Monday, March 31, 2014

Crony Capitalism Detroit Red Wings-Style

UMichigan-Flint Associate Professor of Economics Christopher Douglas has some strong thoughts for those that think building a new stadium to house the Red Wings will help energize Detroit's miserable economy.  Here he makes an excellent point:
Sports teams are simply too small a component of the local economy to serve as an engine of economic development. According to Forbes, the Red Wings earned $96 million in total revenue in 2013. According to the U.S. Bureau of Economic Analysis, total income in the metro Detroit area was $208 billion in the same time period.

This means that the Red Wings comprise 0.05 percent of the metro Detroit economy. The Red Wings could move to a new state tomorrow and it would not cause a blip on Michigan’s economic radar, especially since studies find that consumers would shift their entertainment spending to other local options.

Surveying the literature on sports stadia and economic development, economists Dennis Coates and Brad Humphreys find “the overwhelming preponderance of evidence [is] that no tangible economic benefits are generated by these heavily subsidized professional sports facilities.”
Douglas raised several other points in his important article which you can access here.