I’m a little behind the game here, but in a relatively recent segment on NPR, commentator Frank DeFord lamented the current lack of American women in tennis and golf. He notes that,
In tennis, Europeans dominate. In golf, Asians. The only U.S. female tennis player in the top 35 is Serena Williams, who comes in at a modest No. 9. And Serena is 30 years old, which, in tennis terms, is like Jamie Moyer pitching in the big leagues at 49.
There was something poignant the other day when there was a reunion of the pioneers of women’s tennis, who, led by Billie Jean King, symbolically turned pro for a dollar apiece in 1970. Seven of the nine were Americans. It was a stark reminder of how we’ve bequeathed women’s tennis to the rest of the world.
While the very top women’s golfers in the world are Asian, it is far from clear that the U.S. has bequethed golf to the rest of the world. 8 of the top 30 players in terms of money winnings in 2011 were Americans, comprising 26.7% of the total. The U.S. represents 25.1% of the total population of the OECD countries, the sort of rich, industrialized countries that are likely to develop top golfers.
The pesky issue of data aside, Deford ask why the U.S. is falling behind in the women’s sports race. Deford states, “You’d expect, then, that the most promising American young female athletes would naturally migrate to individual sports, especially to tennis and golf, where the big money is made. But obviously this is not the case.” He then falls back on that great excuse of curmudgeons everywhere – lazy American kids these days. ”And, goes the thinking in tennis, poorer Eastern European girls will work harder and longer, hitting shot after shot, than will spoiled American iPhone kids.”
From an economic point of view, I think Deford is wrong in both of these claims. First, if the lack of success is due to America laziness, we should see the U.S. slipping off the charts in all sports, not just tennis and golf. Instead the U.S. continues to dominate women’s athletics across a wide number of events. At the 2008 Olympics, the U.S. women won the second highest number of medals just behind China, whose medal totals were likely boosted by home court advantage.
More interesting is his claim that American women should be attracted to indidual sports with the highest earnings. It is true that golf and tennis provided potentially high rewards. Yani Tseng, the top player in the LPGA earned $2.9 million in prize money in 2011. By way of comparison, the WNBA salary scale tops out at about $100,000. But if the decision to pursue a career as a professional athlete is a purely economic one, that decision should be based on expected salary, not maximum wage, and it should be made relative to the expected economic returns of participating in another sport.
Prior to Title IX and the explosion of women’s intercollegiate athletic programs, the potential for any economic returns for women athletes were limited to golf, tennis, and perhaps figure skating, meaning those sports should attract the best athletes. It’s should come as no surprise that Babe Didrikson Zaharias, probably the greatest female athlete of the 20th century, gave up track for a career in golf. In a world with large amounts of scholarship money available to college players, however, it is far from clear that golf or tennis provide the best opportunities for monetary rewards for female athletes.
A full athletic scholarship at my institution has a retail value of roughly $55,000 per year. While that’s a far cry from $2.9 million, it’s also much easier to attain. Fewer than 90 women’s golfers earned over $55,000 on the LPGA tour last year while over 60,000 women earned NCAA scholarships (although admittedly most of them were worth only a fraction of $55,000). Still, the total prize pool from all events on the LPGA last year was about $35,000,000 while the NCAA’s “prize pool” for women athletes outside of golf and tennis was about a billion dollars. Given these sorts of figures, it comes as no surprise that American women athletes have increasingly turned from golf and tennis to other sports where the reasonable chance of a small scholarship payout outweighs the nearly impossible chance of the “big bucks.”
Steve Kerr, former player and current TV analyst, proposes raising the NBA minimum age from 19 to 20 in a recent Grantland column. His argument is simple, the move makes business sense for the NBA by reducing both financial and interpersonal/team costs associated with including very young players. He sums up saying:
If this were about legality or fairness, you might have a case. But it’s really about business. The National Basketball Association is a multi-billion-dollar industry that depends on ticket sales, sponsorships, corporate dollars, and media contracts to operate successfully. If the league believes one rule tweak — whatever it is — would improve its product and make it more efficient, then it should be allowed to make that business decision.
