Why hosting World Cup games does not bring economic advantages to cities

Recently, news emerged that Arrowhead Stadium will be one of the US cities that will host the FIFA World Cup games in 2026.

As an economist and someone who loves Kansas City, I was disappointed by the news.

While politicians and bureaucrats are quick to publicize the benefits of major events like the World Cup, economists are more pessimistic on the matter. Despite highly visible claims of job creation and increased spending, the costs of hosting events like this are often hard to see and much higher. What’s worse is that the supposed benefits often never materialize.

For example, a study on the economic impact of the FIFA World Cup in 2002 in Japan and South Korea found that countries suffered a loss of US$5.5 to US$9.3 billion, despite estimates that this would generate a gain of US$4 billion. Therefore, a study for the U.S. Soccer Federation by a Boston consulting group estimating a possible gain of $620 million for Kansas City does not

In his book “The Economics of Sports”, Michael Leeds summarizes the outcome of “mega-events” such as the World Cup, and the pattern is clear: the projections of revenue and jobs are consistently overly optimistic.

For example, the 2006 World Cup in Germany was predicted to create 60 thousand new jobs. Real net job creation? Zero.

Why is the World Cup so consistently disappointing? Believe it or not, a French economist of the century 19 gives us a convincing answer. In 100, Frederic Bastiat wrote an essay that clarified a common mistake known as the “broken window fallacy”. He did this using a parable.

Imagine that a neighborhood vandal breaks the window of a local store. The shop owner must now hire a glazier for $100 to replace the window. While you might feel bad for the store owner, some might suggest there is a bright side. The shop owner spends money that gives employment to the glazier, who uses his new money to buy other things. When the glazier uses his new income to buy things, he creates more jobs and more income for others. The economy improves. Or not?

Bastiat points out that this line of thinking is fallacious. Even if the glazier receives money, the shop owner loses wealth. Maybe he was saving that wealth for a new suit. Or maybe now the bank where he kept his money has fewer deposits to lend as loans.

It’s hard to know how the US$ 100 would have been used, and that is precisely the problem. The benefit to the glazier is seen. The tailor who can’t sell a suit or the lender who doesn’t get a bank loan is hard to see.

The same problem exists with the World Cup. Cities must use funds obtained from taxpayers to win the competition for the World Cup. The aforementioned U.S. Soccer Federation report estimates the cost per city at hundreds of millions, although Kansas City Mayor Quinton Lucas claims the current cost is US$

millions in renovations to Arrowhead Stadium. But if history teaches anything, this figure may be greatly underestimated.

What Kansas City taxpayers would have spent their money on is not something we can easily know. But it’s easy to see how hotels, for example, can benefit from the World Cup.

But, like the store owner, taxpayers have no advantage with World Cup spending. . This expense comes with a price. And, as studies show, that price is often ignored in pursuit of elusive benefits.

Peter Jacobsen

teaches economics at the University of Ottawa, where he holds the positions of Assistant Professor and Professor of Economic Education and Research at the Gwartney Institute.

©2002 FEE Foundation for Economic Education. Published with permission. Original in English.
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