Summerize
“Exorbitant Costs and
Minimal Benefits: the Impact of Hosting the Olymipics” by Sidhant Wadhera
Every four years, the world tunes in to watch pageantry, competition, and peak athletic
performance at the Summer Olympics. Before the COVID-19 crisis, the 32nd Summer
Olympiad was scheduled to take place in Tokyo from late July to early August 2020 and
was marketed as the “Recovery Olympics” in light of recent natural disasters in the region.
The Olympics are often touted as a method for invigorating economic growth and urban
development under the premise that the effects of infrastructure development and
increased tourism last long after the games have ended. However, whether these events
actually positively impact their host cities in the long run remains an open question. For
some host cities, such as Rio de Janeiro, the aftermath is decay and debt. Government
officials considering a bid for the Olympics ought to think carefully about the associated
costs and benefits.
It should come as no surprise that hosting the Olympics is a costly endeavor. Cities often
need to build event-specific infrastructure, bolster their existing infrastructure (e.g.,
transportation systems), and deal with operational costs like security. These costs can
reach into the billions of dollars and often run over budget: for example, the 2004 Athens
Olympics cost $11 billion. For policymakers and taxpayers in a host city, these astronomical
costs should not be taken lightly. From a pure accounting standpoint, the benefits of
hosting the Olympics must be greater than these costs in order for them
to be “worthwhile.”The long-run infrastructure spending does not lead to the expected net positive
impacts
Economists Robert Baade and Victor Matheson postulate that the potential benefits of
hosting the Olympics can be divided into three distinct areas: short-run benefits such as
tourism and spending, long-run benefits such as infrastructure development, and
“intangible” benefits such as civic pride. Their review of the existing literature on the
Olympics finds that there is limited evidence to support any of these claims. Perhaps of the
greatest concern is that the short-run increase in tourism and spending from the Olympics
does not cover the cost of the games. Furthermore, the long-run infrastructure spending
does not lead to the expected net positive impacts. Another potential benefit of the
Olympics could be increased trade, a benefit that Andrew Rose and Mark Spiegel do find to
exist, but not necessarily due to hosting the games. Countries that lose a bid to host also
experience a boost in trade.
A majority of the respondents in both cities believed that hosting was “worth it,” and
that the event was a success
It is much harder to assess whether the Olympics benefit a city by increasing or improving
abstract concepts like civic pride. However, by conducting surveys of host city residents’
moods and valuations of the Olympics before, during, and after the games,
researchers Henry Hiller and Richard Wanner ascertain information about these less
tangible impacts. Hiller and Wanner look at survey data for two recent Olympics ? London
in 2012 and Vancouver in 2010 ? and find that a majority of the respondents in both cities
believed that hosting was “worth it,” and that the event was a success. However, Hiller and
Wanner’s results should not be used to generalize across all potential host cities.
Vancouver and London are wealthy cities in developed countries, so it is not realistic to
assume that this pattern holds for cities in all countries.
Finally, in an era of climate change, it is essential to look at the impact of hosting the
Olympics from a sustainability perspective. The International Olympic Committee (IOC) hasmade a prominent effort to include sustainability in its host selection
process. Infrastructure development is often carbon intensive and can impact local
communities. As Jules Boykoff points out, host cities like Rio de Janeiro made commitments
for their development to be sustainable, but often failed to match their commitments. As
environmental concerns grow for urban residents, the lack of credible sustainable
development around the Olympics only furthers the case against hosting the games.
The literature asserts that the economic costs of hosting are not covered by the benefits,
and the negative environmental impacts have not been successfully mitigated. Yet, in select
cases, the population finds the event to be successful and “worth it” more than a year later.
Perhaps hosting the games can serve to signal revitalization or recovery after loss. These
mixed results paint a confusing picture for policymakers. The choice whether to bid or not
is a complex one, but, broadly speaking, it appears that the benefits do not
outweigh the costs.Article sources:
Robert Baade and Victor Matheson, “Going for Gold: The Economics of the
Olympics,” Journal of Economic Perspectives 30, no. 2 (Spring 2016), 201-218.
Jules Boykoff, “Green Games: The Olympics, Sustainability, and Rio 2016,” in Rio 2016:
Olympic Myths, Hard Realities, ed. Andrew Zimbalist (Brookings Institution Press: 2017),
179-206.
Arnout Geeraert and Ryan Gauthier, “Out-of-control Olympics: Why the IOC is Unable to
Ensure an Environmentally Sustainable Olympic Games,” Journal of Environmental Policy &
Planning 20, no. 1 (2018): 16-30.
Philip Hersh, “The Olympics in Crisis,” Harvard International Review 39, no. 1 (Winter
2018): 28-33.
Harry Hiller and Richard Wanner, “The Olympics as an Urban Policy Choice: Post-Game
Assessments of Economic Value by Host City Residents,” Journal of Urban Affairs 41, no. 8
(July 2019): 1205-1224.
Andrew Rose and Mark Spiegel, “The Olympic Effect,” The Economic Journal 121, no. 553
(June 2011): 652-677.
