Evaluating Major Events and Avoiding the Mercantilist Fallacy*

Economic Papers

Volumn 30, Issue 1, 2011, Pages 48-59

  Abelson, Peter ^a  

^a UNIVERSITY OF SYDNEY   (Australia)

Author keywords

cost benefit analysis; economic evaluation; H76; major events; R39

Indexed keywords

EID: 84863779494     PISSN: 08120439     EISSN: 17593441     Source Type: Journal    
DOI: 10.1111/j.1759-3441.2011.00096.x     Document Type: Article

References (37)

1. Abelson, P. (2009), ‘Economic Modelling and Forecasting’, in Argyrous, G. (ed.), Evidence for Policy and Decision Making. UNSW Press, Sydney; 94–115.
2. ACT Auditor-General’s Office (2002), V8 Car Races in Canberra – Costs and Benefits, Performance Audit Review. ACT Auditor-Geneneral’s Office, Canberra.
3. Allen Consulting Group (2007), Commissioned Study B. Computable General Equilibrium Analysis (of Formula 1 Grand Prix), in Victorian Auditor-General, 2007, State Investment in Major Events. Victorian Printer, Melbourne.
4. Applied Economics (2007), ‘Commissioned Study A. Cost-Benefit Analysis (of Formula 1 Grand Prix)’, in Victorian Auditor-General, 2007, State Investment in Major Events. Victorian Printer, Melbourne; 81–126.
5. Atkinson, G., Mourato, S. and Szymanski, S. (2005), ‘Are We Willing to Pay Enough to “Back the Bid”? Valuing the Intangible Impacts of Hosting the Summer Olympic Games’, Working Paper, Tanaka Business School, Imperial College, London.
6. Australian Department of Finance and Administration (2006), Handbook of Cost-Benefit Analysis. Australian Department of Finance and Administration, Canberra.
7. Blake, A. (2005), ‘The Economic Impact of the London 2012 Olympics’, TTRI Discussion Paper 5/2005, Christel DeHaan Tourism and Travel Research Institute, Nottingham University Business School, Nottingham, UK.
8. Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L. (2006), Cost-Benefit Analysis, Concepts and Practice, 3rd edn. Prentice Hall, New York.
9. Bureau of Transport and Regional Economics (2007), ‘Estimating Urban Traffic and Congestion Cost Trends for Australian Cities’, Working Paper 71, Department of Transport and Regional Services, Canberra.
10. Dixon, P. (2009a), ‘Comments on the Productivity Commission’s Modelling of the Economy-Wide Effects of Future Automotive Assistance’, Economic Papers, 28, 11–8.
11. Dixon, P. (2009b), ‘Towards Improving the Conduct of Policy Modelling: A Response to Gropp, Jomini and Salerian’, Economic Papers, 28, 25–6.
12. Dixon, P. and Rimmer, M. (2010), ‘Optimal Tariffs: Should Australian Cut Automotive Tariffs Unilaterally? Economic Record, 86, 143–61.
13. Dixon, P., Kauzi, G. and Rimmer, M. (2010a), ‘Effects on the PNG Economy of a Major LNG Project’, Economic Papers, 29, 143–55.
14. Dixon, P., Lee, B., Muehlenbeck, T., Rimmer, M., Rose, A. and Verikios, G. (2010b), ‘Effects on the U.S. of an H1N1 Epidemic: Analysis With a Quarterly CGE Model’, Centre of Policy Studies and the Impact Project, General Paper No. G-202, Monash University, Melbourne.
15. Dobes, L. and Bennett, J. (2009), ‘Multi-Criteria Analysis: “Good Enough” for Government Work? Agenda, 16, 7–29.
16. Dwyer, L. and Forsyth, P. (2009), ‘Public Support for Special Events’, Eastern Economic Journal, 25, 481–99.
17. Ergas, H. (2009), ‘In Defence of Cost-Benefit Analysis’, Agenda, 16, 31–40.
18. Fleurby, M. (2009), ‘Beyond GDP; ‘The Quest for a Measure of Social Welfare’, Journal of Economic Literature, 47, 1029–75.
19. Giesecke, J. and Madden, R. (2007), ‘The Sydney Olympics, Seven Years on: An Ex-Post Dynamic Investment’, Centre of Policy Studies/IMPACT Centre Working Papers g-168, Monash University, Melbourne.
20. Gropp, L., Jomini, P. and Salerian, J. (2009), ‘A Reply to Professor Dixon’s Comments on the Productivity Commission’s Modelling of Automotive Assistance’, Economic Papers, 28, 19–24.
21. NSW Auditor-General (2010), Government Investment in V8 Supercar Races at Sydney Olympic Park. Performance Audit, Sydney.
22. Pearce, D., Atkinson, G. and Mouranto, S. (2006), Cost-Benefit Analysis and the Environment, Recent Developments. Organisation for Economic Co-operation and Development, Paris.
23. Productivity Commission (2008), Modelling Economy-wide Effects of Future Automotive Assistance. Productivity Commission, Melbourne.
24. Smith, A. (1776), The Wealth of Nations.
25. Victorian Auditor-General (2007), State Investment in Major Events. Victorian Printer, Melbourne.
26. Residents would typically include Australian citizens and other long-term residents. Arguably, no value would be attached to the well-being of short-term visitors who are normally resident inter-state or overseas
27. Formally using the compensating variations principle, the net social benefit is the maximum net amount that local citizens would be willing to pay for the event and be just as well off with the event as without it. Using the equivalent variations principle, the net social benefit is the minimum amount that the local citizens would be willing to accept as compensation for not having the event
28. The results shown here are those reported in VictorianAuditor-General(2007). They are based on the Applied Economics report but reflect some adjustments by the Victorian Auditor-General
29. This refers to unpublished preliminary work by Applied Economics – see footnote 4
30. The NSW Department of Industry and Investment employs I–O method of analysis, which is also described as an economic impact analysis (NSWAuditor-General,2010)
31. For macroeconomic modelling purposes, there are many other potential forecasting models (time series and structural estimation models) that forecast GSP (or GDP), employment, inflation and so on, but they usually do not disaggregate to industry level (Abelson,2009)
32. Events NSW has adopted a consultant recommendation that CGE modelling should be adopted for events attracting over $10 m in government support (NSWAuditor-General,2010)
33. As noted by a reviewer, most experienced CGE modellers are well aware of the limitations of CGE models, but some users of CGE models are not
34. In private correspondence, Peter Dixon has pointed out that it is not inherent in CGE modelling that GDP and welfare are confused. DixonandRimmer(2010) and Dixonet al.(2010a) clearly distinguish between GDP and local gains in consumption
35. For example, Blake(2005) assumed a labour supply elasticity of 0.33 in the UK, whereas GieseckeandMadden(2007) assumed that there was full employment across Australia in 2000
36. Using the Monash Multi-Region Forecasting CGE model, the ProductivityCommission(PC,2008) estimated an annual welfare gain of about $500 m from cutting automotive assistance. On the other hand, Dixon(2009a), the main creator and user of the model, estimated that with the PC’s own assumptions, the gains would be between −$26 m and +$66 m. In further notes, the two parties also disagreed strongly on the appropriate assumptions for the model (Dixon,2009b; Groppet al.,2009)
37. Gross visitor expenditure in the ACG report was $73.4 million compared with $60 million in the Applied Economics report (VictorianAuditor-General,2007)