Friday, 17 August 2012

Stadiums in the context of natural disasters

Sam Richardson has been writing on the topic of stadiums in the context of natural disasters, in particular with regard to Christchurch, over at the Fair Play and Forward Passes blog. At one point he writes,
At the heart of this dilemma is a point that Matheson and Baade make beautifully, so I'll post it here:
Sports yields hedonic value, in other words, and the quality of life benefit it imparts is a luxury affordable in affluent communities rather than an activity that helps a community achieve affluence. Sport for the most part is properly viewed as a luxury good and not a productive resource.
What this seems to be saying is that if you are rich you can afford lots of warm fuzzies and if you are poor you can't. I would point out that Christchurch is really poor right now. I would also note that most things generate warm fuzzies to some degree, so if we are to count fuzzies for the calculation on whether or not to spend money on sports stadiums we need to count them for all good and services that the council could spend money on.

Sam continues,
Therein lies the crux of the argument, and it is here that we are likely to see the more passionate divergences of opinion. There is no doubting the importance and potential quality of life value of sports in Christchurch. The initial call of whether the investment makes sense is largely dependent on this value, I believe, and how it stacks up to the costs. This is a complex value, as one must also factor in the role of the sports environment including the new temporary stadium, as well as the impact on other facilities in the city and surrounding areas. As I have mentioned in my earlier posts on this issue, complicating matters further is the role of sports in the context of the rebuilding city's priorities. Do Christchurch policymakers see the stadium as a luxury good or a potential productive resource?
As Sam himself points out,
There are sound reasons why a facility in Christchurch is unlikely to generate tangible benefits, [...]
So productive resource doesn't look likely. Thus we are left with, "luxury good". The problem I see here is that even if we accept the idea of including warm fuzzies in our calculations my point above about most goods producing them comes in play. As Eric Crampton has noted
The covered rugby stadium is tipped to cost $506 million
You would have to generate a lot of warm fuzzies to justify spend $500 million and if you are going to spend that amount of money is a rugby stadium the most cost effective generator of warm fuzzies. I mean just how many hip replacement could you do for $500 million or how many cancer treatments could people get for that amount? Won't these thing also generate a lot of warm fuzzies? Improved health would I'm sure increase the quality of life for many people. Or how many warm fuzzies could be generated by spending $500 million on repairing the east-side of Christchurch?

There is also the obvious question of how do you include warm fuzzies in any analysis? It is far from clear how you could measure such things.

1 comment:

Sam Richardson said...

I totally agree, Paul. Total economic benefits (tangible and intangible) need to be compared to total opportunity costs (tangible and intangible). I didn't realise the anticipated cost was in excess of $500m. That's a lot of intangibles needed to justify the project. Dunedin's stadium was half that, and it is struggling. Put something worth twice as much in a city that is struggling and I think you're asking for trouble. This is endemic in such projects - you expect the economy to pick up with the new stadium, and then blame the economy when it doesn't meet expectations. You can't have your cake and eat it too!