Cost-benefit analysis alone shouldn’t guide Olympic bid decision

S​pecial to The Globe and Mail

As an economist, perhaps I should find it satisfying that every public-policy decision we make demands an economic justification. What’s the cost-benefit analysis of the project? What’s the return on investment of building a new tunnel or library? Do the economics of it make sense? We obsess over these questions.

Surely economic analysis does provide valuable guidance for policy makers. The problem is we work ourselves into analytical cul-de-sacs from which we can never return. The traditional models of estimating the impact to the country’s gross domestic product can tell us whatever we want them to tell us – they are only as good as the assumptions that go into them.

Canada – and Alberta specifically – is about to enter another analytic cul-de-sac with the question of whether taxpayers should back a bid for Calgary to host the 2026 Winter Olympics. Already the debate hinges on one question: Will it be good for the economy?

Almost universally, economists agree that hosting a sporting event is not worth the economic benefits to the host region. The costs are enormous – the cost of security alone for the 2010 Games in Vancouver rang in at almost $1-billion. Most economic cost-benefit analyses would suggest that coin this large would be much better spent elsewhere, or rebated to taxpayers, if boosting the GDP is the goal.

Yet, economic impact is not the only thing that matters. When it comes to supporting an Olympic bid, other questions should guide the debate.

The first question Canadians should ask is whether we value amateur sports and the future of the Olympic movement at all. Some would say no. But my guess is that most Canadians like cheering on our nation on a global stage. We love our Olympic athletes. Who didn’t love watching Penny Oleksiak win in Rio? Or Clara Hughes on the ice or her bike? Or Sid the Kid score the winning goal in Vancouver?

If that’s the case, Canada has a responsibility to host the Games at least occasionally. Between the Vancouver Games and 2026, there will have been eight Olympic Games – Winter and Summer. Canada is one of only a handful of countries geographically capable of hosting the Winter Games. And as the list of countries willing to bid on the Olympics diminishes, the future of the movement could be in question. Besides, why should we expect other, much poorer countries to host? Some nations are so corrupt that hosting the Games has burdened their people unfairly.

The second question that should be answered is whether the host city will find a lasting economic impact from the sports facilities left behind. Certainly some cities have found their stadiums to be enormous white elephants that sit empty and eventually crumble.

But in Calgary’s case, the venues of the 1988 Games have continued to generate economic activity. The speed-skating oval at the University of Calgary and the bobsleigh and luge track at WinSport continue to attract world cup events. None of this is accounted for in a traditional cost-benefit analysis.

The third question is whether the city in question would benefit from a boost in global profile. For Olympic cities such as London, Tokyo or Sydney, the answer is probably not.

But for small cities such as Calgary, Pyeongchang or Salt Lake City, the boost in profile could be enormous. You can’t buy this kind of tourism promotion.

Economic studies and cost-benefit analysis can be valuable tools for policy makers. But relying too heavily on an economic impact study – whether it is positive or negative – can result in a wrong decision. Other factors need to be taken into account as well.

Do Canadians care about the future of the Olympic Games? Can we derive value for decades to come from the sporting venues? Will we benefit from a boosted global profile? If the answer to even one of these questions is yes, the strict economic analysis alone should not be our guide.