Chicago recently lost its much-publicized (and politicized) bid for the 2016 Summer Olympics. The International Olympic Committee (IOC) announced the destination Oct. 2, selecting Rio de Janeiro over Madrid, Tokyo, and Illinois’ Windy City. Days prior to the final vote, President Barack Obama, first lady Michelle Obama, and media icon Oprah Winfrey all attempted to use their clout in Copenhagen to influence IOC voters as Chicago made its final pitch.
While many were disappointed that Chicago didn’t win its bid—the biggest disappointment came from the fact that Chicago was eliminated in the first round of voting—from an economic standpoint, it could be argued that Chicago is actually better off not hosting the Olympics.
Past Summer Olympic Games on American soil, such as Los Angeles (1984) and Atlanta (1996), have been financially successful, but there’s no guarantee that the city of Chicago would have received a monetary boost. Building the necessary infrastructure to host the various sporting events has proven extremely costly for some host cities, with a long list of them having suffered long-term economic difficulties due to spending that, in some instances, surpassed initial budgets by 10 times.
In order to gain more insight into how Chicago’s economic future could have been affected by hosting the 2016 Olympics, Fitness Information Technology (FIT) contacted Dr. Brad Humphreys. An associate editor of FIT’s International Journal of Sport Finance and one of the leading experts in Olympic budgets and stadium finance, Humphreys previously was an associate professor at the University of Illinois at Urbana-Champaign in the Department of Recreation, Sport and Tourism and is now chair in the Economics of Gaming at the University of Alberta.
Q: Having worked in the state of Illinois, you probably have a good feel for how Chicago would have done as a host city for the 2016 Summer Olympics. How do you think Chicago would have performed?
Humphreys: I’m sure they would have done an excellent job hosting the Games. Chicago is a great city, and it would have been a fantastic location. I think most hosts do a great job—the big issue is how much does it cost.
Q: Speaking of cost, from strictly an economic point of view, do you believe Chicago is actually better off not having won its bid for the Olympics?
Humphreys: Absolutely. There is little evidence that hosting the Games provides tangible economic benefits to the host community. All public spending for hosting the Games has an opportunity cost—Chicago now has billions to spend on other badly needed public projects. In addition, hosting the Games imposes a lot of intangible costs on residents, in the form of inconvenience (increased traffic during the games, all the disruption associated with construction projects, etc.) and residents of Chicago now escape those costs. A lot of residents of Atlanta left town during the Games in 1996. Read the rest of this entry »