I can't help but link to this post and expand on my famous-osity. And, it is relevent for environmental economics. Bruce Johnson, a real sports economist at my alma mater, had the idea to investigate the role of existence value for sports teams. The problem is, when professional sports teams want subsidies they threaten to move. Economic impact studies show that pro sports teams have no impact but they then argue that the teams generate significant non-market benefits such as providing water cooler fodder, improving racial relations, and giving a city "major league status."
The question is, are these non-market benefits enough to justify the subsidies?
The answer is no. Here is an excerpt from a 02/04/07 Pittsburgh Post-Gazette article (A heaping helping of handouts):
Of course, there is the hard-to-measure notion that being a "big league" city has some implicit value to the economy.
In a 2000 study, a team of economics professors -- Peter Groothuis of Westminster College, Bruce Johnson of Danville, Ky.'s Centre College, and John Whitehead of East Carolina University -- attempted to do just that by setting out to measure the value of the Penguins franchise to the city.
The trio concluded that the Penguins "do not generate enough public goods to justify complete public financing of a new arena." They said Pittsburgh's population is too small for its residents to make up, via restaurant spending and parking taxes and amusement receipts, the money spent on the arena. And the people who live here don't receive enough "intangible" value from the team, either, to justify a new public arena.
They attempted to place their dollar value on the Penguins' presence in the city by randomly polling area residents and Penguins fans, using a controversial survey-based calculation known as the "contingent valuation method." It's a way of giving value to resources that exist outside the marketplace and aren't directly sold to the taxpayer or consumer (think of the benefit a homebuyer might receive from a Mount Washington view of the city).
The upshot is that the region's "willingness to pay" for the Pens is about $5.3 million a year on the high end, $1.9 million a year on the low end. Over 30 years, the most value we'd derive from the team is $66 million, says the study.
We've done three studies that come to the same conclusion. The weakness of these studies is that we may not aggregate across the entire market area -- but a recent CVM study of the Vikings does just that and comes to the same conclusion (sorry, nothing online).
So, how is this related to environmental economics? Compare existence values for sports teams to existence values for environmental amenities. The former don't justify public provision while the latter often do. Here we have some evidence of the divergent validity of the CVM -- its ability to attach different values to different things. Divergent validity makes me think that existence values for environmental amenities really do exist (here is a contrary view).
