The Olympics are overrated
Discover more from Monday Morning Economist
People around the world will tune in to see the Summer Olympics opening ceremony this Friday. One of the big announcements over the past week was that Olympic venues around Tokyo will be closed to spectators during matches. Notable athletes, especially in tennis, have been vocal about not wanting to play “behind closed doors,” and the Olympics have already seen 10,000 of the 80,000 volunteers for the Tokyo games dropped out because of Covid concerns. To make matters worse, as athletes arrive at the various villages, two of them have already tested positive for Covid-19.
The Olympics have always been marred by scandal, whether it be host city bribery, judges colluding against representatives from certain countries, or athletes found using performance-enhancing drugs. The Wikipedia page on “List of Olympic Games scandals and controversies” has entries for all but a few of the summer and winter games. Given the seeming constancy of scandals, some people believe the games are beyond saving and should just be over forever. That may be a little too extreme though.
Even when the Olympics are completed without major scandals, many of the venues turn into abandoned ghost venues that make some excellent photographs and not much else. Another constant controversy surrounding the Olympics is the cost of hosting the events themselves and whether they are good investments of taxpayer money. This is a common refrain tossed around as soon as host cities place their bids for future games, but they’re even discussed years after they’ve ended. One of the major criticisms of the “no spectators” policy is that it would cost Tokyo upwards of $23 billion on their investment. That value would imply the Olympic games are profitable, but that’s likely very far from the truth.
In order for the new policy to lose $23 billion, that would imply the Olympics even generated $23 billion of new spending, to begin with. A lot of the common supporting claims will argue that the games bring lots of visitors to the city and that those visitors spend money in the city. They also argue that improvements to infrastructure around the stadium will last beyond the games. Lastly, there’s a belief that hosting the Olympics puts the city/country on the world stage and acts as an advertising tool. While some have merit, it mostly ignores the “unseen” side of the games.
There’s very little evidence that these benefits really happen. The job creation argument is typically overstated and the actual increase in the hospitality sector is much lower. The increase, however, isn’t even a pure increase. Most of the jobs go to workers who already have jobs, which doesn’t change the actual number of unemployed workers in the city. While hotels and restaurants may see employment increase in the lead-up to the Olympics, shopping malls and car dealers likely see a decline. Outside of the employment implications, the profits going to hotels and restaurants may be going to international companies like Hilton and Mariott or McDonald’s and KFC. At least some of the money spent on construction is staying in the area thanks to the Japanese mafia’s control of the construction industry.
Along the same lines of the job creation argument is the overall spending impacts by visitors. While visitors to Tokyo may spend more money around the area during the games, they are likely to spend less money in their home cities. Tokyo may see an increase, but the other cities experience a decrease. The net impact across Japan may be zero. At the same time, residents of Tokyo may leave the city for a few weeks to avoid the Olympic chaos (thus decreasing their normal spending in Tokyo) and visit other areas for a vacation (increasing spending there). There has been some interesting work on the spillover benefits of hosting such that surrounding cities actually benefit during the games. Those cities spend nothing on hosting the games, but they receive all the people leaving the host city while the games are going on.
There’s little causal support that the games have a long-term impact on a country’s GDP, but the way to win hosting privileges often mirror’s that of a winner’s curse. Some international visitors may arrange their trips to visit during the Olympics, but again, it may also represent a shift in spending from one year to another. Costs like these are often much harder to quantify and may make it appear that the Olympics are creating benefits from foreign visitors. Coincidentally, there is actually some evidence that regions hosting Olympic games could see fewer foreign visitors during the games, not more!
That brings us to the final potential benefit of hosting the Olympics, which is also the most difficult to quantify: civic pride. There have been attempts to use contingent valuation studies (these are the same types of studies researchers use to determine the value of rainforests) to measure the benefits people across the country receive from an increase in international attention. A study of the 2012 Olympic games in London found a benefit of around £2 billion, which is a far cry from the nearly £9 billion that was spent on the games. Overall, it’s just really hard to find economic support for big events like this, and it may instead expose cities and countries to some of the bad things happening in the area.
If you’re watching the Olympics, leave a comment and let me know which sport you are most looking forward to seeing. If you have a friend who believes that the Olympics are a good investment, be sure to share this post with them. Now let the (incredibly expensive and not all that beneficial) games begin!
The United States has won 1,127 gold medals in the summer and winter Olympics dating back to 1896 [Wikipedia]
Japan has administered 66,714,528 vaccines, which would mean no more than 26.4% of the population is fully vaccinated [Reuters]
Tokyo has approximately 100,000 hotel rooms across the city [Quartz]
Approximately 2,500 people can cross the streets at Shibuya Crossing in Tokyo [World Atlast]
Week 28 is over and I’ve checked in a total of 40 books for the year. This past week I finished up a memoir (The Happiest Man on Earth) and a comedy book (The Redneck Liberal Manifesto). Both were solid books, and nice additions to the library. This week I’m going to try and finish up a handful of books that I’m in the middle of reading. The one I’m most excited to read is The Hollywood Spy, which is the 10th book in the Maggie Hope series. Thanks to social media, I actually know that I received my first copy of the Maggie Hope book on January 23, 2014.
My friend, Abdullah, had shared an interesting tweet about a bookshop in Santa Clara, California offering “blind dates” with books:
It was such a cool concept that I reached out and purchased two books from them. One of them I didn’t love, but the other I fell in love with. I’ve read the entire Maggie Hope series and often recommend it to people who are trying to read more historical fiction. The blinded cover for the book is on the left:
The Olympics are overrated
Thanks for the write-up. It may be cliché, but I'm looking forward to all of the events! That's one of the points of the Olympics. An all-in-one stop.