When bids open in 2011 (having passed 2016, for which, Rio is the likely candidate), India will bid for 2020 summer Olympics. There’s potential competition from South Africa, Thailand, Nigeria, South Korea, Malaysia, Turkey, UAE, Hungary, Denmark, Germany, Scotland, the Czech Republic, Portugal, Italy, Russia, US, Mexico, Canada, Argentina and Australia, not all of which are equally serious. There’s symbolic value to hosting the Olympics — for instance, Malaysia becoming a developed economy by 2020. This is especially true of the summer Olympics. In different ways, Berlin (1936), Melbourne (1956), Tokyo (1964), Mexico (1968), Moscow (1980), Seoul (1988) and now Beijing (2008) were the recognition of a country’s crossing an economic threshold, an argument that applies for 2020 to South Africa, Southeast Asia or South Asia too. But beyond symbolic value, are there economic benefits from hosting the Olympics and how do they balance against the costs? Both costs and benefits are difficult to pin down. For a start, costs vary from country to country and there are organising costs and infrastructure costs. In principle, organising costs should be covered through revenue from broadcasting, sponsorships, ticketing and licensing and it does seem that organising costs are generally covered, often leaving a small surplus. What’s left uncovered is infrastructure costs, public or private, typically the former.
Recently, Parliament was informed that the 2010 Commonwealth games will cost Rs 6400 crore, with an additional Rs 20,000 crore earmarked for improving Delhi’s infrastructure. That gives a rough order of magnitude, though costs will be significantly higher for the Olympics. Since investments in infrastructure are considerable, and these are usually public, there must be benefits and several impact studies of the Olympics, or other sporting mega-events, float around. Typically, these focus on benefits (including employment) to construction, tourism and allied sectors and legacy effects, such as of infrastructure that has been built. In practice, after the event is over, empirical studies find little evidence of such a legacy effect having been left. But there is a more fundamental conceptual problem. Economic theory has unfortunately left a conceptual legacy that is more often misunderstood than understood. This is the concept of the multiplier, identified with Keynesian economics. Any increase in expenditure leads to a more than proportionate increase in national income. There is the dramatic example associated with Keynes, though Keynes himself never seems to have used this example. This seems to be more a case of Joan Robinson having interpreted what Keynes might have said.