Of course, as he discusses, such an age increase would require an amendment to the collective bargaining agreement. Given that veteran players tend to like raising entry barriers, with the exception of a few whose consciences push them to voice concerns for yet-to-be players, amending the CBA seems a small step.
Given Kerr’s NBA perspective and taking the legal situation as given, its hard to argue with him. Nonetheless, my inner legal philosopher always stumbles at the fact that statutory labor law trumps constitutional protections against age discrimination. As a result, a conspiracy between a union and league permits a league to do what it could not by itself — but that’s the legal standing as reconfirmed in the Maurice Clarett case (See Skip’s post).
What if the NBA adopted a MLB-style setup where high school seniors are draft eligible but players at 4-year colleges are not eligible until after their junior year? This system works very well for baseball, in part, because of the well-developed minor league system and the relatively lengthy period needed to develop into a major league player. The NBA situation differs in that the diminutive development league in the U.S. offers fewer opportunities. In addition, the length of time needed for an 18-year old, at least among the very best, to develop into a NBA-caliber player is much shorter, leading to some of the maturity and chemistry problems that Kerr discusses.
Even thought it is beyond Kerr’s viewpoint, minimum age choices by the NBA spillover into effects for college basketball (one could debate whether this rises to an “externality” in a strict econ sense or not). The current setup leads to a “one and done,” highly mercenary system for the top players as exemplified by the UK Wildcats this season. A 20-year old rule would keep more players around for their sophomore year — something many college fans would probably like. The downside to either age, from a player/societal perspective, is that it forces many developing players to choose an option that they would not otherwise. A 20-year old rule forces more player-years for athletes who really don’t want to be at a university. That’s one of the benefits of the MLB system — it affords 18-year olds the choice. The relative small number of development spots in basketball vis-a-vis baseball, however, would likely limit the effective options for many young players. On the flip side, such a system might place a greater incentive on the NBA to foster the growth of development leagues rather than on relying on universities as their de facto development league.
As a side note, the NCAA’s ridiculous “dumb jock?” campaign during the basketball tournament was laughable. While there are many highly intelligent NCAA athletes, there are plenty of athletes in basketball and football who have no interest in academics.
Textbook economic models of firms typically begin with the assumption that firms make decisions in order to maximize profits. When a firm realizes that it will incur losses no matter what it chooses to do, it’s best for the firm to act to minimize those losses. Since losses are negative profits, profit-maximization and loss-minimization are two sides of the same coin.
Yesterday, going into the bottom of the ninth in Cinicinnati, the Cubs enjoyed a 3-0 lead over the Reds after another dominating performance by Ryan Dempster. Dempster finished the bottom of the eighth, but since he was fresh off the disabled list, Cub manager Dale Sveum brought in struggling closer Carlos Marmol to pitch the bottom of the ninth.
Handed that three-run lead, Marmol immediately displayed what is becoming his trademark wildness, walking the first two batters. He failed to record an out and left with the bases loaded, nobody out, and a run in.
At this point, Sveum inserted rookie Rafael Dolis, a ground ball pitcher and played his middle infielders back, hoping for a double-play ball. That’s exactly what happened as Dolis coaxed Reds catcher Devin Mesoraco to hit a grounder to short that the Cubs turned for two, letting the tying run score. Dolis got the next man out, but he gave up the winning run in the bottom of the tenth.
Blown saves are not an official statistic kept by (or even mentioned in the official rule book of) Major League Baseball. I do not know why this is, but perhaps this game gave us an indication why: this save opportunity was blown by the team. Marmol couldn’t get anyone out, but this was in part due to an Ian Stewart error on a possible double play ball. Had third baseman Stewart fielded that ball and started a double play, the Reds would have a runner on second (or first) with two out and no runs in. Instead the Reds got their first run on that play and had men on first and second with nobody out. After Marmol gave up a single and walked another man, Dolis was brought on and promptly minimized the damage when he let the run score on the double play grounder.
Perhaps the fact that the Cubs lost the game is enough of a stat to show who blew yesterday’s game.
