Local sports fans might not be too happy, but fans of sensible economic decisions should be happy about Team Mercenary's decision to host the next America's Cup regatta in Barcelona. The New Zealand government and Auckland Council had pledged $99 million towards the hosting, but apparently that wasn't enough. As the New Zealand Herald reported yesterday:
The yachting syndicate today announced Barcelona officially as the next venue of the America's Cup, replacing Auckland of hosting duties for the 2024 event.
Emirates Team New Zealand and the Royal New Zealand Yacht Squadron made the announcement overnight, confirming the 37th running of the event to be held in September and October of 2024.
Team New Zealand successfully defended the Auld Mug last year with a 7-3 victory over Luna Rossa and then rejected a $99 million bid from the New Zealand Government and Auckland Council to host the next America's Cup, meaning the event looked likely to be hosted abroad.
This came after the Government had invested $136.5m in the previous defence, alongside $250m from Auckland Council.
A cost-benefit report last year found the New Zealand economy was left $293 million worse off.
The last sentence is the most damning, and the reason why we should be glad to see the end of the taxpayer subsidies (although there are multiple reports that disagree over the measurement of the costs and benefits of the last event). Now, there is good reason to be sceptical of economic impact studies generally, and studies of the America's Cup are no better than most (see here and here). However, the bias in such studies is almost always upwards. So, it is likely that the last running of the America's Cup left New Zealand a lot worse off than just $293 million out of pocket. That's a pretty expensive party, but it's certainly not going to drive economic growth. That money is better spent elsewhere.
It could have gone much worse, if the government had decided to engage in an extensive bidding war over the rights to host the regatta. Since the real benefit of hosting is largely unknown, in a bidding war the highest bidder is likely to be whichever bidder most over-estimates the benefits (since that largely determines what they are willing to bid). This is what economists refer to as the winner's curse. Presumably, Barcelona will either genuinely benefit to a greater extent than New Zealand would have from hosting (and therefore offered more money to Team Mercenary), or Barcelona over-estimated the benefits by more than New Zealand did (and therefore offered more money to Team Mercenary), or both. Probably both. Regardless, whether hosting the America's Cup is worthwhile is not something New Zealand need worry about for a while at least. That should provide some consolation at least for losing the big party.
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