On April 2, 2024, Jackson County voters will be asked to approve a new 3/8 percent sales tax to support improvements to “funding for park improvements consisting of Arrowhead Stadium and its surrounds, and a new Major League Baseball stadium in Jackson County.”

Learn more here.

The post KC Stadium Tax: The Opportunity Cost appeared first on Show-Me Institute.

I believe in my gut that the timing is right for the Royals to become residents of the Crossroads and neighbors to Power & Light, 18th & Vine and Hospital Hill, helping to further connect the cultural center for our great city.

What’s important to note is that Sherman plans to include an entertainment district in the construction. Mike Hendricks of The Kansas City Star adds: “The imagined $1 billion-plus ballpark would be bordered on the east by office, retail and residential development, which would be a potential source of revenue for the team.”

No one should doubt that this publicly funded stadium with all the additional accouterments would be good for John Sherman. But will it be good for his neighbors?

Remember that all sorts of research and many economists make it clear that sports stadiums “are really poor public investments.” Part of the reason that the economic impact studies released by proponents of such efforts are flawed is that they count only the new spending at the new location—not the reduction of spending elsewhere. In a 2017 report, the Federal Reserve Bank of St. Louis concluded: “economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs.”

Consider the Power & Light District. According to the Regulated Industries Division of Kansas City, Missouri, the number of liquor licenses (a gauge of how many restaurants and bars are operating) and employee health cards (a proxy for the number of people employed at bars and in food service) remained flat citywide for a decade after subsidies were awarded.

The Power & Light District didn’t create new jobs or businesses. It merely moved them from elsewhere in the city to downtown. And it moved them from places where the city, county, and school districts were collecting property, sales, and income tax revenue to a place where those taxes are diverted back to the developer to offset the cost of construction.

Even if you consider the Power & Light District on its own merits, it has failed to be successful. Thomas Friestad reported last year in the Kansas City Business Journal that Kansas City has had to meet multimillion-dollar debt-service obligations because the district does not generate enough revenue to pay its own debts. Those payments have ranged from $6 million to $17 million, amounting to over $160 million since 2006.

Just as with the Power & Light District, John Sherman’s entertainment district will not create new economic activity. It will only move it from elsewhere in the city. On game day, fans who now stop at grocery and liquor stores on their way to tailgate may instead go to bars at the stadium. That is not new activity—just different activity. Fans who might have gone to Power & Light, or to other places in the Crossroads District, may now go to the bars that Sherman owns. That is not new spending—just different spending. This is exactly what happened when Ballpark Village opened in St. Louis; it cannibalized other existing businesses.

The economic impact studies that will inevitably be produced to tout this new entertainment district will likely only count the new spending in the new location—not the loss of spending elsewhere.

To the degree that the Royals’ new entertainment district leeches spending away from Power & Light—which seems like it may be the intent of Sherman’s gambit—Kansas City taxpayers will face even higher annual debt obligations than now.

A publicly funded downtown stadium and entertainment district will be good for John Sherman. It won’t be good for anyone else.

The post John Sherman’s Proposed Entertainment District Is Bad for Everyone Else appeared first on Show-Me Institute.

Opportunity cost. The concept is so simple that a first-grader could understand it. I know, because I used to teach it to first-graders. Had you walked past my classroom at just the right time, you might have heard 20-something first graders chanting, “Opportunity cost is the opportunity lost.” The students understood that our decisions have consequences. It was a lesson they learned every time they went out to recess. If they chose to play kickball, they couldn’t play basketball. This basic life lesson bears some repeating for the adults who set policy in our state.

Though the term opportunity cost was not coined until 1914, French economist and writer Frédéric Bastiat provided one of the most salient examples of the concept in his 1850 work, “What Is Seen and What Is Not Seen.” Using the parable of the broken window, Bastiat explained how money being spent on one activity is money that cannot be put to more productive use elsewhere. Imagine that a pane of glass is broken at a baker’s shop. Obviously, the money that the baker must pay to have it repaired becomes revenue for the window repair man. Anyone walking by can see the repair man doing work and recognize that he’ll be paid for his labor. But it makes no sense to look at the repair man’s good fortune in isolation. Doing so would lead to the harebrained conclusion that breaking windows leads to economic growth! Instead we need to remember that, had the window stayed intact, the baker could have done something else productive with the money. The problem is that we can’t see what the baker could have done with the money—only what he actually did with it.

