More on economic impact of Super Bowl

1. From Catherine Rampell

Excerpt:

“It’s going to be a huge economic boon,” Representative Carolyn B. Maloney, the New York Democrat, declared in a celebratory Times Square news conference earlier this month. Super Bowl revelers will generate $550 million to $600 million for the local economy, according to a variety of sources, including Ms. Maloney’s office and N.F.L. officials. 

Those numbers sound big, round and fairly specific. There’s a problem, though: Where do they actually come from? 

Unfortunately, I’ve been unable to come up with a clear answer. Everyone who cites that estimate credits someone else for producing it.

2.  From the AP

Excerpt:

"Move the decimal point one place to the left," said Robert Baade, a professor at Lake Forest College in Illinois, who has studied the Super Bowl's impact on local economies. "The NFL says $500 or $600 million? I think $50 to $60 million would be a generous appraisal of what the Super Bowl generates."

What is the economic impact of the Super Bowl?

Link here to article

This article focuses on the economic impact for the area that's hosting the game.  In theory, the area hosting the game could see a positive economic impact if it draws in visitors it otherwise wouldn't have.

What about the US as a whole?  For the US the economic impact of the Super Bowl is close to zero.  Many people will spend significant amounts of money on travel, tickets, etc.  Others will spend lesser amounts on food items for parties and souvenirs.  Each dollar spent is one dollar less to spend elsewhere, however, so the overall impact to the economy is negligible.

Misleading economic impact study and other assorted links

1. An interesting Marginal Revolution post on tennis wagering.


2. Lies, damn lies, and economic impact studies

Excerpt: 

The S.C. Sea Grant Consortium generated $8.9 million in economic impact in South Carolina in 2012, and $11.5 million in the tri-state region, according to a Sea Grant-funded study completed by the University of South Carolina Darla Moore School of Business.

In addition, the study notes that every $1 the state invested to support the consortium and its coastal and ocean research, education and outreach activities generated $26 in statewide economic output.

The actual economic impact figure they report may or may not be accurate.  But the statement about the state funding is downright misleading.  You see this with universities and other entities often.  So often, in fact, that Siegfried et al.'s published review on economic impact studies discussed it here:

Regarding presentation, studies of public universities should stop claiming “For every $1 the state legislature spends, the university returns $X dollars to the state…” At best such statements are meaningless. At worst, they may delude decision-makers into thinking (incorrectly) that the marginal return on investment in higher education is several orders of magnitude more than returns on other public investments. If the returns to higher education were as high as these statements imply, states and the private sector would be building universities frantically.

3.Senator Mike Lee (Utah) writes about the higher education system.

Excerpt:

Under the federal Higher Education Act, students are eligible for Title IV student loans and grants only if they attend formally accredited institutions. That makes some sense, for purposes of quality control. Except that under the law, only degree-issuing academic institutions are allowed to be accredited. And only the U.S. Department of Education gets to say who can be an accreditor.

That is, the federal government today operates a kind of higher-education cartel, with federally approved accreditors using their gatekeeper power to keep out unwanted competition.

Fracking economics - review of presentation given by Deborah Rogers

SU hosted hosted an anti-fracking speaker, Deborah Rogers, on Thursday night.  (link here.)  

She is an anti-fracking activist, focusing on the financial side. I knew this going into the speech, but I was still hopeful she would give an objective presentation of the facts, then just discuss her interpretation of them.  That didn't happen.

As somebody who reviews economic impact studies and sees the bias on both sides, many of her statements were misleading or interpreted in a way I found questionable. 

Here are four issues I had with points she made:

1. Do you want to produce something using more inputs, or less inputs?  She talked about how the direct jobs with natural gas drilling were "only" 180,000 nationwide.  That produces 45% of our country's energy.  This is while the direct jobs with renewable energy was about the same, but produced 15% of energy.  She then concluded that it would be better to promote renewable energy because it creates more jobs.  (Note - you could make an externalities argument for why to use renewables - but that's not what she was doing.)

This is faulty economic logic.  If you can produce more output with the same amount of workers, then you're better off.  If it takes 3 times the workers to produce some level of output, the price will be higher. 

