Is It Worth It To Host The Olympics?
Daniel Becker
Brazil has 1.7 billion dollars in debt but that did not stop them from hosting the World Cup in 2014 and the Summer Olympic Games in 2016. The host city Rio is planning to splurge and spend over ten billion dollars on the 2016 Olympics. So is it worth it to host the Olympics?
It is a relatively new idea that that large sporting events are good for a countrys economic growth. Countries pay more and more every Olympic Game. The 2012 London games had a budget of 4.4 billion dollars. By the end of the games, they ended up spending 14.6 billion dollars. Many countries get the idea that the Games (World Cup and Olympics) can serve as a tourist pull and a chance to be better recognized world wide politically. The host countries often look at the Los Angeles games and the Barcelona games where both cities were revived by the huge income of over 200 million dollars each. Brazil does not plan to drop all their money on new stadiums, but to invest in new airports and roads that will benefit the country long term as well.
Many times, the organizers and their supports neglect to think about their opportunity cost. In other words, “What could have happened if the country did not host the Games?” The biggest opportunity cost is the loss of valuable and scarce real estate. Although some countries manage to keep some of the stadiums open, many sit empty and abandoned including stadiums from the games as near as the 2004 Athens Olympics.
According to a California Berkeley study in 2009, there are some major boosts in trade the come after the Games. The trade goes up because it tells other countries that they, the host country, are open for business. This is really the only benefit that may come but is not guaranteed.
Many people don’t often realize that dozens of countries say they are interested in hosting. This list slow dwindles down over two years and ends up around three countries placing a bid. Justing getting on this list will boost a country's economy and trade. Often during this process, countries have to think in the margin. For the 2022 olympic games, only two countries are in the process of bidding for the position. Both options are bad. The first is a country where they want the olympics but cannot afford it (Kazakstan) and the second is a country that can afford it but none of the people want it (China). For China, their marginal cost would be to host the games or not. Their marginal benefit would be if it is worth it to spend the money on the games and make the people mad or not. “Does the profit that the games could bring outweigh the retaliation that the people might have?”
Every country needs to think of the benefit the could come if they hosted before they even place their bid. They economists for the countries go so far to the point where they created a formula to decide if their country should host or not.
With many studies done, researchers have found that the olympics bring nearly no economic benefit to the country and that it hurts more than it helps. Really the only major reason countries host the olympics is for the joy of hosting, not for the economic benefit. I guess a country could follow in Beijing's foot steps by paying off their olympic debt with a fifteen minute segway tour around the track of the Bird's Nest stadium for $20.
WORKS CITED:
Appelbaum, Binyamin. "Does Hosting the Olympics Actually Pay Off?" The New York Times. The New York Times, 9 Aug. 2014. Web. 9 Feb. 2015. <http://www.nytimes.com/2014/08/10/magazine/does-hosting-the-olympics-actually-pay-off.html?_r=0>.
"Cost of the Olympic Games." Wikipedia. Wikimedia Foundation. Web. 9 Feb. 2015. <http://en.wikipedia.org/wiki/Cost_of_the_Oly
Lim, Louisa. "China's Post-Olympic Woe: How To Fill An Empty Nest." NPR. NPR, 10 July 2012. Web. 9 Feb. 2015. <http://www.npr.org/2012/07/10/156368611/chinas-post-olympic-woe-how-to-fill-an-empty-nest>.
Rose, Andrew. "The Olympic Effect." 1 Apr. 2009. Web. 9 Feb. 2015. <http://www.nber.org/papers/w14854.pdf>.
It would be interesting to see the change in GDP of Olympic host countries in the years leading up to the Olympic Games. You would think that the increase in government spending would drastically increase the GDP, but maybe these purchases are just diverted from other areas. For example, maybe the people are taxed more heavily, shifting consumer spending dollars into government spending dollars.
ReplyDeleteI really like the topic of this post, I think a lot of research went into this and it was very interesting. I agree with Matt, while there already is a lot of information, there is still more that can be added. I would just make sure to include more specifics on how hosting the Olympics is affecting the citizens more directly. You could possibly add some sort of graphics of before and after a country has hosted the Olympics. Otherwise it was really good!
