Chicago is out

A semi-random CBA methodology question:

On page 41 and 42 they don’t count the consumer surplus in secondary market (for things like hotel rooms – but presumably travel, taxi, food, etc.) because that consumer surplus is already measured as part of the “Olympic spectacle” measure – and they don’t want to double count.

But how is consumer surplus measured for the “Olympic spectacle”? From page 23 and 24 it seems like it is only measured based on the ticket price, with some modifying assumptions for scalping, etc.

In other words, on page 41 and 42 they essentially say “the ‘willingness to pay’ for the Olympic experience isn’t just the ticket price – it’s the price you pay for your hotel room, your travel, your food while you’re there, etc. too – but we don’t want to count that for attendees because that would be double counting”. But then when they count the willingness to pay for the experience on page 23 and 24, they only base it on ticket prices, with some adjustments – they don’t base it on “ticket price plus hotel price plus food, etc.” like they say they should on page 42. Shouldn’t this be an underestimate of consumer surplus, or am I thinking about it the wrong way?

The treatment of national pride is strange too. They take an estimate of what “national pride” is worth in the literature, but then decide to cut that in half for people that don’t live in British Columbia. That doesn’t seem to make much sense, since the literature provides an average estimate for national pride – not local pride. Obviously there’s a lot of discretion on these things – but it makes you wonder when changing that one aspect alone would have closed TWO THIRDS of the negative net benefit gap (the net cost was $100 million. If they did what the literature said rather than cutting the “national pride” benefit in half, the net cost would have been only $35 million – for that change alone)!!!

But you know – people disagree on these things, which is why CBA’s usually do sensitivity analyses that tighten or relax these assumptions. This one doesn’t seem to have a sensitivity analysis.

To a large extent advocating against the Olympics and other investments like it suffers from the same problems as people who advocate protectionism – just like with free trade, the costs of these public investments are concentrated, but the benefits are diffuse. That makes it really easy for opponents to get their way.

Well as Bill Maher said at least the comparisons of Obama to Hitler can stop now. Because Hitler GOT the Olympics.