Friday, August 11, 2006

New adventures in impact multipliers 

Over at the now-famous Sports Economist (where I've been derelict in posting much lately -- too busy watching late-inning Red Sox meltdowns on, Skip Sauer points out some funky math in deciding the new University of Louisville basketball arena will generate $154 million in revenues per year.
Freedom Hall seats about 19,000. The new arena is designed for 22,000. Suppose both sell out for 30 games. Let the new arena's seats be a significant improvement, so that they sell for $50 each, a $15 premium over tickets at Freedom Hall. The additional seats would thus yield $4.5m of new revenue. The seats "moved" from Freedom Hall would bring in, under these assumptions, an additional $8.55m. So the bread and butter fare at the new arena nets $13.05m in additional ticket sales ($33m if you assume that Freedom Hall is no longer usable). How one gets from there to $154m in annual economic impact takes a mighty big imagination.
Having just taught a course in benefit-cost analysis, I can tell you I have no models that allow for a multiplier of 5 or 10. But even more important is to say, whose benefits are those, anyway? And whose costs? BCA doesn't just yield a single number ... or at least, it shouldn't.