The Olympics and the Cost Benefit Analysis
The Olympics are world events that are filled with pomp and grandiose demonstration of a countries abilities in a bid to win over direct investments, tourism and world status among others. However, relative to the cost benefit analysis, there is a lot to be desired and explains why most of the nations are now not as willing to take part in the bidding process (Rosenblum, 2009). Robert Baade and Victor Matheson, bring out the costs and benefits associated with the Olympics and it is easy to see why the benefits do not matchup with the capital cost investments that go before hand, from the time the cities bid for their chances to excess in infrastructure investments that they have to make n preparation (Baade & Matheson, 2016).
The Cost of Hosting the Olympics
The cost of hosting the Olympics far outstrip the benefits to accruing from the same. This is evident first from the non-trivial costs associated with the bidding process. Countries have to spend billions of dollars in reference to architectural renderings, marketing and the planning process. It is interesting to note that, the international Olympics committee, requires that for countries to win the bid, they have to sign into contract their willingness and ability to build the amenities (Baade & Matheson, 2016). These include, opening up the roads, the stadiums to include the tracks, improve their airports, upgrade their hotel capacities and improve on elements such as security for the visiting nations, sports tourists, athletes, officials and dignitaries (Mobilian, 2016). More importantly, the bids are won according to the willingness of the bidders to display their ability to go overboard with their promised spending. This can explain why the likes of Russia and China went overboard in the most recent Olympics, spending more than $45 billion dollars while the average cost is between $5 and 15 billion dollars (Baade & Matheson, 2016).
The Benefits of Hosting the Olympics
The benefits of hosting of hosting the Olympics as not as clear as the costs. For instance some of the ways that the host cities get to recoup their costs is through ticketing, sponsorships and local committees getting the rights to broadcast the sporting events. Most of the benefits are far-fetched and in most of the cases these are the most emphasize, such as increased tourism, improvements on the infrastructure such as roads, airports, railway stations and hotels (Mobilian, 2016). Historically, very few cities have had the luxury of gaining from their investments after the Olympics are over. Barcelona for example was able to rise above the shadows of the neighboring Madrid after hosting the 1992 Olympics as a tourist destination (Baade & Matheson, 2016). This is also the case with a city such as Utah which saw an increase after the 2002 events (Baade & Matheson, 2016). Los Angeles also gainfully benefited from the events, but in their case they had a different approach to the spending right from the bidding process. Other cities have not been as lucky, such as Lillehammer in 1994 and Calgary 1984 (Baade & Matheson, 2016).
The Need for a New Approach
For the Olympics events to gainfully benefit the host cities and respective nations, there is need to approach the events as Los Angeles did in their 1984 events (Baade & Matheson, 2016). The city insisted to the International Olympics committee that they would host the event, but they would only use the existing infrastructure with minor upgrades. This meant that they did not go deep into infrastructural costs, since they only needed to upgrade the existing ones. This is a crucial element to consider especially where the cities in question have already achieved their maximum employment levels the cost will only be at the expense of other sectors in the economy. This makes hosting the Olympics an expensive affair that rarely brings back return on the hefty investments (Rosenblum, 2009).
References
Baade, R., & Matheson, V. (2016). Going for the Gold: The Economics of the Olympics. Journal Of Economic Perspectives, 30(2), 201-218. doi: 10.1257/jep.30.2.201
Mobilian, Z. (2016). Te Economics of Hosting the Olympic Games: Te Miscalculation of Cost-Beneft Analyses and Why Cities Continue to Bid [Ebook]. CMC Senior Teses. Retrieved from http://. htp://scholarship.claremont.edu/cmc_theses/1264
Rosenblum, S. (2009). The Impact of the Summer Olympics on its Host City: The Costs Outweigh the Tangible Benefits [Ebook]. Retrieved from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=2ahUKEwi2sdnV7YDfAhVHJlAKHXIQDpsQFjABegQICRAC&url=https%3A%2F%2Fdigitalcommons.bryant.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D1004%26context%3Dhonors_history&usg=AOvVaw2KayivBag-kojwad3jUXXj
