Here is how economic production is supposed to work in a market driven society. If a business wants to make money, they gather resources and make their product. If consumers pay you a bunch, then you keep offering the product. If they don’t pay, you back off and shift your energies elsewhere. This is why markets work. Profit seeking encourages businesses to make what people actually want and dropping stuff that people don’t want.
The market test often works well for sports. Most folks aren’t interested in, say, competitive archery. That’s why you don’t see a lot of televised archery or archery themed merchandise, and archers don’t make a lot of money off their competitions. Still, sports fans use political influence to bypass this basic market process all the time and it is a problem.
Perhaps the most outrageous example is the Olympics. It often happens that governments build enormous structures to host Olympic events, and these structures go to waste. There simply is no consumer base willing to pay for the privilege of using giant stadiums or Olympic villages. Governments only build them in order to appease sports fans. If you want a sad example, check out this CBS news article about all the sports facilities that go to waste around the world after Olympic events end. Literally billions of dollars wasted.
Another great example are city subsidies for sports stadiums. Routinely, private sports teams ask cities to help pay for new fancy stadiums. This may occur through a direct subsidy or a tax deferral. And often cities are very happy to help out. This is a bad outcome because economic studies of sports stadiums routinely find that the promised economic growth doesn’t not offset opportunity costs and lost taxes. In other words, most stadium subsidies are a raw real.
We also see sports fans demand things from schools and colleges. Educational institutions routinely spend a ton of money of their own smaller stadiums and sports teams. In Change: The Magazine of Higher Learning, Malcolm Getz and John J. Siegfreid summarized that college sports are simply unprofitable:
a 2006 Knight Commission survey found that 78 percent of Americans believe college athletics programs are profitable, big-time commercialized university athletics rarely make money. Only 22 of the 120 Football Bowl Subdivision universities earned an operating surplus in 2010, according to NCAA figures. Add in capital and overhead costs, and profit becomes even rarer or turns into losses.
In fact, the subsidy generally flows in the other direction. A 2010 report in USA Today found that more than $800 million per year moves from student fees and university general funds to athletics in the top conferences. And even as revenues increase, expenditures invariably keep pace, if not accelerate. College athletics appear able to absorb all the revenue that comes their way, either from inside or outside the university.
In other words, English major tuition pays for coach salaries, but ticket sales don’t pay for English classes.
When you look at all of these examples, you see a disturbing pattern. Sports fans want other people to pay for their entertainment. Instead of limiting athletics to what the market supports, they ask national governments, cities, and schools to fork over huge piles of cash … and they often get it.
In raising this issue, I am not criticizing sports or its fans. I love watching sports, I participate in local rec league sports, and I cheer on young people who strive to be excellent in sports. Rather, we need to recognize that sports fans, and the businesses who cater to them, are a “special interest” whose demands should be sternly, but politely, declined. The message should be simple. Sports should be organized up the level demanded by consumers, not subsidized by schools and governments. To do otherwise is to encourage a problem.
Bottom line: Just because something is enjoyable and good doesn’t mean that we should throw tons of money at it.
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