Bread or Games? Social cost-benefit analysis of the World Cup in the Netherlands SEO

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1 Bread or Games? Social cost-benefit analysis of the World Cup in the Netherlands SEO Comments by: Stefan Kesenne, Economics Department University of Antwerp

2 General Comment In my opinion, this SEO-study is a careful (social) cost-beneft analysis of the FIFA World Cup in the Netherlands in 2018 or It is NOT one of these nonsense and useless so- called Economic Impact Studies (EIS) that only register the money flows that are generated by hosting a sports event, without indicating which money flow is a cost and which flow is a benefit. They simply add all the flows and present them as if they are all benefits to the host country.

3 Nevertheless, The Dutch government and its lobbyists did not like the unfavourable results of this SEO-study, and that is to be be considered as a great complement to the scientific hostesty of the authors. So, the Dutch government found a few other consultants, who were willing to critize the SEO- study, promissing to come up with more favourable results for the Dutch economy!

4 Surprise, Surprise These lobbyists critized the SEO-study for overestimating the costs and underestimating the benefits! Go and tell Robert Baade and Victor Matheson These two world famous specialists in this field, concluded from their extensive experience that in ex-ante studies, the benefits are always overestimated, even up to 5 times the real benefits, and the cost are always underestimated, down to 10 % of the real costs. So, we should be very careful with the ex-ante economic impact studies that invariably show up if a country wants to host a major sport event.

5 Can we learn something from the last FIFA World Cup in South Africa 2010? Let s look at a very good cartoon from Gado, that I found in an African newspaper, shortly after the World Cup. In my opinion, it tells the main story of the FIFA World Cup.

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7 Indeed, the World Cup Football is a very profitable business, which can also make the population of the host country very happy and proud, but the FIFA runs off to Zürich Z with all the profits, and leaves the host country behind with huge deficits. And this will also be the case in 2018 or 2022 in the Netherlands and Belgium. In its most pessimistic scenario, the SEO-study predicts, for the Netherlands only, a net-benefit (benefits minus costs) of: euro (NPV) which maybe, given our past experience, must be considered as the most realistic estimate.

8 General criticism 1 Estimating the total costs and benefits, or the total net-benefit of hosting the World Cup is one thing, but more important, in my opinion, is to know who are the winners in the host country and who are the losers? This study tells us very little about the distribution of costs and benefits. Is it again the Dutch taxpayer who will be the main loser, even if maybe the majority of the Dutch (female) taxpayers does not like football?

9 General criticism 2 What matters is in KBA is the opportunity cost, rather than the actual financial cost. f.i: Has the shortage of unemployed construction workers in Holland been taken into account in calculating the stadium costs? Nothing is said in this study about the extra consumer surplus of the Dutch population, if they spend their money on football tickets instead of anything else.

10 Minor comments and questions 1 On page 8, the authors start from a multiplier of about 2, which is then reduced to 1 if the costs are included in the computation of the multiplier This is unclear to me. If it is an input-output multiplier, which only calculates the sectoral output resulting from an increase in final demand, how can it be larger than 1? If it is a Keynesian (macroeconomic) income multiplier, a value of 2 is too high for the Netherlands, with its high savings rate, high tax rate and high import rate. Also, to the best of my knowledge, income multipliers are not commonly used in cost-benefit studies.

11 Minor comments and questions 2 On page 14, the authors deal with the benefits of increased tourism, and they found positive additional tourist expenditures of 72.7 million euro, even in the most pessimistic scenario. However, In Australia 2000, Greese 2004, in China 2008, and in England 2012, a decline in the number of tourists and tourists expenditures have been observed or predicted in the year of the Summer Olympics, compared with other years. So, can an increase in tourist spending be expected from the World Cup in the Netherlands?

12 Minor comments and questions 3 The SEO study has been criticized for overestimating the costs of the stadiums, because some stadiums would have been build, expanded or renovated, even without the World Cup coming to Holland. Do you agree? What is your opinion about the argument that the new football stadiums will serve the country for decades after the World Cup, and so not all stadium costs should be charged to hosting the World Cup?

13 A final unimportant remark: If the authors want to refer to the spectacles of the ancient Roman empire, The title of the paper, Bread or Games, should be changed to: Bread and Circus

14 Thank you