I thank John Lawrence for the very legitimate questions he asks of me in his article “Footy: Another Extension of the Nanny State” ( HERE: ), and I hope that my response here goes some way towards answering them.
Foremost, it is a serious proposition that in times of surplus capacity Government funding be used to create more demand. The popular term for it is stimulus, and it is what successfully led Australia out of the GFC.
Even the Liberal opposition does not dispute this; rather, they say the amount spent was overkill – and perhaps that is John’s point here.
‘Good money after bad’ is also an interesting problem – the sunk cost conundrum. Bellerive Oval may not be the ideal piece of urban planning; nevertheless, Southern Tasmania deserves (and has indeed insisted upon) a major event stadium. I have assumed in my article that the Government is unwilling to raze Bellerive and start again.
So why do we have a stadium in the first place? Economists have long struggled with the ‘rationality’ of public stadia, even though societies have been doing it since before the Coliseum. The problem, you’ll be relieved to learn, is not with us (the irrational public), but with them, and their method. John correctly points out two of the main limitations of economic impact studies: they only quantify benefits in terms of commercial transactions; and, they somewhat blithely ignore the effect of spending substitution.
A cost benefit analysis (CBA), on the other hand, would treat jobs as a cost (as John does), but also enumerate the social benefits – or consumer surplus – of a project. Even if you accept John’s premise that the business community is putting on an additional 300 FTE jobs at a catastrophic loss just to prop up the Hawthorn Football Club; using the CBA framework, we would probably see that the theoretical loss he describes is more than offset by the psychological, social, knowledge and symbolic profit that public infrastructure like this returns (a number of these are referred to in my original article, HERE ). It is for this reason that cost benefit analysis is the preferred instrument of decision making in policy.
As John also points out, if people didn’t spend their money on stadium attendance, they would just spend it on something else. There are two responses to that.
Firstly, I have been careful to distinguish the off-shore tourism impacts. These are people who would not spend their money in Tasmania at all if they weren’t travelling to AFL games. Secondly, if local consumers didn’t spend their money on AFL game attendance and hospitality, they would likely spend their money elsewhere, but not necessarily in Tasmanian businesses. They might, for example, travel to Melbourne to get their AFL fix, or buy a Chinese made big-screen TV on eBay. Having games here guarantees that the better part of their money sticks in Tasmania for one more lap of the economic merry-go-round.
To address John’s final question, careful reading of my article will show that I do not at all endorse sponsoring AFL games or teams. It is in fact my view that governments should invest in enabling infrastructure (which can be reapplied to any number of sporting or community events), and that sponsorship should be left to the market.
After all, weren’t sponsors falling over themselves to support Tassie’s bid for its own AFL team?
John is correct in suggesting that this debate is entirely too emotive, and I for one have no opinion on the government’s recent decision to prefer the Hawthorn deal. I instead suggest that where the government could have done better was in properly and publically looking at the full social and economic costs and benefits of the two proposals, at the same time resisting what was no doubt significant commercial pressure applied by Hawthorn to reach a hasty decision (Kennett really is the politician’s politician!).
All I propose in going forward is that we don’t throw the baby out with the bathwater, and that the redevelopment of Bellerive is kept alive.