Sunday, 24 July 2011

World cup costs and benfits

Eric Crampton at Offsetting Behaviour notes this piece about Massey University economist Sam Richardson who is taking about the benefits (or otherwise) of the rugby world cup.
Dr Richardson, who researched public spending on major sporting events for his PhD, says the $507m to $700m [in economic benefits] bandied about is a lofty and unrealistic figure.


“Maybe the Government shouldn’t talk about economic impact,” he says. “I do not think we should be using economic impact as a justification for hosting sporting events. Maybe we should forget the magic figures and focus on the long-term benefits.”

Dr Richardson is sceptical of any argument that suggests we are going to get something tangible out of hosting events. “The bottom line is yes, we are going to bring in visitors, and yes, they will spend money. We also know that the taxpayer will pick up a sizeable chunk of what is expected to be a loss of around $40 million.


He says research from the United States shows the real figure could be gained by moving the decimal point one place to the left.

“Based on the original figure, this would give us $50.7 million – there is an element of truth to that view,” he says. “But we cannot confidently say it is going to bring in so many dollars. If we are justifying government spending on these numbers, it tends to become a creative accounting exercise.”
Richarson's PhD thesis was done on, "Assessing the economic justification for government involvement in sports facilities and events in New Zealand". Perhaps the takeaway line comes from the abstract, where he writes,
Findings of the research suggest that the economic impact argument for government involvement in the construction of sports facilities and the hosting of internationally oriented events is generally not justified [...]
If only central and local government could understand this point as such an understanding it would save the taxpayers and ratepayers of New Zealand a lot of money.

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