Unfortunately, our board of aldermen and other policymakers regularly make decisions based on what they see without accounting for what they can’t see. Take for example the earnings tax in Saint Louis. Policymakers can see the revenue generated by the tax, but they can’t see the economic activity that has been lost. They can’t see the jobs that might have been created had those dollars been reinvested by the businesses. Nor can they see the economic activity that might have been generated if those dollars had remained in workers’ pockets.

Think about opportunity cost the next time you see a ribbon-cutting at some new development that has received tax breaks or some other form of support from the government. Whether it is a property that has been blighted and given property tax abatements for development in the Central West End or a big box store that receives tax-increment financing, we can see the product of those government actions. We cannot see the harm they do to other businesses through unfair economic competition.

I was reminded of these ideas when I read Lindenwood economist Howard Wall’s most recent paper for the Show-Me Institute, “Is Growth in Outstate Missouri Tied to Growth in the Saint Louis and Kansas City Metro Areas?” Wall uses an econometric model known as Granger-causality to estimate the impact of employment growth in Saint Louis and Kansas City on the rest of the state. He finds a statistically significant downstream relationship between Saint Louis and the rest of Missouri. That is, employment growth in Saint Louis leads to employment growth in the state. He estimates that a 1 percentage point increase in growth in Saint Louis would lead to an increase of 0.35 percentage points in outstate Missouri within two or three years. Why this connection exists (he doesn’t find a similar relationship in Kansas City) is a matter for some hypothesizing or future research. Nevertheless, the point is clear—Saint Louis is an economic driver for the state.

While Wall’s paper does not deal directly with the idea of opportunity cost, his findings make it all the more important for policymakers to understand the importance of their actions. When they support an earnings tax or other policies that harm the city’s economic growth, they are hurting the economic growth of the entire state.

Missourians, not just those who live in the city, benefit from a thriving Saint Louis economy. That’s why we need policymakers to put in place pro-growth policies that create the economic conditions for the market to thrive.

The post Opportunities Squandered in St. Louis Affect All of Missouri appeared first on Show-Me Institute.

Perhaps people are upset that the hit Netflix show Ozark and the Oscar-nominated film Three Billboards Outside Ebbing, Missouri were filmed elsewhere in the United States. Whatever the reason, some Missourians are now deliriously calling for the reinstatement of film tax credits to draw filmmakers to the Show-Me State.

Film tax credits can be summarized as state governments paying a portion (usually about 25-40%) of a filmmaker’s costs in order to attract them to do business in the state. In theory, the economic activity generated by the film production will be enough to offset the cost of taxpayer dollars, providing a positive boost to the economy.

Missouri film credit advocates have repeatedly claimed that Gone Girl made $7.9 million off a $2.36 investment. But this is simply not the case. The $7.9 million was not profit or revenue for the state, but “economic activity” (salaries, hotel rooms, dining, etc.). But even that figure is exaggerated, as most of the newly created jobs funded out-of-state employees and all in-state workers were part-time (most work as extras). Out-of-state production companies like to retain their own workers; the number of Missouri editors, producers, actors, and directors actually declined over the Missouri film-credit era.

Additionally, opportunity cost cannot be ignored. Opportunity cost can be defined as the loss of benefits (time, enjoyment, profit) that could have been received from an alternative strategy. Therefore, when you read articles promoting economic tax credits, you shouldn’t compare supposed “boosts” in economic activity to $0, but to what the same millions of dollars could have produced instead, such as infrastructure, public safety, or tax rebates for Missouri citizens.

Film tax credits will not provide Missouri or its citizens with gains in the long run. Independent studies find that states typically recapture only 8 to 28 cents per dollar spent on film credits. Missouri terminated the film credit program partly due to its economic failures, as the Missouri Department of Economic Development found that the program allowed the government to recapture only 15 cents per dollar spent.

Be careful about the spread of Hollywood fever. Instead of paying for films to come to our state, why don’t we improve our state with those funds so filmmakers will have more reasons to come? That would make our state more attractive for all businesses and citizens, not just Hollywood accountants.

The post Hollywood Fever Hits Missouri appeared first on Show-Me Institute.

Bastiat (1801–1850) was a French economist. In his most prominent essay, What is Seen and What is Not Seen, he explained how policymakers often tout the immediate effects of a policy but ignore what might have happened without the policy—what is not seen. This would later be known as the concept of “opportunity cost.” Whether discussing tax subsidies for sporting stadiums, tax-increment financing for development in flood plains, or a host of other issues, policy analysts at Show-Me Institute regularly follow in the tradition of Bastiat by explaining what is not seen.

