Insensibility of Hosting the Olympics and Its Hidden Negative Impacts
Professor Ahn Yong-do (Division of International Studies)
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When the IOC (International Olympic Committee) officially announced Pyeongchang, South Korea as the host of the 23rd Olympic Winter games on July 6 of 2011, the whole nation was overwhelmed with joy. However, where does the joy and glory arise from? Despite all of the positive economic effects that hosting the Olympics produces, there are also negative opportunity costs and hidden expenses. Professor Ahn Yong-do of the Division of International Studies reveals the hidden costs of hosting the Olympics that the national media do not promote through his paper: “The Leontief Matrix, the Keynesian Cross, and Economic Insensibility of Hosting the Olympics: A Survey of the Korean Experience.”
There are various feasibility studies (an assessment of the practicality of a proposed national plan) to evaluate the benefits and costs of hosting mega-events like the Olympics, Asian Games, and World Cup. For example, state-run research institutes use the Leontief Matrix or Keynesian Cross models to analyze the costs and benefits of hosting such events. Leontief Matrix is an input-output model which predicts the proper level of production of goods and services while the Keynesian Cross describes the relationship between an aggregate demand and the GDP (Gross Domestic Product).
However, there are extensive flaws in such research methods, which Ahn depicts. “Such research methods are extremely inappropriate for national research institutes to utilize when predicting the benefits and costs of mega-events like hosting the Olympics. These events are macroeconomic, while the methods mentioned above are a closed-system and microscopic,” explained Ahn. Along with its problems of economic scope, the data accumulated by such research is exceedingly outdated and are also exorbitant to run the test. “The best option is to utilize the holistic cost-benefit analysis as a feasibility test which discovers and calculates all the hidden opportunity costs of hosting such events,” said Ahn.
The most important criteria to consider when deciding to host an event in accordance with the national budget is the long-term productivity of the social overhead capital. “Let’s assume that we have a limited budget in our nation and we can either choose to build childcare facilities in a number of companies or to host the Olympics. Unlike what the media promotes, an increase in the GDP and job creation effects are merely similar between those two activities. Then, considering the long-term effects, obviously building childcare centers would be more plausible,” explained Ahn.
Ahn also described another real-life example from the 2002 FIFA World Cup that proves macroeconomic risks in hosting mega-events. “In order to host the World Cup, South Korea constructed 10 stadiums in Sangam-dong that still require the national budget of 5 billion won as a fixed cost annually. However, when citizens use the airport highway, we have to spend our own money at the tollgate to support its construction costs which the government must have secured as its mandate budget. Comparing these two incidents, building an airport highway is more productive than hosting the World Cup in the long-run since we do not utilize the stadium as much as we demand highway usage,” described Ahn.
The journey to produce this paper was arduous according to Ahn. Because the contents of the paper criticize the media and the government and their behaviors of covering people’s eyes, the procedure to find data to disprove the governmental decision was difficult. “I had to discover evidence for this paper through sometimes unofficial, desperate ways since the national research institutes would not provide the data passively. Thus, my research began in 2002 and was finally brought to a conclusion, just recently,” reminisced Ahn.
Even though Ahn’s major is business management, his passion towards economics is extensive. “I am not an economist, but an economic learner. Economics is the most logical study in political science subjects which maintains my passion to reach forward,” said Ahn. Currently, Ahn’s goal is to produce his own version of books on the principles of economics in a groundbreaking way, similar to Paul Samuelson.
Kim Ju-hyun email@example.com
Photos by Kim Ju-hyun
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