By a WALL STREET JOURNAL Staff Reporter
August 30, 2004

Finishing out of contention in the 2004 Olympics: Economists.

Before the Olympics, Andrew Bernard, a professor at Dartmouth College’s Tuck School of Business in New Hampshire, and Meghan Busse, a visiting professor at the University of California at Berkeley, used economic models to predict the medal standings of what were expected to be the top 34 countries in the Games.

The model had its shining moments, but it also produced a few notable misses. The computer projected that the U.S. would win 93 medals; the U.S. took home 103. “We think the U.S. exceeded expectations,” Mr. Bernard says.

The economists say their model can predict country performances by weighing a nation’s population size, gross domestic product per person and past performance. Despite the model’s misfires, Mr. Bernard says he was happy with how he did. He came within three medals of a perfect prediction for 23 of the 34 countries tracked and the computer model did a pretty good job predicting gold medals. It called for the U.S. to win 37 gold, and American athletes won 35. It called for Russia to win 29 gold medals, and Russia ended up with 27. Germany was seen winning 13 gold, and it won 14. “The model performed well,” the economist says.
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Tounge and cheek, the model did perform well, however it was better on analyzing past data rather than prediction. Illustrating how difficult the Fed’s job can be, and the trickiness of projecting out of sample.

Economists Wrestle
With the Olympics

By JON E. HILSENRATH
Staff Reporter of THE WALL STREET JOURNAL
July 26, 2004; Page A2

NEW YORK — The Olympic Games are still more than two weeks away, but two academic economists say they already know how many medals countries will win.

Sports writers and Olympic enthusiasts have been predicting medal winners since the Games began, mainly by sizing up athletic talent sport by sport. But Andrew Bernard, a professor at Dartmouth College’s Tuck School of Business in New Hampshire, and Meghan Busse, a visiting professor at the University of California Berkeley, say they can predict how many medals 34 countries will take home without knowing anything about the athletes involved.

Their computer model tracks population size, gross domestic product per person, past performance and home-field advantage. Population is important because a large population gives a country a large pool of talent. GDP is important because it gives a country the financial resources to develop Olympians. Past performance can tip the model in the direction of countries like Cuba and Russia, which tend to do better than their economies or population suggest they should.

Mr. Bernard and Ms. Busse say that besides offering an unusual way to measure Olympic success, their research offers some broader insights into globalization.

In 2000, the model used by Mr. Bernard and Ms. Busse accurately predicted the number of medals won by South Korea and on average came within four medals for the countries tracked.

For the Athens Games, which commence Aug. 13, Mr. Bernard and Ms. Busse have some good news and bad news for the big sporting powers like the U.S., Germany and Russia. First, the good news. The U.S. is forecast to win 93 medals, Russia will come next with 83, and Germany will come in fourth place with 55 medals. Now the bad news: While still dominant, the Olympic goliaths have been reaping smaller and smaller shares of the total medal count since the 1980s, a trend Mr. Bernard says is likely to continue at the Athens Games. For example, in the Barcelona Games of 1992, the U.S. won 13.2% of all of the medals awarded. That fell to 10.4% in the 2000 Sydney Games, and Mr. Bernard says it will fall to 10.1% in Athens.

Meanwhile, Mr. Bernard says underdog countries will be playing some catch-up. In the last Olympics, Sri Lanka, Cameroon and Barbados all joined the ranks of medal winners for the first time, Cameroon in soccer and Sri Lanka and Barbados in track and field. Jamaica has increased its medal count in every Olympics since 1988, while Brazil doubled its medal count between 1988 and 2000 to 12.

Mr. Bernard sees a broader point about the global economy in this development. He says his findings are “consistent with poorer countries … having improved their standard of living and thereby having improved their chances of sharing in Olympic glory.”

China’s performance best exemplifies the point. As its economy has soared, it has gone from 28 medals in 1988 to 59 in 2000. The economists are predicting that China will win 57 medals in Athens, but Mr. Bernard wouldn’t be surprised if it outperforms his own prediction. Because China will be hosting the 2008 Games, the coming-host effect could boost those tallies even more at the next Games.

Improved living standards in the developing world might explain part of the equalizing effect of Olympic performances, but not all of it. Angus Deaton, a Princeton University economist and an expert on poverty, notes that millions of people have climbed out of poverty in China and India, helping to narrow the living-standard gap between people in the developed world and the developing world. But income inequality has still widened significantly between the poorest countries in Africa and the developed world.

So what else might explain the changing Olympic landscape? The developing world also is home to rapid population growth, which could be lifting performances at the Olympics of some countries simply by increasing their potential pool of talent even as their economies stagnate.

Michael Lowry, an executive with the Canadian Olympic Committee, has another explanation for the balancing-out factor. While he isn’t an economist, his explanation relates to an economic theory that dates back to 19th-century economist David Ricardo, who held that everyone gains when countries focus on producing what they are most capable of producing. The idea is called comparative advantage.

Mr. Lowry says more countries are focused on their own comparative advantage in sports. Kenya, with high-altitude training, excels in distance running. Hong Kong, a coastal city, has won in windsurfing. Canada is working hard to promote rowing and canoeing. But its real comparative advantage is in winter sports. That might explain why, among wealthy countries, it seems sure to disappoint in the Summer Games of Athens. Mr. Bernard says his model suggests that based solely on its population and economic output, Canada ought to produce about 28 medals at Athens. Instead, it is likely to come away with only 13.

Write to Jon E. Hilsenrath at jon.hilsenrath@wsj.com

*sigh*, another reason for a camera phone.