2. She laughed off the statement that "fracking has helped the poor", claiming that natural gas companies had no interest in helping the poor.  Here is an excerpt from  the story she was discounting:

Thanks to the lower price for natural gas, families saved roughly $32.5 billion in 2012. (That's 7.4 billion MMBTUs of residential use of natural gas times the $4.40 reduction in price.) The windfall to all U.S. natural gas consumers—industrial and residential—was closer to $110 billion. This is greater than the annual income of all of the residents in 14 states in 2011.

She, of course, didn't go into the specifics, she just called it laughable that companies would want to help the poor.  With that, she might be right.  But the great thing about the free market is that sometimes the poor do benefit, even if the companies had no intention of helping the poor.  Because of fracking, the quantity of natural gas increased, pushing the price down.  This helped the poor.  She can deny this all she wants, but its pretty clear the lower natural gas prices have benefited the poor, and, as I argued, are a big reason Obama got reelected.

3.  Is the natural gas industry being unfairly subsidized relative to "green energy"?  She described, several times, how the drilling industry damages roads and don't pay the fair share of the damage.  This, she says, gives them an unfair advantage over green industries.  Several points related to this:

A. In research I'm doing with Dave Ramsaran, we have found that these companies are paying for road improvements, and citizens are saying their roads are better.  What she claimed didn't match what we found in our research.

Let's assume she's right for a moment, however ....

B. It's disingenuous to talk about fracking being subsidized by government relative to green energies.  The only reason windmills, solar panels, etc. are somewhat viable now is they've been so heavily subsidized by tax dollars.  Many times, quite poorly.

C. Do other companies pay road taxes?  For example, what about Fed Ex or UPS?  Or environmental companies?  If no companies pay traveling on roads, should frackers?

4. She disregarded the indirect jobs, saying they're counting "prostitutes and strippers".  If any statement showed her bias, it was this.  Technically, she's right.  If fracking brings in 1,000 jobs, one or two might be for strippers and prostitutes. The others are for grocers, restaurant workers, hotel workers, lawyers, etc., however.

There was one part of her talk that I thought was informative and interesting.  She made an argument for why she thought production would drop and prices would rise.  I've heard others make the case before, but she made it as clearly as I've ever heard.  I don't think I agree with her (and it's different from other reports), but it was a well-argued case and was informative.  Overall, however, I was quite disappointed.

Both the left and right make assumptions that can help give an incomplete story on the economics of fracking.   Those who do this work, from both the left and right, get paid for this, and it's a common problem with many economic impact studies, not just fracking.  Unfortunately, I felt like yesterday's speech was a good example of this.

The McDonald's minimum wage story

This story happened when I was abroad ... but since it's new to me, I'll still post here.

A falsely listed ad led to these stories ... McDonald's requires college degree to be a cashier.  Another story here.

It turns out it's false and it was just an error in the listing.

I still think this story is interesting.  This is easily something you could see in the near future, given the left's hope to increase minimum wages.   If there was no minimum wage, then low-skilled workers might be able to better obtain this job by offering to work for lower wages.

In Massachusetts  however, the minimum wage is $8/hour.  Obama wants to raise the national minimum wage to $9/hour  How will lower-skilled workers be able to compete when a firm could hire a college graduate for just slightly more?

Quick thoughts on Munich

Last weekend, I had about 27 hours to explore Munich before heading to Friesing (a northern suburb) to meet with my colleague from TUM and present a paper.

What I liked about by brief time in Munich:

The Residenz:

The local pub (click here for link):

It was great.  I sat right at the corner of the bar and enjoyed a beer and a meal.  The bartender was very nice and spoke perfect English.  (As someone who speaks English and only knows a bit of Spanish, I am always awed by those who are perfectly bilingual.)  He recommended a very tasty beer and an authentic Bavarian meal.  It was a type of brat/sausage that you had to cut "gently" and peel the skin off prior to eating.    Yum!

Dachau:

OK, to say I "liked" this is the wrong term.  It's done very well, however.  It is pretty haunting to be in the exact spot where so  many were tortured and died.  

Soccer Match - 1860 Munich

I planned my Sunday figuring I would visit Dachau in the morning.  I knew that would be pretty depressing/heavy, so I intentionally put something fun in the afternoon.  The "2nd-tier" soccer team in Munich, 1860 Munich, played at Allienz stadium (the big stadium in Munich that hosts the world cup).  I got great seats from a scalper for a reasonable price (much less than list price).  

