by Declan Jordan
The issue of governments bidding for large sports events comes up again and again. It's fair to say the consensus view among economists is that these bidding processes are inefficient and wasteful. Governments engage in rent-seeking behaviour to capture the rights that are in the monopoly control of the large sports bodies such as the International Olympic Committee, FIFA, UEFA or World Rugby. There is also the spectre of corruption associated with almost all decisions on hosts of large sports tournaments.
Ireland has committed to bidding for the Rugby World Cup in 2023.There have been several posts on this blog relating to that bid - which are summarised here. Despite the consensus view that countries do not benefit financially from hosting these mega sports events, it is still remarkable that many countries still seek to host them. In Ireland's case one of the primary reasons put forward for bringing the Rugby World Cup is that it would provide a substantial boost to tourist numbers. (It's worth noting that the assumptions and figures are not publicly available).
A new paper in Applied Economics by Heather Mitchell and Mark Ferguson Stewart called "What should you pay to host a party?" (requires a subscription), considers the relationship between tourism and three football World Cups and five Olympic Game. The authors find very little positive effect. This is worth bearing in mind for the Irish bid.
The paper suggests another reason why governments may be willing to support bids for large sports events and this is based on significant evidence that these events are associated with greater happiness levels in the host country. The paper argues that governments are seeking to generate a feel good factor that can be turned to political gain. There may be something in this but it is a gamble because bids are made many years in advance of hosting an event and governments may be providing a boost to future governments that may not include their own parties. Admittedly this is only a problem in democracies.
Mitchell and Stewart also suggest that the happiness of the population is also based on ignorance. They say:
Ireland has committed to bidding for the Rugby World Cup in 2023.There have been several posts on this blog relating to that bid - which are summarised here. Despite the consensus view that countries do not benefit financially from hosting these mega sports events, it is still remarkable that many countries still seek to host them. In Ireland's case one of the primary reasons put forward for bringing the Rugby World Cup is that it would provide a substantial boost to tourist numbers. (It's worth noting that the assumptions and figures are not publicly available).
A new paper in Applied Economics by Heather Mitchell and Mark Ferguson Stewart called "What should you pay to host a party?" (requires a subscription), considers the relationship between tourism and three football World Cups and five Olympic Game. The authors find very little positive effect. This is worth bearing in mind for the Irish bid.
The paper suggests another reason why governments may be willing to support bids for large sports events and this is based on significant evidence that these events are associated with greater happiness levels in the host country. The paper argues that governments are seeking to generate a feel good factor that can be turned to political gain. There may be something in this but it is a gamble because bids are made many years in advance of hosting an event and governments may be providing a boost to future governments that may not include their own parties. Admittedly this is only a problem in democracies.
Mitchell and Stewart also suggest that the happiness of the population is also based on ignorance. They say:
Although people feel happy when hosting these events, this is probably because they are unaware of, and certainly do not feel personally responsible for, the cost of both acquiring and putting on the event. Part of the reason for this is because the bidding costs are usually concealed from the public; and this is also often the case with the full cost of staging the event.
As a potential solution to this rational ignorance among voters and to address the inefficiencies in the bidding process, the paper recommends that large sporting events would be allocated using an auction. This would mean citizens would be able to see clearly how much hosting a sporting event will cost. This is not a bad idea but is unlikely to be welcomed by sporting bodies. The payments to them as part of hosting a bid (the monopoly rent) is not very transparent and they would not like it to be. The payment to the sporting body may also be only a (small) part of the total cost of hosting an event, with infrastructure investment (a lot on white elephants) probably accounting for a greater proportion of the cost. It means citizens are just as likely to remain rationally ignorant of the cost they are paying for their sporting buzz.
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