My local public radio affiliate WFCR occasionally interviews Smith College professor and sports economist Andrew Zimbalist. Over the years, I’ve heard him interviewed several times and respect his opinion. He’s very level-headed in my opinion. He also wrote the book on hosting the Olympics, at least economically speaking. Yesterday, Zimbalist was interviewed on WFCR yesterday when he persuasively explained why the Olympics are not worth hosting. As an economist, Zimbalist is, of course, concerned with the bottom-line, but his thinking about the incentives and planning process are also helpful.
The hosting of the Olympics should be considered as a question of return on investment. Will the they cost the Commonwealth more than they bring in? Would they bring in more tax revenue? Would Massachusetts gain useful new infrastructure? Would they contribute in some way to our well-being? Make us feel really good about ourselves? The answer is, no.
Zimbalist has an op-ed in the Globe, but I’ve maxed out on my free articles. He had one in the Wall Street Journal earlier this month.
Around the time of the London Olympics, Zimbalist explained the return on investment:
These days the summer Games might generate $5-to-6 billion in total revenue (nearly half of which goes to the International Olympic Committee). In contrast, the costs of the games rose to an estimated $16 billion in Athens, $40 billion in Beijing, and reportedly nearly $20 billion in London. Only some of this investment is tied up in infrastructure projects that may be useful going forward.
The high costs are bound to make hosting the Olympics a bad deal in the short-run. Promoters, however, claim that there is a strong benefit that accrues over time connected to the advertising effect of hosting the games. The idea is that the hundreds of hours of television exposure to hundreds of millions of viewers around the globe will generate increased tourism and business for the city.
It’s a lovely idea, but there is little evidence that it pans out. Whether or not the city receives a positive PR boost from the TV exposure itself is uncertain. Should the Games be plagued by disorganization (e.g., the current security snafu in London), the pervasive pollution of Beijing, the violence of Munich, Mexico City or Atlanta, or the corruption scandals of Salt Lake City and Nagano, then the PR effect might be negative. Further, many of the host cities are already well-known as tourist destinations around the world and the notion that hosting the Olympics will put them on the map is about as implausible as Mitt Romney calling for national health care.
It should be added that there is little evidence that tourism increases during the Games. Rather, Olympic tourists replace normal tourists who want to stay away to avoid the congestion and greater expense during the Games.
Writing in the WSJ, Zimbalist predicts the costs of a Boston Olympics:
Because of its developed infrastructure, Boston will spend less, but the final tab, particularly with $2 billion or more for security alone, will likely exceed $10 billion. Boston’s projected budget for the Games is currently $4.5-$5 billion. But consider that the budget in London’s initial bid was $4 billion.
Cost runs are inevitable…
the environment in which the preparations for the Games takes place is not conducive to rational, effective planning. Sports venues and stadiums must be built and infrastructure serving those edifices takes priority. The other challenge is that the budget, initially bloated, only grows over time as construction costs escalate over the ten-year preparation period, bells and whistles are inevitably added, and initial drawings are revealed to be overly optimistic.
Fiscally beneficial Olympics have occurred in rare exceptions, but there were material reasons for that success:
Los Angeles showed one, when it was the only bidder for the 1984 Summer Games. The city told the International Olympic Committee that it would be host only if the IOC guaranteed the organizing committee against any losses. Los Angeles planned to use its existing sports infrastructure, plus a few smaller, privately funded venues. And Peter Ueberroth, the head of the organizing committee, introduced a new corporate sponsorship model, based on fewer contracts with exclusivity to help cover operating expenses. The Los Angeles Games ended with a $215 million operating surplus.
Barcelona 1992 is the other example. The city began to develop a plan for the renovation of the city after Spain’s dictator Fancisco Franco died in 1975. Crucially, the renovation plan predated the bid to host the Olympics and the Olympics were fit into the plan, reversing the typical sequence. And like Los Angeles, a large majority of the sports venues in Barcelona were already built.
Neither circumstance applies to Boston. Indeed, there has been no public discussion of the plans presented to the United States Olympic Committee and neither the city council nor the state legislature has voted in favor of hosting the games.
As many BMGers have already figured out, we’ve probably been set up to fail already. Boston 2024 has already offered more than we really want to deliver. It was necessary to compete with other countries. As Zimbalist explains,
There’s one monopoly seller of the rights to the games—the IOC—and prospective hosts from around the globe competing for the honor. If Boston ultimately puts up a frugal, few-frills bid, Berlin, Paris, Rome, Istanbul, Casablanca, Johannesburg, Doha or Melbourne will no doubt step in with something fancier and more expensive.
Since the private cost is diminutive and the private gain extraordinary, the local organizing committees, on behalf of the cities, are bound to overbid, wiping out any modest, potential economic gains.