ReplyDeleteI was unaware that hosting the Olympic Games or the World Cup was not influential on the economy of the host country. I knew that there was spending occurring to make the stadiums and arenas, but I did not know the extreme amounts of money being spent. I would like to know how the country can be okay with blowing way over the budget and losing money as a whole. What would be the positives to having the games hosted in a different location each time? I liked the topic you wrote about, and it was very interesting to me.
ReplyDeleteThis is completely true. This year in advance communications and composition at the end of the semester we did a project called a year in review. Me and my partner decided to do Sochi and its costs were drastic. Sochi in total spent $51 billion dollars on the winter games and infrastructure. But unlike Athens the stadiums have not been abandoned and they are still in use. Just like the new hotels that were built for the games and the beltways. But, yes at times countries do go to the extreme to host the olympic games, But abandoning them is a waste of money so hopefully they can remain open for the publics interest.
ReplyDeleteI thought this was a really interesting topic...I think that many people believe that the Olympics would greatly help the economy, so it was interesting to see that they don't. I also thought it was interesting to see that there weren't many countries who want to host the Olympic games. I agree with Kati, a graph showing the impact of the Olympics would be cool to see. I also would like to know more about the two countries potentially hosting the games...But it was a really interesting topic and well written post. Nice job.
ReplyDeleteThis article brought up an interesting point that the host country of the Olympics might not actually help their economy, but hurt it. I had always thought that the country hosting the Olympics would gain money from the tourism and popularity. However after taking into account the amount of money it takes to build everything, the economy might actually be losing money. Instead of the country deciding for itself whether they would be a good applicant for hosting the Olympics, maybe other countries should help them decide whether they can handle it at the time. Great article!
ReplyDeleteI found it interesting that the two countries bidding for the 2022 Olympic Games are "bad" and just not as popular. Additionally, I was surprised to find out that hosting the Olympics actually does not bring in that much money but again it's understandable considering the amount of money that has to be spent on preparations(arenas, hotels, airports, etc). It seems like there should be more regulation on what countries are even allowed to make a bid considering the debt issues to start with. Overall, this was a well written article and a very interesting topic, nice job!
ReplyDeleteI think that this is a really interesting topic. Many people don't really think about how much hosting the Olympics would cost or how the Olympics could negativity effect their country's economy. I thought It was interesting that only two countries wanted to host the Olympics, I wonder if China hosted the Olympics is they would reuse the Olympic stadium from when they hosted the Olympics in 2008.
ReplyDeleteI've actually heard a lot about this online, mainly from people who are absolutely outraged about Brazil's hosting of all these events when their country is having so many political and economical problems. While the games will draw attention to the country, I also think the country will do a lot of work to hide its debt and issues while the games are going on in order to "look good" for the rest of the world. I knew the Olympics weren't very beneficial, but you really highlighted how the costs of building and setting up everything would just be an unneeded blow to Brazil, especially if the people get angry about this and start rioting. I think it was definitely a mistake to host the games in Brazil instead of somewhere that can afford it.
ReplyDeleteWhile I was aware that so much money is spent on the Olympics, I did not think that budgets, like the London Olympics had such a difference between their planned budget and what was actually spent. Since many of the stadiums specifically built for the Olympics sat empty, it would be interesting to see what they could be made into. Even if they were torn down, it would allow the country to have valuable land that they could actually lose. Also, it's interesting that after all the hype about the Olympics, that it does so little to actually help the country that is hosting it. You would think, that because there is such a high demand to be in the Olympics and how much it is talked about, once it gets close, that it would improve the host country's economy.
ReplyDeleteI think it's interesting how the countries bid to host the Olympics. I wonder, though, why they would want to host it when it hurts their economy more than it helps. While it brings them attention, they are still not benefiting their economy.
ReplyDeleteI found this topic to be very interesting. I had no idea that countries have to bid against each other to be the one to host the Olympics. I have truly never thought about how much it really costs to put on the Olympics and how much a country could be out that amount of money. Countries really have to think about their cost and what all the prices would be. Truly you don't benefit from the Olympics you only go more into debt which in the long run doesn't help anyone. Countries only host the Olympics so that they can say they hosted the Olympics.
