Monday, March 01, 2010

Olympic post-mortem 

Personally, less viewing was more fun. It was a shame though, to see "home-cooking" in the Men's 500m short-track race, where a Canadian judge made a marginal call to disqualify my countryman and elevate his onto the podium. If that's what "own the podium" means, the podium's not worth owning. So I'll join England's temporarily pro-American Simon Barnes in sending a somewhat sardonic "Well done, Canada" to our neighbors up North. But why wasn't there an English judge available?

Here at TSE in the past few weeks, we've been riffing on the psychological impact of athletic competition. At the Montreal Gazette, Randy Boswell applys this thinking to his country in "Historic Olympics a nation-building milestone for Canada: experts." Wow. I thought Canada already had a formidable nation? On second thought, perhaps that short track judge has a day job with the Canadian Security Intelligence Service. More seriously, Boswell's story does have plenty of quotes from people who are either measuring or somehow attuned to Canadian psychology at the moment. My money though, is on Montreal historian Jack Jedwab who says "if you ask most Canadians today what they remember about Calgary [ed: site of the 1988 Winter Games], I don’t know that they’ll be able to tell you a lot.”

Back stateside, the impeccably named Casey Curlin focuses on the Olympics' impact "beyond Vancouver:" everything from a boom in orthodontics in Korea to the fallout in Russia from a disappointing haul of medals. "The headlines in Russia were brutal, 'Red Machine Crashes into Maple Tree,' 'Nightmare in Vancouver'," states Curlin. What strikes me as interesting in this case is that perceived Olympic failure is tied directly to Russia's Sports Minister, with the political opposition calling for President Medvedev to take action. In contrast, the U.S. went into these games with an Olympic organization that was universally disliked and apparently dysfunctional, yet somehow American athletes won more medals than ever. Hooray for decentralization!! I'm glad that the U.S. doesn't have a Sports Minister. But I doubt that Medvedev would consider abolishing the Russian office, even for a moment.

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Friday, February 19, 2010

Vancouver Olympic Blitz 

Paragraph 4 of this from the Sports Business Daily is priceless.

Can you say substitution effect? Or, as Craig Depken calls this particular example, the "skedaddle effect".

Thanks to Craig for alerting me to this article. Here is what he had to say at Division of Labor.

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Saturday, February 13, 2010

Let it snow, let it snow, let it snow 

The Room for Debate blog at the New York Times runs a series of short opinion pieces today about the lack of snow in Vancouver at the opening of the Winter Games. Here's my contribution.
Economists have shown time and time again that the rosy estimates of economic benefits put forward by sports boosters are at odds with actual economic data from cities that host mega-events like the Olympics and the Super Bowl.

In the face of that evidence, the boosters often turn to the potential “indirect” benefits to be reaped. For the Olympics, the claim is that the games can serve as a huge advertisement for the host city. But of course, the image left isn’t always positive.

The bribery scandal that surrounded Salt Lake City’s 2002 Winter Olympics bid sullied the area’s squeaky clean image. The terrorist incidents at the 1972 and 1996 Summer Olympics cast their host cities in a bad light. Even successful events may do little to promote a city. The 2005 Super Bowl in Jacksonville, Fla. went off without a hitch, but many visitors left the city with the impression that it had little to offer tourists.

Vancouver is an appealing setting. But the warm weather and last minute scramble for snow might well damage perceptions of the city as a reliable winter sports destination. (Why book a ski vacation there when snow might be unpredictable?) That would be a shame, but it wouldn’t be the first time that a big event had a negative effect on a city’s image.

Of course, yesterday's tragic death of luge athlete Nodar Kumaritashvili only further decreases the chance that people will come away with a positive image of Vancouver after the games.

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Monday, February 08, 2010

It's all Greek to Economists 

Financial turmoil has roiled Greece over the past several weeks. There is real concern that budget deficits in that country will lead to its government defaulting on its debt and in the worst-case scenario the potential unraveling of euro currency itself. So, how did Greece find itself in such dire straights? The 2004 Olympics are a large but overlooked piece of the puzzle.

