Introduction
Ever since I can remember, I have been vigorously passionate and involved in the world of sports. I believe that sports teach people lessons that cannot be learned elsewhere. Whether it’d be organized competition or a friendly game among peers, sports instill perseverance, teamwork, and good old fashion fun into all of those engaged. The act of competition triggers the release of endorphins and dopamine both for those participating and those who are purely spectating. The way that competition affects individuals differs for everyone, however no one can deny that exhilaration is coupled with competition. I find the link between sport and its psychological impact absolutely fascinating. Additionally, as I have matured, I have realized that there are many parallels within the world of sports and the world of business, competition being the main connection between the two. Consequently, I have become increasingly interested in business, specifically economics. The combination of these three things: sport, psychology, and economic impact is my source of inspiration for this analysis.
The objective of this study is to identify a link between major sporting events (specifically how they are hosted, host nation team success, and personal participation) and the individual happiness, referred to as subjective wellbeing (SWB) or the feel-good factor. From there, I will go on to explain how that same happiness affects economic impact and individual spending. In order to discover such links, I will compare and contrast three different events. The London 2012 Olympic Games, the Sydney 2000 Games, and the 2006 FIFA World Cup based in Germany. Analyzing the major differences between how these competitions were hosted and how each host team performed will allow me to draw correlations with the level of happiness experienced by the host country’s public. I expect to find that hosting a major sporting competition coupled with the host country’s success within that same contest boosts the happiness of home country’s public; and that, in turn, will augment personal spending. Simply phrased, the happier someone is, the more they will spend.
II: Happiness
First off, I will delve into what makes people happy. There have been copious amounts of studies done to find out exactly what makes people happy. Different results have been found, but one fact is consistent with the vast majority of the studies done. The fact is that happiness isn’t a product of circumstance and rather a choice. There are things people can do to control their levels of happiness: meaning lifestyle choices rather than substances. A Harvard study released in 2016 reveals that happiness comes from choosing to be happy in the main areas of activity in in your life, meaning choosing to be happy in whatever you choose to do. 47% of people who are extremely happy say that they thoroughly enjoy what they are doing versus 14% of everyone else (). This study found that the correlation between happiness and occupation, income or wealth is far less than the correlation between happiness and how people feel about their occupation, income or wealth. Studies show that people who call themselves sports fans and associate themselves with a professional or local sports team tend to have lower rates of depression, less stress, and higher self-esteem than non-sports fans. Additionally, fans of local teams tend to be happier than fans of non-local teams, chiefly because the bond between fan and team is more personal this way. Daniel Wann, PhD, says that being a fan of a sports team creates more opportunities for social bonding. It can lead to close friendships and at the very least, the feeling that you are part of a community. It is entirely plausible that not everyone who is involved in sports is happy. Happiness revolves around choosing something that you love. Therefore, the sources of happiness are diversified depending on the individual’s personality.
All human beings experience “flow” at some point in their lives. Flow is a psychological concept which relates to focus combined with relaxation; many refer to flow as being “in the zone.” When someone is in a state of complete absorption in an activity they are experiencing flow. Flow can be reached through multiple routes like sport, arts, or studying. However, studies have shown that the most common way to experience this state is through athletic activity. Participating in physical activity and exercise opens the door to a state where the mind is active, but relaxed as it lets the body take over. The person involved experiences a state where no conscious thought is present, a state where instinct takes over and the body merely reacts. This state causes the highest amount of endorphins to be released, which is why some people claim to be addicted to it. It is known that endorphins are positively correlated with overall happiness. Accordingly, as a recap, happiness can be achieved through multiple facets relating to sport, like being associated with a team, spectating for pleasure, and actively participating in athletic activity. Relating to the connection between individual happiness and individual spending, one fact reigns true:
III: Major Competitions and Happiness
Is it possible that a huge sporting event, like the Olympic Games, can have a positive effect on people’s happiness? An enormous amount of academic research has been done on the Olympic Games due to the large public interest, grandiose atmosphere, and large public subsidies that go into successfully hosting such an event. Much of this research is done with the goal of proving that the Olympic Games are not beneficial to the host country’s economy. However, most studies have found evidence of tangible economic impact. In order to identify the clear link between happiness and spending relating to athletic events, I will have to analyse what makes a major competition attractive to its home country.
