After another fruitless round of talks between the players and owners, it looks like the start of the NBA season—if not the whole thing—will soon be wiped out. It's not only hoops fans who are anxious at the prospect of a lost season. By all accounts, cities with NBA franchises have also been cringing in terror. With the start of the season a month away, we've already seen predictions of a "devastating" impact on Charlotte, N.C., businesses, a $55 million loss to the city of Indianapolis, and certain disaster for sports bars in Portland, Ore.
This kind of reporting is a staple of sports work stoppages, and it's easy to see why. Idle turnstiles and shuttered souvenir stands are obvious indicators of lost economic activity, and an easy visual symbol of the impact of the sports world’s regular strikes and lockouts. The problem with these stories is that there’s no evidence to support any of their claims. The lost city revenues, the devastation for local businesses—none of it ever happens.
"There is no way the NBA lockout will have any significant economic consequences," says the University of Alberta’s Brad Humphreys, an economist who has studied the effects of sports work stoppages. Humphreys' most in-depth investigation came in 2001, when he and Dennis Coates of the University of Maryland-Baltimore County set out to determine the effects of the lockout that wiped out the first half of the 1998-99 NBA season. Since economic data weren't yet available for those years, Humphreys and Coates instead focused on five previous MLB and NFL work stoppages, starting with the mass holdout over baseball's pension plan that briefly disrupted spring training in 1969 and running through the strike that wiped out the last two months of the 1994 MLB season and that year's World Series.
The economists looked at per-capita income data from metropolitan areas that were home to striking (or locked out) sports teams. They found that even when ticket sales stopped, average income in a city didn't change. At all. "Work stoppages in baseball and football have never had significant impacts on local economies," they wrote. As icing on the cake, they looked at NBA cities that had lost their teams and found the same thing: bupkis. "The departure of a franchise in any sport, particularly in basketball, has never significantly lowered real per capita personal income in a metropolitan area,” Humphreys and Coates wrote.
Still, some critics objected. Humphreys and Coates, they noted, had looked for changes in year-long income data as a result of strikes that in some cases lasted only a couple of weeks—the equivalent of trying to hear a whisper at a My Bloody Valentine show.
So, five years later, Robert Baade, Robert Baumann, and Victor Matheson tried a different tack. That trio of economists zeroed in on the state of Florida, looking at how sales tax receipts changed during every MLB, NFL, NBA, and NHL labor stoppage since 1982. Baade, a Lake Forest College professor who's spent the better part of three decades studying the impact of pro sports teams, explains that they picked Florida because it reports sales tax data on a monthly basis. "You're really looking for a needle in a haystack," he says of trying to divine economic effects on a whole city from a single sports team's absence. "But if you're looking at something like tax revenues, you're reducing the size of the haystack."
The new study delivered the same results as the earlier one: When leagues shut down, sales tax receipts keep chugging along. In Miami, the disappearance of the Heat during the 1998-99 NBA lockout showed an extremely weak 0.00987 correlation with sales tax figures; the 2004-05 lockout of the Florida Panthers has an even slighter effect, at 0.00739. And almost as often, the direction of the signs ran the opposite way: The 1994-95 NHL lockout had a negative correlation of 0.00353 with sales taxes—if anything, people in Miami appeared to be spending more as a result of the Panthers being on the shelf.
"If professional sports have a positive impact on a region’s economy, then one should expect a consistent pattern of increasing taxable sales following franchise expansions and the construction of new stadiums and a pattern of decreasing taxable sales ratios during periods of labor disruptions," the three economists reasoned. Instead, "no statistically significant effect on taxable sales is found from the sudden absence of professional sports due to strikes and lockouts."
It may seem counterintuitive—how can the shuttering of a major business not affect the local economy? But economists have an explanation, or rather two.
The first is a well-established phenomenon called the substitution effect. When people choose to spend money on one entertainment activity, that's also a decision not to spend that money elsewhere. Every basketball ticket you buy is a movie ticket not purchased, or a fancy dinner not eaten. If the NBA season doesn't start on time, Charlotte and Indianapolis and Portland will find something else to spend money on: college basketball, movies, restaurants.