Racing Costs

Listener: 5 November, 1988.

Keywords: Environment & Resources;

Formula one motor racing is not one of my interests. All it seems to involve is pretentious cars continually turning in the same direction, making a lot of noise, wasting a lot of energy, and ending up where they started – a bit like political parties really.

Nevertheless my eye was caught by a book entitled The Adelaide Grand Prix; The Impact of a Special Event*, written entirely by economists and statisticians. The book is about the first Adelaide Grand Prix, staged in 1985 to celebrate South Australia’s 150th birthday, and the first grand prix to be staged in Australia. It is almost silent about the event itself, not telling who raced or who won, and the map of the circuit does not show whether the cars had to keep turning to the right or the left (an uncertainty I face with our political parties too).

The book focuses rather on the impact of the race on the city of just under one million people. While the promoters always pronounce these sorts of events a success (and the Adelaide Grand Prix did win international acclaim for race, television, and tourism presentation), those who suffer because of event and the costs they bear are frequently ignored.

For instance, consider the Grand Prix Board surplus of $2.4m (that is real Australian dollars). Actually the board ran its operation at a loss of $2.6m but the Australian Government in Canberra chipped in $5m, converting the running loss into money in the bank. What we do not know is whether Canberra cut back on some other grants. It might, for example, have given the state less to spend on roads or schools or hospitals.

This is what economists call a “counterfactual” proposition. When we evaluate costs we have to compare the outcome with what might have happened. Costs for economists are always

in relation to the alternative opportunity, which requires a counterfactual.

One chapter of the book asks what would have happened to road accidents given a counterfactual that there was no grand prix. It finds a rise in the accident rate in the weeks after the race, which when other effects had been allowed for, amounts to up to an extra seven dead and 273 non-fatal casualties, The authors conservatively estimate the cost of these “hoon effect” accidents at between $3.2m and $5.8m. So bang goes the profit of the Grand Prix Board. Its accounts may have been ahead, but other government accounts, such as hospitals’ , were set back.

Of course, these figures do not include the profits firms made from the extra tourists, nor the pleasure people got from the race (and the disturbance it caused them). The writers are indefatigable. They calculate that the motor race attracted 32,000 visitors who are thought to have spent $9.9m in the state.

The research team also surveyed residents about how they felt. Of the 79 respondents in the zone which included track, 20 said they would leave home for the duration if there were a race in the following year, 14 said they would the grand prix next time, 11 said they would get better tickets and 7 said they would move house. While in headcount terms the vast majority favoured having the race – even those in the close zone who suffered travel, work, and other disruptions – weighting for the degree of enjoyment and stress may result in less support.

Noise was also assessed. Surprisingly. at least to me who finds “broom broom” sounds irritating and worse, a good majority, even those in the closest zone, were not affected, The bigger complaint seems to have been about the helicopters and an RAAF F18 hooning overhead.

At this stage you might have expected these solemn economists to have offered an overall figure of the value of the grand prix. While numbers are scattered through the book there is no single summary figure that somehow sets out the goods and the bads of the event. Quite rightly so; even the few items I have described indicate that there were winners and losers in the population (as there were on the race track), and to subsume this all in a single number would have been to have missed the point of the diversity of public responses to the event:

Nor was there any list of recommendations. Rather this was research commissioned by the state treasury to enable a better understanding of the phenomena. In the end the decision was made by the politicians, enlightened by the analysis, that on balance the Adelaide Grand Prix was a “grand success”. And so it is repeated each year, with our Prime Minister as one of the celebrity drivers (but I cannot tell you whether he drives around to the left or to the right)

* The Adelaide Grand Prix; Impact of a Special Event, edited by J P A Burns, J H Hatch, T J Mules (Centre of South Australian Economic Studies, 1986).