Does Hosting the Olympics Make Economic Sense?

Each year, we hear about the amazing construction programs embarked upon by countries and cities hosting the Olympic Games.  The cost of hosting the Olympics has skyrocketed.  The Beijing Olympics reportedly cost more than $40 billion!  No worries, claim the host cities... The economic benefits will be tremendous and long-lasting to boot!   Is that actually true?  Does hosting the Olympic Games make economic sense?  Is there a positive return on investment for host cities?   Most academics argue that hosting the Olympic is a losing proposition, from a purely financial perspective.  One or two cities have seen a positive return on investment, but most have not.   The research is abundant and quite clear.   Here's an excerpt from an NPR article describing one such study: 

Allen Sanderson, senior lecturer at the University of Chicago who specializes in sports economics, investigated that question. He and a student, Samantha Edds, compared cities that hosted the Olympics with similar cities in the same country or region that did not. The cities were also comparable in other ways — size, population and tourist appeal.

They compared Atlanta, which hosted the Olympics, to Charlotte, which did not. They pitted Olympic city Barcelona against Madrid, and matched up Sydney, Australia, against Melbourne. They checked for marked growth in construction, tourism and the financial-services sector over a nine-year period — four years before the games, and five years after.

"We couldn't find any difference in terms of building permits, tourism, anything before or after," Sanderson says. "If you masked the name of the cities, you would not be able to tell which of these two cities had the Olympics and which did not."

According to Sanderson, this doesn't mean cities should stop competing to host the Olympics; it just means they should stop claiming that the games make economic sense. "We do lots of things that don't turn a profit," he says. "We own dogs. We have boats. Those things lose lots of money, but we know it." So cities, go ahead and host the Olympics. It's a great party. It's just a terrible investment.