🥇🥈🥉 Who has to pay for the Olympic Games?

In a nutshell: The economics of monopoly power in sports

The Olympic Games are a worldwide spectacle. It was and is used for many purposes, also for bad ones. Almost a century ago, the Nazi regime used the 1936 Olympic Games in my home town Berlin for propaganda purposes. Since then, the Olympics were a showcase for several autocracies. 

The Olympic Games are also, of course, a gigantic business model worth billions. But there aren't just winners. The bottom line is that the organiser of the Olympic event is regularly one of the losers. It doesn't seem to be any different for Tokyo. When the Japanese megacity won the bid for the Olympics in 2013, the estimated cost was 7,3 billion US-Dollar. Today, experts estimate the costs up to 26 billion US-Dollar. 

A serious labour shortage in the Japanese construction sector, the depreciation of the Yen (and therefore higher costs for all imported construction materials), and the corona pandemic: There are many reasons for the steep increase in costs. 

But above all, there seems to be a systematic error. In the 2012 paper "Olympic Proportions: Cost and Cost Overrun at the Olympics 1960-2012", the economists Bent Flyvberg and Allison Stewart found out that "with an average cost overrun in real terms of 179 per cent – and 324 per cent in nominal terms – overruns in the Games have historically been significantly larger than for other types of megaprojects. ... The data thus show that for a city and nation to decide to host the Olympic Games is to take on one of the most financially risky type of megaproject that exists, something that many cities and nations have learned to their peril." 

And what is the systematic error? Flyvberg and Stewart again: "Even more than in other megaprojects, each budget is established with a legal requirement for the host city and country government to guarantee that they will cover the cost overruns of the Games. These data suggest that this guarantee is akin to writing a blank cheque for a purchase, with the certainty that the cost will be more than what has been quoted." It seems Tokyo learned nothing from the past. And the winner will be once again ... Tatarata ... the International Olympic Committee. 

Notes

https://www.researchgate.net/publication/244484259_Olympic_Proportions_Cost_and_Cost_Overrun_at_the_Olympics_1960-2012 

https://zhuanlan.zhihu.com/p/355630928

https://time.com/4432857/hitler-hosted-olympics-1936/

https://www.tagesschau.de/ausland/asien/olympische-spiele-kosten-101.html (German)