And in spite of the sale pitch we’ll receive in the coming year, the public interests will be overmatched by private interests:
Local committees… invariably are motivated and run by private business interests which individually stand to gain from the massive construction associated with the events.These interests include construction companies, construction unions, architectural firms, investment bankers, and lawyers, among others. They come together to form a coalition and bring politicians on board.
The result is what economists call a principal/agent problem. The city (principal) is not properly represented by the local organizing committee (agent). The committee that nominally represents the city really represents itself and bids according to its sense of the private benefit (of its members) versus the private cost, rather than the city’s public benefit versus public cost.
There are indeed many politically connected people on the Boston 2024 Committee. Review the membership and judge for yourself. The Olympics are created by the 1% and for the 1%. The $4.7 billion price tag–more than 10% of the state budget–will balloon and it won’t be the private supporters stuck with the bill. It will be the Commonwealth of Massachusetts and the taxpayers that fund it.
Christopher says
…if you accept (which I don’t) the idea that only the 1% can afford to attend, then they also get the circus in the original sense of the phrase. “Bread and circus”, aka food and entertainment, was what Rome offered the masses to avoid actually improving their quality of life or allowing them a voice in the imperial government.
Mark L. Bail says
bake sales, the 1% organize the Olympics and World Cup.
petr says
If you normally use a single ‘brand” of browser you can switch temporarily to another to read more free articles. I primarily use Chrome, for example, but when I run out of free articles I temporarily use Firefox. After that runs out I use Safari for a count of free articles that begins at zero… If you use a PC then you could use IE to reset the count. Just FYI.
seamusromney says
I get new free articles every time I turn it off.
petr says
… you’ll note that the OCOG cost is $4.5 to $5 Billion. “OCOG” is the “Organizing Committee Of the Games” the follow-on body to the bid committee that gets created after the city is selected.. This is the cost of the actual operation of the games themselves, and that cost is expected to be fully recouped through ad revenues and ticket sales and other revenue. Boston2024, like all previous Olympic bids, has a projected NON-OCOG cost: this is the point of contention as this contains most of the money for getting the city ready to host the games and is where the bulk of public money will be spent if it is spent. For Boston2024, this number is $3.4 billion but, importantly, does not include security costs. With the addition to the bid budget of $75 million Boston2024 projects that the 2024 Olympics will cost $5 billion (OCOG) + 3.4 billion (NON-OCOG) + 75 million (Bid budget) = $9.15 billion before security costs which are expected to be in the billion dollar range. So, from publicly available documents, the Bid committee is not saying that the Olympics will only cost 4 or 5 billion dollars… but rather that the Olympics will cost at least 10 billion dollars. That might be something to balk at (I dunno about that in a CommonWealth with a nearly half a trillion dollar GDP) but it’s not the groundwork for an assertion that they are only planning to spend 4 to 5 billion…
chris-rich says
I’ve cued the Google algorithm for its news feeds to keep a nice article aggregation flow without needing the Globe.
The array of news items is interesting and the emerging narrative is how little ridiculous Boston is in over its head. It’s being described as ‘Smaller than El Paso or Columbus Ohio..”.. Which it is.
It’s also pretty funny to see the strange bedfellow alignments forming. Ouah beloved Howie Carr is sinking his teeth into the problem with his usual adamant derision.
Opposition, even in this early phase is coming from left, right and center. One of the opposition groups is headed by a Bain partner. Labor alignments are impressive with potential for a teamsters versus hardhats element.
When parties from this many diverse constituencies cohere in opposition, it is not a good sign.
If anything, it may be a welcome reset of what kind of aspirations are the best fit for the city going forward, but it may also sink the good ship Walsh or make a bad episode of Gilligans Island of the mess.
By the way, one interesting item I spotted turns on how the planning and scheming as to how to take other people’s stuff has been going on in secret for two years. Nothing was stopping them from making this an open process from the onset beyond a likely fear of effective opposition.
But that has already been well stoked by the appearance of hubris and bad faith from essentially unelected construction industry oligarchs and hedge funds disguised as universities that dodge taxes as a matter of principle.
The latter have been particularly ham handed and cavalier about river basin locations that presume to seize up both Storrow and Memorial Drive for the duration, unless you are willing to assume Homeland Security will just allow normal traffic flow adjacent to these narrow strip river side sites that make perfect terrorist targets.
Can you say truck bomb?
