State policy intervention on sports economy - Term Paper Example

policy intervention on sports economy Executive summary The essence of the study is to justify that whether the state policy intervention is favorable or unfavorable for the economy. The role and the importance of the government in developing the sports have been discussed in this paper. The market failure and the other constraints have been identified, which has lead to the emergence of the state policy intervention in the sports economy. The importance of sports and its contribution towards the growth and development of the economy has been emphasized in this paper. The limitations of the state policy intervention and how it can be dealt with has also been explained. 1. Introduction The study is inclined towards analyzing the concept of state policy intervention in the sports economy. This topic can be explained with justification whether the state government should or should not intervene in the sports economy. The positive and the negative impact of the state policy intervention have been discussed in this paper. The government provides fund to the sports sector of the economy. For example in England, the government is engaged in offering facilities and training program to the people which will assist them in developing their talent. The sporting events can be organized without much intervention of the government. But in order to organize mega events such as Olympics or World Athletics Championships can succeed only with the involvement of the government from the early stage. 1.1 Background The growth and popularity of sports has influenced the changes in consumption and production of sports. The management of the sports events has started on the twentieth century which involves implementing the strategies and techniques that are mostly adopted by the nonprofit organizations. It has been observed that the European Union supports the intervention of the state policy in the sports economy. The market fails to consider the externalities; therefore the state policy will assist in providing subsidies with positive externalities. 1.2 Purpose of paper The purpose of this paper is to justify whether the state policy should intervene in the sports economy or not. 1.3 Objectives of paper The main objective or aim of the study is to focus on the pros and cons of the state policy intervention in the sports sector of the nation. 1.4 keywords The main key words of this paper are the externalities, market failure, intervention, perfect competition in the economy. 2. Literature Review Literature review is considered as a vital part of the study which clearly explains the essence of the topic with reference to the different views of the authors. 2.1 Definition of sport The author Abeysinghe, in his paper has explained the concept of sports which can be defined as all forms of physical activity through the organized or casual participation which aims at improving the mental and physical fitness required for developing the social relationships and achieving competition at all levels. The author has also emphasized on the definition of sports with examples that sports can be classified as the activity such as the individual sports, professional team sports where the individuals decide to participate in this activities. The development of the sports program depends mainly on the commitment and involvement of the volunteers of sports and the initiatives taken by the government to improve the training program that is imparted to the team. Sports organized at the international level cannot succeed without the involvement of the state policy since the government is required to provide adequate subsidies for organizing the event. Sports is perceived differently by different people, some people perceive it as a source of fun, whereas some people consider the sports as the physical activity (Abeysinghe, 2001). The researcher Arnold, in his paper has focused on the role of the state policy in explaining the concept of sports. The state policy is required to be designed effectively by the government through which it can identify the needs and requirements and identify the skills and expertise of the member’s .It also determines the benefit, risk and cost associated with it. The importance of the state policy intervention in the sports can be analyzed with the example of the games that is organized in UK. The common wealth games, Winter Olympic Games and the world cup explain the strong engagement of the nation or government in organizing the event. The main role or the function of the state policy is to broaden the opportunities for participating in the events and developing the skills and talents of the members (Arnold, 2008). 2.2 Sport economy main components The researcher Collins, in his paper has focused on the components of the sports economy. The researcher has emphasized on the main components of the sports economy for discussion since he considers that the components are regarded as the source for generation of revenue and cost. The main components of the sports economy are the sports clubs which has been originated due to the government intervention and market failure and the voluntary labor. The Sports economy components play a major and vital role and it has multiple effect and influence on the economy. The component has direct, indirect and induced effect on the economy. In case of the direct effect, the rise in income or expenditure of the economy is related with the tapping of resources by the sports events. The direct effect can be explained with examples such as the income that is received by the event organizers or the audience visiting facilities. The indirect influence of the components can be explained with the example such as the income received by the construction company and the company that is assigned with the responsibility of hosting the event. The induced effect can be explained as the income received or the expenditure that is incurred by the employees and suppliers of the organizations (Collins, 2015). 2.3 Sport Suppliers The writer Hirschey, in his study has emphasized on the role of the sport suppliers in accordance with the externalities that exist in the market. The writer has explained that the producers and the consumers have right to sell and purchase the property. The writer has emphasized that suppliers are required to be well informed before organizing the events. The market failures and the externalities affect the suppliers and the participants. The suppliers are required to respond by increasing the price. The investment decision is also influenced by the suppliers that are associated with increasing the capacity of goods and services to the consumers. The main objective or the aim of the sports suppliers are maximizing the profit that is achieved when marginal cost is equal to marginal cost (Hirschey, 2008). 