At his Offsetting Behaviour blog Eric offers a quick summary of what he said on Jim Mora's Panel at Radio NZ yesterday (Eric comes in at approx 2:45). He writes:
I covered a few points:What we have to keep in mind is that the economics of funding sporting events, be they boxing matches, the rugby world cup, the Olympics, the America's Cup or whatever, are generally bad. The returns from such funding do not justify spending taxpayer money on such events, no matter what some ministers may claim.
- A boxing match is a commercial endeavour. If investors thought it would be more profitable here than it would be hosted elsewhere, they’d be putting in private money in anticipation of that return.
- Government funding to bring it here then only makes sense if:
- It would not have happened here unless it were funded (likely); but more critically,
- There is a real benefit to New Zealand in hosting the match here that would not be enjoyed were it hosted elsewhere; and, further,
- That this benefit, relative to the government’s outlay, is bigger than the government can get from spending the money elsewhere, or from leaving it in taxpayers’ pockets in the first place.
- Governments love subsidising big sporting events. They talk a lot about the extra spending that tourists coming to events bring with them, but the kinds of studies backing these things up are usually pretty flawed.
- First, they’ll count spending by visitors rather than profits on spending by visitors. Where there are costs involved in providing services to visitors, those need to be brought into the analysis.
- Second, they’ll assume that the visits would not have happened but for the event, and that the visits that do happen do not displace other visits. Both of these are often wrong. People who had always planned on visiting New Zealand and who like the event might shift the timing of a visit to coincide with the event. And other people who could only visit New Zealand during the time of the event might be put off: hotels get booked out for big events, for example, and rental caravans can be hard to find during things like the Lions’ tour. Just looking at the spike of visits during a big international event isn’t enough. You also have to account for displacement.
- Finally, none of this much enters into the picture for a boxing match which would draw fewer tourists in than a big sporting tour anyway.
- Minister Joyce noted that he’d hope that the government might be paid back if the match turned a profit. If I were operating under that kind of contract, I’d be pretty sure to pay myself and staff bonuses big enough to make sure there weren’t profits, or to buy my supplies from a related company at inflated prices to make sure there weren’t profits to pay back. But maybe the companies with whom the government strikes these kinds of deals are more publicly spirited.