The Economics of Sports

Introductory chapter | Table of Contents

This collection shows how big-time sports has outgrown its role as a simple pastime. Fueled by fans' rising disposable incomes and the promise of jobs and local economic development, professional and major college sports have evolved into a multibillion-dollar economic sector that produces winners and losers both on and off the field.

The contributors to this book, all economists at the forefront of the movement to study the economics of sports, show how a host of contemporary economic issues come into play in today's world of sports. These issues include industrial organization, influences on labor markets, monopsony power, the behavior of cartels, local economic development policies, and price discrimination.

Given the interest many students have in sports, this accessible volume would serve as an interesting companion reader for the economics classroom. Examination copies are available.

• Market Power in Pro Sports by Rodney Fort, Washington State University
  Fort blames monopolies in professional sports for skyrocketing ticket prices and player salaries and for the leverage that allows owners to extract subsidies from governments for stadium construction. He recommends breaking up these sports cartels not only as a means of tipping the economic scales away from the owners and players toward fans and taxpayers, but also as a means of gaining competitive parity on the field. Fort also explores whether or not sports franchises are "hot beds" of urban redevelopment that help generate jobs and economic growth.

• The Impact of Sports Teams and Facilities on Neighborhood Economies: What is the Score? by Robert Baade, Lake Forest College
  Previous work showed that the impact on regional growth and employment from stadiums and arenas was negligible at best. Baade refines this line of research by examining the effect of sports facilities on neighborhoods. He looks at the impact the now-defunct Seattle Kingdome had on its neighborhood, and he uses survey evidence from that area to support his argument that urban- sited stadiums do little to invigorate neighboring central business districts.

• Who's Sitting in the Stands? The Income Levels of Sports Fans by John Siegfried and Timothy Peterson, Vanderbilt University
  The authors discuss government-subsidized stadium construction and focus on the equity in this type of financing. The evidence they uncover shows that public funding of sports facilities redistributes wealth from those with lower or middle incomes to those with very high incomes, including team owners and players, along with ticket buyers whose incomes are typically much above the average.

• Academics, Athletics, and Finances by Richard Sheehan, University of Notre Dame
  Sheehan points out that competitive balance is a major issue in collegiate sports and that most college sports programs are not profitable. "Big-time schools with tradition and reputation may make money," he says. "A 'have-not' school has virtually no chance ..." Sheehan also links the ability of teams to generate revenues with their on-field success, and he discusses whether winning leads to a profitable sports program and how some schools use academics to subsidize sports.

• Economic Issues in the 1998-1999 NBA Lockout and the Problem of Competitive Balance in Professional Sports by Andrew Zimbalist, Smith College
  The author, a consultant for the NBA Players' Association, discusses the economic issues surrounding the1998-1999 NBA lockout. He argues that there are several strategies that the league could have employed to preserve competitiveness, including revenue sharing, adjusting the college draft order to give more teams a better chance for parity, artificially restricting the growth of players' salaries, and demanding league divestiture to engender competition. Zimbalist concludes that if the NBA owners truly wanted to create a more competitively balanced league, they should have pursued revenue sharing as did the NFL. Even better, he says (echoing Fort's recommendation), owners should have broken up the existing league and created new ones.

• A Level Playing Field? Sports and Discrimination by Lawrence Kahn, Cornell University
  Kahn looks at the issue of winners and losers from a racial perspective by examining the extent of racial discrimination in professional sports with respect to salaries, hiring, retention, positional segregation, and customer prejudice. Sports is a particularly rich environment in which to study discrimination, says Kahn, because of the abundant statistical evidence available on player race, compensation, and productivity. He finds that discrimination in hiring, positional discrimination, and retention stemming from racial preferences of sports fans lingers.

"I liked this book a lot. Its essays present a broad perspective on a number of current issues from scholars who have made substantial contributions to this new field. The book is also very readable. It will be useful to anyone interested in gaining a basic knowledge of some of the major issues in the economics of sports. And I would recommend it to anyone teaching a sports economics course and looking for supplemental reading material." Robert Thornton, Eastern Economic Journal

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