1. COMPLEMENTARY TEACHING MATERIALS
CABI TOURISM TEXTS
4th Edition Leisure, Sport and Tourism, Politics, Policy and Planning
A. J. Veal
COMPLEMENTARY TEACHING MATERIALS

2. The Market versus the State
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th Edition
CHAPTER 5
The Market versus the State
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

3. Outline Introduction The triumph of capitalism?
Mainstream economics: the market system
Mainstream economics: the role of the state
Mainstream economics: market failure types
Types of socio-political argument
The role of the state: summary
Market versus state: Issues
Out of the mainstream
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

4. The triumph of capitalism?
Collapse of eastern Communist bloc, 1989–90
Reforms in China: ‘market system’ but under Communist control
Decline in socialist parties in the West =
Triumph of capitalism
N.B. Global Financial Crisis of 2008 indicates instability
What is the role of the state in a market economy?
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

5. Mainstream economics: the market system
Describes/analyses the market system, i.e. firms and consumers; but also
Has a theory about the state – welfare economics
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

6. Mainstream economics: the role of the state
Adam Smith (1723–1790):
Role of the state:
national defence
provision of a system of law and order
public works
Interpretation of Smiths ‘public works’:
market failure
social/political arguments
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

7. Role of state 1: national defence and LST
Traditionally, sport promoted to ensure fitness for war:
James I Book of Sports (1618): sport for ‘the common and meaner people’… ‘such exercises as may make their bodies more able for war, when His Majesty or his successors shall have occasion to use them.’
1930s: promotion of fitness in Britain and Australia due to concerns about the fitness of young men for war service
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

8. Role of state 2: law and order and LST
Legal restrictions on potentially disruptive activities, e.g. gambling, sale of alcohol and use of recreational drugs
Government control of access to: air-space, radio and television channels, coastal waterways and fisheries
Copyright laws
Fire and safety regulations in entertainment/transport
Gun laws
Leisure provision to prevent juvenile delinquency
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

9. Role of state 3: market failure
Market process alone fails to produce optimum outcomes
Situations:
public goods and services
externalities/neighbourhood effects
mixed goods
merit goods
option demand
infant industries
size of project
natural monopoly
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

10. Market failure: (a) Public goods/services
Characteristics:
non-excludable: difficult/impossible to exclude users
non-rival: one person’s enjoyment does not preclude another’s
Consequence: difficult for private sector to operate, so the market ‘under-provides’
Examples:
free-to-air broadcasting
public pride in success of local/national athletes
open public events: e.g. firework displays, street parades
street signs/lighting (facilitating access to leisure venues)
major scenic amenities, e.g. conserved historic/natural environment
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

11. Market failure: (b) Externalities (or ‘third party’ or ‘neighbourhood’ effects)
Market under-provides or over-provides, due to specific benefits enjoyed or costs imposed, but not paid for, by specific third parties
Negative: costs imposed on third parties
e.g. air pollution, noise pollution, congestion
Positive: benefits to third parties, which they do not pay for
e.g. environmental/amenity benefits of a golf course to surrounding properties; public tourism attractions
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

12. Market failure: (c) Mixed goods
Part private and part public goods/services, e.g.:
Theatre visit
private: enjoyment
public: good social/cultural spin-off
Sport participation
private: enjoyment, well-being
public good: improved health = cost savings to health service/insurance and to employers
Urban park
private: visitor enjoyment, well-being
externalities: environmental benefits to local residents
externality/public good: passers-by enjoyment, well-being
public good: dispersal of pollution
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

13. Market failure: (d) Merit goods
Enjoyment/appreciation is not immediate: high learning threshold, so government should subsidize education/exposure, e.g.:
environmental education
some art/music
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

14. Market failure: (e) Option demand
Goods and services that people want to maintain in case they or their successors want to use them in future, e.g.:
significant environmental, cultural and heritage items
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

15. Market failure: (f) Infant industries
Industries where it is difficult for new entrants to get started because of power of existing companies, so state supports start-up, e.g.:
local film industry
local publishing industry
airlines
Problem of ‘picking winners’
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

16. Market failure: (g) Size of project
Projects too large for private sector to invest
Few examples today in developed economies
possibly major resort development, Olympic Games
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

17. Market failure: (h) Natural monopoly
Services where only one supplier is technically required, e.g.:
– unique heritage attractions or
– environmental resources
As with any monopoly, state may take over or highly regulate, to avoid excessive profits.
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

18. Market failure: (i) Competition failure
Consumers not fully informed – information asymmetry
Monopoly/oligopoly
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

19. Role of the state 4: socio-political arguments
Equity or humanitarian measures
Economic management and development
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

20. Socio-political: (a) Equity or humanitarian measures
Leisure may be part of a package of goods and services required for a minimum acceptable quality of life
To be assured for all, notably disadvantaged groups – people with disabilities, elderly, unemployed
In cash (income support) or direct services?
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

21. Socio-political: (b) Economic management/ development
Leisure industries may:
be supported as a significant part of the local economy – e.g. entertainment district, theatres, restaurants
be used to boost the economy – e.g. tourism
Problem of governments ‘picking winners’
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

22. Socio-political: (c) Incidental enterprise
A leisure enterprise may be part of another public service – e.g. shops/restaurants in museums
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

23. Socio-political: (d) Tradition
It may be politically difficult to close down a long-standing service, even when it is no longer effective.
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

24. Market versus the state: issues
Profit-making or loss-making?
If a facility/service can be run profitably, why should government bother?
N.B. ‘profitable’ includes a return on capital, including land/buildings, as well as meeting operational costs.
Government failure/size
often argued (e.g. by neo-liberals) that government is innately inefficient
therefore a large government sector is a drag on the economy.
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

25. Issues (cont’d) Provider or facilitator? Globalization
one response to the government failure/size argument is for government to facilitate others to provide services (commercial or non-profit)
Globalization
problems of national/local cultural identity
film, TV, music, sport
economic disruption/unemployment
leisure providers are job creators
services in high unemployment areas
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts

26. Out of the mainstream Marxist economics (see Ch. 2)
Institutional economics (see Veblen, Theory of the Leisure Class)
Humanistic economics – based on analysis of human needs (see Ch. 3)
Behavioural/psychological economics
Anti-materialist economics
Inequality-based critiques
Leisure, Sport and Tourism, Politics, Policy and Planning, 4th edition, Veal, 2017, CABI Tourism Texts