Willingness to Finance Sports as Public Goods
Conventionally, the expectation in basic economic theory is that the optimal supply of public goods must factor in the cost of financing them. The expectation is that the benefits of a public should exceed the cost of financing the good. However, in many instances the costs of financing exceed the benefits of the public good. This discussion explores the concept of cost and benefits of public goods with particular interest on recreational or participation sports and spectator sports. This follows the debate that at time the public is willing to finance participation sports than spectator sports, with little spending on recreational sports. Since there are various economic evaluation tools for assessing the cost and benefits of public goods, this discussion will limit itself on the contingent valuation method proposed by Johnson et al. (2007).
According to the contingent valuation method (CVM), the public is more willing to finance recreational sports than spectator sports like basketball, the baseball league, National hockey league, football league, and the building of an arena for the basketball team. The CVM evaluated that the public’s unwillingness to finance spectator sports is tied to their belief that sports stadiums and spectator teams result in negligible impact on employment, income, and tax revenues. Therefore, the public’s willingness to finance sports is directly tied to the value or level of benefits of the sports to the community. The evaluation tool is vital for it indicates the public’s perception and value for sports. It is evident that the tool is vital for it reveals that the public does not value major leagues, arenas, and stadiums in terms of economic benefits, as much as they do recreational sporting activities and resources.
The ability of the CVM to identify the public’s value for public goods is necessary given that few studies have evaluated the benefit of sports in relation to the cost of financing. The CVM tool is vital since it provides a perception of the value of recreational and spectator sports to the society. This is necessary given that the government justifies that league teams and arenas generate large positive externalities, and therefore, it is justified in spending on the building of sport teams and arenas (Johnson et al., 2001). The justification given for the benefits of financing spectator sporting teams and arenas is that they generate two types of positive externalities for the society. Johnson et al. (2001) identifies that spectator-sporting arenas are alleged to create income through an increase in tourism rates. Moreover, these tourists increase spending on meals, lodging, entertainment, and travel thereby improving the local economic activities. The second positive externality is that teams also generate public goods, like tickets, and any form of payment to the team from fan loyalty. These public goods also include street parties and demonstrations by funs of league teams, indicating the teams possess cultural importance (Johnson et al., 2001). The evaluation of these allegations by CVM studies focus on the individual’s willingness to finance public goods, and evaluate major league spectator activities.
The results of these studies indicate that publically financed professional sports and stadiums do not produce significant increases in the economy or the local income, since the spending of such teams is lower than that of many industries. The studies indicate that spectator teams tend to reduce the income of an area, with little effects on employment in leisure and recreation for cities with arenas (Johnson et al., 2001). However, Johnson et al. (2007) finds the concentration of CVM studies on the WTP of major league benefits against cost of financing prevents analysis of other sporting activities. This focus also creates a bias for it gives the perception that sporting activities do not create any benefit for the public. This is because the government not only finances major league sports but also other athletics and recreational activities.
Therefore, an assumption cannot be made that all spectator and sporting activities have benefits to the public based on CVM studies on major league spectator sports. This is because other sporting activities do exist in the public domain like university and college sports, amateur sports, and recreational sports like swimming. Johnson et al. (2007) CVM study indicates that the public may be willing to pay more for such sports since they have more value as they instill civic pride, as compared to major league activities. The public values these activities since participation in community based recreational and organized sports strengthens the community bond as they assist people to meet fellow citizens. They also value these sporting activities for they enhance the quality of life in the community. Johnson et al. (2007) indicates that CVM studies have found the public willing to finance recreational sports since they possess positive externalities. These are the creation of a forum to maintain adolescents under adult supervision, keeping them off the streets, and developing qualities like teamwork, sportsmanship, and leadership. The sports also improve public health and well-being of participants and reduce healthcare costs. Therefore, from such results it is evident that the public’s willingness to finance sporting activities arises from the direct benefits to their community. Though major league spectator sports may produce benefits to the society with positive externalities as identified by the government, the public seeks direct benefits to their communities. Moreover, the empirical CVM study by Johnson et al. (2001) on the Penguins value to the city of Pittsburg indicates that, the willingness to finance sports is dependent on the socioeconomic and consumption of hockey. These results indicate that the public is more willing to support sports that provide direct socioeconomic benefits to their communities.
The results applied to the case of varsity and intramural sports in universities and colleges implies that, the public will be more willing to spend revenue from their taxes to finances these sporting activities. Under the socioeconomic benefit perception of the sports, the public will identify these sporting activities as more beneficial to their communities than a major league sport. This is because, university and college sports to the society fall under the category of community-based activities that give adolescents and young adults recreational activities. Such sporting events would receive more support from the public since they improve the leadership, teamwork, and individual responsibility of the youth. This analysis follows the lead of the results of Johnson et al. (2007) CVM study that indicates that Albertans have a high value for their sports and recreational programs. This implies that individuals’ willingness to contribute to sporting activities as public goods it tied to the community level benefits the sports would present. Moreover, it implies that communities are willing to contribute to community level sporting activities. All sporting activities that are recreational offer higher social and economic benefits to the community and for this reason have a higher benefit to cost to communities. Analysis of the discussion surrounding the value of spectator and recreational sports as public goods leads to the perception that, the increase in quality of life by recreational and participatory sports exceeds the benefits of spectator sports (Johnson et al., 2007). The results given by CVM studies lead to the perception that the American public would rather have the large public subsidies given to professional teams and stadiums, spent on amateur and recreational sports. The study by Johnson et al. (2007) shows that, the experience from coaching, playing, and organizing sporting activities in the communities is probably more satisfying and intense than watching a league hockey game by strangers. This supports the discussion that the public would finance college and university sporting activities because unlike league professional games also involve the community at a certain level. Moreover, given that Johnson et al. (2007) reveals that communities like Alberta find it the chances of finding an event or activity to their liking easier with amateur and recreational sports rather than professional spectator sports.
Therefore, the evaluation of CVM results on the cost and benefits of recreational or participatory, and spectator sports as public goods, indicates the public prefers sports that directly add value to their communities. The results indicate that the public is more willing to support and finance recreational and participatory sports and arenas than spectator sports. The implication of this is that public goods that offer direct benefits to the socioeconomic activities and public health of communities have greater value that those that have indirect positive externalities. Therefore, though the government may identify spectator sports as having greater positive externalities, the public value the benefits and positive externalities of recreational sports.
References
Johnson, B.K., John, C.W., and Peter, A.G. (2001). The Value of Public Goods Generated by a Major League Sports Team: The CVM Approach. Journal of Sports Economics, 2(6), 6-21.
Johnson, B.K., John, C.W., Mason, D.S. and Walker, G.J. (2007). Willingness to Pay for Amateur Sport and Recreation Programs. Contemporary Economic Policy, 25(4), 553-564.
