Who am I?
I am Matthew Rousu, a Professor of Economics at Susquehanna University. For more about me, see my university homepage. My interest in starting this site is recent. In the past couple of years, I have conducted economic impact analyses for universities. I was new to this particular subfield of economics until recently, so I spent a considerable amount of time reviewing previously published studies along with studies that examined proper methods for conducting an economic impact analysis. I learned both that these studies can be valuable and that there are major problems.
The Value of Economic Impact Studies
A properly conducted economic impact analysis can be valuable. It can show how much an entity affects the economy for a defined region, which may be of interest to a number of stakeholders. Each day, many new economic impact studies are released, showing the impact of universities, sports stadiums, rivers or other items of environmental interest, and more.
What’s the problem?
Almost all economic journals have a system where articles are "peer-reviewed" prior to being published. This means that other experts in the field will review the study prior to it being published. The opposite happens with economic impact studies. Almost all economic impact studies are not peer reviewed. Further, many of the authors of economic impact studies have an incentive to present their client with a certain result, meaning there are often incentives for "mistakes" to be made, as long as those mistakes help the outcome! For example, a firm that is in favor of Marcellus Shale may pay an economist for an economic impact study. Alternatively, a group that dislikes Marcellus Shale drilling may also pay an economist for a different study. These studies may use different methods and different assumptions to arrive at different estimates. These estimates are rarely peer reviewed by independent economists.
While there are several articles that discuss appropriate methods, the quality of economic impact studies varies wildly. For example, "The Economic Impact of Colleges and Universities" (Siegfried, Sanderson, McHenry, 2006) discuss the case of two universities in Chicago, both with a similar number of students. One determined their economic impact was $1.04 billion, the other only $145 million. Debates over sports stadiums have brought similar divergences in estimates.
What are we doing, and what do we hope to accomplish?
We will publicly post reviews of economic impact studies as we find them. Anyone who has reviewed a study or multiple studies is welcome to email them to us. Further, we will provide our own reviews of economic impact studies on a regular basis.
Currently, when economic impact studies like these are published, local media outlets usually just run with the estimates. There is no incentive for an agency to be honest in its methodology when conducting these analyses, as there are rarely groups or individuals that counter any misleading statistics. We aim to correct that.