In another of his popular essays, The Law, Bastiat explains that “the law is justice.” The purpose of the law is not to bestow rights or benefits on members of society, but instead: “Its function is to prevent the rights of one person from interfering with the rights of another.” His ideas on property rights and the purpose of the law help form the foundation of the classical liberal tradition.

Lately, I have been particularly intrigued by his essay Justice and Fraternity. I am an educator by trade. My bachelor’s and master’s degrees are in elementary education and my Ph.D. is in education policy. I have been a classroom teacher in public schools and I currently teach university classes for aspiring principals and superintendents. Through my experiences, I have developed some specific views on the purpose of education and what constitutes great teaching. Often, I find these views are not shared by others. Indeed, there are many ideas on the matter that are often incongruous with one another. This is one of the reasons I am so supportive of school choice; it allows individuals to explore the type of education they view as the best.

Others, however, are not sold on school choice. They believe the state should dictate what and how students learn. Oh, they may not say this directly, but consider what they propose. They want the government to dictate which schools children will attend. They want those schools to be accountable to government agencies and financed by funds from the government. They want the government to certify teachers who will teach  government-approved content standards. In short, they want a heavily regulated and centralized system of education.

Now let’s suppose that there is one best way to educate students. Bastiat suggests in Justice and Fraternity that the best way to discover this one best way is through a decentralized system:

Obviously, if people could agree on the best possible kind of education, in regard to both content and method, a uniform system of public instruction would be preferable, since error would, in that case, be necessarily excluded by law. But as long as such a criterion has not been found, as long as the legislator and the Minister of Public Education do not carry on their persons an unquestionable sign of infallibility, the true method has the best chance of being discovered and of displacing the others if room is left for diversity, trial and error, experimentation, and individual efforts guided by a self-regarding interest in the outcome—in a word, where there is freedom. The chances are worst in a uniform system of education established by decree, for in such a system error is permanent, universal, and irremediable. Therefore, those who, in the name of fraternity, demand that the law determine what shall be taught and impose this on everyone should realize that they are running the risk of having the law direct and impose the teaching of nothing but error; for legal interdiction can pervert the truth by perverting the minds that believe they have possession of it.

There are two important points made here. First, that the rational self-interest of diverse groups of individuals is better suited to discover the best way to educate students, or at the very least to satisfy the desires of the most individuals. Second, instituting one method from on high via government agencies is a surefire way to mandate error. At present, we do not have the magical education bullet that will meet the needs of every child. Therefore, a centrally imposed system will by its very nature force some students into a system that doesn’t work for them.

Think about this as we move forward in the coming months. As schools remain closed, parents throughout the country will be taking on the new role of home educator. They will, undoubtedly be working to find the system that works best for them. These parents will need the support of teachers and schools, but they are most likely to find that system through their own trial and error. They do not need a government order that forces every family to conform to the same routines.  

In my estimation, some of Bastiat’s essays should be required reading for high school economics students. Maybe I should work to impose that view on others. 

The post Homeschooling, Centralized Education, and Bastiat appeared first on Show-Me Institute.

Mind you, a new baseball stadium funded by taxpayers might be great for the owners of the Royals. But what evidence is there for any benefit to taxpayers?

The St. Louis Federal Reserve pointed out that stadiums fail to drive economic development in a 2017 report, concluding:

Building sports stadiums has an impact on local economies. For that reason, many people support the use of government subsidies to help pay for stadiums. However, economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact. Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.

A 2019 piece in The Berkeley Economic Review, a publication of the University of California–Berkeley economic program, also failed to find any economic benefit from sports stadiums:

Over the last thirty years, building sports stadiums has served as a profitable undertaking for large sports teams, at the expense of the general public. While there are some short-term benefits, the inescapable truth is that the economic impact of these projects on their communities is minimal, while they can be an obstacle to real development in local neighborhoods.

The owners of the Royals are welcome to build a stadium wherever they like. But if they want to take tax dollars away from schools, public safety, and infrastructure to help build the stadium, they should share any evidence they have that such a plan presents a good return on investment for taxpayers—not just themselves.

The post Downtown Baseball? Show Us the Research appeared first on Show-Me Institute.

The table above shows the projected revenue sources and costs of the proposed streetcar expansion. Note two things: (1) The expansion is over 20% more expensive per mile than the existing 2.2-mile downtown line; and (2) $14.5M of the required revenue would come from Surface Transportation/Congestion Mitigation–Air Quality (STP/CMAQ) funds.

