Sport is often a microcosm of broader patterns in society. Sport can also say something about the economic incentives in society. Take the relationship between a country’s inequality and its economic performance. Most of us would argue that inequality hurts growth; that a highly unequal society inhibits the productive potential of those at the bottom of the income distribution.
Some, though, would say that inequality, even severe inequality, is a necessary condition of economic freedom: those with the best ideas or best talents must rise to the top and be rewarded for their skills and their appetite for risk – the incentive effect. Identifying just which of these two effects are most important, though, is a precarious exercise, full of knotty measurement issues.
However, what we can measure quite accurately is Olympic performance – the number of medals per capita. Can we discern which of these two effects are dominant when analysing the relationship between inequality and Olympic medals? Let’s begin by assuming that the rich and poor are equally endowed with sporting talents in any society.