Does March Madness really hurt the economy?

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Ryan Young
Fellow, Competitive Enterprise Institute
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      Ryan Young

      Ryan Young is the 2009-2010 Warren Brookes Journalism Fellow at the Competitive Enterprise Institute. His writings communicate ideas from economics and classical liberal political theory in layman’s terms. His articles apply the economic way of thinking to issues from airplane baggage restrictions to fiscal stimulus to salary caps in baseball. He has been published in Politico, Investor’s Business Daily, Real Clear Markets, and other outlets. He also writes the popular “Regulation of the Day” feature for Open Market, CEI’s staff blog.

      Ryan holds an M.A. in economics from George Mason University in Fairfax, Virginia, and a B.A. in history from Lawrence University in Appleton, Wisconsin. He was previously Fellow in Regulatory Studies at CEI, and worked in the Cato Institute’s government affairs department.

Every March, millions of workers slack on the job to follow college basketball’s championship tournament. Challenger, Gray & Christmas CEO John Challenger’s famous annual survey predicts this year’s March Madness will cost $1.8 billion in lost productivity from Selection Sunday to the end of the first round. Sounds pretty scary. Fortunately for the economy, he blows the story way out of proportion.

For now, let’s assume Mr. Challenger’s numbers are accurate. His $1.8 billion is based on 45 percent of non-farm workers wasting 20 minutes each day during the first week of the tournament. That represents about 2 percent of all workers’ total productivity during that week. That can hurt a bottom line.

But the entire tournament only lasts 11 working days, out of about 250 in a year. If March Madness costs the economy $1.8 billion, we’re only talking a little over one-hundredth of one percent of GDP—$1.8 billion out of $14.26 trillion.

Of course, a lot of workers don’t even follow the tournament, so Challenger’s estimate might be too high. Television ratings hit an all-time low in 2008, and recovered only slightly in 2009. Eight out of nine televisions in use during game time will be tuned elsewhere.

Of course, part of the reason tv ratings are down is that more people are watching games online. The NCAA streamed 8.6 million hours of video from last year’s tournament. That’s up 75 percent from 2008, and could grow even faster this year. But even assuming every single one of those hours was streamed to an office computer, it’s still not a big deal.

According to Microsoft, 58 million people filled out brackets last year. Let’s assume that jumps to 60 million this year. That’s about 14 minutes and 20 seconds of streaming video per bracket-filler. And that’s not per day—that’s over the entire tournament. Even with streaming video’s skyrocketing popularity, that’s still just one minute and six seconds of game-watching per working day. That could double this year, and still not matter.

If economic growth goes negative this quarter, it would be pretty hard to blame it on March Madness.

Mr. Challenger protests, “Those who insist there will be no impact are kidding themselves.” He’s right. But if he thinks the actual impact is anywhere near $1.8 billion, Mr. Challenger is also kidding himself.

That’s because he assumes that if people weren’t following the tournament, they would otherwise be working. Truth is, workers will waste some of their time whether it’s March Madness or not.

Employers know this. They are not stupid. Down time is already factored into wages. People are paid according to how much they are expected to produce. And it is expected that they will not spend their entire 40 hours on the job actually working.

Nobody knows whether filling out brackets or talking trash to coworkers is additional slacking, or a substitute for other forms of slackery. Workers regularly waste time forwarding bad Internet humor to friends and family. They make personal calls on office time. They gossip with coworkers, and take long lunches.

Even if Challenger is right about the $1.8 billion lost to March Madness, we don’t know if it’s a net productivity loss or not.