STP/CMAQ grants are federal dollars allocated throughout the region by the Mid-America Regional Council (MARC), a consortium of government officials. These funds are used to build streets, bridges, trails, and other transportation projects. Jurisdictions from Platte to Cass counties rely on these funds to meet their basic infrastructure needs.  

By targeting these funds, streetcar advocates are asking that the streetcar be given higher priority than other regional projects—much higher priority. During the next two-year STP/CMAQ funding period, roughly $42M in funds will be available. So the $14.5M grant that rail advocates are after could gobble up more than a third of the total funds. As a result, other regional priorities could wait years until funding becomes available again. The request for STP/CMAQ funds also demonstrates that rail proponents are trying to offload even more of the cost of their expensive project on taxpayers far outside city limits. (Note the $100M federal grant listed among the revenue sources.)

Rail advocates might reply that even if a grant is awarded to expand the streetcar, funds would still be available for other projects. While it’s true that some funds might still be available, this response overlooks the opportunity cost of funding the extension, not to mention the opportunity costs already incurred for the downtown line. In 2013, the downtown line received an unprecedented $17.3M in STP/CMAQ funds. The streetcar has already pushed projects to the back of the line before—why should it do so again?   

So while rail advocates seek out another multi-million-dollar grant, public officials should ask themselves: Is the streetcar project the best use of regional funds?  

The post Could KC Streetcar Expansion Drain Regional Resources? appeared first on Show-Me Institute.

Proponents of a new $311 million hotel claim that the project will create construction jobs. At a recent hearing before the City Council, developer Mike Burke said [begins at 46:35], 

Let me talk a little bit about jobs. During the course of construction, which is about 27 months, there are about 1,300 jobs on the site.

Let's be clear about this: there won't be 1,300 jobs for 27 months. If someone were to ask Mr. Burke about this directly, he would probably walk it back immediately. Some jobs, such as heavy digging and foundation, may exist for a few months at the start. Those will transition to other, different jobs once the structure is being raised, and then finally there will be the finishing jobs once the hotel is ready for its final touches. 

Moreover, even the time spent building the hotel won't result in new jobs. The hotel will be just be a new project for those workers who already have jobs. This is why the economic impact statistics for projects such as hotels, stadiums, and airports are so suspect. Proponents want to pretend that without the project in question, people wouldnt be working or traveling or staying in hotels. As my colleague Joe Miller wrote last month regarding a proposed riverfront stadium in St. Louis:

In fact, a paper from an economist at the University of Missouri studied the impact of the Edwards Jones Dome and the Kiel Center (now the Scottrade Center) in Saint Louis specifically. The author found:

By econometrically modeling construction employment during the 1970’s, 1980’s and 1990’s, it was found that there was no more nor no less construction employment within the St. Louis MSA during the time the Kiel Center and the Trans World Dome [Edward Jones Dome] were being constructed…

…instead of creating new construction jobs, jobs were shifted from projects that would otherwise have been undertaken, resulting in no net new job creation in the construction industry.

The author concluded:

These results, coupled with the more extensive analysis given in the article on construction employment, suggest that the net impact of stadium construction on construction employment and worker incomes is zero.

The post Will Building the Convention Hotel Create Jobs? appeared first on Show-Me Institute.

The number of events matter because it factors into how the authors calculate additional sales taxes a new stadium would generate. They estimate that the new stadium development would host 123 events, including professional soccer and high-school sports. For the sake of discussion, let’s grant that a new stadium will keep the Rams here. What of these other events?

It is no sure thing that Major League Soccer (MLS) will locate a soccer team here. This is important because MLS spending makes up a quarter of the authors’ calculation. The authors should not be counting on soccer revenue without a guarantee that a new team will actually exist.

Beyond the MLS, how many concerts, high-school/college sports, and other events do the authors think are available for the stadium to host? Saint Louis is not lacking in venues. The Scottrade Center, Chaifetz Arena, and the Edward Jones Dome can all serve as hosts. How many net new events will this stadium attract? This study doesn’t say. Based on the authors’ other calculations, it’s possible that they would count any event as a net gain for the city, regardless of whether it came at the expense of another local venue.

Determining the number of events the proposed stadium development would attract is a difficult task. However, given the hundreds of millions in taxpayer dollars on the line, it would be more prudent to have conservative estimates. The region doesn’t need another development to fall short of expectations. 

The post Where Did All of These Events Come From? appeared first on Show-Me Institute.

In a couple of weeks’ time, incoming college freshmen will get their first taste of independence. But with independence comes responsibility, and right about now parents are giving familiar advice on how to handle life without a safety net: Study for class. Eat healthy. Spend smart (read: don’t spend your rent money on pizza and beer). Most freshmen will find their footing, eventually. Some never really do, especially when it comes to budgeting properly.

