Medal-Count Economics: What Factors Explain the Olympics' Biggest Winners?

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India might have 99 problems, but finding a place to keep all its Olympic medals ain't one. They're not so good at winning those -- a little bit better than Michael Phelps. In their entire history.


Why does a country with a billion plus people only have 24 Olympic medals? Well, there's more to capturing athletic glory than having more people than other people. Consider the chart below, which compares the populations and medal hauls of the most successful nations from the London games -- and India too. They're the yellow dot in the bottom right.

OlyPop.png

Population isn't everything, but it is something when it comes to making the podium. The rest of the formula for Olympic success is intuitive enough. You need lots of people, lots of money, and lots of desire. In other words, a big talent pool, the resources to develop it, and the willingness to spend on those resources. As my colleague Max Fisher pointed out, India lacks in these latter two categories.

Let's put on our economist hats for just a second and think about how wealth and desire interact when it comes to Olympic spending. Like everything else, it's all about supply and demand. The supply in this case is the marginal cost of Olympic spending, and the demand is the marginal propensity to spend on the Olympics -- in English, how much we can spend, and how much we want to spend. The more money you have, the more you can afford an additional dollar of spending. But it's not clear what having more money means for how much you want to spend -- it might be more, it might be less. The demand curve is idiosyncratic.

The chart below gives a sense for just how idiosyncratic it is. It compares GDP per capita with medals won for the top countries at the 2012 games. That a poor country like Cuba can do better than a rich country like Sweden -- despite roughly equal populations -- shows just how differently different countries approach the games.

OlyGDP.png

These Olympic overachievers share an obvious bit of history. They used to be communist -- or still are. In other words, countries accustomed to treating the Olympics as a measuring stick of national greatness continue to do so, even if it's a comparatively more expensive proposition for them. But it's not just former Iron Curtain nations that put more effort into the Olympics. The host nation does too. So does the future host nation. Consider Great Britain. Its 2012 performance has been far better than its 2008 performance -- which was itself a big jump up from the 2004 games. It's easy enough to understand why. Everybody wants to put on a good show for the home crowd.

Let's try putting this all together. Starting with the 1996 Olympic games, I went back and looked at four factors: population, GDP per capita, whether a country used to be communist, and whether it was hosting or about to host. Regressing on these variables explained 42 percent of the medal results -- not great, but enough to tell us something about what matters most. The answer: Population, with a coefficient of 0.542, followed closely by GDP per capita with a coefficient of 0.515. Communist history was about half as important, with a 0.272 coefficient, while hosting came in with a 0.168 coefficient. This analysis doesn't capture the reality that some nations are just more talented -- think Jamaica in the sprints or Kenya in long-distance running -- and that success often begets more success as Olympic victories spawn Olympic development programs. Still, it does tell us that supply is what matters. You can prioritize the games all you want, but if you don't have a big enough talent pool or the money to develop that talent, there is a very low ceiling on what you can do.

In other words, China is just getting started.
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Matthew O'Brien

Matthew O'Brien is a former senior associate editor at The Atlantic.

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