Monday, January 18, 2010

About that Vikings stadium article 

I've had several people forward me this article from the weekend WSJ (alternate non-WSJ copy here) on how to measure the value of the Minnesota Vikings. I found an ungated version of the paper (I think) here. Much as the article suggests, there's some technical analysis in here. But here's the basic point I think they are making.

Your child is threatening to leave if you don't let him go out with his friends tonight. Your decision whether to cave in to this kid or not depends in part on whether you think he'll carry out his threat. If you think the threat is real, you may be more willing to relent. (Of course not me. I'm a hard dad.)

Likewise, we've been through this with the Twins. They at one time told us they were leaving, taking their marbles and going to Charlotte. While some fans panicked, many others and the state of Minnesota called Carl Pohlad's bluff, which ended up failing. It took another 8 years before the papers got signed for a new Twins stadium. Interestingly, at that time there was no threat of leaving.

This matters greatly to the reaction of people to a survey asking "how much would you be willing to pay to build a new stadium for the Vikings?" When such a survey was done for the Jacksonville Jaguars, they got a very low number (about $36 million, well below what Jacksonville subsidizes for the Jags.) The authors of the Viking study point out that at the time the Jag survey was done the threat of Jacksonville leaving had disappeared. So you had to ask Viking fans at the time of a threat. The use of 2002 in that Viking study is not an accident. It's the time Red McCoombs was threatening to sell the team to an out-of-state party because his in-state offers were too low.

The answer that the paper gives of $515 per household overstates the case the authors made, since building the new stadium costs them a perceived amount of future income as well. The authors measure this as well, and the net-of-stadium benefit to Minnesotans is $292. They might be willing to pay this if you have a credible threat of leaving ... which is why sports leagues go to such lengths and torture fans. It's a pretty ugly thing to do to people, but when the payoff is that large, it's hard to pass up that temptation.

There are many people skeptical of this paper's methodology, but it continues to be used in cost-benefit analysis to measure the benefits of public goods, and if anything I think the authors over-sampled non-metro population to be sure they were a little conservative on their value. If you compare that number to today -- when while Viking fans are giddy, they do not think the Vikings will leave next year -- you will find it an obvious exaggeration. That's not what the paper measured though. It is more the answer to the question "how much would each Cleveland resident have paid if they saw Modell closing the door on the van?" Doesn't sound as far-fetched then, does it?

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