    
Frank Mazur
Hsympothai Member
Post Number:
306
Registered: 02-2005
Rating: N/A
Votes: 0 (Vote!) | | Posted on Friday, April 11, 2008 - 08:40 am: |   |
Bill gave us "Barstool Economics" with its statistical legerdemain that is most impressive to those who had severe difficulty with math—persons who are mystified that if they received a 10 percent discount on 100 dollars, it would take a greater increase to get back to that same amount.
Anyway, here's a different economics that's been playing in many regions of the country. Call it "Ballpark Economics."
Ballpark Economics
A professional sports team has been doing poorly, and a man learns the franchise is for sale. Although the man himself does not have the required funds, he is a man of privilege, meaning he comes from wealth that was first acquired several generations ago. He’s attended one of the best and most expensive universities. His family has financial connections that most people do not, and so a few phone calls are made by his father and himself, and in short time he has a number of well-off people agreeing to invest in the ball club. As a partner himself, he will need to acquire about three quarters of a million dollars. He has no record of business success that would support him as a good risk for this money, but this is again where being a man of privilege enters into play. While most people would be denied such a large sum of money, he is not.
Now that they are the new owners of the sports team, the investors wish to see their investment grow. For most businesses, this means that you improve product and find ways to attract greater numbers of people to it, resulting in more profit at the same time you are increasing the overall value of the business. It also requires that you reinvest those early profits in order to achieve such results. So these investors, spurred by Partner One, the man of privilege and arranger of the deal, decide a new multimillion dollar stadium is needed. However, they are not going to invest more of their own money, but instead will work to get the money from the taxpayers. The push on the city by the investors is that the team will pull up stakes if the city will not agree to build a new stadium, and how much respect can any major city expect if it cannot hold onto its professional sports teams.
The city agrees, but it has to find new funds to underwite the project. An increase in the sales tax is proposed. This increase will be dedicated to the construction of the new stadium. Since this is not the same as a proposal to build a public road or sewage facility, the citizens will need to vote on it, and so a referendum is held. Prior to the vote, most arguments in letters to editors and on radio talk shows are against the special increase. When the referendum is finally held, less that twenty percent of the registered populace have cast their vote. Not surprisingly, the project is a go, as those who vote are mostly fans. Soon, everyone begins to pay more sales tax on virtually every product they purchase. This applies to all those inside the metro area. It also applies to millions who live outside the city. It forces people who have no interest in the sport or ball club to pay. It also forces the poorest of the area’s citizens to pay, fathers and mothers who can barely afford the cost of a few hot dogs and soft drinks at the ballpark, let alone the price of admission and parking ticket.
Once the new stadium is completed, the investors and the city contract a deal that says the franchise will rent the stadium with the option to buy. The stated purchase price is much less than half of what it took to construct. The rent is more like a mortgage payment, except there is no interest attached. As hoped for by Partner One and his investors, the value of the franchise increases. The sports team does not leave the city. Yet the investors do. They sell. They sell for millions more than they invested. The other millions that were invested—that extra sales tax— will give no return to the million of residents who paid it. Part of what little wealth they hold has been redistributed to the already rich.
3-dollar gas. Writers' strike. Read a great book by F. E. Mazur.
SPINE
THE BUCKSELLER
"A BIGGER CASE" |
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