On Bastiat and the Edifice Complex
By Art Carden
Last week, I asked my principles of macro students to do the following:
Evaluate this argument in light of Frederic Bastiat’s essay “What is Seen, and What is Not Seen.” You may use the assigned readings and videos, but you may not consult any other sources.
“The city of Birmingham and the state of Alabama should work together to finance a domed football stadium in downtown Birmingham. It would be an economic engine for the city and an economic engine for the state. The money spent on the stadium would ripple through the economy and create jobs and prosperity as those building the stadium buy food, cars, and entertainment. After the stadium is finished, it will encourage economic development as people spend money at and around the stadium. The city government and the state government should build a domed football stadium in downtown Birmingham.”
Here is my own answer, with a couple of extensions:
If a private developer or sports team wishes to build a stadium in Birmingham using their own money, we should welcome them with open arms. We should not, however, welcome them with open (taxpayers’) wallets. In Frederic Bastiat’s essay “What is Seen, and What is Not Seen,” he argued why not. Using taxpayer money to build a domed stadium in downtown Birmingham creates the kind of “prosperity” that comes about when people have to fix their accidentally broken windows. The tax money spent on a stadium will be money that taxpayers don’t spend or invest elsewhere.
The argument that the city of Birmingham should build a stadium using taxpayer dollars is built on an emphasis on the easy-to-see benefits. It’s easy to see the new construction jobs that come about because the government is building a stadium. It’s harder to see the things that aren’t being built because the money that would have been used to build them was taken in taxes. It’s very easy to see the hustle and bustle of activity in restaurants, bars, and hotels on and around Big Events, but it’s harder to recognize that a lot of that activity is merely redistributed from other parts of the metropolitan area. The money people are spending on entertainment around a new stadium is money they aren’t spending in other parts of town like Five Points, Avondale, or Pepper Place.
A couple of extensions:
1. i’ve seen the fascination with “if you build it, they will come”-type boondoggles referred to as the “edifice complex.” Clever.
1. There’s actually a fairly well-developed body of research on the effects of stadiums. Here’s a 2008 article by Dennis Coates and Brad Humphreys in which they summarize the research on the effects of government subsidies for stadiums and big events. These are not economic winners.
2. Teams are notorious for trying to shake down cities for sweeter stadium deals. The Cardinals did it when I lived in Saint Louis, and the Falcons are
trying to do it doing it in Atlanta even though the perfectly-functional Georgia Dome is only 21 years old.
3. My best guess is that a stadium in a mid-sized city like Birmingham would almost certainly suffer a fate similar to the Alabama Cruise Terminal.