International bidding for hosting such competitions like the Olympic Games or the FIFA World Cup can be just as competitive as the actual contests. Countries fight tooth and nail for the right to host the games, in the hope that such a privilege can boost the public’s levels of happiness and excitement, as well as leaving an economic footprint that is worth the investment. In order for the contests to be attractive, countries must meet certain requirements. Cities are encouraged to better shape their value propositions and to discuss and present proposals and potential solutions that will deliver excellent Games, without compromising the field of play for the athletes and also meeting the needs of the city and region to ensure a positive, long-term, sustainable legacy (). Cities must be able to build elaborate facilities, they must present creative ideas to their own public in order to build national support from stakeholders and the general public, while developing firm foundations and putting together a solid concept that meets the long term development and legacy plans for the city and region, with a strong emphasis on sustainability (). They must be able to keep certain safety promises during the games. For the latter to be successful, countries must be in stable political states without any civil unrest that could potentially lead to catastrophe with the massive influx of people coming to attend such a historic event. Countries must be able to differentiate from one another through creative means. All of these things must be met in order for public demand to increase, thus making the games “attractive.” Let us not forget that these factors are not the only pivotal aspects of hosting contests and making them boost public happiness. The countries’ individual success in the competition is of utmost importance.
Let us examine the 2000 Sydney Olympic games. This is the first time that Australia has hosted the Olympics since 1956 in Melbourne. Television and internet are now a normality in everyday life in the year 2000, which sets a much bigger stage for the Olympic games than was set in 1956. The Sydney Olympic games left a powerful imprint in the Australian public’s mind. Harry Gordon, author of a book about the Sydney Olympics described this imprint as, “A memory that Australia will treasure always, but with a period of sheer, enduring happiness, possibly unmatched in Australian history.” The country of Australia hosted the games with massive success. The games served as a catalyst for Sydney to host more athletic events later. “In addition to the creation of a world-class major events precinct – which has allowed Sydney to host a number of major events, such as the Rugby World Cup and the World Masters Games – the facilities within Sydney Olympic Park have allowed Sydney to attract major entertainment and convention/exhibition events ().” Sydney was able to complete these games in a creative, logistically-efficient fashion that received criticism only from the most biased and irrational. Sydney was able to host the games with no mistakes and the Australian public’s happiness levels showed it. During the games, the public was able to pride themselves on how well they hosted the event, but they were also able to witness Australia’s biggest haul of Olympic medals in its history. Australian athletes brought in a grand total of 58 medals at the 2000 games, an impressive 17-medal improvement from the Atlanta Games four years earlier. At the next Olympics, 2004 Athens, Australia declined to 50 medals and has been on a downward trend ever since. It is safe to say that Australia fought so hard to host these games because they knew that they were in an excellent position with their athletes. A very strategic move because post-Olympic happiness levels have never been higher.
Although immediate economic impact is crucial when deciding whether or not a country should host the games, many Olympic advocates now point out one fact that is often overlooked. To justify hosting the games, proponents claim that one of the main benefits of the games is the emotional impact they have on the people who host them, i.e the effects on happiness. For example, when England was deciding if it wanted to host of the 2012 Olympic Games in London, officials stressed the intangible assets instead of the monetary ones. An overarching message of “inspiring a generation of children and young people, community engagement, and enthusiasm for volunteering” (DCMS, 2013) was widespread throughout the meetings. The mentality of this argument seems to be economic impact through direct correlation. Advocates believe that by maximizing the intangible benefits, the monetary ones will follow, but not without the initial price of hosting the games.