Greece's federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.

But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.

Of course, the Olympics didn't usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.

While its hard to place all of the blame for the current Greek meltdown on the Olympics, the lingering debts from the Games are undoubtedly exacerbating an already difficult situation.

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Monday, January 18, 2010

Gold Medals, Red Ink: NBC to Lose $200 Million on Games 

A number of media outlets are reporting that NBC will lose about $200 million dollars on the 2010 Vancouver Olympic Games broadcast. The network paid $2.2 billion of the US broadcast rights to the 2008 and 2010 games, and a reported $820 million of that was for the Winter Games. However, this loss is based on a comparison of the amount paid for the broadcast rights fees compared to the advertising revenues for the Games. The calculation does not take into account any spillover benefits that NBC gains from broadcasting the Games. For example, if more people watch non-Olympic related programming on NBC, and the network is able to charge higher ad fees for those programs, then broadcasting the Games produces additional revenues for months or years after the Games end.

Similar claims have been made in the past about networks losing money on broadcast rights for other sporting events, like the NCAA Men's Basketball Tournament and the National Football League. When interpreting claims of large losses by networks on sports broadcast rights deals, it is important to keep in mind that broadcasting sports events like the Olympic Games adds more than the revenues from advertising during the Games to the bottom line of networks.

Hat tip to Nick at the IJSF Blog.

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Thursday, November 05, 2009

Tour Operators and Mega-events 

The displacement of normal business by events such as the Super Bowl or the Olympics has been a staple issue in academic economists' analyses of economic impact. These warnings from the ivory tower are typically been derided by local commercial spokesman, as if we are imagining things.

Well, here's a change of pace. Today comes news from the European Tour Operators Association, who claim that the London Olympics will have a measurable negative impact on their business. From BBC News:
The ETOA report, which said benefits of 2012 Games were "wholly illusory", looked at tourism figures for the past six Olympics, including Athens in 2004 and Sydney in 2000.

Whilst some of the events saw a peak in demand during the games, all saw a major disruption to their normal tourism market and none showed any obvious signs of tourism growth.

Beijing, the last city to host the Olympics, showed international visitor arrivals plummeted by 30% in the month before the games, compared with the previous year.

In the months after the games, the tourism slump continued with international arrivals down by more than 20%.

Beijing fared considerably worse than the rest of China in 2008, which was not a strong year in general for tourism in the Asia-Pacific region.

Following the Sydney 2000 Olympics, the city's tourism lost "significant ground" to other Australian and New Zealand cities, it added.

"We have yet to have a games where tourism has not been disrupted, and disrupted in a way that causes real harm," said ETOA executive director Tom Jenkins.

"Even in the case of Athens, where they carefully restricted new capacity, there were considerable losses before and after the games both in the capital and throughout Greece," he added.
How about that!

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Monday, October 05, 2009

Monday Potpourri: Olympic Edition 

  1. Rio was selected to host the 2016 Summer Olympic Games. Despite lobbying by President Obama, First Lady Obama, and mega-star Oprah, Chicago's bid was eliminated in the first round of voting. The aftermath of the decision has been quite interesting. President Obama's critics immediately seized this opportunity to criticize the president. The blame game started immediately in the USOC, and the fall out there may include a purge of executives. In my opinion, now would be a good time to re-examine the whole Olympic bid process. The IOC awards the Games in a way that extracts maximum rents from the host city and country. Chicago reportedly spend $50 million on their bid, and Tokyo and Madrid probably spent that much. The money for the Chicago bid came from donations, but that doesn't mean that there was no opportunity cost. Why do we continue to allow the IOC to operate this kind of rent extraction scheme? Here are two Canadian takes (link two) on the bid process.
  2. Meanwhile, down in Rio, the first estimate of the cost of new facilities for the 2016 games: $1.1 billion. I'm sure Brazil really needs a billion dollars worth of oversized new sports venues.
  3. Speaking of initial cost estimates, TSE co-blogger Stefan Szymanski points out that losing the Olympic bid may not be such a bad thing, based on recent events in London. Stefan does a great job of shooting down a number of myths about hosting the Olympic Games.
  4. Finally, in an interesting development, the IOC is going to set up a program to monitor betting on Olympic events to help detect any fixing. Good to see that the IOC recognizes the power of prediction markets.

