Wednesday 26 October 2011

RWC Economics

I've been more than a bit sceptical about the benefit numbers postulated for the Rugby World Cup. But Sam Richardson has been watching things more closely than I've been. And, he's now blogging! He writes:
If the best case scenario eventuates, and the event costs the taxpayer $26m (that is, 2/3 of $39m), then to be economically justified, we should see additional economic benefits of at least $26m. Of course, as has been reported, the costs of the tournament to local, regional and central government are quite a bit larger than $$39m. Thus we should expect to see substantial benefits to make the tournament worthwhile. Will we? Time (and research) will tell.
I'll look forward to seeing Sam's updates. You don't necessarily need measurable economic benefits of $26m to make the spending worthwhile - if the joy experienced by hosting the event were sufficiently large, it could be justified as consumption expenditure. But we'd also want to tally the economic losses suffered by sectors that saw a drop in custom custom as people were scared off by rugby traffic. And we'd also want to be careful to compare the feel-good benefits of the RWC with the benefits we could have achieved through other spending, and to put some weight on the losses experienced not only by the sports atheists like me but also by those who like rugby but don't like the congestion, parades, and diversion of public amenities. Sam looks to the increase in spending with the tournament:
The net change in spending is where we see changes in things like the tax take (GST, etc), which are listed in the expected benefits from the tournament. Gross figures are all well and good, but they are very difficult to substantiate or refute. Literature on previous mega events pretty much says the same thing - that the realised economic impacts are highly likely to be significantly less than initial projections.
Further, if rugby tourists consume amenities costly at the margin or otherwise rivalrous, then GST revenues too are an overestimate of benefits.

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