Arguably, an important part of the value of public expenditure is the legacy effect, i.e. the long-term benefits of the Olympics (). A study done at the Paris School of Economics aimed to discover “the nature and the extent of the hypothesized intangible impact of the Olympic Games on the inhabitants of the host city. Also, to enquire into whether the effects, if any, persist for at least one year after the Olympics ().” A survey was done by _____________ with the objective of measuring subjective wellbeing or (SWB), which is basically the emotional and psychological impact of how people think and feel about their lives. The goal was to study how the Olympic games affected the public’s levels of SWB. The survey was given to 50,000 individuals in multiple different locations. Questions asked during the survey were either evaluative or experiential. For example: (a) Evaluative: Overall, how satisfied are you with your life nowadays? (b)Experience: Overall, how happy did you feel yesterday? (c) Experience: Overall, how anxious did you feel yesterday?
The main result is that the Olympic Games increased happiness among Londoners during the Games. In terms of potential “legacy” effects, they found that the effect of the Olympic Games is short-lived. While the effects are especially strong around the opening ceremony, there was no lasting change in happiness when going back to the respondents of the survey. These results are robust to controlling for observables, selection into the survey and attrition, and how the counterfactual and the actual timing of the Olympic Games were chosen.
The Olympics are one of the most iconic sporting events in the history of humanity. The Games are the most well-known event, but, ironically, they are not the most watched. The Fifa World Cup is by far the most watched sporting event on earth; it is also twice as long. So the question rings, are the results of the 2012 London Olympic study consistent with studies done on the World Cup?
Allmers and Maennig studied the effects of the FIFA world cup on countries and found that the feel-good effect is very real and correlated with the economic impact of the event. The feel-good effect is “the benefit for the host country’s population…even for those individuals who do not visit the stadium.” Allmers and Maennig claim that “the free and relaxed atmosphere during the World Cup, or increased topics of conversation” make citizens happier and prouder than they might otherwise be, and thus more willing to consume (). This increased purchasing power will be referred to as a person’s willingness to pay (WTP). On the basis of ex ante (before event) and ex post (after event) studies of the 2006 German World Cup, they found that the average WTP of citizens was increased from €4.26 per person to €10.0 after the World Cup (). If multiplied by the total number of 82 million inhabitants, the corresponding increase would be around €479.3 million. In the past, the feel-good effect has long been regarded as “non-useful” by many economists, they claim, because only the small part of residents who attend the Cup can be influenced. However, Maennig asserts that this intangible effect is applicable to all citizens of a host-nation and “perfectly quantifiable ().
Germany hosted the 2006 World Cup successfully. It was an expertly planned event that was free from logistic and social issues. Willingness to pay increased among the German crowd because the contest was at home, yes, but let us not forget that Germany played extremely well in this event which caused the feel-good factor to increase dramatically, other factors about the team, other than success, influenced the public’s happiness. The German National Team was full of class-acts in 2006. Michael Ballack, Bastian Schweinsteiger, and Lucas Podolski are amongst the most respected footballers of their generation. They led their team to a semi-final loss against champion squad Italy. They played with outstanding effort for their country and, despite a loss, carried themselves with impressive sportsmanship and self-respect which instilled even more admiration among the German fans. Also, let’s be frank and say that Germany had an extremely attractive, young football team. This fact increased popularity around the globe, not just in Germany. These athletes quickly became stars for their soccer skills as well as their looks. Youngsters like Schweinsteiger and Clemens Fritz gained instant fame among the young female crowds and were lucky enough to receive popular endorsements where they could flaunt their looks. These factors, although often overlooked, have a tremendous psychological impact on WTP of fans, both female and male alike.
Moreover, this willingness to pay changes the ambiance of the domestic economy from poor to promising, which is almost always shown through the stock markets. Aforementioned studies have attested that the successful match-play results of the English squad in the World Cup can increase the share price of stocks traded in the London Stock Exchange. Clearly, this is certain evidence that a country’s success on the international field of play changes the spending attitudes of the public positively and causes leads to more consumption. The link between success and increased spending is the subjective wellbeing of the public. If SWB is higher, so is their willingness to pay. Additionally, it is commonly acknowledged that a flourishing stock market tends to bring more liveliness to a country. Conversely, if the feel-good effect of a home team victory is combined with an increased national spirit due to hosting a major athletic competition, odds are it will result in increased productivity and efficiency. South Korea, for instance, has a significant economic boom surged after the 2002 Japan/Korea World Cup () (South Korea also performed well in this tournament). Since soccer enjoys a high national prestige in South Korea, it is shown that both the production incentive and workers’ manufacture efficiency were significantly increased when the World Cup was held in South Korea (Kim, 2001). This shows that the feel-good effect not only increases the purchasing power of citizens along with consumer confidence, but also enhances the vitality of domestic industries. Though aspects of the feel-good effect are difficult to measure, it is widely accepted that this positive effect can influence a host country significantly.
