The past week has seen numerous reports of economic joys via sport. The New South Wales government announced that the Man U-A League All Stars game brought in $16m for the NSW economy. Similar claims for the Victorian economy (around $10m) were made about the Liverpool-Melbourne Victory game played on Wednesday night at the MCG, and also the recent British Lions tour and the upcoming Ashes Test cricket series.
Last week a report in Britain found that the London 2012 Olympics boosted the UK economy by around £9.9bn.
But before we get too excited about such figures we really need to remember who gains from such claims.
Those claiming the $16m benefit are the same people who reportedly spent $3m to entice Manchester United to Sydney in the first place.
The $16m figure was reported on the Monday after the Saturday night game. That’s a pretty quick count of economic benefit. But it is not a count at all – just an estimation. In fact it is the same $16m that was suggested by the NSW government back in December last year when it announced it “had beaten interstate competitors” to host the event.
So rather than actually being a confirmation of an economic boost all that has happened is the tense has changed from “will deliver” to “delivered”. But that doesn’t make it any more real.
Never forget that these big sporting teams know they will sell out a stadium, and thus like any smart business they sell themselves to the best price. When a premier boasts of “beating” interstate competitors to get an event, she or he might as well say they won the auction.
And to justify such expense, they need to claim an economic benefit. But mostly they overstate it.
For big-time events such as the Olympics and the World Cup, the problems of estimating economic benefit are even more exaggerated. To determine the benefit you cannot merely count the production and employment that came from spending the money on building a new stadium, the athletes’ village and the tickets sold.
Clearly building a stadium (or anything really) will add value to the economy – people will be employed, money will be spent. What you have to consider is whether that benefit is greater than had that money either been spent on something else or not even spent at all.
That is tougher to estimate, and much easier to exaggerate, especially if (as is always done with Olympics) you start talking about “long-term” benefits.
One of the claims regarding the Sydney Olympics made by the NSW government in 1997 was that inbound tourism would “be a key feature of the Games and post-Games years, with the number of extra international tourists expected to reach a peak of almost 340,000 in 2001 before gradually returning over several years, towards the non-Olympics underlying trend”.
However, a study in 2007 by the Centre of Policy Studies at Monash University found that from 1997 to 2005 only in the financial year 2000-01 did foreign demand for tourism in NSW grow faster than in the rest of Australia.
Perhaps with London it will be different. Maybe there were people unaware of London prior to the Games and have since thought about travelling there. I doubt it though.
With smaller one-off events such as the Man U or Liverpool matches the benefits are easier to find – mostly they are in hotel accommodation and perhaps restaurant/takeaway sales.
However, even here we find that the benefits are overestimated.
The Super Bowl in America each year is often said to bring in around $300m to the host city. But one review of economic studies on the event found that at best around $30m in benefit could be attributed to hosting it. It concluded that “hosting the Super Bowl also had no effect on real per capita income in the host metropolitan area”.
So is spending money on sporting events a bad thing? Well it depends what you think governments should spend their money on.
Clearly spending vast sums of money on a World Cup or Olympics is harder to justify – especially if, like Brazil, the poverty levels are extreme.
But one-off events like the Man U and Liverpool matches are different.
Yes, you can argue that all spending should be on productive, utilitarian-type measures. But the reality is had the NSW and Victorian governments not stumped up some of the money, the Man U and Liverpool matches would not have happened. And it is abundantly clear from the crowd figures, the singing of “You’ll Never Walk Alone and the willingness of TV stations to buy the rights that many people are happy the events took place.
Life is not only about profit and loss. If a government is able to assist in creating enjoyment, whether through sport or an art exhibition or a fireworks display on New Year’s Eve then, within reason, I cannot say it shouldn’t be done just because the economic benefits are not great.
Sure, government spending should be justified. Does the Victorian government’s spending of $57m to host the Formula One grand prix deliver appropriate benefit?
When judging such things, we should take the economic claims with a large helping of salt, but that doesn’t mean they shouldn’t be funded. There is actually more to life than economics.
This article originally appeared on guardian.co.uk