IF THREE PEOPLE say you're drunk, advises an old Hungarian proverb, go lie down. That bit of wisdom came to mind the other day at a forum hosted by the Pioneer Institute, when three notably sober experts planted themselves athwart the rush to build a convention center-stadium "megaplex" in Boston, and said: This makes no sense.
The three cold-water-throwers -- Edwin Mills, director of real estate research at Northwestern University's renowned Kellogg School of Management; Robert Tannenwald, senior economist at the Boston Fed and a noted scholar of public finance; and William Stern, former chairman of the New York Urban Development Corporation, which built the Jacob Javits Convention Center in Manhattan -- warned that government-financed facilities like a megaplex rarely live up to the intoxicating promises of their boosters and usually leave taxpayers nursing a hangover.
Heaven knows, it's easy to get high from all the grandiose predictions about what a megaplex would mean for this town. Vast throngs of tourists! World-class conventions! Zillions of dollars pumped into the economy! A surge of business for hotels, restaurants, shops! Thousands of new jobs! Prosperity! And, best of all, such a jump in tax revenues that the megaplex will pay for itself!
If only real life worked that way.
The sorry truth is that government-run convention centers nearly always lose money. They "almost never generate enough revenue on their own to be able to repay the capital costs of building them," said Mills, who has studied convention center finances nationwide. "Most of these facilities don't even cover their operating costs," a small fraction of the total. Boston's existing convention center, the state-owned, -operated, and -bungled Hynes, is a case in point, losing millions of dollars annually, with no hope of ever breaking even.
Convention halls (and stadiums) can be run at a profit -- when they are privately owned, as dozens of such facilities around the country are. But government control, as Stern discovered with the Javits Center in New York, which is now mired in scandal and crime, "creates an environment that encourages political influence-peddling, sleaze, and even corruption. At the end of the day, it produces results . . . that are not anywhere near as effective as if the same amount of effort and resources went into allowing market systems to work effectively."
Government has no more business running a convention center than it does a chewing-gum factory. Private enterprises are disciplined and self-corrected at every turn: by the bottom line, by competition, by the demands of customers, by the high price of failure. But government enterprises face no discipline. They are neither rewarded for success nor punished for failure, so success is rare and failure common.
Conceived in politics, they are intensely political, more sensitive to the demands of officeholders than to the signals of the marketplace. (The Massachusetts Convention Center Authority, which runs the Hynes, would never dare offend Senate President William Bulger, its godfather; but stories abound of exhibitors and convention planners it has treated badly.) In the private sector, sustained losses lead to bankruptcy; in the public sector, they become a justification for increased taxes or public bailouts.
And yet, despite all the evidence that convention centers (and stadiums) are a poor investment of tax dollars, the megaplex cheering squad clamors for a new one anyway. And why not? Most of the cheerleaders will benefit personally if a megaplex is built. Hoteliers and restaurateurs who cater to out-of-town visitors, politically wired lawyers and lobbyists eager to take a piece of the project, legislators with a yen for empire-building, a mayor and governor with edifice complexes -- if the megaplex goes forward, they'll make out quite nicely, thank you.
We won't. The $1 billion it will cost to erect a megaplex will be vacuumed from our pockets in taxes and fees. That enormous transfer of wealth from taxpayers to the government will represent an equally enormous diminution in our liberty and choices. We'll lose the freedom to spend those dollars on our priorities, to channel them where we think best, to invest them in what's important to us. By forcing that billion dollars to be sunk into a megaplex, the government will shut off every other option for using that money.
Societies are far likelier to prosper when individuals and businesses decide how to spend their own money than when the government decides how to spend it for them. Bureaucrats and special commissions, however well-intentioned, cannot pick market winners better than the private sector can. If spending a billion bucks on a new convention hall made good business sense, a consortium of private investors would be raising the money to do it. The fact that no such consortium is doing any such thing is all the evidence Beacon Hill and City Hall should need that they are doing the wrong thing.
"Massachusetts has been the source of many ideas that led the country," William Stern told the Pioneer audience. "But when I hear about projects like the megaplex, I say: You are not leading the country. You are making a mistake many of us already made."
(Jeff Jacoby is a columnist for The Boston Globe.)