The World Cup is well underway, and as expected, India, the West Indies, England, and Australia are topping their groups as I write.
Oh sorry. That’s actually the women’s cricket World Cup happening right now in England.
Most US-based sports fans are probably more aware of the soccer World Cup happening across the US, Canada, and Mexico. As the tournament heads into the knockout stages, the big guns of Germany, Argentina, Brazil, and (er, hum) the United States Men’s National Team (abbreviated USMNT for no reason, we don’t have GMNT for Germany) are through to the last 32.
Anyway, this is an economics column, so what are the economics behind hosting the World Cup? If you believe F.I.F.A. (no one does), the tournament will generate $80 billion in gross output, $30.5 billion in the US alone. Even if this were true (it isn’t), this would represent only 0.0001% of Gross Domestic Product (GDP).
So why is this an exaggerated figure? Mainly because the World Cup displaces economic activity that would have taken place in its absence. For example, people may attend the overpriced games in Atlanta, but they do that instead of a nice meal, or, given ticket prices, a vacation. New spending is not created; it is just moved around.
You may have seen pictures of fans from all over the world who have come to support their teams. (Scottish fans are getting a lot of press for overindulging on airplanes and at bars. But even some of this visitor spending is just replacing spending that would have occurred. Some tourists who don’t like soccer (apparently, there are some) have chosen to vacation in other counties to avoid soccer crowds in tournament cities. In fact, hotels reported bookings below expectations in several World Cup host cities, and Airbnb renters were disappointed in rental bookings.
But economists have long recognized that GDP is not a great measure of the well-being of a nation. For example, the Scandinavian countries regularly top the list of happiest places despite their GDP being lower than that of the U.S. In an increasingly divided country, the World Cup provides an opportunity for everyone to support common goals such as beating Bosnia and Herzegovina tomorrow and beating up on Alexis Lalas.
Go USMNT!!