Tom Verducci of SI.com hammers the management of pitching in MLB, particularly the role of “closers,” in “With More Closers Breaking Down, It’s Time to Rethink the Modern Bullpen.” In spite of extensive medical/training resources devoted to them, relievers (and starting pitchers) are pitching less and less but breaking down more and more. The piece includes a variety of data describing these trends to which Verducci adds:
It’s not just that they break down; Wilson, Soria, Madson, Bailey and Farnsworth will earn $30.2 million combined this year, whether they pitch or not. It’s that paying a guy $12.5 million to throw 60 innings … is a waste of a great arm.
I’ve addressed this topic — How Much v. How Well and Closer Madness – and cited more extensive research by JC Bradbury in his book Baseball Economist.
What does this say about managerial practice? Some decisions (say, outfielder position) seems to fit a model where each manager makes incremental decisions to maximize their player assets subject to existing conditions (say, opposing hitters, or more generally player/budgetary limits). In other areas, however, managers shift practice more like an on/off switch. When the Dodgers, Indians, and Giants innovated with black players in the late 1940s, the successful innovation caught on with other teams. Billy Beane increased the use of data analytic methods and after a decade or so, these methods became widespread. This “switching” fits the copy-cat managers who saw Tony LaRussa succeed by using Dennis Eckersley in one-inning segments. The trouble is that while some of the advantages of using the new decision are akin to using a new technology with the potential benefits common to all teams (e.g. black players), in other cases like relief-pitcher decisions, the resources and, therefore, the soundness of the practices differs across teams.
Is this a rejection of the typical way economists think about decision making and management — an endorsement of “behavioralist” ideas? I think it more refinement than rejection. Yes, these episodes suggest an amendment the understanding of decisions under uncertainty, taking into account the application of successful decision templates around them. When problems are “ill-structured,” — they cannot be fully written out in a solvable mathematical form — cutting-and-pasting the methods of others is one means searching for solutions.
In addition to the uncertainty issue, politics also constrains decisions. Friedman’s discussion of “tyranny of the status quo” and similar analyses of “organizational inertia” describes these forces that build up that lobby for continuance of current practice. In the case of using black players, these kinds of constraints are fairly obvious, at least in retrospect. With relief pitchers, they are more subtle. Closers and agents who are compensated by saves evolve into an interest group protecting current practice. Starters and their agents who, rightly or wrongly, link pitch counts to longevity lobby for limits. Media commentators not only echo these concerns but serve as skeptics for any “new” practice. Together with the uncertainty problem, these “political” constraints encourage highly discrete or “lumpy” jumps in managerial practices rather than continuous and incremental ones. Eventually someone takes the step, succeeds, and resets practices. This lumpiness is implicit in a couple of questions in Tom Verducci’s article:
Is anybody watching the Tampa Bay Rays? They don’t have the money to waste nor do they waste a valuable young starter in a closing role. The team with the fourth best record in baseball since 2008 has done just fine with five different pitchers leading the team in saves over those five years.
And yet the universally accepted system is a failure when it comes to reducing the rate of injuries. What can change it? A maverick organization. (The Rangers and Giants are loosening pitch count restrictions in the minors, but the evidence is not yet very apparent in the majors.) A maverick manager. (Why won’t somebody use a closer — say Sean Marshall or Aroldis Chapman in Cincinnati — in the manner of a 1980s closer such as Jeff Reardon?
The Marlins beat the Cubs 5-2 last night, spoiling another good effort by Ryan Dempster. Dempster, who hurt himself with a throwing error in the game, is now 0-1 on the year despite having just a 1.33 ERA. The crushing blow was delivered by the Marlins’ Hanley Ramirez who blasted a 3-run, tie-breaking homer in the 8th inning off of Rafael Dolis. So what does that have to do with economics? This from the Chicago Tribune’s Paul Sullivan:
Ramirez’s blast to deep left set off a carnival-like monstrosity in center field that includes flying fish, flamingos and palm trees.
It was just another eccentricity in what is sure to be the game’s most controversial ballpark.
