INTRODUCTION

On balance, academic economists agree that there is little justification for public funding of profitable businesses. This idea is also reflected in EU law, whereby competition law is deemed to apply to any entity (including public bodies) that is engaged in economic activity on the market for a profit, and where the public funding of entities is subject to state aid rules. In these circumstances, sport should replenish rather than deplete the public purse. Sports economists are likely to view alternative arguments as ignorant of the sports economics literature or to be supported by non-peer-reviewed economic evaluation studies commissioned by vested interests.

Is there a role for the public funding of sport outside the market setting? Virtually all economists would agree that there is, potentially, a role for the public funding of sport. There is a theoretical literature that supports such a role. Some sport could be viewed as having the characteristics of a public good, a merit good or a good with positive externalities. Differences between economists are likely to emerge when it comes to the specific empirical cases for the public funding of sport. Economic evaluation studies are a fertile breeding ground for disagreement between economists, with claims about the overestimation of benefits and the underestimation of cost abounding. Two features of this disagreement are worth noting for the purposes of this chapter. First, economists who make their living by publishing in the academic journals are likely to disagree with economists who make their living by producing commissioned reports for public policy purposes. Second, among the academic economists, sports economists are more likely to question the case for public funding than some other economists, such as health economists or regional development economists. Explaining these two features is an important element of this chapter.

As might be expected from a chapter within a book on sports economics, the next section outlines the conventional wisdom on the public funding of sport as presented in the sports economics literature. It explains how the literature is likely to leave the reader with the impression that there is too much public funding of sport. It is a product of the context in which sports economics developed and how the focus of the analysis is on the sports market.