The NBA and trickle down economics

One of the major tropes accompanying the frustrated complaints about the lockout being an unnecessary and unwarranted interruption of the NBA’s tremendous momentum is that as bad as missing the NBA would be, what’s worse is the impact on stadium workers who won’t have games at which to work. In this depressed economy, throwing out thousands of people who depend on the league for their daily bread seems particularly cruel.

That’s all true, and on an individual level, this lockout could have some pretty frightening consequences. But when we zoom out, the economic picture gets more complex. When professional teams are lobbying for a new stadium, they cite all the economic growth that will come from spending tax payer moolah on a massive private enterprise.

But Neil deMause talked to some economists about this issue and argues that on aggregate, losing a professional sports team won’t hurt a city’s economy. In fact, economists say that the economy as a whole might benefit from a lost season, because it redistributes consumer funds more broadly. instead the money that would be spent paying LeBron James’s salary (who makes a penny or two more than the beer guy) is redistributed across business all over town.

The magic of consumer spending is that it begets even more consumer spending: Buy a can of tuna from your local grocery store, and the store owner uses a share of the cash to pay his workers, who in turn spend it on more groceries, and so on. The cycle continues until somebody sinks the money into a bank account or spends it on something in another state or country, at which point it “leaks” out of the local economy.

At a sporting event, however, the cycle is cut short. That’s because a disproportionate share of sports revenues goes to a handful of people—the team owner and the players typically soak up the majority of every dollar spent at a game. When a local grocery store owner goes out to dinner, he ends up putting money in the pockets of busboys who’ll later visit his store to buy vegetables and milk. When LeBron James cashes one of his paychecks, by contrast, it’s unlikely that he spends it all at the local Walgreens. Rather, your outlay on Heat season tickets will end up doing as much to boost the Bahamas as it does the economy in South Florida.

While bars, restaurants and businesses in the immediate vicinity of the arena, ones designed specifically to feed off of fan foot traffic, will no doubt suffer. This is not to say that these people don’t deserve our attention and empathy. But deMause makes a smart point: the money will be spent elsewhere, and assumedly it benefits a local economy when consumer spending goes to more local businesses.

This makes sense, especially for teams that play in downtown or urban areas. But in the case of a team like the Sacramento Kings, whose suburban arena out in Natomas draws thousands and thousands of people to an otherwise unremarkable city, it’s possible that a lost season would force dozens of businesses into the red and dry up a whole community’s major source of business.

The NBA is important to local communities as churches of entertainment. They provide a sense of cohesion and are a source of joy. I certainly wish the Sonics were still around, regardless of the cost.  But as a public trust, or even a public good, the positive impact in terms of dollars and cents is up for debate.

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