ReplyDeleteI found this topic interesting, but it is true that countries drop a lot of money on new stadiums, advertising, and doing whatever it takes to boost the outcome of tourist to come to their country and watch the game, but on the other hand host the Olympics council sometimes benefit the country in that the large influx of tourists who are willing to spend big money on the games as well as spend money at the games which would go back to the government and depending on the circumstances could only be a marginal loss in the end.
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ReplyDeleteI'm surprised that hosting the Olympics brings no economic growth. What about all the revenue from tourists and athletes? I also wonder if the popularity that the Olympics brings to the country helps them in the long run by bringing more tourists later on to the see the Olympic stadiums. I remember when China hosted in 2012 and they had to relocate many citizens in order to build the stadiums. The new stadiums made the cities more crowded and the relocation of the citizens brought much disdain and discomfort, but the games increased China’s popularity.
ReplyDeleteI was interested by the fact that economists have come up with a formula to decide whether a country is able to afford hosting one of these large international sporting events. Maybe it was in the image and was just hard to see, but I think you could have expanded a bit on what that formula really entails. The equation is probably too complex to explain it entirely, but I'd like to know what components, exactly, go into the calculation. My guess is that GDP plays a large role. Overall, this blog piece had an interesting question to pose, and I thought you did a nice job examining many different economic aspects of the Olympics/ World Cup.
ReplyDeleteAs a Olympic enthusiast myself, I often see alot of articles like the ones you did. This is a great topic to discuss in Economics because many don't really look at it this way. Last year at this same time currently we had the Sochi Olympic Games in which they spend millions of dollars in there hospitality and for the venues as well. But a few months had past since the games were done and I saw an article on what Sochi looks like know with no one there. The place is deserted and simply aren't wanting to put anything in that area for future purposes. Also some of the venues that they were going to use weren't even finished for the games they just deserted them making it look like a ghost town. But back to the economic point of view you exactly right that the countries want to host but then they don't really think on how much money that they are spending to create a good venue. Like many had mentioned above it would nice to see a graph in your writing as it would help correlate to the topic more. Overall, I thought you did a good job explaining the economic point of view of the Olympics.
ReplyDeleteIt would be interesting to see a country like Kazakhstan host the Olympics, given that they have only begun to really come out of their post-Soviet state as a country with an independent identity. Not to mention, that region of the world isn't exactly Fiji or Tahiti in terms of tourism and commercial flow, so while they cannot necessarily afford it initially, perhaps they wouldn't need to be as extravagant as previous Olympics like England and China, and could instead see the Olympics as an investment and a welcome into a country which does not receive recognition of much. As a result of the massive influx of money from the Olympics, the country could show what it has and perhaps attract prospective investors and businesses. While extravagant, elaborate, and expensive shows are always entertaining, a country such as Kazakhstan would benefit far more from hosting that Olympics than a country that is already very well off.
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ReplyDeleteI didn’t know this whole hosting the olympics thing could have such a big economic impact on the hosting country. It seems like a good idea for a country to host if they want to make money, because it’ll bring a ton of tourists in. However, I definitely didn’t realize how much it costs to host these games. $14.6 billion is a ridiculous sum of money to pay, especially if they won’t make that much back. For poor countries, it seems like an extremely bad idea for them to host. They’ll just end up losing money and also land, just like Athens. I think that the 2022 games should be held in China, because Kazakhstan won’t be able to recover as easily from all of the lost money. The only thing it could do for them is bring more attention to their country, but it probably won’t have much of a positive impact on them.
It would be interesting to see a country like Kazakhstan host the Olympics, given that they have only begun to really come out of their post-Soviet state as a country with an independent identity. Not to mention, that region of the world isn't exactly Fiji or Tahiti in terms of tourism and commercial flow, so while they cannot necessarily afford it initially, perhaps they wouldn't need to be as extravagant as previous Olympics like England and China, and could instead see the Olympics as an investment and a welcome into a country which does not receive recognition of much. As a result of the massive influx of money from the Olympics, the country could show what it has and perhaps attract prospective investors and businesses. While extravagant, elaborate, and expensive shows are always entertaining, a country such as Kazakhstan would benefit far more from hosting that Olympics than a country that is already very well off.
