Anyone who cares about basketball – and many who don’t – has by now heard of Lebron James’ letter released on Sports Illustrated, which announced his intentions to end his free agency and return to his hometown(ish) team. This has all kinds of wacky basketball implications (Andrew Wiggins?! Kevin Love!? OMG!), but I’m also curious about what economic impact this will have.

Notable economist Jalen Rose recently predicted on Grantland that Lebron’s move back to Cleveland would bring roughly $500 million into the Ohio economy (around minute 18). Jalen didn’t cite any sources, but the specifics aren’t too relevant as long as he’s roughly correct in asserting that the impact will be huge, an assumption I’m willing to work with. Whether it’s $500 million, or $350 million, or $200 million, it’s a hefty figure for one person to shift around on their own.

Due to Ohio’s physical proximity to Michigan and its inclusion as one of the “Rust Belt” states, I had been under the impression that its economy was in similarly dire straits. I thought that there was the possibility of a sports-related economic surge having a significant impact on raising quality of life for Ohioans. A cursory Wiki-glance tells me that Ohio is doing pretty okay anyways. So it’s not like James will add the layer of “economic savior” to his mythology. But still: BUT WHERE DOES ALL THIS MONEY COME FROM?!

I imagine the money coming in through two forms: “transferred capital” and “released capital.” “Transferred capital” I see as money coming in from other states. Seeing James play basketball is a pretty big draw – people are going to make the trip to Cleveland to go see him, and they’ll bring their money with them. Cash spent on food, drinks, accommodation, and clothes would go back to the businesses in Cleveland. When calculating the GDP of a state economy, I’m not sure if this would fall under “exports” or “consumer spending,” but it should be a positive contribution either way. I think.

The second aspect, “released capital,” would be Ohioans increasing their own spending. For example, if wealthy individuals with accrued capital begin to spend it more freely on Lebron-related activities, their capital would begin circulating. On the other hand, if they already had this capital stashed away in various forms of financial investment, wouldn’t this money be already counted as part of GDP in “savings,” as a component of “investment?” That’s not to say that more liquid capital spent more freely might benefit a broader cross-section of Cleveland people than exclusively those who were looking to secure business loans – but I don’t quite understand how the money is being counted in a way that will tangibly boost or increase Ohio’s economy.

I guess what I’m asking are two questions: how are these improvements calculated?

Secondly: in this instance, when there are no innovation or efficiency gains, is improving Ohio’s economy by X amount of dollars essentially just moving X amount of dollars from other places?

If this is analogous to Lebron taking a giant shovel and moving a pile of 500 million dollar bills from downtown Miami to Cleveland, I can deal with that.


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