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Thursday, March 26, 2009

The Economy and the Olympics 

There's an article on the front page of today's Denver Post about the effect of the stumbling economy on the Olympics:

Although the Olympic flame was extinguished just a little more than seven months ago, already there are some who wonder whether the 2008 Summer Games in Beijing marked the end of the Olympics as we've come to know them.

"The economic climate has got to be taken into consideration; you just aren't going to have the huge spectacle that Beijing was," said Andrew Bacchus of United Kingdom Trade and Investment, one of the groups responsible for securing financing for the 2012 Games in London.

In these days of global financial uncertainty, it's hard to envision any sports extravaganza approaching last summer's — in its over-the-top theater or the estimated $45 billion that China shelled out.

It's not necessarily the worst thing in the word if you believe that the Olympic Committee is mostly a rent-seeking organization. If you believe in substantial positive externalities generated by the Olympics, it's not so good. I count myself as mostly being in the first group, although I don't deny there is some degree of "publicness" associated with big-time sports. But if anything, the current economy is forcing people to remember that thing we economists talk about until we're blue in the face: we face trade-offs all the time.

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Tuesday, February 24, 2009

Olympic bust 

Some choice quotes from a fascinating article by Barbara Demick in the LA Times:
Reporting from Beijing -- "Empty," says Jack Rodman, an expert in distressed real estate, as he points from the window of his 40th-floor office toward a silver-skinned prism rising out of the Beijing skyline.

"Beautiful building, but not a single tenant.

"Completely empty.


So goes the refrain as his finger skips from building to building, each flashier than the next, and few of them more than barely occupied.

...The government spent $43 billion for the Olympics, nearly three times as much as any other host city. But many of the venues proved too big, too expensive and more photogenic than practical.

...The National Stadium, known as the Bird's Nest, has only one event scheduled for this year: a performance of the opera "Turandot" on Aug. 8, the one-year anniversary of the Olympic opening ceremony. China's leading soccer club backed out of a deal to play there, saying it would be an embarrassment to use a 91,000-seat stadium for games that ordinarily attract only 10,000 spectators.

The venue, which costs $9 million a year to maintain, is expected to be turned into a shopping mall in several years, its owners announced last month.

A baseball stadium that opened last spring with an exhibition game between the Dodgers and the San Diego Padres, is being demolished. Its owner says it also will use the land for a shopping mall.
In sum, waste on a massive scale. Thanks to Kevin Stovall for the link.

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Thursday, January 22, 2009

More Olympic Bailouts 

From The Times:
Ministers have approved a £461 million public bail-out of the London Olympics after private investment in two of the biggest venues on the East London site failed to materialise.

It will be used to pay for ongoing construction of the £900 million Athletes’ Village and a £355 million media centre, which is now a fully nationalised project. Both were due to run out of money in March after the credit crisis and falling property prices scared off commercial backers.

...The £461 million released today breaks down to £326 million for the Village, which will be turned into up to 3,000 homes after the Games, and £135 million for the media centre, which will be converted into office space.

It is likely that the taxpayer will have to cover the full cost of building the Village as well as the media centre. Ministers hope to recoup the money by selling off the flats and offices from 2013. Up to half the flats will be affordable housing and could be funded by registered social landlords.
Registered social landlords? These seem likely, to me at least, to be a drain on the public purse for decades.

Part of a continuing series. EclectEcon predicted this at TSE three years ago! No doubt we'll see more.

