The NBA Lockout and the Economy: An Overstated Impact

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The NBA lockout keeps eating away at the regular season, like the revolting tapeworm that it is. Regular season games had been scheduled to start last week. Now all November games have been canceled. As the stalemate drags on, lament the lack of basketball — but don’t believe it’ll do major damage to local economies.

Conventional wisdom has it that the NBA lockout is bad news not only for basketball fans, but for all of us — another snag on our already suffering economy. Mayors from 14 NBA cities recently penned an open letter to NBA commissioner David Stern and players union chief Billy Hunter, imploring them to end the lockout. “Lost in the debate over a new NBA collective bargaining agreement,” the letter reads, “has been the perspective [of city] residents and the negative impact a cancelled season might have on them, our cities, and our local economies.”

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Without question, sporting events generate sizable, if often overstated, amounts of game-day spending in cities. According to the Oklahoma City Chamber of Commerce, for example, every Oklahoma City Thunder game pours $1.3 million into the local economy. As The Atlantic recently pointed out, Spurs games generate $95 million for San Antonio, the Portland Trail Blazers made a $2 billion local impact between 1970 and 2004, according to a study, and in 2010 the Greater Memphis Chamber of Commerce estimated that the Grizzlies and their arena, the FedEx Forum, general an annual economic impact of $223 million.

So if these games are lost in a lockout, the thinking goes, NBA cities lose out on big money. The empirical work of a few sports economists, however, has proven otherwise. For example, a 2000 study by University of Maryland-Baltimore County economists Dennis Coates and Brad Humphreys found that work stoppages in baseball and football between 1969 and 1996 – the NBA had experienced no labor disputes in that time period – had no impact on the economies of 37 metropolitan statistical areas with pro sports franchises. In fact, the models showed that cities saw a very slight increase in real per capita income during years with a work stoppage. Robert Baade, a sports economist from Lake Forest (Ill.) College, led a 2006 study that examined sales tax data in Florida. The study found that the lockouts and strikes since 1980 had no statistically significant effect on sales tax receipts in the metropolitan areas that house pro sports franchises.

Why do lockouts seem to have no adverse impact? Start with substitution: Instead of spending a fortune at the NBA arena, fans may go out to dinner, a movie, or a bowling alley, providing additional income for other local workers and business owners. Spending gets redistributed within a city during a work stoppage, but overall levels remain the same. “The idea that, somehow, the only discretionary income that people have are spent on pro sports is just wrong,” Baade says. (He does acknowledge that in today’s era of austerity, people might be more likely to save the money that they otherwise would have spent on NBA games, putting less gas in the local economic engine. But you can’t completely ignore substitution when evaluating the economic impact of the lockout).

Second, as Coates and Humphreys point out in their paper, a reduction in public spending during a lockout can offset a drop in private spending. “Professional sporting events increase metropolitan government spending by driving up spending on public safety, crowd and traffic control, etc.,” the authors write. “If this category of public spending declines during a strike, and the metropolitan government either borrows less or collects fewer taxes or fees as a result of this decrease in spending, then additional money will remain in the pockets of private citizens.”

A third explanation offered by Coates and Humphreys is impossible to quantify, but makes some intuitive sense. Without NBA games to obsess over, people will actually do their jobs. “If workers spend time discussing the outcome of last night’s game rather than devoting this time to job related activities, then those workers will be less productive, in terms of output produced per unit of time,” Coates and Humphries write. “Less output will be produced, and less income generated. Fewer such opportunities exist during sports strikes. Therefore, other things being equal, during these strikes one would observe higher productivity, production, and income.” In an interview, Coates is more succinct. “After an important game,” Coates says, “how many people show up hungover?”

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Let’s be clear: The lockout will do some damage. On a more micro-level, arena support staff – the vendors, the concession-stand operators, the security guards, the ticket takers – will be out of work, at a time when low-skill workers are having trouble finding other employment. The burger joints and bars near the arenas will take a hit. These adverse effects are very real, and should not be marginalized. Select individuals will suffer and will have to scramble. But cities will survive without basketball.

Sean Gregory is a staff writer at TIME. Find him on Twitter at @seanmgregory. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

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