Does Los Angeles Really Need a NFL Team?

The LA Times presents a rosy article arguing in favor of Los Angeles taking steps to recruit a new NFL team to our city.  To quote the article;  "The unanimous vote gave city leaders a rare chance to seize on a major economic development after years of slashing payrolls, scaling back services and watching helplessly as the real estate market dried up. And it came at a time when business leaders and trade unions are desperately seeking ways to jump-start a local economy plagued by double-digit unemployment."

Do academic economists believe that attracting such a team is "good business" that will stimulate significant local economic development? 

1.  Jerry Carlino and Ed Coulson have argued in favor of such investments. Here is the abstract from their study.  "We use hedonic rent and wage equations to measure compensating differentials in central cities and metropolitan areas with franchises of the National Football League. Rents are about 8 percent higher in the central cities, but this impact may not carry over to broader geographical areas. Wages are about 2 percent lower in areas with teams, but the standard error on this parameter is large. The central city results indicate that sports franchises appear to be a public good. Once these quality-of-life benefits are included in the calculus, the large public expenditure on new stadiums appears to be a good investment for cities and their residents."

But, there are other economists who question the wisdom of using public funds to finance sports team investments.

2.  Ed Mills has consistently argued that such place based investments are rarely cost-effective.  He argues that evaluations of such investments often implicitly assume that every dollar spent at such new facilities (such as a stadium) is a "new dollar" when in fact the people who attend the future LA NFL games would have eaten somewhere else within Los Angeles and so their attendance at the game is merely a transfer from one LA business to another (i.e a zero sum game).

Another justification for attracting a NFL team is to give a city a morale boost as it feels like an important place.  After living in LA for 5 years, I don't believe that LA has any self confidence issues.

As long as Kobe keeps playing and UCLA football keeps winning (I'm kidding), why do we need to invest a lot of $ in a team that will play 8 games a year here?  Let's watch the New England Patriots and wish their Coach well.

 

Comments

[Meijun Zhang]

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