Dispatches from the Rio Olympics from Professor Victor Matheson

Thursday, August 04, 2016

Dispatches from Rio Olympics

The 2016 Summer Olympic Games begin on Friday here in Rio de Janeiro. Nearly ten years ago, Brazil decided to gamble on hosting the world's two largest sporting events back to back: the 2014 World Cup and this year's Olympics. The question for economists like myself is whether these types of "mega-events" are a good investment for the economy.

I have been a long-time critic of public spending on sports events and stadiums (including the proposed Providence baseball stadium). I am here in Rio looking at the preparations and talking with organizers to learn more about how Brazil is trying to make this work.

The first thing that is very noticeable from the moment one arrives in the city is the heavy security presence ranging from uniformed guards to heavily armed soldiers. It is clear that there is the dual purpose of both preventing a major terrorist incident as well as deterring the small scale street crime that is widespread in the city. During normal times tourists would be strongly discouraged from wearing jewelry or taking out an expensive camera in public areas due to the risk of theft.

Unfortunately, keeping athletes and spectators safe has become a major burden for hosts of mega-events. A reported 85,000 military troops are will be stationed in Rio during the Games, and the total security budget is likely to be around $1.5 billion. This works out to a cost of over $100 per ticket sold. Security costs alone for this year's event are likely to exceed the entire cost of the 1984 Summer Olympics in Los Angeles, even after accounting for inflation, and security expenditures have gone up by a factor of 6 since 9/11/01. These costs make it difficult for any country to make a profit on the Olympics, even if all of the infrastructure is in place already. While Brazil and Rio may benefit from the long-term legacy of the Olympics, in the short-run, it is impossible to make the books balance when it costs the organizers more to protect the fans than it is charging them for tickets.

Victor Matheson is a professor in the Department of Economics and Accounting at the College of the Holy Cross. He specializes in the economics of sports stadiums and mega-events. Frequently quoted in the press, he has been appeared on NPR, CNN, and in the New York Times, Washington Post, Boston Globe, and of course various GoLocal sites. He is currently president-elect of the North American Association of Sport Economics as well as the editor of the Journal of Sports Economics.