy of the Baltimore Sun from a friend in Baltimore who wanted to gloat that his city was en route to securing an NFL team - the Los Angeles Rams - while her city had failed."
There is no mention of job creation or wage improvement in the article. Instead the article sums up the decision to subsidize construction of the Edward Jones Dome ($280 million from 1993-1995) in St. Louis thusly: 1. Professional sports brings prestige to a community; 2. The people in the community felt like losers when other professional sports teams left the area; 3. It's government's job to do things to make life a complete and fulfilling experience; 4. We were jealous some other community was going to get a team and their officials were going to gloat.

But no new jobs or higher wages.


Tuesday, November 30, 2004

Down with the Flu

I have come down with a little bout of the flu, so I don't plan to blog for a day or so.

This sucks.