The Olympics can teach you as much about economics as sport. So here are 10 fundamental economic lessons to take home from Rio:
1. Olympians have fought gladiatorial battles to reach Brazil and the competition is about to get even more intense. In economics, as in sport, competition is critical. The most successful Olympians and the most successful economies see competition as their friend, not their enemy. Whether it’s Usain Bolt, Mo Farah or Andy Murray, these guys thrive on competition, because they know it makes the best even better.
2. The positive spur from competition needs to be learned at a tender age. Children compete with each other at school but the education system as a whole frowns on competition, which is why most of it remains in the hands of a public sector monopoly. A monopoly state at the school gate teaches the wrong lesson in life to our children. Culture matters. We need a culture of freedom and competition, not all must have prizes, to drive forward success.
3. While we don’t want a win-at-all-costs mentality driven by bad sportsmanship – there needs to be respect and admiration for competitors – we do want one that says second place isn’t acceptable. All too often our political leaders are happy with second, third, fourth or fifth place. That’s not the attitude of an Olympian. Being happy in the middle is the surest way to fail to reach Rio in the first place. Where’s the vitality that led to an economic empire spanning the globe?
4. Free trade works. Trading (and competing) at the global level has expanded the world market and driven up standards. The benchmark isn’t local, regional or national, it’s global.
5. If you’re going to compete with the rest of the world, you need to be able to get there. The lesson for Heathrow expansion from sport is simple. You’ll base your training camp where the facilities are best and the transport logistics most efficient. Get the message, Boris?
6. Government needs to get out the way. Yes, it may have a key role in providing core infrastructure (Olympic stadiums), but that’s it. If you don’t think the government has any role managing Olympic teams, you also have to ask whether it has the required knowledge to manage or intervene in any other sector of the economy.
7. State corruption and collusion (e.g. in avoiding doping checks) can undermine a market so much that the benefits of competition are completely lost. The rule of law is essential to an effective market and a successful Olympics.
8. If voluntary exchange determines pay levels in sport, that’s seen as fair. Nobody seems to complain when Olympic superstars have pay packages running into the millions. The Olympic lesson goes further, however. Olympians who don’t deliver feel the consequences in lost sponsorship income. Maybe we need more of the Olympian spirit in the boardroom as well.
9. Sport is emotional and this is one of its great benefits. Billions will scream and shout over the coming weeks, not because they hate competition, but because they’re inspired by it. How can we capture the Olympic spirit at work? Employers, employees and customers can be persuaded with facts, but they’ll be inspired with emotion.
10. There can be an enabling role for government in sport (e.g. lottery funding) and the economy (where there is market failure), but taken too far (e.g. subsidies), diminishing returns set in and performance gets worse, not better.