What Taylor Swift Explains About Corporate Subsidies

Time for some Eras Tour economics.

Photo credit: Ronald Woan

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“Federal Reserve credits Taylor Swift with boosting hotel revenues through her blockbuster Eras Tour.”

That’s an NBC News headline published last week, one installment from a burgeoning cottage industry in analyses and news pieces hyping the supposed economic impact of Taylor Swift’s ongoing “Eras Tour.” Here’s another entry in the genre, and another, and some social media action as well. This is the same sort of coverage that gets produced in every city hosting a Super Bowl or World Cup game, but it’s currently occurring all across the country — and soon internationally — at the same time.

Well, I’m here to throw cold water on everything: Not only is the economic effect of Swift’s shows being exaggerated and overblown, but news coverage of this kind is detrimental to good public policy, because if local residents, and more importantly local politicians, believe that a couple of days of concerts has some massive economic impact, they’re more likely to OK corporate subsidies for the sports and entertainment industries that ultimately harm communities.

There are a few issues colliding here that I’ll attempt to untangle, before explaining why you should be skeptical of the headline numbers appearing in the press, and what all of this ultimately means for how corporate subsidy disasters happen.

First, much of the hype coverage is clearly being driven by local tourism officials and industry leaders. They’re the ones sending out glowing press releases based on half-baked economic studies and being quoted in story after story. But, of course, those folks have a vested interest in making it seem like individual events have a massive economic impact: It justifies their jobs, the budgets their offices receive, as well as the the fees they collect from industry players and visitors. They’re talking their book, as they say, with some pretty thin evidence backing it all up, so everything they’re saying should be taken with massive heaps of salt.

Tourism office hype, though, meets a willing co-conspirator in news outlets, particularly local ones run by dodgy owners or national ones that are glued to big media conglomerates, that need to generate clicks, and are thus willing to engage in fantastical economic thinking so long as “Taylor Swift” and “Eras” gets in the headline.

For example, that NBC News piece I referenced at the start of this piece has much less to it than meets the headline. (For the record, the writer of the story almost certainly did not write their own headline, so don’t blame them.) In fact, the “Federal Reserve” did not credit Swift with anything. One of the 12 regional Federal Reserve branches, the Philadelphia Federal Reserve, reported that one, just one, of its contacts in a survey noted that May was a strong month for Philly’s hotel industry, in part because of some Swift concerts.

Here’s the full reference, which is part of the Fed’s “Beige Book,” a regular release of data and anecdotes about economic conditions: “Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.”

That’s it! That’s all! It is decidedly not the entire Federal Reserve system saying Swift is singlehandedly boosting the hotel industry writ large. But I clicked on the story, and probably loads of other folks did too.

A similar dynamic is at play in this piece, which claims “Taylor Swift’s two Denver concerts could give Colorado economy a $140 million boost.” Leaving aside why that number is bogus, which I will get to in a moment, even if it were true, it would represent 0.03 percent of Colorado’s GDP for the year. Calling that a rounding error would be generous. But it gets its own headline because that’s what folks will click on, which serves the interests of both the news outlet and the tourism and events industry that wants everything to sound like an Earth-shattering big deal.

Now, why is that $140 million number, as well as the other measures of Swift’s economic impact, as actually insignificant as they are, still way too big. Because much of the spending attributed to her shows is actually not new to the economy, but simply shifted around within it: People who attended a Taylor Swift concert did so instead of spending at least some portion of those same entertainment dollars on a different show, a sporting event, a night at a restaurant, some new clothes, etc. etc. So Taylor Swift, Ticketmaster, and the owners of the stadium she performed in benefitted, at the expense of a restaurant owner, clothing brand, different music venue, and on and on.

This is what economists call the “substitution effect,” and failing to account for it — out of intent or ignorance — plagues discussions of the economic impact of large events. Remember, it’s not like people sit around doing nothing waiting for a particular concert or sports match to come to their city; they spend their money in other ways. Choosing at one moment to spend it a particular way doesn’t alter the overall trajectory of an entire metropolitan area economy.

And yes, before you yell at me: I know some people did travel from out of town, some of them very long distances, to take in a Taylor Swift concert, adding new money to the economy that wouldn’t have been there before. I’m not saying her economic impact on a city in which she performs is zero.

But even if that traveling cohort is pretty large, it’s nowhere near large enough to make a meaningful impact in the vastness that is a metro area economy during the height of summer, when many people would be traveling to these locations anyway because they are normal tourism destinations. If Swift hadn’t performed in Philadelphia this summer, a significant number of people would still be heading there to do normal Philadelphia tourism things.

The “study” that produced the $140 million number for Swift’s impact on Colorado even acknowledges this fact. You have to read all the way to the end to find, tucked below a bunch of charts, tables, and a hyperbolic headline, the following grammatically questionable admission: “Some of this will be in the form of displaced spending, essentially, if it had not been spent at the Eras concerts, it would’ve been spent elsewhere in Denver.”

That throwaway line about the percentage of the spending that would have occurred anyway, in the absence of Taylor Swift’s presence, is actually the pivotal question that can explain whether the event adds to the economy or not. There are costs associated with security, traffic, and the like that go along with major events, too, but that are never acknowledged amidst the hype.

So why does this debate matter? Because perpetuating the myth that large concerts, major sporting matches, and other events, such as the NFL Draft or the Grammys, have a serious economic impact leads policymakers to make bad decisions, and leads to voters rewarding them for those bad decisions.

Being able to woo major events such as large concerts or a Super Bowl is, for instance, one of the prime justifications boosters use to win new tax subsidies for sports stadiums, despite the ample evidence that those subsidies do next to nothing beneficial for the local community.

Believing that major concerts have some outsized economic impact may also make politicians more likely to approve subsidies for concert tours, like those that recently became law in Missouri and that exist in Georgia but are scheduled to expire at the end of the year.

Politicians already need very little encouragement to hand out subsidies to major entertainment corporations or the billionaire owners of stadiums, so having a fig leaf with which to cover those actions makes everything worse. And that same misleading information makes voters more likely to support those policy choices, when they should really be outraged at the waste of public resources, resources that could be better spent on almost literally anything else and have a more meaningful economic impact.

This feedback loop between the press, local officials, and the economic development complex happens with corporate handouts, writ large, of course. A pliant press, determined PR people, and easily impressionable or corrupt political actors create a situation in which obvious boondoggles are foisted upon communities, even when its clear from the start that they won’t provide economic benefits to anyone but the already rich and powerful.

The problem is everywhere, once you know to look for it. But it’s particularly acute around something like the Eras Tour which, while it is assuredly an awesome spectacle, can’t actually make your city rich.

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— Pat Garofalo