Wednesday, August 20, 2008

Olympic medals and a little bit of Economics...

Gary Becker in the Becker-Posner blog presents the findings of the paper "A Tale of Two Seasons: Participation and Medal Counts at the Summer and Winter Olympic Games", published in 2004 in the Social Science Quarterly. The authors of this paper tried to find variables that could explain why some countries collect more medals than others.
Quoting from Becker:
Their regression analysis shows that two very important variables are the total population and per capita incomes of different countries. Also important are whether a country has an authoritarian government-such as communism- a country's climate, and whether a country is the host country for a particular Olympics. These five variables taken together predict closely the total number of medals won by different countries in the winter as well as summer Games.

His discussion of each variable is interesting. How do you expect each of the above variables to affect the medal count? Can you think of any other variables that may have been included in the analysis (but did not prove significant)? I think I could come up with a couple!

Read also the economic arguments for government spending on athletes preparing for future Olympics. Does it make sense to you? Are there any significant 'externalities' involved that could justify government spending (i.e. subsidization of the process)?

You can read Gary Becker's post here. (Aug 17 post)

Richard Posner's comment below it is also (of course) intriguing!
The nationalistic fervor and great-power aspirations that Olympic competition stimulates seem to me a negative externality. In addition, some unknown but doubtless large fraction of the expenditures on training athletes have no social product, but are in the nature of "arms race" expenditures. If one nation spends very heavily on training its Olympic athletes, other nations, if they want to win a respectable number of medals, have to spend heavily as well. The expenditures are offsetting to the extent that the objective of competition is to win rather than to produce an intrinsically better performance. Economic competition produces better products at lower quality-adjusted prices, and this effect dominates the costs of competition in duplication of facilities and offsetting advertising. The balance in athletic competition is different, because the main product (as in war) is winning, and it makes little difference to the consumer whether the winner ran a mile in 3.05 minutes or in 3.01 minutes. Moreover, Olympic competition is inherently lopsided since, as Becker explains, success is largely determined by a nation's population, per capita income, and (in the winter Olympics) climate. Why should Americans feel good if an American team beats a team from Costa Rica?

And, who was it that said that IB economics is not interesting/useful?

PS: You should all be very much aware of Gary Becker (Nobel Prize 1992). Read about him here, here and here.

And, you should definitely also be aware of Richard Posner, especially if you are planning to do Law (and Economics - huh, Mr. Alex P.??!!). Read about him here and here.

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