But unrepentant spendthrifts should not feel so bad, because many of Missouri’s top policy makers never figured out how to spend smart, either.

A handful of state and Saint Louis officials want to spend close to $400 million of public money on a new football stadium in downtown Saint Louis in an effort to keep the Rams from moving to Los Angeles. Not only is Saint Louis’s existing NFL stadium, the Edward Jones Dome, a mere 20 years old, but virtually every economist who has studied the issue has found that NFL stadiums are a bad place to invest public dollars. They do not generate economic growth, spur urban revitalization, or greatly increase tax revenue.

Unfortunately for Missouri residents, the way Saint Louis funds its football stadiums makes this much more than a local or regional issue. Statewide residents already covered half the cost of Saint Louis’s Edward Jones Dome. In fact, the state is still paying $12 million annually on that stadium’s debt. One could be forgiven for thinking that Missouri taxpayers deserve a break from funding entertainment venues in Saint Louis City, especially when tangible economic benefits are so unlikely. But that’s not the case. Quite to the contrary, state taxpayers will be expected to cover more of the stadium costs than they did last time, with total state support topping $300 million—about three quarters of the total subsidy. That money will come straight from Missouri’s general revenue.

However, even as Missouri and the City of Saint Louis prepare to spend lavishly, yet again, on pro sports, every level of government claims it is broke. We are told how courthouses are crumbling. How highways are deteriorating. How the schools are underfunded. How the state parks have a $400 million maintenance backlog. How Missouri’s Amtrak routes need $32 million in upgrades to continue running. Even Saint Louis City officials claim that core departments like fire protection and police are short of cash.

When it comes to basic government services, there’s never any money in the budget. Residents instead have to vote on tax increases, or else. But when Saint Louis’s NFL status is threatened, hundreds of millions of dollars are suddenly available. As for a vote, that’s restricted to those who will vote “yes.” At the state level, it’s likely that the decision of the governor alone will be sufficient to authorize spending more than $300 million, and he is spearheading the stadium effort.

Right now, Missouri’s leaders sound a lot like college students calling their parents because they can’t afford groceries. And they’re making that call from a noisy bar in Cancun. It’s true—some people never learn to spend responsibly, whether they are freshmen or officials. Then again, most of the time, that’s because no one ever makes them.

The post Missouri Needs to Learn to Prioritize Spending appeared first on Show-Me Institute.

But there is ample reason to be skeptical of the CVC’s tax revenue claims. First, the estimate was generated using estimates of estimates, which could easily lead to miscalculation. Let’s assume that the numbers are correct, and convention goers who use the dome go out and add $23 million to city coffers. That still does not ensure that the dome generated $23 million.

Why not? Imagine you owned a passenger train that generated $5 million annually. You decide you can get more riders if you make the train bigger. Post investment, revenue increases to $6 million. Did the improvement generate $6 million or $1 million in new revenue? Obviously $1 million. You were already making $5 million before you spent a dime. Passengers are likely substituting their use of the old train for the improved train; the investment itself may be attracting few passengers. Even worse, you have to consider opportunity cost, or what you could have made had you invested the improvement dollars elsewhere. If you could have earned more putting your money in other projects, the train improvement was a bad investment.

When the CVC claims the dome makes $23 million annually, they ignore substitution effects, assuming much convention spending would disappear without a dome. They also ignore opportunity cost, or that convention center investment could have gone to other projects. In doing so, the CVC is not only coming up with questionable estimates, they are ignoring historical data.

According to the Brookings Institution, the opening of the dome in 1995 had little impact on hotel occupancy. In 1991, downtown hotels combined for 1.16 million room nights. In 1998, three years after the dome had opened, room nights were 1.15 million (10,000 fewer room nights). As the author put it:

In terms of filling more hotel rooms, the city’s investment in more and newer convention center space and a dome had done absolutely nothing to either fill existing downtown hotel rooms or to prompt the private development of more hotels.

And it’s not just hotel occupancy that remained stagnant. The city’s general tax revenue actually fell in the dome’s opening year:

Revenue growth in the 1990s was faster before the dome opened rather than after. This is not to say the dome decreased revenue growth, just that there is no obvious evidence that the dome created significant revenue expansion.

To sum it up, there are many issues in calculating revenue impact of the dome today. In addition, historical data does not show that the dome significantly impacted the city’s hotels or tax revenue. For that reason, I’d take the CVC’s $23 million estimate with a football-sized grain of salt. 

