Entrepreneurial nations win big in medal tables

IT’S THE question on everyone’s lips. Which country will walk away from London 2012 with the biggest medal haul? Economists are no different from the general public. Several have come up with innovative ways of predicting what it takes for a country to win more medals than its competitors.

Goldman Sachs found that national income is “strongly associated with medal attainment.” But it also noted that there is more to success “than high income levels”. We, therefore, need to look more widely.

At the Legatum Institute, we produce a prosperity index to measure a country’s total prosperity. It’s about more than a nation’s wealth. Our index is a complete assessment of national success and takes into account factors like personal freedom, health and entrepreneurship.

Despite the fact that Team GB has only won four medals so far, we predict that Great Britain will increase its medal haul and beat its success at Beijing 2008, when it won 47. It may now sound unlikely but, as host nation, Britain will benefit from a premium – linked to home crowd support and extra investment. The US will likely come out on top in the rankings, and win a total of 91 medals at London 2012.

When we consider historical performance, the relationship between prosperity and total Olympic medals won per head of population is clear: more prosperous countries win more medals. There’s no simple explanation, but the results reveal interesting stories, arising not only from economic differences, but cultural, institutional and political conditions.

Nordic countries are both prosperous and win lots of Olympic medals. But detailed analysis reveals that a country’s economic performance is one of the weakest predictors of Olympic success. More accurate measures include safety and security, quality of education and, most interestingly, the level of entrepreneurship in society.

These latter factors are the results of developed institutions and infrastructure, the legacy of long-term policies. Consequently, the economic downturn in Europe is unlikely to have a negative effect on European Olympic performance.

Although the relationship holds globally, some interesting stories are found in the outliers. It’s surprising that India (population 1.2bn) has won only 20 Olympic medals in the last 100 years. Meanwhile, Kenya (population 41m) has won 75 medals in the last 50 years, even though it ranked lower in terms of prosperity in 2011.

In fact, Kenya has won more medals per head than both Argentina and Brazil. Kenya has risen up our index since 2009 and, if this is reflected in its Olympic performance, Kenya is likely to break its record of 14 medals.

Although it’s certainly interesting to speculate on the underlying factors that contribute to a nation’s sporting success, we shouldn’t forget that the Olympics are primarily about individual prowess. Whether our predictions come true or not, even us economists will enjoy the Games as true tests of achievement.

Stefania Lovo is an econometrician at the Legatum Institute. She co-wrote the article with Nathan Gamester, a research analyst at the Legatum Institute. The Prosperity Index can be found at www.prosperity.com