THE QUADRENNIAL battle over which city should host the Olympics strikes some people as illogical. Famously, Montreal is still paying for the wildly expensive 1976 Games. The Greeks spent more than $12 billion on last summer's Athens Games -- or about 5 percent of their entire economy. The inhabitants of the winning cities have to put up with the massive security that now accompanies any such event. Given how much New Yorkers complained when their city hosted the Republican convention last summer, it's fair to ask why they tried so hard to bring home the 2012 Olympics.

Nevertheless, such rational thinking does not always govern human behavior or account for the thrill of hosting thousands of the world's greatest athletes and tens of thousands of their followers. Indeed, the naming of a city to host the Olympics has come to have mythical significance, so to speak. Barcelona's Games in 1992 seemed to announce the arrival of Spain as a new European power. Beijing's selection for 2008 was widely seen as a sign that China has arrived as a global player. When Washington and Baltimore lost their bid for the 2012 Games, we were sorry: We think the U.S. capital region has more than enough reason to host an Olympics. But, to prove our fair-mindedness, we would now like to applaud London, the 2012 winner.

In fact, there is a lesson in London's victory. For all of the arguments about how particular cities (and particular countries) are permanently trapped by a pessimistic, anti-entrepreneurial, anti-growth culture, the revitalization of London is proof that it is possible for downwardly mobile cities to reverse course and become richer. In 1948, the last time London held the Olympic Games, the city was still filled with bomb craters, and the population still lived on ration cards. Afterward, things got worse: In the 1970s, when Britain's currency had to be bailed out by the International Monetary Fund, London was a city best known for strikes, bad lighting, poor heating and inedible food. At that time the city would hardly have been capable of hosting the Olympic Games, let alone losing money on them.

Since then, London has come so far and changed so much that it is barely recognizable. The economic revolution begun by former British prime minister Margaret Thatcher and continued by the present prime minister, Tony Blair, has made the British capital the center of European finance, a mecca for the arts and a magnet for talented people from all over Europe and the world. Like other big cities, London is still plagued by urban blight, decaying public transportation and pockets of intense poverty. But the trajectory is upward. And Londoners believe in their city and its possibilities again -- so much so that they were able to sell the charms of London to the notoriously finicky International Olympic Committee. For that, congratulations.