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The Economics of Subsidizing Sports Stadiums

May 1, 2017
By Scott A. Wolla

This paper, written by Federal Reserve Bank of St. Louis senior economic education specialist Scott Wolla, examines the economics of sport stadium subsidies.

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This paper, written by Federal Reserve Bank of St. Louis senior economic education specialist Scott Wolla, examines the economics of sport stadium subsidies.

Economists don’t hate sports, but do dislike sports subsidies, Wolla writes.

“When surveyed, 86 percent of economists agreed that ‘local and state governments in the U.S. should eliminate subsidies to professional sports franchises,’” Wolla writes. “Perhaps economists just do not like sports? Actually, many economists love professional sports—including former Federal Reserve Chair Ben Bernanke, an ardent Washington Nationals fan. Rather, it is the provision of taxpayer money in the form of subsidies that economists generally oppose.”

Predictions of sports stadiums subsidies’ benefits fail to account for the stadium’s opportunity cost, Wolla writes.

“Building sports stadiums has an impact on local economies,” Wolla writes. “For that reason, many people support the use of government subsidies to help pay for stadiums. However, economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact.”