Nothing is quite as winner-takes-all as sport
This round of Olympic Games is over so in the lacuna left behind by live-screened sport, we can take the time to muse on the economic meaning of the quadrennial sportfest.
An obvious economic question to ask is “was it worth it” in terms of profit for the host city? The economic return of organising the Olympics is a well-examined topic, and the answer is “almost certainly not”.
The economist Andrew Zimbalist points out that this is what economic theory predicts, given how the games are awarded: auctions lead to the “winner’s curse” since the more a bidder overestimates the value of the thing being sold, the more he or she is likely to have put in the winning bid.
Zimbalist goes into detail about the latest games in Rio de Janeiro, and finds both “pointless and disruptive infrastructure” and “human cost . . . the Rio government has evicted more than 77,000 residents from shanty towns or favelas” since the games were awarded.
This is par for the course. Tim Harford of the Financial Times went down the list of unprofitable recent Olympics this summer. But the Olympics could be seen as a consumption good as well as an investment for the host city and nation. So Harford gamely looks at hard economic studies of Olympic value for money as far as having a good time goes. He reports that “the central finding . . . is much as one might expect: Londoners really enjoyed hosting the  Olympics but the buzz did not last long”.
Any effect on Londoners or Britons from the London Olympics is, however, surely confounded by the British sporting successes at those games, which brings us to the even better results for Team GB in Rio.
Here, too, the “was it worth it” question applies because it is widely appreciated that the second-place in the medals table was the result of careful investment. The BBC has a fascinating feature on just how obsessively UK sporting institutions have chased victory.
This includes a step-change in funding — well beyond a tenfold increase since the mid-1990s when Britain set up the National Lottery and a portion of its profits were dedicated to sport — but much more than cash. The Institute for Government has praised the gold-standard governance features of UK Sport as playing a part in the Rio success. Britain has also invested a lot in improving coaches or importing good ones from abroad. Together, funding, governance and coaching have allowed the UK to go to extraordinary lengths to eke out margins of victory as the BBC reports — including optimising sleep environments and, believe it or not, pubic hair care advice.
Team GB’s success does not deserve only superlatives. As always, bigger countries win more often, and when measuring medals per population, Britain drops from second to tenth place (even lower if medal-winning micro-states are included), behind Jamaica, New Zealand, Croatia and Denmark, among others. But the UK can fairly claim to be the best-performing largish country in Rio.
That has triggered reactions from other large European countries, which feature a deal of envy and sour grapes. Poland wants to emulate Britain’s approach; others lament the country’s “brutal and heartless” pursuit of victory, which funds sports at which British athletes are the most competitive to the detriment of those that might be more popular but further from the Olympic podium.
So is Britain’s approach worth it? It presumably depends on what sport, and the money that goes into it, is for.
If medals are the goal, the UK method works. And it may work in other fields, too. Owen Barder argues that those involved in economic development policy can learn from the UK approach to sport, which shows how “results-based funding can significantly increase — perhaps by more than an order of magnitude — the impact of a limited budget”.
The obsession with incremental improvements and the empiricism it involves, Barder thinks, can also bear fruit in economic development. The Institute for Government, in contrast, cautions that analogies to other policy fields are “a bit tortured. There are few other areas of public-sector activity which have such licence or where it is desirable to focus so ruthlessly”.
Indeed, there are important ways in which sport prowess differs from other endeavours. Each gold medal may count the same in the tallies but different sports involve different types of excellence. Cullen Roche points out that we tend to be more awed by those dominating the sprinting events, such as Usain Bolt on the track or Michael Phelps in the pool, whereas winning in long-haul or multi-sport disciplines, such as marathon distances or decathlon, is in reality a superior achievement — and more like what it takes to be successful in fields such as investing.
Much is said about the economy becoming more winner-takes-all but it is still nothing like sport, in which the winner literally takes all (or at least gold).
That limits the transferability of the UK’s successful sport policy to economic and industrial policy, which should be measured by its productivity, not about whether it “wins” against others.
And there is even a built-in vulnerability to the method in sport for in any true winner-takes-all sphere of society, resources that everyone puts into getting ahead are ultimately wasted. The more others emulate Britain’s recipe, in other words, the less Britain will get back for its efforts. If the UK wants to obsess over podium places, it had better hope others will not.
- Could India leapfrog the world and become the first country to get rid of cash? Yes, says Mihir Sharma.
- Suresh Naidu and Noam Yuchtman study the US labour market during the Gilded Age, and find lessons to draw for today.
- The post-referendum summer has confounded observers of the British economy: a UK “economic surprise” index has hit a three-year high.
Get alerts on Olympic Games when a new story is published