The British government announced yesterday that it will "pull out all the stops" to support London's bid to host the 2012 Olympics. Lance Knobel is right to say that there is not much that economics can say about this, despote the considerable research into the economics of major sports franchises and large sporting events. Questions to be asked are whether sports events like the Olympics contribute to long-run growth, or are merely a temporary local stimulus; the signficance of the substitution effects to the public- and private-sector spending on sports, and is there is a "crowing out" effect; the opportunity costs of such spending. Ultimately, though, opinions on the olympics and similar events come down to how people feel about the event in question, and whether they welcome or condemn the disruption they cause.
In London's case you can read the Arup Asssociates cost-benefit analysis [PDF] of a successful olympic bid. "Benefits" are broadly defined, and include unquantified theings such as national prestige and improved cultural development. A major goal is the regeneration of the East End of London. In a press release, Michael Ward, Chief Executive of the London Development Agency, says that a "successful Olympics bid will transform a neglected and run down part of east London and kickstart the regeneration of the wider Thames Gateway, creating thousands of new jobs in the process”. A revealed preference rebuttal is in order here. If the Mayor, the national government and other interested truly valued the regeneration of the East End it would be doing it already, not needing the "catalyst" of an olympic games to do so. It's odd that interventions that some see as desirable need the commitment to an event like the Olympics to move forward. Sir Bob Scott, who ran Manchester's successful Commonwealth games last year says:
If we take the IOC down to Stratford to see the Lower Lee Valley it's not a case of them seeing world-class facilities but hopes and dreams. I can see why London wants the bid. It wants the catalytic effect to speed up the regeneration of the Thames gateway. That is not of great interest to the IOC. It's what you can offer the Olympic movement, not what it offers you.
For an example of what it takes to win, consider what Beijing did to win the 2008 games:
Beijing is preparing for the [February 2001 IOC Evaluation Commission] visit with a vast programme of urban reconstruction involving more than 3,000 streets, demolishing old, illegal and unseemly shops, offices and homes and replacing them with grass, trees, pavements and sculptures. It has designated the three principal roads on which the IOC delegates will travel as guest roads, lined with grass and trees.
£17 million has been allocated to finance London's bid--not nearly enough to take care of the the dirty and graffiti-strewn parts of London where the Games are proposed to be held.
London, though, is favoured to win. Well,. apparently. The olympic bidding news site GamesBids.com breaks down the bookmakers:
London is odds-on favourite to win the 2012 bid, and then two clicks later Paris is the bid to beat. Toronto's non-existant bid is tops in North America here but can't touch New York over there. The early odds for the yet-to-begin 2012 Olympic Bid race provide excellent opportunities for gamblers to literally hedge their bets.
Now that London has thrown its hat into the "rings", U.K. bookmakers are setting the odds and Ladbrokes was quick to get in on the action. Currently, both London and New York are at 3-1 behind Paris at 2-1. Toronto hasn't even tabled a bid but are given 8-1 odds. Then it's Madrid at 10-1, Leipzig and Rio de Janeiro at 14-1, Moscow at 16-1, Sao Paulo at 20-1 and Havana at 200-1.
But you could just as easily place a bet with bookmaker William Hill and you may end up with more favorable odds. London leads at 2.75-1 followed by Paris at 3.5-1 and then Toronto with 5.5-1 (but don't expect Vancouver 2010 supporters to get in on this action).
The rest follow like this - Madrid at 7-1, New York at 9-1, Rio at 11-1, Sao Paulo at 15-1, Moscow at 17-1, Leipzig at 34-1 and Havana at 51-1.
The author correctly questions the basis for these initial odds, especially at such an early stage in the bidding process. GamesBids itself operates a mathematical model called BidIndex, which currently favours Salzburg to win the Winter Olympics in 2010; they have yet to start such an index for the 2012 games. Though bookmakers do adjust the odds over time, a better indicator of probability would probably be a proper decision market like the Iowa Electronic Markets.
As for me, a Trinidadian born in New Jersey who's currently residing in London, how do I feel? I support New York's bid, naturally.