The post Be Skeptical of Dome Convention Claims appeared first on Show-Me Institute.

Myth 1: Professional sports teams generate development and boost regional economies.

The consensus among economists is that this is not the case. Nearly every study on stadiums finds no tangible impact on job creation or economic activity. As for redevelopment, economists Dennis Coates of the University of Maryland and Brad Humphreys of West Virginia University wrote:

“. . . strategically placed stadiums and arenas can sometimes ride existing redevelopment trends, but they are never the cause of these trends.”

Myth 2: A riverfront stadium plan will pay for itself.

Total subsidies to the riverfront stadium in Saint Louis will likely exceed $400 million, no small sum. Even so, public officials and respected news outlets like the Post-Dispatch claim that the stadium will pay for itself through increased tax revenue. The mass of scholarly literature rebuts this assumption. Most economists find that sports stadiums have very little impact on tax revenue and do not recoup large public subsidies.

A review of the literature suggests that the optimistic assumptions of stadium backers and local newspapers tend to rest on overestimated direct tax revenue from sports teams and underestimated opportunity costs for government expenditures. However they go wrong, when politicians claim an NFL stadium will pay for itself, they are ignoring clear economic evidence to the contrary.

Myth 3: The stadium will be built with no new taxes.

First, extending bonds (and the taxes that back those bonds) is an increase in taxation when those taxes would otherwise expire. Beyond that, the existing stadium plan does not account for the following costs:

1. New stadium maintenance

2. Renovations to the Edward Jones Dome

3. $150 million in state tax credits

Someone will pay for these policies, and it’s unlikely to be the Rams. Furthermore, according to the lawsuit the Regional Convention and Sports Complex Authority (RSA) filed against the city, officials plan to use other methods of funding that will result in more taxpayer dollars getting spent (or diverted). These include using public dollars to purchase land (which is already underway), setting up new downtown taxing districts (more TDDs and CIDs), and tax increment financing.

Missouri residents should understand that if they subsidize a stadium, they may get an NFL team, but they aren’t likely to make their money back. There also isn’t any reason to think that it will create significant economic benefits for the region. The plan’s high costs and limited public benefit should make some sort of public approval a necessity. Unfortunately, depending on how the courts rule, public involvement might be sidestepped altogether.

The post Top Misconceptions About the Riverfront Stadium Plan appeared first on Show-Me Institute.

As reported in the St. Louis Business Journal, bars and restaurants are taking serious hits to their sales. For example, Paddy O’s, a popular bar for pre-game and post-game activities, is expecting to draw $1.3 million in revenue this baseball season, a far cry from the $2.5 million they received last year. The Flying Saucer, another restaurant located near Busch Stadium, is looking at a 20-25 percent drop in business. These reports are anecdotal, but they fall in line with what economists find when they examine subsidies for similar types of developments, such as sports stadiums. While the subsidized development might do well, in many cases, it comes at the expense of other businesses in the area. Little to no actual wealth is actually created.

The government should not be subsidizing private developments. Even the ones that actually do well, such as Ballpark Village, just end up shifting consumer spending from one location to another. Instead, the government should be focusing its spending on areas that can benefit the public at large, such as public safety.

The post Ballpark Village Crushing It . . . appeared first on Show-Me Institute.

Beyer contends that public subsidies to developments such as Ballpark Village mean that there wasn’t enough demand in the first place in order to justify investing in them. I agree. I also believe that using subsidies to finance these projects will be of limited economic benefit because they will just shift spending from other local establishments. A waitress who works at one area restaurant told me that her co-workers in Kiener Plaza are expecting a permanent 10 percent reduction in revenue now that Ballpark Village has opened. This example is only anecdotal, but it falls in line with what economists find when they examine public subsidies for similar types of developments, such as sports stadiums. They find that a lot of the economic benefit these developments bring to cities comes at the expense of spending elsewhere in the economy. Little to no actual wealth is created.

The government should not be picking which development gets public money and which does not. Instead, it should be focused on providing public goods such as basic infrastructure and public safety. Ballpark Village looks like it is going to be a great success, as most people thought it would be. Forcing taxpayers to subsidize the development, however, is not justified and is improper.

The post Does Ballpark Village Really Need Subsidies? appeared first on Show-Me Institute.

Researchers at MIT and George Mason University estimate that delayed and canceled flights imposed on passengers an aggregate delay of 28,500 years in 2007. The cost of these delays, and of risk-averting behavior like traveling early to destinations, was estimated at $15.3 billion, a startling number that accounts for the opportunity cost of time but doesn’t measure the consequences of missing critical appointments like weddings or job interviews.

