Grand Prix or booby prize ?

The economic case for events like this is a con job

Another Grand Prix has come and gone in Melbourne, with pretty much uncritical coverage from the media, and particularly The Age. This article from Chip Le Grand has a headline implying some balance to follow The Australian Grand Prix is here to stay, but at what cost? but repeats without question estimates from consulting firm Ernst and Young about the economic benefits of the event. Le Grand gives a paragraph or two to some opponents, resigned to defeat, but most of the article is based on a softball interview with the guy in charge.

ChatGPT refused to create an image showing negative environmental effects of car races (against policy, it seems), but was happy to produce this image of a car race dominated by smoke and noise, “capturing the dynamic intensity and excitement of the moment.”

Fortunately, this ABC article by Madi Chwasta found space for some critical analysis, quoting my observation that

"[The modelling] treats all the economic activity associated with a project or event as a benefit.

"For example, it measures visitor spending on restaurant meals and accommodation, without considering the cost of providing those services and the people who might want to visit and choose not to do so because hotels are booked out."

Ernst and Young offer the following defence of their work

The methodology used for this study has been applied by EY in numerous assessments of major sporting and cultural events and is accepted by major event bodies and government departments across Australia."

Sadly, this is quite true. This kind of bogus analysis has been largely driven out of project assessment in Australia, but it remains par for the course in relation to sporting events .

There’s a broader issue here. If Ernst and Young is willing to use discredited methods like this to deliver the result its government clients want in this case, why should we pay any attention to any finding they report? For that matter, why should we believe them when their accounting business signs off on corporate reports?

It’s long past time for Australian governments to stop doing business with consulting companies, except for those with specialised knowledge that can’t be replicated within government (consulting engineers, for example).

And it’s time, globally, for the accounting business of these firms to be separated from consulting and similar activities. A limited version of ring-fencing has apparently been proposed in the UK, but much more is needed.

As a special service for paid subscribers, I’ve send the ABC article in a separate email. I’m going to think about more add-ons of this kind, but my own writing here and on my blogs will always be free for everyone to read

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