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Wednesday, January 07, 2009

Mega Event Update: Beijing Bird's Nest Stadium 

Stop me if you have heard this one before...

Remember all those claims about the continuing benefits that flow from the lavish sports facilities constructed for mega sporting events for years after the actual event? As example #1, consider the National "Bird's Nest" Stadium in Beijing, host to the opening and closing ceremonies of the 2008 Olympic Games. There were supposed to be a huge number of events there following the Beijing Games. The Wikipedia page even claims: "A shopping mall and a hotel are planned to be constructed to increase use of the stadium, which will host football events after the Olympics."

Ever wonder if they actually materialize? According to a recent article in the Telegraph, the answer is clearly "no, they don't." According to the article:

Three months after the end of the games, new figures show the "Olympic Effect" has been short-lived and hotels are empty, industrial output has fallen and the streets are quiet.

But even the biggest single symbol of the modern rise of China, the "Bird's Nest" National Stadium, stands forlorn, largely unused except for a shrinking number of tourists.

I am shocked, shocked I say! The stadium is reportedly too big for Beijing's main soccer team. I guess they could not see that coming. According to a stadium employee quoted in the article "There was a primary school athletics contest here, and I've heard they want to arrange a concert for next year." So there you have it. In August, Usain Bolt electrifies the world; in November, pee-wee football. That's the economics of mega events in a nutshell.

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Tuesday, December 02, 2008

Policy Makers and Economic Analysis 

The Bush administration has earned the reputation for ignoring policy advice from economists, for better or for worse. From the sound of this story, Bush's crew have company across the pond, in England. In this case, the issue is whether there is an economic case for hosting the Olympics. Our own Stefan Szymanski can count himself among those whose studied opinion was solicited but ultimately ignored:
Ministers ignored evidence from their own experts who found scant social or economic justification for bidding for the 2012 Olympics, The Times has learnt.

A 250-page strategy document, signed off in December 2002 by Tony Blair as Prime Minister but selectively distributed, found little support for the claim that the Games would produce significant economic returns or more people playing sport.

The Game Plan document, whose findings are not widely known even in sport’s upper echelons, has emerged as Games chiefs meet today to agree funding cuts for Olympic sports such as basketball and hockey.

...Researched for nearly a year by ten experts, Game Plan was intended as a framework for sports policy for the next decade – in particular, whether Britain should bid for events such as the Olympics and the World Cup.

Instead it was quietly forgotten when it did not present a strong case for a bid. Civil servants watered down the findings but the final draft was still unhelpful to bid champions within the Government, an unnamed source told The Times.

“This was a robust report that showed why we should not bid for the Olympics but it was an inconvenient truth. Almost the moment the ink was dry, there was a volte-face,” said Stefan Szymanski, a professor at Cass Business School.

“The justification for bidding should have been based on evidence placed in the public domain. Instead key evidence was suppressed or ignored.”

The revelations raise the question of why ministers backed a bid citing reasons dismissed by their own experts.
Our politicians are disturbingly consistent on this point -- ignoring the advice of the very experts whose opinions they solicit. What a strange old game!

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Sunday, November 16, 2008

Olympic bailouts 

The developers who are Vancouver's partners in the 2010 Winter Games reportedly have ... financial issues. UBC's Professor Somerville sums up the implications nicely, I think: "We’re looking at a very real potential here for some levels of government to pony up more money. The alternative would be the Olympic tent city." The bailout business continues to boom.

Meanwhile, the cost of the 2012 games in London has escalated from £3.4 billion when they were awarded the bid to £10.3 billion at present. Private financing has gone the other direction however, and half of the government's £1 billion contingency fund has already been tapped.

Financial headaches are doubtless behind this statement from Olympic Minister Tessa Jowell last week: "Had we known what we know now, would we have bid for the Olympics? Almost certainly not." Jowell has since "clarified" her statement, going Keynesian and all that. I'm sure the British people are as happy as a hog in a wallow over the obligation to spend lavishly on Olympic infrastructure.