Here is the view from my seat.  (Note - my camera doesn't zoom):

The fans on both sides did all sorts of fun chants (one was Twisted Sister's "We're Not Gonna Take It" in German) - and I loved the theme song:

That was a fun 27 hours!  From there I was off to Friesing to meet my colleagues and present a paper!  An update on that will be coming soon.

Quick thoughts on Vienna

What I liked:

 * Hofburg Palace

I got the ticket for the apartments and the Sisi museum, studying Elizabeth, the wife of the Franz Joseph. Very interesting how they tried to make her a celebrity after her assassination.  Seems to be some parallels to Princess Di.

* State Opera House

I am not a huge opera person, but got a standing room ticket for €3!  I only stayed for 30 minutes , but well worth it!

* The Karntner Strasse (main shopping street)

     * Also, all of these are within a few blocks!

* Good food at food stands!  I had a great brat and some great Greek food.  (Don't even know the name - it was in a tortilla with meat, a white sauce, and veggies.) 

What I didn't like:

* Smoking in bars/restaurants

In Pennsylvania and London - cannot smoke indoors at restaurants. 

* Tax rates in Austria. This is brutal.  This doesn't even count the social security taxes. 

1	up to €10,999	0%
2	€11,000 – €25,000	36.5%
3	€25,001 – €60,000	43.2%
4	Over €60,000	50%

About the conference:

An outstanding conference!  I made two presentations, saw several good presentations, and also met lots of great people.  They have another conference in Philadelphia in October.  I wasn't planning on attending, but this conference was so good I think I may submit a paper.  

I arrived in Munich today (Saturday) ... I meet with colleagues tomorrow night and make another presentation on Monday.  Fun times!

More false claims of National Parks creating an economic impact

I'm in the midst of writing a paper on the proper methodology for estimating the economic impact of national parks.  That will be out soon.  

Meanwhile, the false claims are flying around.  Link here.  This study, from the National Parks Conservation Association, says the following:

"National parks support more than $30 billion in economic activity and more than a quarter million 

private-sector jobs. Many of these jobs are in rural and urban communities that are gateways to these 

popular travel destinations."

This is misleading at best, an outright lie at worst.  It is true that individual parks almost always have an economic impact on the local areas they serve.  However, to claim that this is extra economic activity for the country is completely wrong.  These parks are funded by US taxpayer dollars.  For every dollar that supports jobs, that's one less dollar Americans can spend to support other jobs.  

The only economic impact that National Parks should be claiming for the national economy is the money from out-of-country tourists that wouldn't have made the trip if not for the parks, or Americans that visit the parks that would have traveled out of country if not for the parks.  This must be at tiny fraction of park spending.  Hence, the national economic impact of National Parks is tiny.

For reviews of several studies on the economic impact of parks and recreation areas, go to my website, economicimpactreview.com.  

I'm quoted in Chicago Tribune story about economic impact study

Link here.  (But it's behind a paywall, so I think to get to it for free you have to google it. (Google "12 billion tollway doesn't add up"  ... then you can access for free.)

Kudos for the Tribune for not just running with the misleading numbers provided by these government officials.  By speaking to me and two other economists, they ran a great story.


Here are two sections:

"Tollway officials tout a potential $21 billion economic boon. But that's about the same amount as the tolls that will be paid.

Several economists who reviewed the program not only question the validity of the job calculations — they also challenge the notion that there's even going to be a net economic benefit.

For them, Move Illinois is a "zero-sum" exercise. That is because the program takes money from the pockets of toll payers and puts it in others' pockets — specifically, of those who would benefit from highway construction and related development.

"When people estimate a fabulously large economic benefit, most of the time it's completely false," said Matthew Rousu, an economics professor at Susquehanna University in Pennsylvania. "You're merely shifting money from one part of a region to another.""

AND

"Because most of the toll revenue that funds Move Illinois is generated locally, the program is essentially just shifting money around, economists say.

"If you spend money on the tollways, where is that money coming from? It's not as if this is brand-new money," said Robert Baade, an economics professor at Lake Forest College. "If people have to spend more money on tolls, then they have less to spend on other things. It comes at the expense of other economic activity."

Rousu agreed that the net impact will be close to zero.

"You are taking a small amount of money from everybody who drives (on tollways) — maybe $10 a week," Rousu said. "That's $500 less per year that individual has to spend. So they don't go out to eat as often, don't buy extra tickets to a play or don't send their kids to ballet lessons.""