TheWiz
04-15-2007, 11:02 AM
Somehow I would like to imagine that a Harvard PhD would actually certify someone as smart enough to write a good article. Yet Roger Noll, a Stanford Economics Professor, managed to completely inject personal preference and bias into his opinion submission. He twists calculations and tries to hide behind economic jargin to try and scare local residents. Yet very little of what he says is the least bit based in reality. I can only surmise that he quite literally abuses his authority as an academic to make bad arguments seem more plausible. It's like buying street corner jewelry, even if he is a certified gemologist you can bet that diamond necklace isn't made with diamonds and he knows he's selling you cubic zirconia. Yet he put himself on that corner and peddled away.
The opinion piece of which I speak can be found at: http://www.mercurynews.com/opinion/ci_5672692
Background
First of all, let me add my own little piece about Noll and his theories. He is a very educated man with his hands in all sort of economic and political theory. The most ridiculous of which is his belief that the trickle down effects of stadiums for a community do not exist. His opinion on this matter is largely academic, relying largely on economic theory than actual results. To make a long story short, he's basically trying to sell people an idea on the level of proving that global warming doesn't exist. His opinion is so ill respected that even his own university invested heavily in a big new stadium recently.
Trickle down effects are basic: Bringing in tens of thousands of fans increases profits for the local economy. At least 10 times a year, people who don't live in the city visit to go to the games. They buy gas, they eat food, they buy tshirts and they get hotel rooms. As a result local businesses need to either increases hours or hire new workers to staff restaurants, sell merchandise, clean hotel rooms, etc. It's free advertising for the local businesses too. You can't tell me that Great Adventure won't see increased business with a straight face. He's also vastly discounting the other events. What about a professional soccer exhibition game? Major concerts in the spring and summer? How about a CA state lacrosse championship or a youth football day for area-wide pop-warner teams? Either way, it's not like a stadium is a 10-game shot and that's it. Not to mention how much a Superbowl brings to the community. That's a week of packed hotels, eateries, and millions of spending in just a single week. If you can't believe in those benefits, ask the mayor of Miami how much he likes having a Superbowl nearly every 5 years.
Yet he denies that these exist. In fact, he more or less states that cities lose more by building stadiums. Yet I have never seen a non-academic article or real case where a city was worse off. He has economic figures that prove it but can't prove anything because the figures are in fact theoretical estimates. He is in a vast minority of people hiding behind equations when dozens of examples in the modern day prove otherwise. You can't prove anything by saying "Well, I think the city could've made more money had the stadium not been built". Generally he waves around numbers saying exactly that.
Construction Spending
By his claim "Counting construction spending as a benefit is a fundamental economic error". That's funny because I find it to be a logical error to make that statement. Yet as I said right off the bat, he's hiding behind economics as opposed to common sense. He talks about how costs should not be considered a benefit which again, avoids common sense!
First of all, it isn't the city paying the costs, it's the team. Secondly, he avoid the fact that we'd be spending hundreds of millions of dollars to create that 112M in economic effect. Stadiums are actually built from materials and buying those materials causes a profit for the supplier we buy them from. Building does help a local economy! You spend money to build, money that otherwise would not be spent if your weren't building. The act of erecting a stadium means the team spending to get workers and materials and to say that money can't be considered a positive for a local economy is laughable. If we spent 800M in merchandise in the city, it would be an economic benefit. But since we're buying concrete and steel it doesn't count? The reason Santa Clara doesn't just build things is because the economic returns are much smaller than the money spent! The city would be stupid to spend tens of millions to increase tax revenue by a small amount for a short period of time.
Construction Hiring
He does provide a logical argument over construction hiring but misses the underlying effects. I'd expect an economist to know that construction is a fairly volatile business. Companies arise when the economy and expansion is hot and vanish when work gets scarce. It only takes 1 fault structure and a lawsuit to ruin a companies name and put it and its workers out of business. He then makes a counterargument against himself! "Construction jobs are up 4.4 percent from a year ago". So, even without a stadium being built the industry still needed more workers? If the industry need to hire more workers and bring in out of town workers, only the better! The fact that we pull people away from other jobs is of minor consequence. As I understand it, long-term big contract deals result in better pay and guaranteed benefits for the workers. This is opposed to a 3-month quickie job on a housing complex where the workers won't get a pension credit or paid time off.
Ignoring The Facts
As he stated himself "a stadium subsidy requires some combination of increases in taxes and utility fees and reductions in other expenditures, all of which depress employment." Wait, wait a second here. When did the team or the city talk about increasing taxes or cutting back expenditures? The team hasn't even made a formal proposal on the utility items, that's just speculation until they could present it outright before the draft. Yet somehow "no effect on the city's general fund" is entirely passed over by this nutjob.
Economics Gone Awry
This is the part that really, really, REALLY smashes my gourde inside out. "A rough rule of thumb is that $100,000 in higher taxes or reduced expenditures causes the loss of one job." By his economic rule of thumb, we will in effect be firing 1,800 people if we take any money from the city. This is when I realized that this guys brain lost touch with Earth years ago.
