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October 11, 2011
AP: La la la, we can't hear you, economists!
Last Wednesday, I published an article in Slate on why the NBA lockout isn't likely to harm local economies, providing evidence from multiple economic studies of previous work stoppages. The explanation is the same as for why new sports stadiums don't help local economies much: Most sports spending is just reshuffled from elsewhere in your local region, so what's good (or bad) for sports is bad (or good) for movie theaters, restaurants, bowling alleys, etc.
Twenty-four hours later, the Associated Press ran this:
Harry Buffalo is one of the downtown restaurants in Cleveland that counts heavily on the beer-drinking, burger-devouring NBA crowd to keep its doors open. Operations manager John Adams has taped an internet report outside the kitchen for his waitresses, bartenders and cooks to read.
With yellow highlighter, he's shaded the grim news of the NBA labor impasse for his employees, some of whom may soon lose their jobs if there's no deal.
This is where the lockout hits home, and hits hardest.
"It's rough," Adams said, glancing toward The Q. "I've got three single moms on my wait staff and two single dads in the kitchen. I've got their 11 children to think about. It's painful when it's out of my control, when I have to put the business first and say I can't have 15 servers on staff because we don't have the business."
Now, all of this is true — but in both economic and journalistic terms, utterly beside the point. If a restaurant across from the Cavs arena is facing layoffs if the NBA season is cancelled, there's almost certain to be a restaurant across town that will end up hiring as a result — people in Cleveland have still gotta eat. (Some people, anyway.) But that doesn't fit the desired narrative as well, so instead we get stories of how "ushers, security personnel, parking lot attendants, concession workers, restaurant employees and others all stand to have their hours cut or join the country's 14 million unemployed." Number of actual economists consulted by the six AP writers who contributed to this 1200-word article: zero.
On Friday, incidentally, I wrote another article for the Village Voice on how claims (this time by the New York Daily News) of a lost economic windfall from the Yankees not making the next playoff round were hogwash, for the same reasons as the mythical lockout disaster. So far as I can tell, the AP hasn't written an article yet directly contradicting this one with no evidence, but maybe they were all off for the holiday weekend.
I'm going to take exception to your use of the phrase "...there's almost certain to be a restaurant across town that will end up hiring as a result..." While I agree that the discretionary money is shuffled around, the NBA is seasonal and other restaurants might choose to pay overtime to current staff or count on increased productivity rather than hire staff to take care of any additional new business so the Cleveland area might suffer a net decrease in jobs due to the NBA lockout but still maintain the same level of economic activity.
Posted by Kevin on October 11, 2011 09:57 AM
Point taken, though I should point out that the flip side is also true: Arena-side restaurants might not lay off permanent workers just yet, as they'll want to ready to gear up full speed once the NBA season gets back under way. Either way, it's going to be a small overall effect — not that this makes it less painful if you're the person being laid off, but journalists reporting on the story should know better, or at least take some note of what the economic literature indicates.
Posted by Neil deMause on October 11, 2011 10:29 AM
Neil, Neil Neil. You'll just never be a supply-sider, will you?
Sure, *most* of the economic activity that would have been generated by an NBA season will be redirected elsewhere, but in a bad economy every little lost bit of productivity hurts.
Posted by Ben Miller on October 11, 2011 11:37 AM
Meanwhile, in Indianapolis...
www.ibj.com/loss-of-pacers-season-would-deal-blow-to-cib-state-revenue/PARAMS/article/30065
Did you know that the CIB is still giving the Pacers $10M this year, because that money doesn't support the team, it supports the team's arena operating expenses. Oh, I get it now. Wow. Why didn't I see it before?
Posted by MikeM on October 11, 2011 01:02 PM
Ok, Ben has convinced me...
Our sympathies at this trying time should be with the divorce lawyers, agents, Bentley & Rolls dealers, drug & firearms merchants (licensed or otherwise), gangstas and general 'posse' members for whom incomes will be drastically curtailed during this unfortunate work stoppage.
And think of all the lab techs at paternity/DNA testing facilities that will be idled as well.
It's just not fair...
Thank you for the veiled racist comment, John Bladen!
Rip on athletes and professional sports all you want, but the reality is that entertainment has one of the biggest growth multipliers when it comes to local economic activity. Throw money at building a new office complex and you might bring a few new jobs. Throw money at a new basketball arena and you get a few jobs along with peripheral activity at sports bars, parking lots, local television studios, etc.
Posted by Ben Miller on October 12, 2011 02:47 PM
While I agree with Ben's revulsion of John B.'s comment the rest of it falls apart with wishful and one-sided logic.
It is simply misleading to suggest a basketball arena has any sort of special multiplier for all sorts of reasons. I will focus on the two most important. An obvious problem with an arena is its limited use. Even the worst "office park" would be in use and providing more peripheral activity (even at a sports bar) for 2-5 more days in a year).
But the biggest point has to be with the central economic truth that the only real growth comes from productivity gains. You do not get that at an arena as you get low wage, low thought, low innovation work. Again, even the most marginal "office park" would have greater and broader productivity gains. These productivity gains would "multiply" far deeper and more permanently in a community.
Here's the kicker, the office park would fund itself; the arena would be slumped over near a trash can begging for money.
Posted by Floormaster Squeeze on October 13, 2011 09:21 AM
I'm also not sure I agree that an office complex generates "a few jobs" but an arena gives you a few jobs plus spillover spending. After all, office workers have to eat lunch somewhere, and they're there eight hours a day, five days a week; arena visitors, by comparison, are only there for a couple of hours on the nights the place is open.
Either way, though, the issue should be the "but for: Would the office workers still be working in your city, and would the sports fans still be spending money in your city, if the offices/games weren't there? If the answer is "yes," then it's a waste to throw public money at, or to worry about work stoppages for.
Posted by Neil deMause on October 13, 2011 09:53 AM
Neil,
And that's the problem. For the typical office I believe the answer is usually, "yes," and for the typical arena the answer is often, "no".
Posted by Ben Miller on October 13, 2011 12:38 PM
I really love your blog, it is very informative. Keep up the good work!!
Posted by Golma Garcia on November 21, 2011 02:54 PM