A 2005 paper by Jeffrey G. Owen for The Industrial Geographer on the economic impact of the Olympic Games on host cities concluded that ex-post studies have consistently found no evidence of positive economic impacts from mega-sporting events even remotely approaching the estimates in economic impact studies conducted beforehand.

Longer-term sports programs, usually involving stadium subsidies to attract or keep professional teams, have also failed to deliver on projected economic benefits. Even for cities that usually are considered success stories for sports development strategy, such as Baltimore and Indianapolis, empirical research doesn’t find evidence of statistically or economically significant positive impacts.

Yet government agencies or host committees continue to pay significant fees to outside consultants to generate these inflated forecasts. And industrious reporters continue to report these disparities, when they inevitably arise, as scandalous news.

As is the case leading up to every Olympiad, the amount of economic activity the 2010 Vancouver and Whistler Winter Olympic Games will generate has been one of the two central questions ever since a bid was first proposed, the other, of course, being the question of how much they’ll cost Canadian taxpayers.

A November 2002 report prepared by InterVISTAS Consulting, The Economic Impact of the 2010 Winter Olympic and Paralympic Games: An Update, forecast a GDP boost of anywhere from CAD2 billion to CAD10 billion for Vancouver.

InterVISTAS actually schemed out four scenarios, the best being a positive economic impact of CAD10.7 billion for the province based on the contribution of the Vancouver Convention Centre.

The impact would be a CAD4.2 billion boost to provincial GDP if the convention centre is subtracted from the mix and Vancouver experiences a high number of tourist visits. Under the “medium visits scenario” and the “low visits scenario” the impact was projected to be as low as CAD2 billion.

If the “high visits scenario” were to be achieved, InterVISTAS forecast that British Columbia would see “higher volumes of visitors to British Columbia for at least two years prior and five years after the Games.” The most recent tourism figures for British Columbia show steep declines in international visitors.

According to Tourism British Columbia’s October 2009 figures, based on Statistics Canada data, year-to-date visits were down significantly in August from a year earlier. There were 5 percent fewer overnight visitors from the US to British Columbia, 9 percent fewer from Europe and 14.3 percent fewer from the Asia/Pacific region.

Vancouver reportedly has more recent reports on the impact of the Games but has so far refused to release them. According to one report, the province spent CAD2 million on a study conducted by PriceWaterhouseCoopers. The Vancouver Olympic Organizing Committee has also embargoed a study by University of British Columbia professors Bob Sparks and Rob VanWynsberghe that looked at the economic, environmental and social impacts of the Games and was to be released in June.

On October 21 the Vancouver minister responsible for the Olympics said that PriceWaterhouseCoopers had prepared four reports looking at the impact of the Games between 2003 and 2008. One will look at the actual benefits compared to what was predicted in the InterVISTAS report.

Despite the weight of the evidence, economic impact studies have become standard operating procedure for supporters of public funding for large-scale sports events and facilities. According to Mr. Owen, their prevalence has led to acceptance of their findings by the public, media, and even academic circles with little or no critical evaluation.

Because of the high profile of such events, large–and positive–economic effects are taken as given; the studies confirm what is already believed. Another study concludes, “The promise of worldwide exposure and economic gain has made hosting these major and regularly scheduled sporting affairs a lucrative goal for aspiring cities around the world.”

Mr. Owen notes:

The simple elegance of economic impact studies–injections of money circulating over and over in an economy to create a multiplier effect–has an alluring “something-for-nothing” quality that is hard to refute. The mistakes made in economic impact studies are so numerous that making a lucid counter-argument can be difficult. Critics have focused primarily on the following areas of misapplication: treating costs as benefits, ignoring opportunity costs, using gross spending instead of net changes, and using multipliers that are too large.

In many cases the cost of constructing stadiums, which to a large degree is spent on hiring construction workers and purchasing materials from local suppliers, is counted as a benefit to the local economy. This is arguably the most egregious error in economic impact studies. It is backward-looking in that it looks at the production aspect of the project and ignores the effect of the actual consumption of the product.

There are champions out there. The Dow Jones Summer/Winter Games Index of 36 sponsors and suppliers for the 2010 Winter Olympics is up more than 34 percent since it was updated to track the Vancouver games on Dec. 22, 2008. The S&P 500 is up 23 percent and the MSCI World Index is up 27 percent during the same time frame.

Royal Bank of Canada (TSX: RY, NYSE: RY), the sponsor of the Olympic torch relay, is up more than 60 percent; the fact that the lender has beaten consensus profit estimates three times since December is probably at least as good an explanation for its impressive run as its Olympics role. Teck Resources (TSX: TCK-B, NYSE: TCK), which will contribute to the gold, silver and bronze medals awarded at the Games, is up more than six-fold. The rally in commodities prices and the injection of significant capital by China Investment Corp to help reduce debt are significant factors in its performance as well.

Coca-Cola (NYSE: KO) and McDonald’s (NYSE: MCD), the Dow Jones index’ top two weightings, are up 22 percent and 0.5 percent, respectively. Two sponsors–Nortel Networks (OTC: NRTLQ) and General Motors, er, Motors Liquidation Company (OTC: MTLQQ)–have declared bankruptcy since the Dow Jones index was re-jiggered from the Beijing games toward the Vancouver games last December.