III: Economic Impact
It is no mystery that the Olympics are extremely expensive to host. Yet, there is an extremely high demand for hosting these events; the sums of money spent on a single event are astronomical. A national opinion poll conducted immediately after the 2012 Summer Olympics found that 55% of respondents believed that the public expenditure on the Games had been well worth the investment (). We’ll find out if the majority were right.
The 2012 London Olympics were a success comparable to that of Sydney. Over 200 countries competed in the games and a ticket to the opening ceremony cost $3,139. London paid $758 million for constructing the new facilities and earned $2,569 million in broadcast revenue. 20 million people visited the city for the sole purpose of the games and $14 billion was generated. Four billion people watched the opening ceremonies on television. A study done by Lloyds Bank shows that legacy impacts mean the 2012 Games and associated events are estimated to result in a net increase in tourist visits of 10.8 million between 2005 and 2017. This extra tourist expenditure will generate a $2 billion contribution to GDP and support the equivalent of over 61,000 additional years of employment between 2005 and 2017. While London will receive the majority of these benefits, all of the UK’s nations and regions benefit with the equivalent of 41,000 years of employment supported outside of the capital ().
As far as the cost of hosting these games go, the London Organizing Committee of the Olympic and Paralympic Games (LOCOG) will spend a great deal of money to stage the 2012 Games. They will devote an estimated total contribution of £1 billion to UK GDP. This contribution is made up of £497 million directly from LOCOG’s spending, with multiplier impacts in the supply chain and through staff’s consumer spending supporting another £547 million contribution elsewhere in the economy. The amount required to stage the 2012 Games is estimated to be the equivalent of 26,000 years of employment. The number of people employed will be significantly greater as some of these jobs will be temporary as they are only for the duration of the 2012 Games. London 2012 will make a substantial contribution to UK GDP of £16.5 billion, with the impacts occurring over an extended time period from the award of the Games to London, during the Games themselves, through much of the coming decade, and in some cases even after that. Most of the GDP effect linked to the Games (57%) stems from construction projects occurring before the Games, including the building of the Olympic Park and the development of other sites and venues across the UK. A further 24% of the impact is due to post-Games construction activities. Additionally, a 12% contribution to GDP is anticipated from Games-related tourism across the UK during London 2012 and over the first five legacy years, while spending on the staging of the event itself is expected to contribute six percent ().
Viewed as one of the most professional planned Olympics in history, the 2000 Summer Olympic Games in Sydney Australia were exceptional. The games in Sydney were an economic and social success for multiple reasons:
• The Australian public was incredibly passionate about the games as 47,000 people volunteered. There were incredible economic benefits to such a high volunteer turnout. The amount of output produced without pay was momentous. Volunteers saved the Sydney Organizing Committee for the Olympic Games (SOCOG) $140 million, while also creating a successful post-Games volunteerism throughout the country ().
• Australia’s trade surplus skyrocketed from a $1.3 billion deficit in August to $677 million surplus in September ().
• More people became interested in Sydney. Television and internet brought a tremendous amount of attention to Sydney before, during, and after the games. Visits to Australia.com increased by 700% during the games when compared to the September statistics from 1999 ().
• Environmental benefits resulted. The Games established Australia’s first urban water recycling system, and it also produced the nation’s biggest metropolitan parkland. There are 430 hectares of woodlands, wetlands and remediated lands, as well as network of more than 40 kilometers of pedestrian and cycle paths ().
• Sydney was given the opportunity to host more major events due to its track record. Sydney’s new infrastructure like the Olympic Stadium, Tennis Centre, its Superdome, the Olympic Aquatic Centre, and the International Regatta Centre, Sydney has been given the privilege to host more international events like the 2003 Rugby World Cup ().
