the con in “economic impact” study

Cute paragraph from Simon Kuper’s Soccernomics:

[T]he trick for American [sports team] owners is to persuade the taxpayer to cough up for stadiums. This is where economists come in handy. Economists like to say that people respond to incentives. Well, economists certainly respond to incentives. Anyone hoping to persuade taxpayers to pay for a stadium in the US commissioned an economist to write an “economic impact” study. By a strange coincidence, these studies always showed that the stadium would make taxpayers rich. (One book describing this racket is aptly called Field of Schemes.)

Author: jeremy

I am the Ethel and John Lindgren Professor of Sociology and a Faculty Fellow in the Institute for Policy Research at Northwestern University.

5 thoughts on “the con in “economic impact” study”

  1. Cost benefit studies are so sensitive to the discount rate you pick while calculating NPV that they’re worthless. Special interests (sports fans, say) will believe any explanation that ______ [pet project that delivers me and my friends goodies] is “good for the economy.” Most regressive redistribution is justified as such. Like publicly subsidized student loans. Sports stadiums. And homeowner tax credits.


  2. There are all sorts of interesting and subtle kinds of ways research can come to conclusions favorable to the study’s funders, and then there’s the juicy and simple sort of pay-for-findings. This post sounds closer to the former, especially given the (I thought) consensus research showing that large-scale sporting events and stadiums are almost always economically counterproductive. My favorite example of this more overt sort of “motivated” economic reasoning remains Mishkin’s work on the Icelandic banking sector just before it crashed, covered in Inside Job (video link).


    1. Academic Economists : Consulting Economists :: Academic Sociologists : Social Justice Activists

      And the academics in both cases throw their applied counter parts under the bus regularly for being biased and motivated. Moral purity: it’s what’s for dinner.

      I think the Mishkin case is an example of institutional, Challenger Shuttle style, failure as well. He published a view that was broadly in line with the professional consensus of his field at the time, made a stupid change to his CV after the crash that Matt Damon could sniff at, and now the story is that he lied for money in the first place. I’ve never seen anyone compare the two reports the man wrote, only that he changed the title on his CV.


      1. The issue was not simply the change in report title – it was the lack of disclosure of conflict of interest, and the part where he didn’t appear to do any actual research to support his view that Iceland’s prudential policymaking was sound. But I’ll agree that it’s not an isolated problem of moral failing.


  3. Good call. I’m definitely with you on conflict of interest. We need to be consistent, though, and apply reporting requirements equally to cost benefit analyses of marriage and economic legislation as to campus rape and welfare legislation.


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