One interesting thought thread in major media, USA Today or Daily Beast, is that maybe the best way for Boston to get over its insecurity viz New York is by just walking away from this nonsense because it is a useless crutch.
sabutai says
One of the reasons I’ve come to see economics as a dogma rather than a science is its habit of declaring that if it can’t be measured and easily traced to a causal relationship right now, it doesn’t exist. The esteemed professor says that ” there is little evidence that [long-term benefit] pans out”. Of course, that must be because there is no way to measure the democratization of South Korea with dollars, a legacy of the 1988 Olympics. Or the fact that Salt Lake City hosts more than its fair share of sporting events due to its legacy infrastructure. To take another example — there is an American tv series set and to a minor degree in Lillehamer, Norway, a city only known for hosting the Olympics. No ’94 games, no filming. The fact is, the Olympics do greatly raise the host’s profile, even if that action isn’t reduced easily to equations.
That said, it’s nice to see some analysis on the Games rather than the standard rumor-mongering and invented concerns on other posts.
Mark L. Bail says
a book out now, which accounts for much of his attention of late. I’ve heard him interviewed periodically for years on our local public radio affiliate.
I have not looked at the equations, but I’m not so quick to dismiss them. It’s not usually the equations that cause problems in economics, it’s the data. The farther away economics gets from a phenomena, the more it relies on proxies, the more suspect it is. I suspect that much of this data is knowable. Tax revenue, for example, can reflect growth. I suspect the economics of the Olympics is largely knowable. The amount of money from venues created for the Olympics, such as in Utah or Lake Placid, is easily measured.
As far as intangibles or immeasurables go, I left out what little Zimbalist mentioned in his interview. We should put a price tag on the costs. The Commonwealth is operating on a deficit, when all is considered.
Was the cost of the 1988 Olympics worth the democratization? If the answer is yes, then that’s fine. All returns on investment are not financial. I can agree to that and value that.
It’s unlikely our profile can be lifted; unlike Lillehamer, it probably doesn’t have that far to go. If we need the infrastructure, it would be wiser to directly invest the money in well-planned projects rather than try to do it to accommodate the Olympics, which will have different needs, than the Commonwealth as a whole.
jconway says
I’d like to hear more backing that claim up, it’s one I’m unfamiliar with. Clearly didn’t democratize China, Russia or Nazi Germany-but I’m
open to seeing evidence before I jump to a conclusion one way or the other.
I might also add Bid organizers seem to be trying to prevent democracy (voting on the bid, free speech and civil liberties during the games), and while Boston’s democracy is flawed like any other-it does already exist.
chris-rich says
Some latency comes awake because international athlete hordes arrive for high beam footwork and the lifting of weights.
Maybe there is public opinion data out there from actual Koreans.
chris-rich says
Among these would be the assassination of the autocrat who held power for 18 years and consequent rage over the way said autocrat favored his home region over others.
It evidently led to the Gwangju Uprising.
http://en.wikipedia.org/wiki/Gwangju_Uprising
It was pretty cathartic with more than a hundred deaths. Admittedly the source is wikipedia but there is no mention of an Olympics role anywhere.
sabutai says
It was pretty much received wisdom in the Asian history courses I took back in the day. Don’t have those bibliographies still, but a simple Google search reveals a great deal….much of it is linked to the Gwangju Uprising.
sabutai says
Our great metropole has been the setting in some great media productions, and of course was the birthplace of our country in many ways. However, those are rather Americo-centrie criteria. It’s interesting to read foreign reactions to the selection of Boston as a “little-known” city (a German site that follows Olympic news) . Frankly, our international profile isn’t as high as it should be — more a Geneva than a Rome.
It’s also great to read this better coverage than what we get here, that beats back pretensions that Boston was never the favorite (example).
chris-rich says
How does one gauge Boston’s profile in Budapest or Mozambique?
It can easily become a distracting navel gaze or a high school prom queen quarrel. I’ve been in the area since 1955 and am reasonably happy with any number of substantive elements of the place.
I tend to adhere to a ….be the best you can be because it’s a worthy thing to do and applause is insignificant… outlook. But I understand it’s an anxious time and approval seeking has been beaten into many anxious psyche’s
TheBestDefense says
My experience is different. I was in a half dozen countries in the developing world and three major international capitals. Most everyone who has any education recognizes Boston but for different reasons. Some identify with out sports teams, or our revolutionary history, our universities and to a lesser extent, our health care system. The consistent thread amongst them is their belief that the city is much larger in population than it really is.
Christopher says
You may know that Boston expanded its footprint in the 19th century and that names of neighborhoods used to be the names of separate towns. Many other cities we think are comperable, especially internationally would include most of inside 128 within their jurisdictions, which of course would increase population.
TheBestDefense says
The point I was making is that most people think Boston is many millions of people. They are shocked when I tell them that it is about 550,000 plus another million in the near suburbs as they think of it as comparable to Chicago or even New York in population.
ryepower12 says
It’s nice that there are many who’d like Boston to play as the international heavyweight champion of the world, but why risk that when we’re already the Manny Pacquiao of cities?
