[Original post 20 August 2012]
As noted in the previous post Sam Richardson has been continuing his thinking on the feasibility of a new covered rugby stadium for Christchurch over at his Fairplay and Forward Passes blog. He writes,
If tangible benefits and costs exist for these projects, then it is worth considering whether intangible benefits (and costs) do too. There is a small but not insignificant area of research that have examined the nature of intangible benefits and quantified them, using techniques such as demand analysis, travel cost methods and contingent valuation (all of which have been borrowed from recreational demand and natural resource economics). What is needed in the stadium context is some measure of net intangible benefits – that is, the ‘warm fuzzies’ from the stadium itself (which includes the retention of the franchise(s) it plays host to) less ‘warm fuzzies’ from the next best alternative, say repairing the east side of Christchurch. If the net warm fuzzies are positive, this suggests the project might well have some justification. What is the likelihood of this happening? A $500 million facility would be twice as expensive as the Forsyth Barr Stadium, and they’ve found the going tough. It would also be the largest amount ever spent on the construction of a sports facility in this country. Is the argument going to be that $500 million is going to pump some badly needed capital into the city and has to translate into some tangible benefits? Or will we see those behind the stadium blame the state of the local economy if the expected benefits don’t materialise?
I agree that if we are to include “intangibles” in our calculus then it is the “net intangibles” that should be included. I guess my problem is whether or not we should include such things in the first place. First there is the question as to what gets measured, and how well it’s measured, by the types of methods Sam mentions, but I will leave that aside. I want to make two other quick points. One, if we are to include intangibles for deciding on the subsidies for rugby stadiums, why not for all goods? Don’t all goods have intangibles attached to them? I’m sure there are many, and large, intangibles that go along with Microsoft Windows so why don’t we include these to justify a subsidy to be paid to Microsoft? Second, if there are intangibles with a rugby stadium what can’t these benefits be turned into tangibles? For example, if there is a large amount of consumer surplus generated by a rugby stadium why can we turn that surplus into revenue for the stadium via, say, some form of nonlinear pricing? If this is done then the stadium should be able to be justified on a straight forward cost-benefit analysis.