While Sexton refers specifically to airline cancellations, his larger point is about the time costs to passengers. This study mirrors recent observations from SaveKCI’s blogger Kevin Koster:

Yesterday, I had to make a day trip to Denver. As I tweeted yesterday morning, it literally took me only 8-minutes from the time I locked my car in the KCI garage until I was through security and standing at the gate ready to board. By comparison that afternoon in Denver, it took me 45 minutes from the time I was dropped at the curb until I was at the gate – and I was told the security lines were unusually short.

More impressive though was our return to KC. It took me less time to get from the gate to my home than it did in Denver to get from the gate to a waiting cab outside. To the business traveler time is money – on average $150/hr. We should be selling KCI’s “private jet speed” convenience to businesses in other markets, rather than considering destroying it.

Airport administrators want to move to airport models used elsewhere in the country to maximize revenue. Kansas Citians like Kansas City International Airport because it allows them to be efficient with their time. For many in the region, this time cost is the most important.

The post The Price Of Air Travel appeared first on Show-Me Institute.

Citizens for Modern Transit recently hosted a luncheon with national TOD expert Dena Belzer on the Economics of Building Around Light Rail. I had an opportunity to review her Powerpoint presentation, which did not convince me of any such economic benefit.

Granted, I have to hedge my comments with the fact that I did not physically attend the presentation. That being said, the most outrageous trend running throughout the presentation is that TOD will save money. It will save money for the government, it will save money for households, employees, employers — pretty much everybody.

The presentation suggests that compact development helps municipalities save money. Just like you save money at Jos. A. Banks buying two suits to get the third one free, when you did not even need a suit. Spending money just to get a “good deal” is not always a good justification for spending that money.

And what about households? Belzer’s presentation suggests that TOD can save households billions of dollars and that money can be reinvested in the community. First of all, TOD will not save us money when we are paying for it in our taxes.

Secondly, she cites figures that suggest Portland’s transit policies save residents $2.6 billion per year. However, more than half of that imaginary figure comes from the estimated value of commute time that has been reduced due to transit options — the opportunity cost. I do not know about you, but I have not found a way to manufacture gold coins from the time I save on days that traffic is light. Nor do I mind my commute to work. Many people choose to spend more time commuting in favor of lower housing costs, community preference, or a variety of other factors.

Other people prefer to use transit or live near a Metro stop and enjoy a predictable commute. There is nothing wrong with that. However, it is not a sufficient reason to compel all taxpayers to subsidize housing, retail, and office facilities around transit stops so that planners can impose their views on the rest of us.

The post The Questionable Economics Of Building Around Light Rail appeared first on Show-Me Institute.

But we must not ignore the shopkeeper’s opportunity cost of fixing the window, namely those products and services that she had to forgo. The businesspeople selling these forgone items take a hit as a result of the broken window.

I was reminded of all this while reading a recent report from goodjobsfirst.org. One section outlined the subsidy programs offered to incentivize private enterprise to move from Kansas to Missouri. The Show-Me Institute’s Patrick Ishmael and Michael Rathbone have expressed concern about such programs over the past few months (here and here).  In 2012, Freightquote moved its headquarters from Lenexa, Kan., to Kansas City, Mo., which landed the company $64.3 million in tax incentives. In 2011, North American Savings Bank received almost $6 million in subsidies to relocate to Missouri. Velociti benefited from $1.6 million in corporate welfare for moving to Riverside, Mo. The list goes on . . .

Such programs are defended on the grounds that they bring much-needed jobs to the state, but one cannot ignore the means by which they are financed. The government is not an exogenous entity, magically creating wealth out of nothing. (Trillion dollar coins notwithstanding.) To provide anything, it must first take from others. This confiscated wealth constitutes revenue that would have otherwise been spent, invested, or saved in the private economy. Accordingly, it is not a stretch to contend that the state creates jobs only by means of destroying them. Bastiat’s sage advice unfortunately seems to have been lost on many of our public officials.

The post The Cost Of Ignoring Opportunity Cost appeared first on Show-Me Institute.

Our discussion started with introductions around the table. Among our 10 attendees, some have been attending book club regularly for years, some have come in the past and had not attended in a while, and one person had never attended. Former Show-Me Institute intern Mary Chism gave a synopsis of the story for the few people who had not read it. Next, I gave a brief summary of the history of intellectuals’ views on the concept of value, from Aristotle’s “value for use”/”value for exchange” dichotomy, to the Labor Theory of Value, to the modern marginalist conception of value, attributable to Alfred Marshall.