Person for person, we already up there with the best, with the kind of amenities and cultural institutions that many cities with populations 5 or 10x the size of Boston dream of having.
Our sports teams are the recognized all over the world. We have internationally recognized art museums and one of the finest homes of any orchestras in the world.
We have a public parks system that stacks up with any city and beleaguered though the MBTA is, few cities in America can claim a system as robust in its service area. We are the father of the American revolution, with history that is rich and deep throughout the course of our country and the colonial era that preceded it.
To top it all off, we’re at the top of the world in biotech and research universities and have many international headquarters centered in and around Boston. We are an economic powerhouse.
Putting ourselves on the hook for the entire cost of a Summer Olympics puts all those hard-earned accolades at risk. I’m all for investment, but smart investment. We should open our wallets to make the city and state a better place, but we shouldn’t be giving blank checks to international organizations known for corruption, absurd levels of extravagance and bankrupting its hosts.
TheBestDefense says
with pretty much everything you wrote. The same folks I referenced in my previous post would love to visit Boston. I have a group of two dozen college age youth who I am mentoring in a developing country who think Boston is a dream land for students. I have other friends in the health care field in a different developing nation who want to come here just to SEE our hospitals (call it hospital envy). My friends around the US all want to either visit here or move here but are held back by our costs. In short, we are a magnet and do not need the Olympics to make us a bigger one. If the proper bid were submitted, I would back it. We are not close to that point.
Mark L. Bail says
What does that mean, materially speaking? We should be more important? We should be doing more business internationally? Would that be achieved by the Olympics?
Is it enough that Harvard has a world-wide reputation? Certainly, the intelligentsia of most countries are familiar with Harvard? Probably a bunch more are familiar MIT. People from all over the world go to school in Boston. They probably also work in Boston.
If the profile is worth it, why not just spend $2 billion promoting Boston?
sabutai says
This conversation began when somebody claimed that Boston didn’t need any help raising its profile as the Olympics would, and I responded on those terms. I wasn’t claiming that was the only reason to host the Olympics.
I knew that I might step on some feelings (we do call it the Hub of the Universe, after all), but the further you get from Boston, the less it’s known. Sure, people in Lille or Nagoya may think their city is universally known as well, but it isn’t. It’s a largish city in a country with many larger. Same for Boston.
To respond to TBD, I’ve also been in a dozen world capitals. My experience has been different. If I say Boston on one occasion I got “didn’t you have a Revolution…”
TheBestDefense says
that you have been in other world capitals. Rah. Rah.
I spend six months or more each year in the developing world. Any people I meet who have electricity (that is a major threshold for understanding the international world) know about Boston and see it as a secular Mecca.
YMMV
ryepower12 says
1) Is there anything wrong with being a Geneva?
2) Boston is not a, but *the* world wide leader in education and biotech, and is home to a number of world wide headquarters from major investment banks to Converse and New Balance.
Whether it’s sports, art, history, parks or music, we compete with any city in the world. We attract over ten million tourists a year from all over the world. We’re ranked a Alpha Class Global City.
Whether our name is as well known in Germany as London or Tokyo shouldn’t be important — that’s just narcissism. What is important is that there are few, if any, cultural or economic limitations for the city of Boston.
We can do anything we want — though we certainly can’t do everything we want. No city can. So the question is do we really want to put so much resources into the Olympics? We could spend a quarter of the Olympic price tag on creating new public transit, parks, museums and cultural institutions and make a much bigger impact on our city — without amassing generations of saddling debt. That sounds like a much better idea to me.
sabutai says
That’s another point. This type of event deals other governments into paying for things that Boston and Mass. should do but hasn’t, and likely won’t. Get a huge group to pay some now, or we pay the same amount by ourselves. (I’m being polite here — I know I have a better chance of getting the Pope to question his Catholicism than to persuade you against your beliefs on Boston 2024).
TheBestDefense says
won’t pay anything for any capital expenditures made to support the Olympics. At best, they will receive preferential treatment to attend events in Boston, and the economic activity they bring will likely just displace other vacationers who keep our city vibrant.
HR's Kevin says
That Boston might benefit from more “democratization”? Or that we really need to be hosting more sporting events? And how the latter come about if most of the proposed venues are temporary?
What concretely will the residents of Boston and surrounding tones get out of a “higher profile”?
ryepower12 says
And it ‘assumes’ the state will spend upwards of $10 billion on transportation projects that will help get the games off the ground.
The bid’s predictions of security costs were also very low compared to London’s costs — and assumed the feds would pick up the full security tab.
So we’re already at about $15 billion, without even having the true cost of the venues or any promises from feds on security costs caked in.