Last week, the Philadelphia 76ers announced their preliminary plans of moving their stadium. Currently, the Sixers play in Wells Fargo Center, located in the South Philadelphia Sports Complex (where most of the Philadelphia sports teams play). The proposed move will be to Penn's Landing, one of Philadelphia's premium cultural sights. Situated right next to the Delaware river, this place is truly one of the city's true gems. Many joggers can be found on the pier, and the main space is used for many cultural and musical festivals throughout the summer.
This proposed move is estimated to cost $4 billion, and the Sixers' ownership has vowed to invest some of this money to as much as 35,000 jobs for Black and Brown people. However, this plan fails to address one important reality: the marginal social cost exceeds the marginal private cost. There are more costs to building this stadium than the construction and land costs. The construction of a brand new stadium right next to a river already suffering from pollution problems will only accelerate the issue. If the Sixers start playing in Penn's landing, the value of the surrounding land will likely go up, and many of the festivals that currently take place there will be affected. The costs of holding an event at Penn's Landing are already high; this may drive some festivals out of existence, which results in a loss of cultural enrichment. Moreover, a large stadium will ruin the pretty view of the Delaware River and Ben Franklin Bridge. Many people come to Penn's Landing especially for this view. The current costs don't account for the environmental impact, loss of cultural enrichment, and change of the scenery; these are all negative production externalities that increase the marginal social cost.
If the Sixers were accounting for these externalities, they might choose one of two options. If the allocatively efficient level of output is greater than 0, then they may elect to build a smaller stadium. However, if it is 0, then they may elect to not build a stadium at Penn's Landing and look into other options.
1 comment:
This proposed move reminds me of D.C.'s decision to fund a new stadium Anacostia, a lower-income area in Southeast D.C.. Anacostia was an even riskier undertaking than Penn's Landing because it was known for being crime-ridden and grimy. Despite having a prime location on the water, this area was not attractive to outsiders because of its reputation. Many argued that the money that D.C. was going to flood into this area could have been repurposed for projects assisting people of color and low-income communities, however, D.C. ultimately made the right decision, in my opinion. The success in moving the stadium to Anacostia allowed for this area, now called "The Yard" to boom. It is true that real estate costs went up, driving out many who could no longer afford the area, however, this is not necessarily a bad thing considering the cultural rebirth that was brought to this relatively dead area. The income tax increases from the increased real estate costs were astronomically higher than the local government ever expected, now increasing the ability to fund projects which target affordable housing, education reform, and job creation for people of color and low-income communities. Additionally, several once-declining businesses owned by people-of-color are now thriving because of the renewed energy brought to the area. Penn's Landing is already better off than D.C. was in helping people of color because because it is actually at the forefront of the developers' goals for this community. I would be cautious in your determination that the marginal social cost will outweigh the benefits of the move because I have personally experienced the growth and faith that people now have in D.C. simply because of the creation of a new stadium. Though these positive externalities are perceived as being rare among economists, it happened in an area that was far riskier than Penn's Landing, so I have hope in the 76ers' plan to move.
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