Olympic performance as a matter of ... economics

When Beijing beat out Toronto and Paris to host the Summer Olympic Games in 2008, it also probably got a bonus of 19 extra medals.

That's what Yale School of Management's Meghan Busse figures. When countries become a host for the games, notes the New Haven economist, they also get a medal "bounce" above what they might otherwise win.

Harder to predict is whether China will make a profit on the Olympics. The Games are now multi-billion dollar enterprises - and risky ones at that.

Last week, the Olympic flame was lit briefly again in Montreal to mark the Games there 25 years ago. Sadly, $334 million in debts are still owed on those Games.

Beijing has earmarked $22 billion over the next seven years to put Beijing in shape for the Games.

"This is an enormously expensive and complicated project," notes John Hoberman, a historian of the Olympics at the University of Texas in Austin.

Prior to the Sydney Games in 2000, Professor Busse and Andrew Bernard of the Tuck School of Business at Dartmouth College used econometrics - a mathematical tool of economists - to predict how many medals 36 key participating nations would each win. They calculated that Australia would pile up 57 medals as host country. It won 58.

For nine nations, their predictions were off only one medal from the actual count. For 23 other countries, they were within three medals of their actual total. "We were very pleased," says Busse.

Yet neither professor had the knowledge to assess sport by sport the athletic talent in each country, predict the likelihood of success in each event, and thereby sum up each nation's anticipated medal total.

So how did they make such accurate predictions and how can Busse forecast China's medal total in 2008?

They begin with the hypothesis that athletic talent is randomly distributed among people. Therefore medal winning should be proportional to population. More-populated nations, such as China, India, or Indonesia, with a deep pool of athletic talent, should have a greater chance of winning medals.

But it's not proportional. China, with one-fifth of the world's population, wins only 6 percent of the Olympic medals.

One problem is that populous countries can't send athletes in proportion to their populations to compete in each event. Also disturbing the population/medal relationship is the fact that team events provide only one medal. Finally, the number of athletes each country may send to the Games is determined in negotiations with the International Olympic Committee. Not all Olympic-calibre athletes from these nations are allowed to compete.

So Mr. Bernard and Busse turned to a favorite statistic of economists - the gross domestic product (GDP) - that is, a nation's output of goods and services. It provides a measure of the availability of resources to enable gifted athletes to train for, attend, and succeed at the Games. It turns out that real GDP is the best predictor of Olympic performance.

But GDP isn't the whole story.

Host countries have an advantage. The cost of attending for individual athletes is minimized. Facilities can be tailored to their own athletes. Home-crowd enthusiasm may sway judges. Over the 1960 to 1996 period, the advantage came to 1.8 percent of the total medals.

Also, Soviet bloc countries increased their medal count by 3 percentage points above what their population and GDP would indicate, apparently because of their state-sponsored sports programs. That advantage is shrinking in the post-Cold War era.

In making her 2008 China medal calculation, Busse notes that new sports introduced at each Olympiad add about 8 percent more medals. So, about 1,086 medals will be competed for in that year. Taking account of the host bounce, China gets 19 extra medals. That is on top of 61 medals on the basis of population and GDP alone. Because of the difficulty of projecting those two factors to 2008, Busse cautions: "I don't stand behind the 61."

China counts on its Olympiad spending adding between 0.3 and 0.4 of a percentage point to the GDP in each of the next seven years. It will also get the long-term benefit of new sports facilities, hotel accommodations, infrastructure, tourism, and, it hopes, international prestige.

The 1996 Atlanta Games were broadcast to 2.3 billion people. China can expect even more.

The Los Angeles Games in 1984 made a profit of $203 million. Since then, a portion of the money has supported sporting events in Southern California and a sports library.

China's Olympic Committee undoubtedly hopes to be so fortunate and make a goodly profit.

(c) Copyright 2001. The Christian Science Monitor