Sun, Aug 26, 2012 - Page 9 News List

The Olympics and economics: a close tie

By Robert Skidelsky

As Olympic mania swept the world in recent weeks, it transported the host country, Great Britain, to a rare display of public exultation. Indeed, the successes of “Team GB” produced an upsurge of patriotic rejoicing akin to victory in war. Britain finished third in the gold medal count, behind the US and China, much larger countries, but ahead of Russia, which traditionally competes with the US for first place.

So, what is the secret of Olympic success? The acquisition of medals, precisely because it gives so much satisfaction, has become the object of scientific inquiry and national endeavor.

Before the 2012 Games, the Financial Times combined four economic models to produce the following “consensus” prediction of gold medals (the actual results are in brackets): 1. US, 39 (46); 2. China, 37 (38); 3. Great Britain, 24 (29); 4. Russia, 12 (24); 5. South Korea, 12 (13); and 6. Germany, 9 (11). The gold medal rankings and overall medal placement (gold, silver, and bronze) were correctly predicted in all cases.

The most striking finding is that the medal count can be predicted with great accuracy from four key variables: population, GDP per capita, past performance, and host status. Everything else — different training structures, better equipment, and so forth — is pretty much noise.

The impact of population and GDP is obvious: A large population increases the chance that a country will have athletes with the natural talent to win medals, and a high GDP means that it will have the money to invest in the infrastructure and training needed to develop medal-winning athletes.

Past performance is also important: The visibility and prestige of a sport increases after Olympic success, as does funding. Medals attract money; failure results in cuts.

Finally, the “home advantage” includes not just the benefit of morale and the opportunity to train in the actual Olympic venues, but also the funding boost that host status brings. In 2004, British athletes received £70 million (US$110 million). By 2008, after London was awarded the 2012 Games, the total was £245 million, and stood at £264 million this year.

Over the past 10 Olympics, the host country has won 54 percent more medals on average than when it was not the host. Hosting the Olympics boosts performance before the hosted Games, and has effects that outlast them.

Some sports are more sensitive to income and host-nation effects than others. Equestrianism, sailing, cycling and swimming, for example, are far more expensive than running, and this reduces the participation of low-income countries. It is almost impossible for some countries to produce medal-winning athletes in some sports — Ethiopia has only one swimming pool per six million people.

Sometimes, poor countries are priced out of a sport. India was historically strong at field hockey, winning almost all of the gold medals between 1928 and 1968, but, since the Games switched from grass to expensive synthetic turf, the Indians have won just one field hockey medal. Some of the sports at which Britain has done particularly well, like cycling and rowing, are most highly influenced by income and host effects.

Brazil can therefore expect to improve considerably on its modest haul (15 medals) and 21st-place finish when it hosts the 2016 Games.

As for the others, the formula for success is fairly simple: Select your potentially winning sports, pick the potential medalists in those sports, pour money into them and stick with both the sports and the players until the medals roll in.

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