Hundreds of millions of men and women all over the world have been tuned to their television sets and clued to their computer screens as they followed the Olympic extravaganza in Beijing. The pride taken by people of different countries in their own athletes as they compete against the best from other countries is truly remarkable. To Americans, the main interest this year has been Michael Phelps' pursuit of a record setting 8 gold medals in swimming-which he accomplished- the gold and silver medals won by two young American girls in the all around gymnastic finals, and the new basketball "dream team" that so far has easily won against China, Spain, and elsewhere. The Chinese have been thrilled by their successes in gymnastics and diving, the Australians by their swimmers, and the Rumanian's by the victory of their 38 year old mother in the women’s marathon. Pictures were shown of how in 2004 the almost all black country of Zimbabwe with a history of significant racial conflict gave a wildly enthusiastic parade to a white Zimbabwe swimmer who won a gold medal during the Athens Olympics. And so it goes in other countries whose athletes have won medals.

All the accolades given to Olympic medal winners-especially to those who get gold- provides plenty of incentive for young and talented athletes to train hard for the Olympics in the hope of becoming a medal winner. When practically all participants in the Olympics are working hard in their training regimes, and since various random factors, such as illness, injuries, and psychological state are extremely important, it becomes difficult to predict individual winners in many of the competitions. Yet it is rather easy to predict quite well the total number of medals won by different nations.

The article "A Tale of Two Seasons: Participation and Medal Counts at the Summer and Winter Olympic Games", published in 2004 in the Social Science Quarterly by Professor Daniel Johnson of Colorado College and a co-author, examines the determinants of how many medals were won by different countries in the summer and winter Olympics since the end of World War II. Their regression analysis shows that two very important variables are the total population and per capita incomes of different countries. Also important are whether a country has an authoritarian government-such as communism- a country's climate, and whether a country is the host country for a particular Olympics. These five variables taken together predict closely the total number of medals won by different countries in the winter as well as summer Games.

It is surely no surprise that population matters a lot since there are many more athletes to choose from in large countries. This is why the breakup of a big country, such as the Soviet Union, had a large effect on the number of medals won by Russia, if Russia is identified with the Soviet Union. Climate is also no surprise since, for instance, the warm climates of African nations makes it highly unlikely that they will be contenders during the winter Olympics in skiing and other cold weather sports. Yet countries with colder climates, such as Russia and Scandinavian countries, do well, given the other variables, in summer as well as the winter Games. Host country effects are somewhat more surprising, but they might be explained by greater familiarity of host athletes with the weather and other conditions of the Games, by the extra incentives provided by the cheers of their fans in attendance, and possibly by the greater preparation efforts of host country athletes.

It is further entirely reasonable that countries with higher per capita incomes, other things the same, do better in Olympic and other international competitions. Parents of promising athletes have more resources to hire coaches, buy equipment, and get other help in their quest to improve the performances of their children. High schools and colleges have more resources to spend on their athletic programs. Private groups establish Olympic and other committees with generous resources to help in the training of the most promising athletes. Companies sponsor athletic programs and offer other incentives- such as the $1 million that Speedo promised Michael Phelps if he succeeded in winning 8 gold medals at the Beijing Olympics.

The importance of communist and other single party countries on the surface is more surprising. It is not that these countries send more athletes to the Olympics than other countries with similar populations, etc- they do not- but authoritarian countries do better per athlete that they send. The reason appears to be that governments of these countries spend considerable resources and energies in finding young promising athletes, and in providing systematic training and equipment in centralized facilities. According to the NY Times' editorial of August 17th, China has spent billions of dollars on its state sports program since the 2000 Sydney Games. These countries also can sometimes use their authoritarian structure to force parents to let their children be taken to centralized facilities, and have refu'ed to allow athletes who win medals to retire. Such activities clearly help explain China’s rapid rise to athletic prominence, but the same considerations were behind East Germany's success in earlier Olympics, and in the great success of the Soviet Union prior to its breakup.

Democratic governments would not be able to employ some of the techniques used by authoritarian governments, but still must decide on the proper role of their governments in preparing athletes for Olympic and other international athletic competitions. The strong interest of countrymen in cheering on athletes representing their countries seems like a positive "externality", especially from Olympic success. However, in private market economies, these so-called externalities from Olympic and some other international athletic achievements are internalized to a considerable extent by endorsements, requests for well-paid speeches, job offers, and other private advantages given to successful athletes. Many of these private advantages are not possible in government-controlled economies, which might explain why their governments are much more active in financing and training athletes.

Perhaps some externalities remain that justify considerable government involvement in democratic countries. Indeed, recently countries, such as Germany, have indicated that they plan to spend more in preparing their athletes for future Olympics. The Times' editorial opposes further government spending on the US Olympic program mainly because the government budget is in deficit and the economy has slowed down. I believe there are much better reasons for opposition to a much larger government involvement. The highly decentralized, mainly but far from entirely, privately financed approach to athletics found in countries like the United States and Great Britain is the right way to attract and train Olympic and other athletes in democratic countries with strong decentralized private economic and philanthropic sectors.