We then started addressing the discussion questions I had prepared in advance (with Mary’s help). Leading from those questions, here are some of the topics we discussed:

• Whether anything can be exchanged for anything else
• The how and why of international currency exchange
• Government policy relating to the supply of money and exchange rates
• Whether sweatshop laborers, especially children, are making a free choice to work where they do
• The opportunity cost of reckless behavior
• Risk aversion and diminishing marginal utility of income
• A question from one attendee: “When a participant in a market has more resources, how does that affect that party’s ability to make beneficial exchanges?”

Some topics were discussed on an introductory level and others on a very high level. Many questions were asked and much knowledge shared. In addition to the lively discussion of economics and such, we talked about what our next reading selection should be and when we should meet again. The respective decisions were Hayek’s “The Road to Serfdom” and Wed., Feb. 20. If you are interested in the book or related topics, stop by our office at 7 p.m. on that evening for pizza, soda, and interesting discussion. See ya there!

The post January Book Club Recap – The Cambist and Lord Iron appeared first on Show-Me Institute.

Why is Ballpark Village receiving public subsidies? The government, whether local, state, or federal, is the steward of taxpayer money. Yet, the government is spending taxpayer money to help build shops and restaurants. Isn’t there anything else a bit higher up on the public’s list of priorities on which the government can spend money? There are legitimate roles for government, being a developer is not one of them.

It is possible the government sees that helping to finance the construction of Ballpark Village will boost economic growth. However, it should be noted that while these new shops and restaurants may do well and attract customers, other shops and restaurants located in the city may lose business. The disposable income of the average citizen is limited and by spending money in one place, they may be declining to spend money in another. If you are a private investor, this is not something to worry about as long as it is your business attracting the customers. However, what is the net benefit to the economy as a whole and why is the government in the position to favor one business over another?

A lot of people might enjoy Ballpark Village once it is built. However, that does not mean I support Ballpark Village being built with the aid of public money. There are legitimate things on which government should spend money; Ballpark Village is not one of those things.

The post So This Is Happening . . . appeared first on Show-Me Institute.

With the state legislature meeting in a special session this
week, lawmakers from both parties are prepared to argue in favoring
of extending $360 million in proposed tax credits to support the
creation of a “Midwest China hub” or “Aerotropolis” at Lambert-St.
Louis International Airport. Based on previous comments, some of
them will admit to a large degree of skepticism about the possibility
that Lambert will evolve into a major cargo hub, but they will go on
to say it is still worth taking a shot at making it happen — given a
huge potential payoff in jobs and increased economic activity.

And on Thursday evening, President Barack Obama will no
doubt echo some of the same sentiments when he addresses a joint
session of Congress on the subject of job creation. We can’t afford to
stand around and “do nothing,” he or his supporters will suggest.
But there is nothing in the history of our state or nation that
suggests government intervention in the marketplace is an effective
tool for job creation. Indeed, when governments use taxpayers’
money in trying to pick economic winners and losers, they almost
invariably pick losers and compound failure.

Milton Friedman, the great economist, observed that people
have every incentive to economize and to get as much value as they
can for each dollar they spend when they are shopping for
themselves, but they are far more likely to be careless or wasteful
when they are spending someone else’s money for the benefit of
others. This is the case when you use an expense account to pay for
someone else’s lunch.

It is also the case when politicians or lawmakers pretend to have the
needed knowledge and expertise to channel a large sum of taxpayers’ money
to selected businesses or industries on the theory that these politically favored
and politically-dependent enterprises will do a bang-up job of
promoting the public good.

Politicians often argue that even one job created through tax credits or
subsidies is better than none. But this ignores the opportunity cost of
expending large amounts of taxpayers’ dollars for little economic benefit. If
the government takes a million dollars to create one job, that’s a million
dollars that could have gone to more efficient and productive ventures in the
private sector — creating stronger and better jobs for more people.

If Missouri lawmakers have some $360 million to spare and want to
put it to good use, they should return the money to all of the citizens of this
state through tax cuts or refunds. As Friedman pointed out, they will know
how to get the most bang for the buck.

The federal government should heed the same advice when it comes
to making a choice between expanded public works or reducing taxation,
leaving people free to choose how to spend a greater share of their own
income.

Andrew B. Wilson is a fellow at the Show-Me Institute, which promotes market
solutions for Missouri Public Policy.

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