Saturday, September 17, 2011

RWC (2) - Cost Benefit

The New Zealand government has contributed millions of the cost of running this international event. As always happens when the hosting of an international event is being considered, they trotted out several economists with claims that the return to the country (whatever that means) will be far greater than the money spent by the government. These economists try to out do each other, as if producing a bigger number confirms their superior understanding of the economy. Of course, they have a good incentive to produce a good numbers, so they will be paid to make estimates in the future.

These numbers are just guesses. They leave out many of the real costs and ignore most of the opportunity costs. However, they cannot be proved wrong, because the impact on an economy of an international sporting event cannot be accurately measured.

Some businesses in the hospitality and tourist sectors will gain huge benefit, but I would be surprised if the Rugby World Cup brings lasting long-term benefit to the economy. The stadiums that have been built or extended represent capital that may never be fully utilised again, but local communities will be paying off the loans for the next twenty years.

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