The Public Goods Parade

 As covid looms over us, my friends and I have decided that a trip to Disney is exactly what we need when the country starts to come out of this pandemic (fingers crossed). As I look into all the festivities that Walt Disney World has to offer there was one in particular that stuck out to me- the parades. Now personally, I am not one that jumps for joy at the thought of a Disney parade, but regardless, I pay to put them on- indirectly that is. Parades can be considered a public good provided by the private market. Everyone who buys a ticket for the parks pays some amount of money towards the parades even if they don’t attend them. 

An individuals utility of seeing a parade is relatively low- I.e. most people would not pay much to watch one. There are even people that don't watch them at all. However there obviously is a demand as evident by the large number of spectators at Disney parades. Disney takes advantage of the cumulative utility of all its guests to justify the expense of holding the parade. So, Disney has done an excellent job at extracting value from the cumulative marginal utility of the parades. When there are tens of thousands of people buying park tickets it only takes a very small amount per ticket to pay for the parade. (Same logic for fireworks, character meets, concerts, etc.) In this case the parades add to the overall experience and the package adds value in the guest’s mind- even if the guest doesn’t attend any of them. These extra festivities enhances the “magical” experience which is what has made Disney such a successful organization.

The Real Cost of Moving to Penn's Landing

 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.