The sculpture cost approximately $2.5 million. I have to wonder: if the ballpark had been 100% privately-financed, would the “tacky” “monstrosity” have been included? Would private investors have believed that, all else equal, that sculpture would have generated marginal revenue of $2.5 million plus an acceptable return (in present value) over the life of the stadium? Or is this sculpture an example of what happens when folks spend other people’s money?
Time is valuable even for sports fans. The Masters is one of my favorite sports events (even if run by an all-male club) but watching a player stand, talk to his caddy, walk around, test the wind, and go through a pre-shot routine only motivates me to do something else and just use my DVR. I like Phil Mickelson, but today, on hole 11 and hole 16, he and “Bones” talked about his shot for 2-3 minutes before Mickelson spent another minute sizing up the shot. Why do so many sports organizations and associations treat fan time as worth zero?
Internal politics along with objectives/tradeoffs that differ for organization and player in specific circumstances combine for these kinds of perverse outcomes (see Less is More for discussion with MLB). In baseball as well as NBA attempts at reducing complaints over fouls, players possess more ability to break down seeming hard lines by the league than many might think. Incentive plans that directly change outcomes generate a lot of media, fan, and player outcry and result in softening or abandonment of incentives. The NFL has struggled with these issues in limiting excessively violent play with its commissioner finally using a sledge hammer on the Saints to try to punish them and incentivize the rest of the league. Of course, the political issues were diminished in the coaching suspensions because players and the NFLPA were not involved.
What keeps the PGA Tour from stronger steps on an issue frequently mentioned over the years by players and former players? The Tour currently uses an impotent faux-incentive that puts an entire group “on the clock” when the group falls too far behind the group in front of them, placing as much pressure on players who may have had little to do with the group’s slow play. Further, this system only promotes keeping up with other slow players, not playing faster. Behind the scenes, the Tour keeps cumulative track of slow play by individuals, but uses this info for little more than gentle reminders.
Here’s my suggestion for a slow play tax: 1) institute a 1-minute rule — once a player reaches the vicinity of his ball and it is his turn, the player has one minute to player his shot inclusive of club selection, pre-shot routine …, 2) permit 5 (or some threshold) “tax free” violations of this rule per player per tournament; 3) violations in excess of the threshold are taxed by loss of tournament earnings at a rate that is substantial and increases with each additional violation; 4) the lost earnings reduce money list standing.
The plan incentivizes faster player without any shot penalty — an action certain to bring huge criticism from media and players; it allows for special circumstances by granting tax free credits; it imposes meaningful penalties. It is relatively easy to track, especially in view of the huge amount of data already collected. Is it perfect? No. Incentives plans rarely are. There’s a wealth problem even with an increasing penalty scale. Highly successful players with large earnings will not be as incentivized. Players will likely try to “game” the plan by using gray areas such as “what’s in the vicinity?” That’s where a strong stance by the Tour can counter such “salami tactics.” The Masters runs its own affair and would be free not to adopt the system. While true, it might be that promoting the habit of faster play week-to-week would help even in tournaments out of the PGA Tour’s direct control.
Will it happen? Doubtful. Leagues and associations have only modestly addressed time issues, implicitly treating fan time value not as zero but close.
Why are concessions so expensive at the ballpark? Some of the explanations include:
- The captured consumer theory. Once in the ballpark, if someone wants to buy, say, a beer, he has little recourse than to buy from inside the stadium. So according to this theory, the concession booths have market power over their consumers and charge a price way above marginal cost. This theory is hard to take seriously for two reasons. First, people who buy tickets to games know full well that once there, they will be paying very high prices for their concessions. So in this sense, these consumers are not captured. They are there voluntarily. Second, there are other goods – bathroom stalls, for instance – that people don’t have to pay to use. The people at the stadium are captured. Why not charge even a nickel to use a toilet?
- The two-part tariff theory. This theory suggests that the price of admission and the price of concessions are a type of two-part price discrimination scheme. Different fans have different demands for a given game, and the team would have an incentive to charge different prices to different fans. However, it’s hard to identify if a fan is high or low demand just by looking at him, so the team is essentially forced to charge a single (low) ticket price to each fan that sits in any particular section. However, if high demand fans are also willing to pay a high price for concessions, then the team can charge a high price for concessions and a low price for tickets. Both types of fans come to the games, only high demand fans buy concessions, and the team makes more money.
