Olympic costs and benefits revisited

Way back in 2003, the CCPA produced a cost-benefit analysis of the 2010 Olympic Games. I think it still stands the test of time, and in any event it was the only such document produced that attempted to distinguish between costs and benefits in a coherent framework (the government tended to confuse the two, with public spending being treated as a benefit rather than as a cost). Until now, that is. An essay for an MA at Queen’s University by Darren McHugh, also released as an Econ Department Working Paper, has attempted the same task. The paper concludes:

As we see from Table 5 above, even the most generous measure of net benefit of the Olympics – Event Benefits minus Event Costs – is negative (-$101m), although by a lesser amount than was anticipated at the beginning of the project. This figure is “helped” by fully evaluating the extra surplus from the spectacle and the Halo.

However, there are a number of factors which push the actual net benefit of this much-celebrated project even further into the red. The first, of course, are the infrastructure costs discussed in section 1. While this paper did not rigorously assess these, a casual perusal of the Infrastructure Costs and the non-Olympic Infrastructure Benefits which might be expected reveals that the net contribution of Infrastructure to the Olympic “bottom line” will be negative by hundreds of millions of dollars. While these costs are obvious, the standard counter-argument is that they will be offset by the “economic impact” of the Games. However, section 4 of this paper revealed that “economic impact”, when correctly accounted for, is not nearly as large as is generally assumed. When combined with the substantial upside risks inherent in costs of public works projects48, the expected overall net benefit of hosting an Olympic Games is substantially negative.