• Sydney was able to create new suburbs out of the athlete housing areas. Newington and Olympic Park are now two of the world’s largest solar-powered suburban areas ().
Now this is where it gets interesting. Looking at the pure amount of money generated in the above figures from the two separate games, they appear to be profitable. However, according to basic economics, we must consider the opportunity costs of these games. At first glance, it is very easy to get caught up in the obvious benefits of hosting the Olympic Games, but we cannot forget to consider the opportunity costs if the games were not held in the host city. A well known example of a massive loss occurred in the 2004 Athens Games. Unlike, Sydney and London, Athens did a horrible job of post-event planning. Some of the most valuable real estate in Athens was wasted on the Olympics. After the games, a multitude of the city’s 24 venues built specifically for the Olympics are were either entirely abandoned or very rarely used. A huge amount of construction costs were squandered, as the elaborate structures are now covered in graffiti and surrounded by chain link fences. In addition, many people are quick to look at the massive revenues earned by Olympics and use them to calculate the success of the games. This action is extremely misleading. In order to truly compute the economic impact of said games, one must compare the revenues from the games to the projected revenues that the city would have earned had the games been hosted in another city. People tend to look at the tremendous influx of tourism that is caused by the event. What they fail to consider is that the Olympic games always halt tourism to other places in the city. This amount of cannibalization should be deducted from the overall tourism number. For example, during the London 2012 Games, the British Museum, one of London’s most popular attractions, lost out on 137,000 visitors that otherwise would have come. Britain as a whole lost witnessed a five percent decrease in visitors during the month following the games in comparison to the prior year. While some industries experience a boom in productivity during the contest, there are others that decrease in productivity, as many local residents leave to seek asylum from the hectic amount of tourists entering their city ().
Happiness and Economic Impacts Combined:
Happiness is a subject that has been widely researched among many different parties seeking various correlations. There are There are abundant studies which focus on the impact of economic situations on the happiness of individuals. On the other hand, evidence also exists of the relationship existing in reciprocal form: specifically relating to happiness levels and their correlation to different economic behavior. A study by Graham, Eggers and Sukhtankar (2004) using panel data for Russia found that happiness had a statistically significant impact on future household income. To clarify, happiness in one stage seemed to have a noticeable effect on personal income in a later stage.
Hosting a major sporting event has happiness benefits for people in the host country; and, happiness has an impact on a person’s economic outcomes (for example, their incomes). This implies that hosting a major sporting event may lead to positive economic outcomes through the event’s effect on the happiness of the population. It is possible to directly investigate such a relationship by looking at two economic indicators which may be correlated with happiness – consumer confidence and household consumption – and whether hosting a major sports event has a positive impact on both. However, care should be taken in interpreting any relationships uncovered as boosts to confidence and consumption may be related to more standard, tangible economic impacts such as increased tourism and investment resulting from hosting a major event.
To investigate whether hosting a major event has any impact on consumer confidence, this analysis looks at how consumer confidence indicators have behaved in host countries in Europe since 1980. The measure of consumer confidence used is the EU harmonised 12-month forward looking indicator. The analysis compares the change in the indicator in the host country in the month in which the major sporting event first enters the time frame covered by the survey, to the average of all of the other EU15 countries for which data was collected. Comparison is drawn with the other European countries to control for the state of the economic cycle, shocks and other factors.
The results suggest that hosting an event has a positive impact on consumer confidence. For each of the events, the change in consumer confidence is positive in the host country and by a larger amount than in the other EU15 countries. However, the significance of the size of the Olympic host bar relative to the two football competitions should be interpreted with caution, as it is based solely on the Athens 2004 Games. consumer confidence of hosting a major event. Other major sporting events – the 1996 European Championships (hosted by England) and the 1998 World Cup (hosted by France) – had positive and statistically significant impacts on consumer confidence in the 12 months leading up to the event due to specific host-country effects. However, we find a negative and statistically significant effect for the 2000 European Championships on Belgium (hosted by Belgium and the Netherlands), while other events are not statistically significant. Therefore, supporting evidence from statistical analysis appears to be mixed.