I’d never heard about Brazil’s National Museum until I learned it burned down. I met the news with a combination of fascination for its impressive collection, sadness at the tremendous loss, and, most of all, anger at the clearly avoidable circumstances.
[timeless]
Q2 hedge fund letters, conference, scoops etc
Opportunity cost, one of economics’ oldest and most important ideas, lurks behind this terrible loss. Opportunity cost represents the untaken option of any decision. As Frédéric Bastiat put it, it is the “unseen” option because it’s the option that never happened and is thus easy to ignore. Money spent on fixing a window is money not spent on buying new shoes. People too easily forget that breaking a store’s window costs shoes because the store owner must replace the window and can no longer afford to buy shoes.
The Olympics was the window Rio de Janeiro broke. The city spent billions to host the 2016 Olympics (and even more on the 2014 World Cup) for stadiums that now stand empty (a typical result). Had Rio not hosted the Olympics, the National Museum might have survived.
It is, of course, impossible to know for sure, but allocating funds to Olympic improvements did not help matters. Opportunity costs are usually hidden because they are never realized, but the Museum’s dramatic destruction suggests it’s one thing, besides money, hosting the Olympics cost.
Why It Burned
Brazil’s National Museum was one of the largest in Latin America. It included Andean mummies, a skeleton of an 11,000-year-old human (the oldest in Brazil), pre-Columbian indigenous artifacts, and Egyptian and Roman articles. It took centuries to accumulate this impressive collection, and, at over 200 years old, the magnificent building that housed the collection was a relic in and of itself.
It all burned in a single night.
Blame poor infrastructure. Workers had long complained about poor maintenance of the 200-year-old wooden structure, including a poorly maintained sprinkler system. To make matters worse, two nearby fire hydrants didn’t work, forcing firefighters to use water from a pond. The delay ensured the Museum’s complete destruction.
The museum’s destruction could have been avoided. This is not a story of a desperately poor country or one suffering invasion or a Venezuelan-like collapse. Brazil is one of the largest economies in the world.
Financial mismanagement rests at the heart of the problem. Rio spent $13.1 billion to host the 2016 Olympics and another $15 billion to host the 2014 World Cup. It’s hard to fathom all the alternative uses for that kind of money, and many now blame Brazil’s current and previous presidents for prioritizing the international games while leaving city services, like the upkeep of the National Museum, starved for funds.
The Opportunity Cost of the Olympics
Rio was an odd choice for an Olympic host city. Brazil was a growing economy when the committee chose its former capital city in 2009, but its infrastructure was poor. The city treated only 17 percent of its sewage, choosing instead to dump most of it in the ocean (where some athletes would compete). By 2016, Rio got that up to 60 percent, but still far short of the relatively modest 80 percent goal. Other problems, including crime and political upheaval, plagued Rio right up until the Games began.
It would be crass and inaccurate to blame the population of Rio for the loss of the National Museum. They knew better than most that hosting the Olympic Games was a waste, and they took to the streets to protest. I doubt they knew—like most people don’t know—that hosting the Olympics rarely passes the cost-benefit test. Most cities end up fiscally worse off and economists agree hosting the Olympic Games is a bad deal. The calculations economists use invariably set aside the difficult task of including the opportunity costs of hosting, and including the foregone benefits renders hosting the Olympics a completely fiscally irresponsible endeavor.
The protesters’ anger laid in the opportunity costs of hosting the Olympics. Why should taxpayers fund new stadiums to entertain foreigners when Rio barely works? Even if some of the Olympic improvements, like a subway line, could be helpful once the Games are over, that doesn’t mean those improvements were the best use of funds. Rio’s infrastructure was (and still is) in bad shape. Crime was (and still is) rampant. Teachers and hospital workers hadn’t been paid in months (and the health and education sectors continue to struggle). These, the protesters argued, should have been the priority.
It was an important economic argument that fell on deaf ears. The people paid the price for their government’s decision that new stuff was more important than maintaining what was there. The people have not forgotten their warnings. Crowds gathering outside the National Museum’s charred husk continue to protest the government’s poor priorities.
The Seen and the Unseen
It is, of course, impossible to know with complete certainty if the National Museum would have survived had Rio not hosted the Olympics. Infrastructure was clearly not a government priority, but maybe losing the bid would have encouraged the government to finally fix the city’s problems. Or maybe the sewage system would still be poor without the international pressure to fix it. We’ll never know.
What makes an opportunity cost so easy to ignore is that, by definition, it is the path not taken. It’s very easy to treat a museum’s destruction as wholly separate from a decision about new infrastructure because a line from cause to effect cannot be easily drawn. It’s reasonable to be suspicious of the claim that the Olympics torched the Museum.
However, the drama of the fire and the long history of protests render Rio’s situation a little different. The opportunity cost is more visible than normal. Even though we’ll never know with certainty what would have happened had Rio not hosted the Olympics, it’s clear that a fire could have been avoided. The money was there even if the will was not.
Rio’s leaders clearly had other priorities. They ignored protesting citizens and existing infrastructure issues. Their priority was international prestige and new buildings. Hopefully, Rio’s terrible loss will stand as a warning to any politician who celebrates construction over maintenance and the seen over the unseen.
David Youngberg
David Youngberg is an associate professor of economics at Montgomery College in Rockville, MD.
This article was originally published on FEE.org. Read the original article.
