Is sport (participation) a public or a private good?

In a recent meeting with senior executives of the State government of Victoria we were debating the challenges faced by the community sport participation system post COVID-19. In considering the role and responsibilities of the State government in regard to the delivery of sport participation opportunities, one of the executives raised the question - is sport participation a public good? In economics, a public good is a good (wherever I mention ‘good’ one can also consider this to be a ‘service’) that is both non-excludable and non-rivalrous. Non-excludability means that once the good is provided, it is difficult or impossible to prevent individuals from benefiting from it, regardless of whether they pay for it or not. Non-rivalry means that the consumption of the good by one individual does not reduce the amount available for consumption by others. In other words, the benefits of consuming the good are available to all without restriction. Examples of public goods are street lighting, national defence, and also clean air. In contrast, private goods are both excludable and rivalrous, meaning that individuals can be excluded from consuming the good, and consumption by one individual reduces the amount available for others. Examples of private goods include food, clothing, and housing.

There is a good reason why the senior public servant asked the question. Sport participation as public goods poses a challenge for market-based economies because there may be insufficient incentives for private firms to produce and provide sport participation opportunities. This is because individuals may not be willing or able to pay the full cost of participation, and if they do pay, others can still benefit from it without paying. The dilemma therefore is, what part of sport participation should be provided by the government or other public entities through taxation or other forms of funding?

The provision and funding of sport participation can vary across different types of economies, but in general, sport participation is more likely to be considered a public good in economies where there is a greater role for government intervention in the provision of public goods and services. For example, in mixed economies where there is a combination of private enterprise and government intervention, sport participation may be considered a public good that is funded and provided by the government to some extent (and ‘to some extent’ is important! rarely it will be ‘free’). This is particularly true in countries where there is a strong tradition of investing in public goods and services, such as healthcare, education, and infrastructure. In contrast, in more market-oriented economies, sport participation may be considered more of a private good that is provided by private firms or individuals. In many emerging economies, there is less government intervention in the provision of sport participation opportunities, and individuals are expected to pay for sport participation out of their own pocket. In a fast-growth economy such as India, private providers seem to be more agile, and responsive to the increasing demand for sport and physical activities as wellbeing enhancing services. In a market economy, the price of private goods is determined by supply and demand, and firms have incentives to produce and provide them based on the willingness of consumers to pay for them. With a substantial and rapidly growing middle-class in India, who can afford to spend on wellbeing services, there is no real incentive for private providers to deliver cheap sport participation services to the mass market. Indian governments (Federal and State) therefore are faced with the same question as Victorian bureaucrats and politicians – to which extent should sport participation services be considered a public good in Indian society?

What then would be the case in favour of sport participation as a public good, and hence, the justified investment by government agencies? First of all, participation in sport can have positive externalities, meaning that the benefits of participation spill over to others who are not directly involved. For example, when a person participates in sports, they may become healthier and more productive, which benefits their community and society as a whole. It will help to reduce healthcare costs and increase life expectancy. These health benefits can have positive economic impacts on society by reducing the burden on healthcare systems and increasing the productive capacity of the workforce. This in turn helps building social capital, which refers to the networks, community values, norms, and trust that enable people to work together to achieve common goals. Increased social capital can benefit the community as a whole, for example, leading to a reduction in crime and improved economic growth. There is also significant evidence that participation in sport leads to improved educational outcomes facilitated by increased school attendance and reduced dropout rates. These benefits can have positive economic impacts by increasing the pool of skilled workers and reducing the costs associated with low educational attainment. Overall, the economic benefits of sport participation suggest that it can be considered a public good, as the benefits extend beyond the individual participant to society as a whole.

