Sporting events pay for themselves in happiness, not money

The idea of Ireland hosting Euro 2020 was mooted by the FAI last year. Ireland has also been suggested as a host for the 2019 Rugby World Cup.

The deputy Lord Mayor of Cork recently added to the debate, suggesting Cork could be a host city for either of the tournaments.

From a sporting perspective it’s hard to disagree. The problem with what on the surface, appears to be a great idea is money. A longstanding myth surrounding the hosting of major sporting events from the World Cup to the Olympic Games, is that they make good economic sense. “The event will pay for itself,” we are told.

While the sporting association running these events do very well financially, the host country is almost never financially better off.

This economic myth is sold under the guise of job creation and an influx of tourists eager to spend in the host country; the Keynesian multiplier in full swing. Sadly, it’s not that simple.

The Keynesian multiplier works when the initial investment in the economy is dwarfed by subsequent spending, generated from that initial investment. Major international sporting events do the opposite. The initial investment dwarfs anything that follows.! This is not the Keynesian multiplier but a bad investment.

Economists Robert Baade and Stefan Szymanski were among the first to address this issue. A study by Baade during the 1994 World Cup in the US found no evidence of faster economic growth in host cities. Two years later, less than 100,000 foreign spectators travelled to England to watch Euro 96.

The Greek crisis is grounded in appalling mismanagement of public finances. The 2004 Athens Olympics is a case in point. The event cost around €9bn to host and generated revenue of less than €1.8bn. Annual tourist numbers actual decreased in the Olympic year. Sydney, the host city of the 2000 Olympics, reports a similar trend.

This summer all eyes turned to London. The city had been awarded the Games seven years earlier and predicted the entire Olympics would cost £2bn-£3bn. By 2007, this had increased to £9bn. The total cost is now estimated at £11.9bn and rising.

Szymanski predicts that the London Games will pay for themselves if ‘happiness’ is taken into account. Hosting the 2012 Games could be worth as much as £1,600 per British worker per month. In other words, the average British employee would have to receive a wage increase of £400 per week to make them as happy as hosting the 2012 Olympic Games has made them.

If Cork is to be promoted as a destination for a major sporting event, let’s be clear about why it should be given this honour — to make the people of Cork happy!

No doubt the cost will overrun and the State will be left to pick up the tab, but the happiness it will generate will be worth billions of euro to citizens of the city.

Robbie Butler lectures in economics at University College Cork.

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