2.4 The role of government in sports The researcher Gottheil, in his article has explained the role of government in sports. The importance of the government intervention in sports can be analyzed from the fact that the failure in the government policy has increased the role of the government. The importance of government intervention has emerged from the market failure. The government provides equality by redistributing the wealth and the income in order to promote the equality of outcome and opportunity. The market failure is considered as one of the most important reason for favoring the government intervention. The subsidy that is offered by the government signifies positive externalities. The government in European Union plays a major role in the sports economy. The national governing body is required to implement and formulate the rules of the sports. The benefit of government intervention on the sports economy is required to measure in terms of its equity. The importance of the government intervention can be analyzed from the fact that it facilitates in modifying the inefficiencies of the voluntary and the private sectors. The role of the government can be justified from the level of interest shown by the government in increasing the facilities of sports (Gottheil, 2013). 2.5 Economics inform policy and sports provision The researcher Davies, in his article has emphasized on the concept of informs policy that affects the sports economy to a large extent. The researcher has focused on the coordinated approach which is required to develop the inform policy. The various economic inform policy is required to be taken into consideration. The government generally implements the sports provision for the benefit of the economy. The government also makes necessary alterations and modifications in the sports provision. The sports provision is influenced by the externalities that exist in the economy. The government is involved in providing subsidiary is considered as a part of the sports provision (Davies, 2004). 2.6 Externalities The researcher Abel and Ben, in their article has emphasized on the concept of externalities and its relation with the intervention of state policy and its impact on the sports economy .The externalities can be divided on the basis of positive and negative externalities. The externalities are also affected by the demand and supply forces of the economy. The demand and the supply factor of the economy which influences the positive aspects of the externalities can be explained as the demand for the watching the sports by the visitors or the audience provide sports opportunity for others. The successful performance by the team generally increases the productivity of the economy. The demand and supply on the basis of negative externalities can be explained as the demand for watching the events or sports may impact the localities negatively. The growth and development of watching sports on television has reduced the craze of the audience and it has also negatively affected the rate of participation and health benefits of the participants (Abel and Ben, 2005). 2.7 Market Failure The writers Downward, Dejonghe and Dawson, in their research paper have focused on the importance of the state policy intervention in accordance with the market failure. The market failure has induced the intervention of the state policy on promoting sports in the economy. The market failure has been explained considering the monopolies and equity by the researcher. In case of monopoly, in order to increase the sale of tickets, extra tickets are sold by the authority at a lower price. The tickets are sold at a higher price, but at the end moment in order to disburse the tickets that have not been sold are sold at a higher price than before. Therefore the sports event is influenced by monopoly market where the prices are determined and charged according to the desire of the event Organizer. The monopoly structure facilitates the organizers of the sports club in maximization of profit. The writers have also explained about the equity which explains that the people with higher income group will demand more tickets for watching the sports as compared to others. The concept of equity has been developed by the government in order to maintain equality in the economy (Downward, Dejonghe and Dawson, 2009) 2.8 Limitations of State Policy intervention The authors Gratton and Taylor, in his article have emphasized on the limitations of the state policy intervention on the sports economy. The state policy can be influenced by the political pressure of the groups which may not be favorable for the economy. The state policy reduces the freedom of the individuals in organizing the sports events and the pricing decision is also taken by the government which reduces the extent of freedom of the government (Gratton, and Taylor, 2000). Conclusion The state policy intervention in the sports economy is considered as favorable for the growth and development of the sports sector. It has been observed that there is no sector in the economy that can operate efficiently and effectively without the intervention of the state policy or the government. The importance of the state policy intervention can be summarized on the basis of the above explanation that the state policy intervention increases the security and protection rights of the sports (Teixeira, Ribeiro and Correia, 2014). Small sports can be organized without the government intervention. But in order to organize a big or international sports event, the permission and the engagement of the government in the decision making process is required. The limitations that exist in the state policy intervention regarding the fixation of price and the loss of freedom of the event organizer can be modified or restricted accordingly. The government plays a major role in maintaining of equity. Sports are considered as an important activity and it is perceived different by people. Some considers sports as a fun whereas some other considers it as an exercise. The importance of sports can be analyzed from the fact that it helps in generating revenue in the economy. References Abel, A. and Ben, B. (2005). Macroeconomics. London: Pearson Education. Abeysinghe, T. (2001). Estimation of direct and indirect impact of oil price on growth. Economics letters, 73(2), pp. 147-153. Arnold, R.A. (2008). Macroeconomics. Mason: South Western Cengage Learning. Collins, K. (2015). Exploring Business. New York: Flat World Education, Inc. Davies, L. E. (2004). Valuing the voluntary sector in sport: rethinking economic analysis. Leisure studies, 23(4), pp. 347-364. Downward, P.M. Dejonghe, T. and Dawson, A. (2009). The Economics of Sports: Theory, Policy and Evidence, Elsevier: London Gottheil, F. M. (2013). Principles of Microeconomic. Mason, OH: South Western Cengage Learning. Gratton, C. and Taylor, P. (2000). Economics of Sport and Recreation. London: Taylor & Francis. Hirschey, M. (2008). Managerial Economics. OH: Cengage Learning. Teixeira, M., Ribeiro, T. and Correia, A. (2014). Demographic and economic factors study in the regional sports development. International Journal of Humanities and Social Science, 4(4), pp. 77-82. Read More