The case against sport participation as a public good would be built on its benefits primarily being enjoyed by the individuals who participate. For example, an individual may participate for personal enjoyment or to improve their own physical fitness, rather than with the intent of benefiting society as a whole. Participation in sport may also not be accessible to everyone due to financial or logistical constraints. As such, the benefits of participation may not be evenly distributed across society, which could undermine the public good argument. Providing public funding or resources to support sport participation could also lead to crowding out, where private investments in sports are reduced as a result of public funding. This could undermine the economic efficiency of the sport industry and reduce the incentives for private investment. Finally, providing public funding for sport could divert resources away from other areas that may have greater economic benefits, such as education or healthcare. It could be argued that this is a misallocation of resources that reduces the overall welfare of society. Of course, this counter argument could easily work in support of the case of sport participation as a public good, as outlined earlier!

In many ways it was the COVID-19 pandemic that demonstrated that sport participation can be considered a public good. Government and public health officials encouraged individuals to engage in physical activity (as one of four reasons to leave the house!) as a way to boost their overall health and immune system. The pandemic has had a significant impact on mental health, with many individuals experiencing increased levels of stress, anxiety, and depression. It was argued that sport participation would help alleviate these symptoms by providing an outlet for stress and anxiety, promoting social interaction and community building, and improving overall mental health and wellbeing. The return to a vibrant community sport system also delivered economic benefits, generating revenue for local businesses, and maintaining and creating jobs. The pandemic therefore had a significant impact on the sport industry highlighting some of its vulnerabilities, with many businesses and organisations struggling to survive due to reduced revenue and cancelled events. During the pandemic, social isolation and loneliness were also significant issues. Without community-based club sport, individuals and communities could not get together, fracturing social cohesion and making people crave for belonging and togetherness.

I think I have come to the conclusion, writing this, that community-based participation in amateur sport should be considered a public good… and that government (to some extent) should invest in the best ways to even out opportunities for people to participate.

The real elephant in the room might well be governments investing in elite sport. This is a more controversial example of sport being considered a public good. While there are arguments that investing in elite sport can have economic, social, and even health benefits, there are also arguments against it. One argument in favour of government investment in elite sport could be that it can generate national pride and identity. Success in international competitions such as the Olympics can bring a sense of unity and pride to a nation and promote a positive image internationally. This can also attract investment, tourism, and other economic benefits. Government investment in elite sport can also provide opportunities for individuals from diverse backgrounds and promote social mobility. Elite sports can be expensive to participate in, and government investment can help level the playing field and provide opportunities for individuals who may not otherwise have the resources to participate.

However, there are also arguments against government investment in elite sport. It can be considered a misuse of public funds and it can therefore be argued that the money would be better spent on other public goods such as education, healthcare, and infrastructure. Another argument is that investment in elite sport can perpetuate inequalities and reinforce existing power structures. Elite sport can be dominated by individuals from privileged backgrounds (who for example attend private schools with extensive sport programs), and government investment may only benefit those who are already privileged, while individuals from disadvantaged backgrounds may not have access to the same opportunities.

This discussion extends to the issue of investing in the attraction and hosting of hallmark sporting events which may also be considered a public good, but it is also a controversial issue. Of course, it can bring economic benefits to the region or country attracting visitors, generate revenue for local businesses, and create jobs in the tourism and hospitality industry. It can also promote the city, the region or country on the international stage, leading to increased visibility and reputation. This can attract investment and promote cultural exchange. However, it sometimes can be argued (and proven) that the costs of hosting these events outweighs the economic benefits, leading to a net loss for the region or country. It can also be argued that government investment in hosting sporting events prioritises the interests of big business and powerful individuals, rather than the needs and interests of the broader public. The construction of sports facilities and infrastructure for these events may come at the expense of other public goods, and excuse the big animal pun, but many sporting facilities around the world have become white elephants paid for with taxpayer funds.

I am grateful for the question that was posed at the meeting last week. It made me think deeper about why and how government should invest in sport, when it delivers a significant community service to be enjoyed by all community members. It also puts in sharp contrast those instances when governments are in danger of overstepping the boundaries of their responsibilities. This happens when they direct funding and other resources to sport activities, sporting events and sport organisations that deliver value and benefits to a few, not the least to the politicians themselves. If nothing else it requires us to have a deep(er) understanding of the whole of sport ecosystem, so that the interests and intentions of all stakeholders are well comprehended, and when publicly justified – supported.