June 23, Robert Lawson, Jerome M. Fullinwider chair in Economic Freedom, SMU Cox School of Business, along with Scott Niederjohn (Concordia University) for a commentary lamenting that NASCAR may be dabbling in cronyism by collaborating with Chicago authorities on a street race in July. Published in the Chicago Tribune under the heading Don’t let the ‘C’ in NASCAR stand for cronyism in Chicago: https://tinyurl.com/ymn69me2
We are free market economists who share a passion for car racing. One of the things we like the most about racing is that it still embodies the spirit of free enterprise — unlike the other major sports.
Almost all racetracks are privately owned by entrepreneurs trying to make a buck. The race car teams are private firms. Sponsors may be wealthy individuals with a passion for racing like the comedian David Letterman or companies like Menard’s that see the marketing value in their association with the sport.
However, if the other major sports can slop up billions of dollars from the taxpayer trough through publicly financed stadium deals, for how long can the two premier racing series in North America — NASCAR and IndyCar — resist the urge to join in the feeding frenzy? The answer, sadly for NASCAR at least, is that they can’t.
By Robert Lawson and Scott Niederjohn
We are free market economists who share a passion for car racing. One of the things we like the most about racing is that it still embodies the spirit of free enterprise — unlike the other major sports.
Almost all racetracks are privately owned by entrepreneurs trying to make a buck. The race car teams are private firms. Sponsors may be wealthy individuals with a passion for racing like the comedian David Letterman or companies like Menard’s that see the marketing value in their association with the sport.
However, if the other major sports can slop up billions of dollars from the taxpayer trough through publicly financed stadium deals, for how long can the two premier racing series in North America — NASCAR and IndyCar — resist the urge to join in the feeding frenzy? The answer, sadly for NASCAR at least, is that they can’t.
In July, the inaugural Chicago NASCAR street races will take place. City leaders, who have inked a three-year deal with NASCAR, will no doubt enjoy a week of hobnobbing with drivers and celebrities and enjoying free tickets to the events.
The costs to the city have not been well publicized, which suggests a lack of government transparency. Still, news media reports suggest huge and ill-specified subsidies are involved.
Undoubtedly, city leaders will point to the intangible “benefits” to the city of having NASCAR in town. Though a NASCAR-commissioned report estimates an economic impact of $113 million, neutral analysts view such studies as unreliable. The problem, sports economists say, is that these impact studies vastly overcount benefits while obscuring the costs. The actual net impact, if any occurs at all, is likely to be a tenth of that amount.
And what about the local residents and racing fans? The street course is laid out in the midst of the city along DuSable Lake Shore Drive and Michigan Avenue, which will be closed for days. If you live in this area, well, that’s just tough for you.
With the sharply limited seating available on a street circuit compared with a fixed road course or oval track, prices are at least two to three times higher than for normal races. Ticket resale apps show prices for the June 25 NASCAR race at the Nashville speedway starting at $84. Meanwhile, the cheapest ticket we see right now for Chicago the following weekend is $269.
Unlike regular racing venues where you can bring in your own food and beer, outside food and drink are banned at the Chicago races. Fans can count on adding a couple of hundred extra bucks, given festival prices.
On the NASCAR Cup schedule, the Chicago street race venue replaces Road America in Elkhart Lake, Wisconsin. Did this legendary American racing venue lose out to Chicago in free and open market competition?
No, the privately owned Road America lost this event to a government-subsidized deal. After last year’s race on July 4 in Wisconsin, NASCAR’s senior vice president of racing development and strategy told reporters, “They’ve (Road America) been great partners. We’ve seen a great turnout from a fan perspective as well. We’ve seen some great racing there.”
So, no, Road America lost because Chicago politicians subsidized NASCAR with money that they took from Chicago residents.
The many severe problems facing Chicago are well documented, from drugs and unemployment to crime — itself illustrated by recent media reports on NASCAR equipment being stolen as the course is set up. But Chicagoans can rest happy knowing their leaders will enjoy the weekend party while pointing to imaginary benefits from a race that only a tiny fraction of Chicagoland’s nearly 10 million residents will see or even care about.
Robert Lawson is an economics professor and director of the Bridwell Institute for Economic Freedom at the SMU Cox School of Business. Scott Niederjohn is an economics professor and director of the Free Enterprise Center at Concordia University in Wisconsin.