http://www.nytimes.com/2014/11/09/magazine/will-the-lebron-james-stimulus-be-good-for-cleveland.html?ref=business&_r=0
After Lebron James announced his return to the Cleveland Cavaliers, people mostly in the Cleveland area were thrilled and celebrated in the streets. Old jerseys broke out and hope was suddenly restored for the Cavs. This year season tickets sold out after Lebron announced his returned and jersey sales rocketed. Fitzgerald one of Cleveland's boosters "envisioned" that the city will be enriched by this excitement. Restaurants located near the arena who lost a lot of business after Lebron left to Miami are now very hopeful that business will pick up. Also many stores that sell T-shirts and jewelry are also optimistic. LeRoy Brooks, a professor of finance at John Caroll University mentioned that the same people making more money will spend it in Cleveland, therefore multiplying the "James Effect". Brooks also added that James will bring between $163 million and $426 million to the regional economy. Apparently, the Lebron stimulus could reach $285 million and could create about 550 new jobs.
Last year, the Cleveland area's economic output was about $123 billion. By estimates, the return of James wold expand output by less than one half of 1%. On the other hand, other experts believe these estimates are inflated. Cleveland us paying for the right to host James, and the most projected spending is merely dollars circulating around northeast Ohio. In other words what's good for downtown Cleveland is bad for the suburbs. They believe the return of James in effect is a return in that investment. Regardless, some people still see hope. Nike paid James roughly $13 million year to endorse its products. Now James is endorsing Cleveland. The return of Lebron which was announced just a week after the news that the 2016 Republican National Convention will take palce in Cleveland, could also change the way residents think about their city. Mood matters in this case.John Maynard Keynes regarded "animal spirits" as a primary motor of growth. When people are happy or feeling good, they are more likely to take risks and make investments.
In my opinion, people might have good reason for expecting economic growth of that magnitude but i'd be more conservative about estimates than Fitzgerald and co are. what are your thoughts?
I don't know how accurate the numbers are but the return of Lebron is certainly a good thing for Northeast Ohio. I remember when James left for Miami in 2010, many restaurant owners and other small businesses were worried about their futures because of the business Lebron James brought in. Ticket sales were stagnating since his departure and now, as mentioned in the article, season tickets are sold out and other games are very expensive and hard to come by. By bringing more people into the city to watch them play, Lebron James and the Cavaliers have jump started the economy and helped money begin to flow around. I'm fond of the analogy to Nike's Lebron endorsement in that Cleveland is certainly being endorsed by Lebron James and I think the city is getting its money's worth. Again, I cannot attest to the accuracy or magnitude of Fitzgerald's predictions but Lebron and the Cavs are definitely a good thing for the city.
ReplyDeleteLebron's return undoubtedly brought money into Cleveland which is a very good thing. The question is, how long will this last? The Cavs did fairly well last time Lebron was in Cleveland, but what if they don't do as well as Lebron claims they will now? Wouldn't this hurt the team's value and decrease the benefit to Cleveland?
ReplyDeleteIts examples like this that show how easily the economy can fluctuate. Just because a sports star changed teams doesn't mean the economy should start to boom again. But since consumers have more confidence since James is back the city will benefit. Cleveland desperately needed this because without the James effect they could have run into problems like Detroit.
ReplyDeleteI believe Lebron will bring short run growth because of excitement and animal spirits. People from around the country will bring business to Cleveland, but this amount of business will not last forever. I am eager to see how the economy will look in about 3 years, and see the growth rate now compared to then.
ReplyDeleteIt's amazing that one man can change so much in that regional economy. However, I agree with Aaron. The changes that Lebron make will only last in the short run. People are excited right now and will go out and spend more and show cleveland pride. But once the excitement ends, rather it's due to the Cavs losing or simply because people don't care that much anymore, businesses may go back to the way they were before lebron returned.
ReplyDeletedo you think that Lebrons quality of play also could have a major affect on the economy of Cleveland? also if they make playoffs how could impact the city?
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