Thursday, July 5, 2012

Why are Olympic Games always more expensive than planned?

Rare are the big sports events that stay within budget, and those that do are criticized as being too "commercial." I would suspect this is because organizers try to submit a budget that seems appealing, knowing that it is the lower end. Of course, by now everyone should realize this, especially legislators, but they may like the idea and care less about the cost and thus may be willing to go along with the mis-representation. Once additional funds are needed, legislators are either to go along anyway or they are forced to accept given all the money that was sunk into the project. And they think about the benefits that come with such events, which is actually not true (previous posts: 1, 2)

Wladimir Andreff has a better take at this than my random thoughts. In the case of the Olympic Games, he notes that the only recent games that did not suffer from a "winner's curse" by overbidding was Los Angeles 1984, which was the only candidate at the time (there was a big financial mess for Montreal 1976 that discouraged other candidates). So it would look like having competition drives candidates to pretending they need too low budgets. The recommended solution is to get rid of candidates altogether: have the games at fixed locations (one for Summer and one for Winter), as I have called for before.


Tom M said...

Is it not possible, though, that if the games were at fixed locations then there would be benefits that arise from hosting?

I suspect this is the case (part of the problem with the Olympics is the huge one-time spend on infrastructure); would other countries agree to Greece receiving the benefits from the Olympics?

That's even avoiding the problem of choosing a host nation in the first place. After all, why not France where the forerunner to the modern Olympics were held? Or Liverpool which held a Grant Olympic Festival between 1862 and 1867? Or London for the national Olympic Games at the Crystal Palace in 1866?

Not entirely sure that it would be an easy sell.

That's not counting the fact that the IOC would be stuck in one (or two) place(s)! They'd have to use the same lanes that everyone else uses when they visit London. Have a heart.

Economic Logician said...

It is pretty obvious where they should be held: Greece, where they have been invented, and Switzerland, which is neutral and is hosting the seat of the IOC.