One thing that both the Vancouver and London plans have in common is "legacy development." More specifically, the idea seems to be to avoid building the proverbial white elephants, and instead leave behind assets that have value to private developers. This is an intriguing possibility, but it could be very, very expensive in the end.

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Monday, November 03, 2008

The Guardian on upcoming mega-events 

These are rants, but interesting ones. The first swing is at the 2010 Fifa World Cup in South Africa:
In my home city, Cape Town, for instance, we are putting up an enormous and ruinously expensive 68,000 seat German-designed super venue. The stadium already dwarfs the commonage and low-rise flatland of its well-to-do Green Point neighbourhood, and it's not even half-finished. At a current estimate of 4.5bn rand (£250m), it's already 50% over budget, but it's early days.

Not only is the stadium far too big for a city where even premier league matches struggle to attract 15,000 spectators, but most of those spectators live far away in the dusty townships of the Cape Flats.

...All in all, South Africans will be forking out for five brand new super-stadia as well as elaborate extensions and upgrades to five existing ones.

We're also spending money we don't have on bigger airports, new airports, more roads and a very expensive high-speed train which may or may not be ready in time to whisk visiting fans from Johannesburg's revamped or Tambo Airport to the swanky hotel and shopping district of Sandton.

And because our national electricity provider has unexpectedly run out of capacity, we are importing brand new diesel-fired back-up generators, and extra diesel, just to make sure the floodlights stay on.
Next up, Simon Jenkins on the 2012 Olympics in London:
First cut the crap. Stop talking about legacy, which never happens. Every Olympian knows that legacy is grass growing over defunct velodromes, cracked concourses and ghost villages. Not a penny of the £9bn is going on sport - that is extra - but on buildings, fees and salaries. The head of UK Sport, John Steele, has already declared that his own demand for money "is investment directed at delivering medal-winning performances". Whatever happened to just playing the game?

[Gordon] Brown was vociferous in attacking City bonuses. What about his Olympics gravy train? At the last count there were 200 officials in the Olympic Development Authority. The lowest-paid member of its management team is on £243,000, and the highest, David Higgins, £624,000.

They are apparently not up to the job and need a consultancy firm, CLM, with a further 300 staff, to help manage the project, at an astonishing fee of £400m over four years. This firm had the effrontery last year to charge (the taxpayer) a further £10m in staff bonuses on a project that has tripled in expense.

A quite separate body is the London Organising Committee of the Olympic Games, whose head is paid £557,000 and whose members get a reported £1,000 just for attending a meeting. How can Brown insult City bankers when allowing this sort of greed to continue?
These can't possibly be annual salaries, can they Nick? Regardless, Jenkins has more:
Simply managing the project is now budgeted to cost £647m, up from £16m in 2005 - more than will be spent on supporting any Olympic athletes.

As totem of this racket, 3,000 limousines are being obtained to ferry Olympics officials to Stratford up a special red-light free "Zil lane" on the Mile End Road. The lane will be banned even to athletes' cars. Yet these same officials demanded that London ratepayers build them a unique train service, the Javelin, from St Pancras, which they are now too grand to use. It is beyond satire.

The 2012 project has ballooned into a giant bureaucracy with a small sporting festival attached, and is beyond ministerial control. Tessa Jowell [the Olympics Minister(!)] can only chant her Olympic motto, that in this business she "spends to save".

The world's greatest white elephant, the "sustainable" £500m athletics stadium, should be stopped now. It will stand empty after the games since nobody wants it. As Building Design magazine said a year ago, "There is nothing sustainable about building an 80,000-seat stadium for less than two months' use" at the highest cost per seat in the world.
Funny how these fat cats can crawl on the "sustainable" train. Do read the whole thing.

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Friday, October 03, 2008

Britain takes a page from China 

The cost of hosting the Olympics should perhaps include the induced subsidy to produce a high medal count.
The government has said it will provide the first £20m of the £80.1m earmarked for elite British athletes competing at the London 2012 Olympics. The £20m is the first installment on a funding package that runs from 2009-2013.

