No significant effects
The results from my own doctoral study show that demonstrating the government’s participation in the provision of sports facilities and organizing major international-oriented events on the basis of economic impact. New Zealand is very promising.
There are a few specific cases in which positive economic impacts have been identified, and even a few cases where the realized effects are negative.
However, the majority of facilities and events were found to have no significant impact on the host city economy.
Costs under wraps
The cost of rugby World Cup is also a mystery. So far there is no published data on the total cost of the tournament for the country so far. The estimate from the New Zealand Herald in mid-2010 is 500 million New Zealand dollars and climbing.
One has to be careful about what exactly constitutes a cost (or really a benefit) of rugby World Cup.
What could be a benefit to one field could be considered a cost for another field. It can be said that the majority of public spending on facilities and infrastructure has been driven by the tournament.
Some have argued that this area of spending should be considered an investment in the future. Facilities that are being built or upgraded for the tournament will continue to be used well after the event is over.
In this respect, New Zealand’s rugby World Cup is quite different from many major sporting events.
Why organize an event?
If the net economic benefit of the event is small, or even negative, is there any case to organize the event?
One must be careful not to limit the economic benefit measures to economic impacts, which are difficult to persuade benefit measures in all cases. There are some potential intangible benefits from organizing a tournament of this caliber.
These benefits include the value that New Zealanders enjoy when attending games that are higher and higher than the fare they pay.
This benefit is known in the economy as consumer surplus. Because consumer surplus from this event cannot be captured by ticket sales, there is a basis for government involvement in the supply.
The benefits are not restricted to those who attend the games. There is one element that feels good when organizing a global tournament in your own backyard.
Communities across the country can experience civic pride by organizing international teams throughout the country.
It may also be possible to enhance New Zealand’s image to the rest of the world as a result of organizing a successful event.
Potential benefits can be measured
Many people will question the extent to which these intangible benefits can be quantified.
Economists have tried to value these benefits using a variety of techniques, but previous research has shown that these benefits exist and can be quantified.
It is worth noting that they are often not large enough to demonstrate the level of government involvement in many of these projects. However, they should not be missed in this discussion.
Given that costs are often unknown, this question may be difficult to answer.
What we should expect is that the perceived economic impacts are likely to be significantly smaller than expected. The expected costs may be higher.
The vast majority of benefits are likely to be intangible in nature. Indeed, the pride created by a New Zealand victory can also make the cost worthwhile for some taxpayers.