Economic Impact Fallacies

David Martin over at The Pitch has a great piece about how the positive economic impacts of a Chiefs training camp in St. Joseph have failed to materialize. Residents were promised millions of dollars of revenue in return for taxpayer subsidies. Build it, they were told, and they will come.

They didn’t come. The expected money has not poured into St. Joseph, in part because the calculations used to make the promise to St. Joseph residents were flawed. Martin writes:

The convention bureau arrived at the $6.3 million economic-impact estimate by multiplying 40,000 (the number of fans who attended training camp, according to Missouri Western) by $158. The dollar figure was the average amount of money that surveyed visitors said they’d spent.

That, anyway, is how the convention bureau understood the math. But H2R [Market Research] officials, when asked about the visitor profile, told The Pitch that the average spending was per party, not per person.

The St. Joseph case is not isolated. Calculating economic impact for projects and events is fraught with errors and often with glaring flaws in the premise. Two years ago we wrote that the promised economic impact of hosting the Republican convention in Kansas City was likely overstated. In short, the number crunchers often base their estimates on the assumption that without the event in question, there would be no economic activity at all—that if we didn’t host the Republican Convention, the hotels and restaurants would be left empty. It’s not just projections for events that rely on such flawed reasoning; from stadiums to film tax credits, economic impact studies often miss the mark.

Sometimes the truth can only be known in retrospect, when we look back and compare promises to results, as Martin did in his piece. But by then the public’s money has already been invested and possibly lost. With this in mind, the public and policymakers alike should be more skeptical of economic impact claims.