This is money from a massive utility surplus we are talking about, right? Money which the city stumbled upon luckily a few years ago that really it shouldn't have to begin with. A very good report suggested how much economic impact moving that money would cost. I doubt he even knows of the report. Yet, I would love to find out how moving money that more or less is a slush fund will cause people to lose hundreds of jobs. It will create higher utility bills, sure, but widespread layoffs? That's a first. It isn't money that will require higher taxes to replace because it's regular spending. It's excess and surplus cash the taxpayers never paid a penny to create, PG&E did. Really, this is a clear case where his 'economics' fall to pieces as a backbone argument.
Another Economic Faux-Pas
"Thus, if unemployment were a problem, $180 million in public money should generate 18,000 jobs, not 2,230." That's great. Except I highly doubt that in those urban projects that the city gets ownership of a state of the art entertainment venue. He also forgets that if the stadium has any impact, that supposed 180M ensures part of that. Let's use basic arithmetic. Let's say the city gives about 20% of the cost to build a stadium. Then let's say the stadium makes an actual economic impact of X dollars. Thus by spending 180M the city ensures .2X dollars in economic impact per year. Let's say X is only 20M in spending per year overall so the city would be paying for 4M. Now, given the minimal 20 year stadium life span, that's 80M the local economy will get, not even adjusted for inflation. This is on top of owning a stadium and the 2,200 part-time jobs. It's also in contrast to the city will gain no actual benefit from the 180M otherwise because it's there only to maintain current utility costs. It won't save people more money or create more jobs, it simply will just keep people from spending an at worst estimated $70 per year. I'd love to see how the ratio of 180M to $70 per resident works out in terms of spending by his magical formulas.
I'm not even going to get into his "trickle down effects" don't exist portion.
The Coup De Gras
"If the city of Santa Clara foots the bill, the per capita investment will be about $6,000 per household." Don't you love the sound of that? It's like the city would be sending every homeowner a bill. Heck, the 180M, as is well known, was never even generated by taxpayers. It was generated by an energy crisis that had Santa Clara smiling. While most CA residents were in the dark, literally, Santa Clara was smiling with surplus energy at a cheap price. The individual resident is spending NOTHING. It has been shown that even the increased electricity costs are theoretical. If the costs go up a lot the increased taxes from a stadium can easily be used to cover a tax credit for residents who spend too much. In this paragraph alone he makes it sound as if a stadium has only bad effects and will cost each resident money out of their pocket, which is absurd. Per capita is cute but it ignores the reality of the matter.
It's like you won 30k on a gameshow and buy a new car. Sure the car price may be a bit higher than you'd pay with your own money but you're still getting a car for free! Yes, you will need to pay for gas and maintenance on it but it's still a car paid for from luckily found funds. By his argument since you pay too much for the car, you shouldn't buy one at all. Besides, it comes with extra costs like gas down the line!
The opinion piece of which I speak can be found at: http://www.mercurynews.com/opinion/ci_5672692
Background
First of all, let me add my own little piece about Noll and his theories. He is a very educated man with his hands in all sort of economic and political theory. The most ridiculous of which is his belief that the trickle down effects of stadiums for a community do not exist. His opinion on this matter is largely academic, relying largely on economic theory than actual results. To make a long story short, he's basically trying to sell people an idea on the level of proving that global warming doesn't exist. His opinion is so ill respected that even his own university invested heavily in a big new stadium recently.
Trickle down effects are basic: Bringing in tens of thousands of fans increases profits for the local economy. At least 10 times a year, people who don't live in the city visit to go to the games. They buy gas, they eat food, they buy tshirts and they get hotel rooms. As a result local businesses need to either increases hours or hire new workers to staff restaurants, sell merchandise, clean hotel rooms, etc. It's free advertising for the local businesses too. You can't tell me that Great Adventure won't see increased business with a straight face. He's also vastly discounting the other events. What about a professional soccer exhibition game? Major concerts in the spring and summer? How about a CA state lacrosse championship or a youth football day for area-wide pop-warner teams? Either way, it's not like a stadium is a 10-game shot and that's it. Not to mention how much a Superbowl brings to the community. That's a week of packed hotels, eateries, and millions of spending in just a single week. If you can't believe in those benefits, ask the mayor of Miami how much he likes having a Superbowl nearly every 5 years.
Yet he denies that these exist. In fact, he more or less states that cities lose more by building stadiums. Yet I have never seen a non-academic article or real case where a city was worse off. He has economic figures that prove it but can't prove anything because the figures are in fact theoretical estimates. He is in a vast minority of people hiding behind equations when dozens of examples in the modern day prove otherwise. You can't prove anything by saying "Well, I think the city could've made more money had the stadium not been built". Generally he waves around numbers saying exactly that.
Construction Spending
By his claim "Counting construction spending as a benefit is a fundamental economic error". That's funny because I find it to be a logical error to make that statement. Yet as I said right off the bat, he's hiding behind economics as opposed to common sense. He talks about how costs should not be considered a benefit which again, avoids common sense!