As to the remaining £60m the government is still hopeful that some of it can be raised through fundraising via the recently launched Medal Hopes plan. Given the current economic climate this seems unduly optimistic.
I'm not sure if Government promises spur private contributions or crowd them out. Might make for an interesting cross-country comparison. Here's more on the somewhat controversial British plan.

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Wednesday, August 13, 2008

About that economic impact... 

Shocking news in a front page article in today's Washington Post: There aren't many tourists in Beijing this month.

"Business is worse than at this time last year," said a receptionist at a 22-room hotel in Beijing's Chongwen district, where rooms cost $28 a night. "It's the season for traveling and last year the hotel was full. The Olympics should have brought business to Beijing, but the reality is too far from the expectation."

In addition, despite "selling every ticket" the venues aren't full, and the organizers are scratching their heads. When I point out that things like this happen, people call me an idiot. When Victor Matheson publishes a paper that shows no economic impact from mega sports events, non-economists say he is clearly wrong, because millions of tickets are sold to these events, and that must generate economic impact. This outcome is consistent with a lot of empirical evidence from Sydney and Athens that suggests little tangible direct economic impact was generated by those games.

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Friday, August 08, 2008

Beijing Olympic Games Open 

The opening ceremonies of the Beijing Summer Olympic games are today. I wrote a short article for the July/August issue of Foreign Policy on some of the financial aspects of the Olympic Games. Among the highlights ...

  • the IOC took in over $4.2 billion in the Salt Lake/Athens cycle, mostly from broadcast rights and sponsorship, and keeps an increasing share of the revenues;
  • you really have to pay to play the Olympic hosting game: unsuccessful bids to host the games typically cost from $22 million to almost $50 million;
  • the cost over-runs in host countries are huge; and
  • although it didn't make it into the article, the IOC is a bloated bureaucracy with no oversight. As recently as 1964, the IOC employed 5 full time staff; in 2000 there were 113.
You have to hand it to them, the IOC has a world class rent extraction scheme going.


Tuesday, August 05, 2008

Olympic-sized crowds? 

Less than one week away from the opening ceremonies of the world's largest sporting event, the Beijing tourism bureau predicts that the city will attract nearly half a million visitors this month. This is a a huge number, no doubt, packing a gigantic economic wallop. In fact, tourist numbers in Beijing haven't been this large since, well,... last August.

According to USA Today, "(security) restrictions on those attending the Games — or at least concerns about them — appear to have virtually eliminated any boost in tourism here from the Olympics. Beijing's tourism bureau predicts up to 450,000 visitors in the city this month — about the same as last August."

Combine this with the fact that China is temporarily shutting down hundreds of factories and curtailing automobile use during the Games, and it is hard to see how China will not end up losing a huge amount of money on its $40 billion investment.

(Thanks to Ron Gecan for forwarding the USA Today article.)

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Sunday, July 27, 2008

Sydney 2000, in hindsight 

The Olympics was touted as the flame that would cast fresh light on the city and lure planeload after planeload of curious foreigners Down Under. Sydney's recognition soared and the tourists flocked, but the effect was a one-off.

In the three years after the Games foreign tourism to New South Wales rose less than for Australia as a whole, the Centre of Policy Studies at Monash University in Melbourne said. There was no debt legacy, but neither was there a multibillion-dollar windfall forecast by its political cheerleaders. The state's auditor-general says that the financial result was a net cost to the public finances of at least A$1.5billion (about £720million).

Cut another way, the Monash researchers say that the redirection of public money into relatively unproductive infrastructure such as equestrian centres and man-made rapids has since cut A$2.1billion from public consumption.

...A lack of political will and funding meant that, apart from the stadiums, the only significant civil infrastructure built for the event was a single dead-end railway line to the site of the Games in Homebush Bay, in the city's west. That 1,580-acre (640-hectare) site at the end of the line also represents a lost opportunity, Holliday said.