ReplyDeleteIt's absolutely crazy that the amount of money a country makes for hosting the Olympics doesn't compare to the amount of money that they spend. I think a really good way to make money would be to make the stadiums into a giant Nerf gun war arena. Not only would they gain a good portion of their money back, but it would also be extremely awesome. Imagine how much space you would have! AND, you would be playing around, where Olympians have walked, which is pretty satisfying. And, the bullets wouldn't hurt you at all! This is a fantastic idea, by the way. Back to your writing, you did a very good job, Daniel!
ReplyDeleteI was surprised that hosting the Olympics does not necessarily mean the economy will be positively impacted. I think that as a whole, this is true and the country hosting will be more in dept than before, however I think that hosting the Olympics makes for a good source of employment. New hotels, stadiums, and restaurants are likely to open up, and they need construction workers and employees to work in the business in order to be successful. This will cause the unemployment rate to decrease greatly, which can help the country's economy grow because the people have more money to spend.
ReplyDeleteI was surprised on how much money is put into hosting the games. I thought that it would be a lot but not 14 billion dollars! I was also surprised that the games bring no economic growth to a country. You would think it would because of how many people go to watch the games and how the stadiums can benefit from hosting other things in the future. I understand that before all the construction starts, the land is deserted and nothing major is happening there but it should be beneficial in the future. For as the debt, I think that every country really has debt and it is their choice on if they want to increase their debt or decrease it just by hosting the Olympics for fun without any benefits. Very interesting article!
ReplyDeleteI can understand why countries want to host the Olympics for recognition, but is it really worth it when they pay that much money? It’s not really surprising that they do not get a lot of profit, since they spend so much money on hosting this event. However, they do gain popularity, which could help them get back some of the money they spent. A lot of tourists would come to the host country and spend money there.
ReplyDeleteTrue, people rarely think about what it is really costing the country when they host such a large worldwide event such as the Olympics. Very similar to the Olympics, Brazil recently hosted the FIFA World Cup tournament in Rio de Janeiro. That, though extremely fun and interesting to host, had already put their country in some serious debt. Now, with the 2016 Olympics scheduled to take place in Rio, Brazil, the government is obviously not thinking for their people’s overall well being. And not to downsize it, but from my observations, people were a lot more interested in FIFA than the Olympics, but that’s just from people I associate with. I myself watch FIFA and not the Olympics, and my concern would be how Brazil could earn lots of money back from SO many people going to witness the FIFA world cup, but with the Olympics, not as many people might go, and I think this is because so many people like watching it on TV in the comfort of their own homes.
ReplyDeleteOlympics is fun to watch and cost more money to construct the stadium. Olympics happen every five years one's in different country. Countries spent more and more money every Olympic game. In 2012 Olympic the London spend 14.6 billion dollars.The coming Olympic game the host city Rio is planning spend more money then London spend money for Olympics. I think the bid against each other.
ReplyDeleteHosting the Olympics is obviously a major decision for a country to make. I think it's unwise for a country that is in extreme debt to even consider hosting it, to be honest. Sure, hosting would attract tons of attention , tourism, & revenue, yet it is an opportunity cost that countries should sacrifice if they are financially unstable. Rather than try to gain some temporary benefits, countries should focus more on paying off their debt first so that they can establish more long-term economic security. A cost-benefit analysis would be helpful for interested countries to use in deciding whether their decision to host the Olympics would be rational or not. In the end, different countries will see hosting the Olympics as a higher priority than paying off their debt at this time, which could be beneficial or detrimental depending on how they make their decisions.
ReplyDeleteI agree with you about the costs, but if people are willing to pay the prices then I don't see why not just host the Olympics. Somethings are just worth the price. But if the Olympics is putting everyone through the dept then I believe that the Olympics have the right to stop supporting the events and hosting it.
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