First of all, it isn't the city paying the costs, it's the team. Secondly, he avoid the fact that we'd be spending hundreds of millions of dollars to create that 112M in economic effect. Stadiums are actually built from materials and buying those materials causes a profit for the supplier we buy them from. Building does help a local economy! You spend money to build, money that otherwise would not be spent if your weren't building. The act of erecting a stadium means the team spending to get workers and materials and to say that money can't be considered a positive for a local economy is laughable. If we spent 800M in merchandise in the city, it would be an economic benefit. But since we're buying concrete and steel it doesn't count? The reason Santa Clara doesn't just build things is because the economic returns are much smaller than the money spent! The city would be stupid to spend tens of millions to increase tax revenue by a small amount for a short period of time.
Construction Hiring
He does provide a logical argument over construction hiring but misses the underlying effects. I'd expect an economist to know that construction is a fairly volatile business. Companies arise when the economy and expansion is hot and vanish when work gets scarce. It only takes 1 fault structure and a lawsuit to ruin a companies name and put it and its workers out of business. He then makes a counterargument against himself! "Construction jobs are up 4.4 percent from a year ago". So, even without a stadium being built the industry still needed more workers? If the industry need to hire more workers and bring in out of town workers, only the better! The fact that we pull people away from other jobs is of minor consequence. As I understand it, long-term big contract deals result in better pay and guaranteed benefits for the workers. This is opposed to a 3-month quickie job on a housing complex where the workers won't get a pension credit or paid time off.
Ignoring The Facts
As he stated himself "a stadium subsidy requires some combination of increases in taxes and utility fees and reductions in other expenditures, all of which depress employment." Wait, wait a second here. When did the team or the city talk about increasing taxes or cutting back expenditures? The team hasn't even made a formal proposal on the utility items, that's just speculation until they could present it outright before the draft. Yet somehow "no effect on the city's general fund" is entirely passed over by this nutjob.
Economics Gone Awry
This is the part that really, really, REALLY smashes my gourde inside out. "A rough rule of thumb is that $100,000 in higher taxes or reduced expenditures causes the loss of one job." By his economic rule of thumb, we will in effect be firing 1,800 people if we take any money from the city. This is when I realized that this guys brain lost touch with Earth years ago.
This is money from a massive utility surplus we are talking about, right? Money which the city stumbled upon luckily a few years ago that really it shouldn't have to begin with. A very good report suggested how much economic impact moving that money would cost. I doubt he even knows of the report. Yet, I would love to find out how moving money that more or less is a slush fund will cause people to lose hundreds of jobs. It will create higher utility bills, sure, but widespread layoffs? That's a first. It isn't money that will require higher taxes to replace because it's regular spending. It's excess and surplus cash the taxpayers never paid a penny to create, PG&E did. Really, this is a clear case where his 'economics' fall to pieces as a backbone argument.
Another Economic Faux-Pas
"Thus, if unemployment were a problem, $180 million in public money should generate 18,000 jobs, not 2,230." That's great. Except I highly doubt that in those urban projects that the city gets ownership of a state of the art entertainment venue. He also forgets that if the stadium has any impact, that supposed 180M ensures part of that. Let's use basic arithmetic. Let's say the city gives about 20% of the cost to build a stadium. Then let's say the stadium makes an actual economic impact of X dollars. Thus by spending 180M the city ensures .2X dollars in economic impact per year. Let's say X is only 20M in spending per year overall so the city would be paying for 4M. Now, given the minimal 20 year stadium life span, that's 80M the local economy will get, not even adjusted for inflation. This is on top of owning a stadium and the 2,200 part-time jobs. It's also in contrast to the city will gain no actual benefit from the 180M otherwise because it's there only to maintain current utility costs. It won't save people more money or create more jobs, it simply will just keep people from spending an at worst estimated $70 per year. I'd love to see how the ratio of 180M to $70 per resident works out in terms of spending by his magical formulas.
I'm not even going to get into his "trickle down effects" don't exist portion.
The Coup De Gras
"If the city of Santa Clara foots the bill, the per capita investment will be about $6,000 per household." Don't you love the sound of that? It's like the city would be sending every homeowner a bill. Heck, the 180M, as is well known, was never even generated by taxpayers. It was generated by an energy crisis that had Santa Clara smiling. While most CA residents were in the dark, literally, Santa Clara was smiling with surplus energy at a cheap price. The individual resident is spending NOTHING. It has been shown that even the increased electricity costs are theoretical. If the costs go up a lot the increased taxes from a stadium can easily be used to cover a tax credit for residents who spend too much. In this paragraph alone he makes it sound as if a stadium has only bad effects and will cost each resident money out of their pocket, which is absurd. Per capita is cute but it ignores the reality of the matter.
It's like you won 30k on a gameshow and buy a new car. Sure the car price may be a bit higher than you'd pay with your own money but you're still getting a car for free! Yes, you will need to pay for gas and maintenance on it but it's still a car paid for from luckily found funds. By his argument since you pay too much for the car, you shouldn't buy one at all. Besides, it comes with extra costs like gas down the line!