Now being developed for residential and commercial use, Sydney Olympic Park was long criticised as a white elephant; a long-term master plan did not appear until 2005. “The master plan is under way, but we're now 2008 and the Olympics was 2000 and we started planning for the Olympics six years before that,” Holliday said. “So we're talking a 15-year time period and the construction of that town centre is under way now. I think it will be successful, but there was a lost opportunity longer term.”
From The Times.

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Wednesday, July 16, 2008

Could the Steelers' sale be a tax issue? 

From today's WSJ Opinion Page:
One of the league's iconic teams, the Steelers have been owned by the Rooney family since 1933. The five sons of the original owner, Art Rooney, control 80%—and they are getting into their 70s. With the team's value estimated at $700 million or more, the 45% federal death tax rate could put each brother on the hook to the IRS for tens of millions of dollars.

That may be more than they can afford. NFL franchises have appreciated quickly in the past decade, and the more a franchise goes up in value, the greater the challenge for estate planning. While a given brother's share of the team may be worth more than $100 million on paper, that doesn't mean he or his heirs have half again that much in cash to fork over to the IRS.

Daniel Rooney, the eldest brother who runs the team, is offering to buy his four brothers out of their shares. He has said he will do "everything possible to ensure my father's legacy" and keep the team in family hands, and in Pittsburgh. Good luck to him. Challenging Mr. Rooney's offer to buy about a third of each of his brothers' stakes now with more down the road is hedge-fund billionaire Stanley Druckenmiller, a man with considerably deeper pockets.

Adding urgency to the Pittsburgh transaction is the prospect of a Democratic President in 2009 who opposes repeal of the death tax and wants to raise the tax rate for capital gains. Barack Obama has promised to raise the rate from 15% to at least 25%, and perhaps the Clinton-era peak of 28%. The artificial timeline adds appeal to a buyer like Mr. Druckenmiller who has the dough to complete a transaction before the end of this year.
The estate tax certainly gives an edge to buyers other than the elderly Mr. Rooney. I haven't read much about the other four brothers. They might not see things the same way. Legacies can be costly to protect, and this is no longer their father's NFL.

Also in today's WSJ, an article on the cost of the Beijing Olympics. Here are the opening paragraphs:
China's record spending on the Olympics, estimated to total $42 billion, is a big sum for a developing country to put into a two-week sports show. While much of the money is going into infrastructure projects with long-term value, at least some of the spending is drawing criticism for wastefulness.

The tab for China's massive Olympic projects -- ranging from a $3 billion airport terminal to the $500 million "Bird's Nest" National Stadium -- dwarfs the Athens Olympics budget of $15 billion, which helped drive Greece into debt. London, host for 2012, is already embroiled in controversy over its Olympics tab.

In Beijing, few details are being spared. Along Jing Shun Lu, a formerly dusty road in the capital's suburbs, the government spent $30 million for an Olympics facelift, including trees, flowers and an ornamental wall. The road is a secondary access route to the city's airport, and near the rowing venue. People who used to live along the road have been given a small sum in compensation and forced to move.

China can afford the financial cost of the biggest Olympics in history. The bill amounts to a small fraction of the country's gross domestic product, expected to be nearly $4 trillion this year, and corporate sponsors have underwritten some of the costs. Moreover, most of the spending isn't going toward running the Games, but toward roads, subways and airports.

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Tuesday, July 08, 2008

Three stories worth noting 

If hosting the Olympics is all about the publicity, China is walking a fine line. The WSJ reports that a Hong Kong journalist, Norman Choy, had his travel permit confiscated on arrival in Beijing and was put on the next flight home. Choy had earlier been given credentials by China to cover the games. This could be an early rumble in a landslide of negative publicity from the Western Press.

The LA Times reports that China has been pursuing a "Soviet-style" approach to maximizing their haul of gold at the games. That's not pretty either. The idea that this demonstrates a "superior" system would be laughable if it were not so sad.

