Olympian Economics

LONDON – As Olympic mania swept the world in recent weeks, it transported the host country, Great Britain, to a rare display of public exultation. Indeed, the successes of “Team GB” produced an upsurge of patriotic rejoicing akin to victory in war. Britain finished third in the gold medal count, behind the United States and China, much larger countries, but ahead of Russia, which traditionally competes with America for first place.

So, what is the secret of Olympic success? The acquisition of medals, precisely because it gives so much satisfaction, has become the object of scientific inquiry and national endeavor. Before the 2012 Games, the Financial Times combined four economic models to produce the following “consensus” prediction of gold medals (the actual results are in brackets): 1. United States, 39 (46); 2. China, 37 (38); 3. Great Britain, 24 (29); 4. Russia, 12 (24); 5. South Korea, 12 (13); and 6. Germany, 9 (11). The gold medal rankings and overall medal placement (gold, silver, and bronze) were correctly predicted in all cases.

The most striking finding is that the medal count can be predicted with great accuracy from four key variables: population, GDP per capita, past performance, and host status. Everything else – different training structures, better equipment, and so forth – is pretty much noise.

The impact of population and GDP is obvious: A large population increases the chance that a country will have athletes with the natural talent to win medals, and a high GDP means that it will have the money to invest in the infrastructure and training needed to develop medal-winning athletes.