On the Other Hand, Maybe Sports Make Us Happy

Harry Truman once asked if he could have only "one-armed economists." This is because too often economists told President Truman, "on the other hand..."

Although I am sure some economists only have one-arm, I have been blessed with two. And consequently, today's column is going to somewhat contradict what I said last week.

Last week I noted that there was a problem with the decision in California to suspend environmental laws so that a new NFL stadium could be built in Los Angeles. More than two decades of research have indicated that stadiums don't create significant economic growth (i.e. income) or jobs. Given this research, it seems likely that California didn't have a very good reason to circumvent its environmental laws.

Of course, on the other hand... there's a different perspective on the value of sporting events. For this perspective we turn to Soccernomics: Why England Loses, Why Germany and Brazil Win, and Why the U.S., Japan, Australia, Turkey -- and Even Iraq -- Are Destined to Become the Kings of the World's Most Popular Sport (by Simon Kuper and Stefan Szymanski; Nation Books)

Yes, that's quite a title. And yes, it's quite a book.

Soccernomics explains how the lessons of Moneyball (sports teams are not completely rational) applies to the world's favorite sport. It explains how soccer can prevent suicides. And it argues that someday the United States might be good at this game.

Although these are all great stories, the discussion of the LA Stadium is related to the rather simple notion that sports can make us happy. When it comes to policy we often focus on income (i.e. economic growth). This is because income is something we have historically measured. But income is simply a means to an end. And the end is happiness. Recently, data on happiness has been studied by a variety of social scientists; and such studies have proven to be quite enlightening.

For example, although studies have shown that hosting the World Cup (or the European championships) -- like we see with respect to the hosting of other sporting events -- doesn't create economic growth or jobs; such events do appear to generate happiness.

Okay, sports make you happy. How is that an amazing insight? Well, what's interesting is how sports increase happiness in society. Soccernomics quotes a study by Georgios Kavetsos and Stefan Szymanski (with a lot of help from Robert McCulloch, guru of happiness research). This study -- looking at European data -- indicated that when a national team is successful in the World Cup (or the European championships) the nation's happiness doesn't increase. What does increase happiness, though, is hosting the tournament. And as Soccernomics argues, the leap in happiness from hosting a soccer or football tournament can be quite large.

Citizens of wealthy countries like the Netherlands or France would need to make hundreds of euros more a month to experience a similar leap. One way to express this is that the average person gains twice as much happiness from hosting a football tournament as from having higher education. The effect can also be likened to an unexpected increase in income that takes someone from the bottom half of the income distribution to the middle of the top half. It's not quite winning the lottery, but very satisfying nonetheless. If you calculate this for an entire nation, then the leap in happiness from hosting can easily be worth a few billion euros.

Wow, a few billion euros? That's quite an impact. Such a study suggests that the LA Stadium could be quite beneficial. Perhaps hosting the NFL could have a substantial impact on the happiness of Los Angeles. And maybe that would make suspending these environmental laws worthwhile.

Of course, on the other hand (had to see that coming), the study from Soccernomics focused on the impact of hosting a soccer tournament in Europe. Can we apply such a study to hosting an NFL team in Los Angeles? In addition, does the increase in happiness trump the benefits from the environmental laws that were suspended to make the stadium possible? After all, studies have shown that people do prefer a clean environment.

Yes, it's possible that building a stadium in LA could be beneficial. But on the other hand, we aren't really sure. What seems to be true is that it was incorrect for legislators in California to focus on income and jobs. What they should have focused on is the fact sports really do make us happy. And I bet -- looking at both hands -- you already knew that.