Clemson student Jon Altman has a post on the economic motivation behind a generally losing strategy, the breakaway in a bike race, which we see annually in the Tour de France. This is a good example of commercial strategies intermingling with the strategies of sport, which sporting purists decry. The ruin of sport is at hand!

Actually, not. Mussolini, Hitler, the GDR and USSR were greater threats to sport than commerce, and they've all fallen by the wayside.

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Monday, July 07, 2008

The Olympics as a symbol 

Vic Matheson's research shows that the economic motivation of hosting the Olympics is quite weak: the direct stimulus to income and employment is so small you can't measure it. But the Olympics do present an opportunity to change the world's perception of the host nation, and perhaps the host's own perception of itself. The 2006 World Cup in Germany arguably did both.

My view is that this is a key motivation for China: the Beijing Olympics are part of the process of putting Mao in the rear view mirror. Today's news brings one small piece of supporting evidence:

Olympic symbols have replaced Mao on the 10 Yuan note. Hooray!! (Note: in addition to the stadium and seal pictured above, a statue of a discus thrower is on the back). Hat tip to Alex at Marginal Revolution.


Monday, April 28, 2008

Allan Sanderson: Consider the Options 

Allan Sanderson tells his readers that TANSTAAFO (Olympics, not lunch).
Whether to support the Games themselves or merely the city's official bid, the latter carrying a price tag of $50 million to $100 million, one hears that "only private money" is underwriting those activities; no tax dollars will be spent. "Private" implicitly refers to donations from corporations and wealthy citizens. However, in jargon that students learn on the first day of Economics 101, virtually all expenditures or allocations have an opportunity cost, whether it be for a firm or family.

If Boeing, Sears, Motorola or McDonald's gives $1 million to help finance our Olympic bid, that is $1 million that does not get returned to stockholders as dividends or plowed back into the company for new projects and production. In addition, that is $1 million that does not, then, support an exhibition at the Field Museum, a new gallery at the Art Institute, or an after-school youth program.

When I sit down each December to write out checks to local, national and international charities and other non-profit organizations, I am implicitly choosing how to allocate, say, $2,000 among various groups and activities. The slice that goes to WTTW Ch. 11 doesn't go to the Chicago Coalition for the Homeless or the American Cancer Society—or to the University of Chicago. It's still just $1 million or $2,000 no matter how a corporation, a wealthy benefactor or I cut it.

There is no free lunch in this world and no free Olympic Games either.

Via Stephen Karlson.

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Wednesday, April 16, 2008

"Technological Doping"? - The Speedo LZR 

Swimming has its version of the aluminum bat, an improvement in capital design that makes "labor" very productive, at least in an absolute sense. Maybe too much so:

Since its debut at the Missouri Grand Prix in February, the new Speedo LZR swimsuit has made nearly as many waves out of the pool as it has in it. With 18 of 19 record-setting, long-course swims – the same pool format of the Olympics – and 17 of 18 record-setting short course swims for the LZR dating back to its inception, Speedo has had to withstand charges of “technological doping” from those in the swimming community and beyond.

FINA, the international governing body for swimming, met with the world’s top swimsuit manufacturers in an emergency meeting Saturday to determine whether the suit and others like it were giving certain athletes an unfair competitive advantage. Though FINA endorsed the suit for a second time and decided to allow other suit makers to copy the design, some in the swimming community have begun to take the matter into their own hands.

The NCAA men’s National Championships, the Italian Olympic Trials and the Canadian Olympic Trials are among meets that have banned the LZR – as well as TYR’s new swimsuit, dubbed the Tracer – from competition.

Given the discussion on this post and this post recently, I looked to see if there was anything regarding the official Olympic (i.e. event organizer position) on this swimsuit. Perhaps readers have seen something, but I couldn't find anything in a quick GIS. But it wouldn't surprise me if Olympic officials would like to see its use.

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