Monday, June 1, 2009

Econ 101: Opportunity Cost and MLS

John Canzano finally makes the point that journalists at his paper have not seen fit to discuss when reporting the 'economics' of the MLS in Portland deal - that the Beavers are not a viable tenant in PGE park:
Ignored in the great soccer-baseball debate is the possibility that the current Lents ballpark proposal blows up and Portland loses minor league baseball, too. The Beavers' lease at PGE Park runs through 2010, and the franchise pays the highest rent in the league.

So here is a little lesson in economics, reporters: the economic 'cost' of an activity includes opportunity cost. So if you are looking at the cost to the city of doing the deal versus the cost to the city of not doing the deal, you have to consider what the alternative is. In this case it is pretty likely that it would be an empty PGE Park with a sizable debt load and no revenue stream to service it. In fact the 'cost' of not doing anything hasn't be reported on at all.

Baseball at PGE Park has been tried by a number of entities in the last 20 years, none with any real success. MLS is quite possibly the best option for keeping the stadium viable.

Of course, following my same argument, you would have to ask what the opportunity cost of keeping the stadium as a stadium and not selling off the property to developers. This is a serious question. But at least for the next few years, it is hard to imagine that there is any private capital for a new development project there and you would need some measure of the social benefit of the stadium and the events it hosts.

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