Assessing the economists

Calculating the economic impact of the Olympics is a Herculean task with different meanings for different authors. At its most basic, some try to estimate the effect on national output of staging the games and building the venues. More sophisticated studies attempt a proper economic cost-benefit analysis, in which the costs and benefits of building the infrastructure are measured as well as the costs and benefits of hosting the event. For London 2012, a sophisticated analysis has proved beyond most researchers.

The costs of building the facilities are relatively easy to measure and include the cost of purchasing land, the construction costs of the venues, the associated transport infrastructure and housing. These need to be compared with the legacy benefits of those facilities in that location. Once the Olympic village and other venues are sold, the wider benefits will be the continued facilities in the Olympic Park and the park itself.

The costs of staging the Olympics and Paralympics – including bid costs, administration, wages, security, costs on other London businesses – then need to be set against the benefits. Again, as with so many cost-benefit analyses, these are much harder to measure and must include the long-term wage premium of workers on the sites, any net business deals done because of the Olympics’ presence, any longer-term tourism benefits, the “halo” effect for the host city and any intrinsic pleasure gained by people in Britain for hosting the games.

As so many of the benefits are almost impossible to measure, economists can disagree strongly over the net benefits of London 2012.