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Business Relocation Subsidies

February 2, 2011, 10:52 am

I return to an old favorite topic of mine this week, government subsidies for business relocation, in my column at Forbes.com.  An excerpt:

To see this clearer, lets take the example of Major League Baseball (MLB).  We all know that cities and states have for years been massively subsidizing new baseball stadiums for billionaire team owners.  Let’s for a minute say this never happened – that somehow, the mayors of the 50 largest cities got together in 1960 and made a no-stadium-subsidy pledge.  Would baseball still exist?  Sure!  Teams like the Giants have proven that baseball can work financially in a private park, and baseball thrived for years with private parks.  But would baseball be in the same cities?  Well, without subsidies, baseball would likely be in the largest cities, like New York and LA and Chicago, which is exactly where they are now.  The odd city here or there might be different, e.g. Tampa Bay might never have gotten a team, but that might in retrospect have been a good thing.

The net effect in baseball is the same as it is in every other industry:  Relocation subsidies, when everyone is playing the game, do nothing to substantially affect the location of jobs and businesses, but rather just transfer taxpayer money to business owners and workers.

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Category: Economics, Government
  • Michael Stack

    True, but keep in mind that's not the game being played. Like voting, the question isn't, "IF everyone didn't play the game", the question is, "given that everyone else is playing the game of giving subsidies to baseball teams, is it in a city's best interest to subsidize the team?"

    I think the answer is still "no", but in a world where subsidies are given, teams will relocate for their turn at the trough, and a city could be made worse off.

  • DrTorch

    It's very interesting to see what would have happened if this were the case.

    I daresay the games wouldn't look much different, except fans would probably be more loyal b/c they'd have money to spend on attendance, not taxes.

    Too bad people don't have more faith in doing the right thing.

  • IgotBupkis, President, United Anarchist Society

    > The odd city here or there might be different, e.g. Tampa Bay might never have gotten a team, but that might in retrospect have been a good thing.

    Tampa Bay doesn't have a team. St. Pete has a team. Some geographically challenged idiot put them in Tampa.

    This is kind of like adding a football franchise called the "Hartford Wailers" and putting them in New Haven.

  • http://www.horton-brasses.com Orion

    Or, you know, like the New York Jets and Giants. Who, umm, play in New Jersey.

  • Henry Bowman

    I suspect one result of having the owners actually pay for their stadiums might be a reduction in the stratospheric salaries of some of the players.