- What I’ll call the “competitive theory. This theory is described in a paper by John Lott and Cafe Hayek’s Russell Roberts. They write about the price of popcorn at the movie theater (page 19):
“If all movie viewers ate popcorn at the movies and ate the same amount, the question of pricing at the concession stand would be of little interest. The only thing that would matter would be the combined price of the ticket and the popcorn. We have one estimate that the average patron spends about 40 (cents) on popcorn, so only a relatively small fraction of customers purchase popcorn. The sophisticated version of the monopoly power explanation adds that there is a positive relationship between willingness to pay for the movie and willingness to pay for refreshments. By charging a high price for popcorn, the theater is able to extract consumer surplus.
“Friedman [1986] suggests a competitive explanation. There are high costs of providing refreshments (the staffing and capital costs of the concession stand) over the short period of time demand exists. As a result, popcorn is expected to have a high price because its true cost is indeed high.”
What can be said about popcorn at the movies also can be said about concessions at the ballparks. The demand for concessions only exists during games, so there is a high opportunity cost of the concession space and a high price for concessions helps cover this high cost.
So those are three theories used to explain why concessions are so expensive at the ballpark.
Then there’s this about the Masters in Augusta:
But once you’re inside the grounds, Augusta is weirdly inexpensive. The general rule of the modern sporting event is the “quintuple gouge” – gouge you for a seat, gouge you to park, gouge you to eat, gouge you to drink, and gouge you once more if you’re daffy and flush enough to want a souvenir. But the Masters is charmingly anti-gouge. Official parking is free, though if you want to be a cowboy and park at a private lot, there are plenty for $10. Food is astonishingly cheap – not just cheap in the sporting event context, but just cheap, cheap. The famous Pimento cheese sandwich is a buck and a half; two of them will have you napping under a shade tree. An egg salad sandwich is also $1.50. The Masters club sandwich is $2.50. For big spenders, you can go wild with a grilled chicken wrap at $3.00.
And beer? This will make you cry: $3 for domestic, $3.75 for imports.
Also see this picture posted by Darren Rovell on Twitter.
Why would the Masters choose such low concession prices when other sporting events have much higher concession prices? If you are partial to the two-part tariff story, then it’s tempting to explain the low prices by saying that those who come to see the Masters have a low willingness to pay for concessions. If you are partial to the competitive theory, then it may be that there is a lower cost of providing concessions at the Augusta National Golf Club.
Why do you think the Masters charges such low concession prices?
The $2 billion winning bid the group headed by Guggenheim Financial CEO Mark Walter and Magic Johnson as PR owner raised many eyebrows. It blows away the $1.5 billion paid by the Glazers for Man United or the $845 million paid for the Cubs in 2009. Is this just another highly leveraged deal leaving owners cash-strapped in terms of baseball operations?
Matthew Futterham’s piece in the Wall Street Journal lays out the driving force behind the deal — local TV broadcast rights. As he observes:
Recent rights deals for the Los Angeles Angels and Texas Rangers are valued at nearly $150 million a year, including equity in the sports networks. As the top baseball brand in such a large market, the Dodgers would likely command more than that, Lee Berke, a sports media consultant, said.
The lowly Padres inked a $75 million per year deal. All of these rights deals run for about 20 years. A simplistic present value estimates of the Rangers and Angels deals falls in the neighborhood of $1.8 billion at a 5% discount rate. Of course, front-loading of any payments or different discount rates change this estimate. Nonetheless, given that the new Dodger owners can sign their own new deal starting in 2014, their bid is roughly equal to the likely value of TV rights. If they can turn a profit from other revenues (gate attendance, concessions, parking, league-shared revenues), then baseball operations should be fine. Of course, the near term flow of cash and interest terms on their debt-financing matter. The details of the deal are due to be publicly released in bankruptcy court April 6.
Ok, local TV rights provides the revenue stream, but doesn’t this just push back the insanity one level? Why would anyone bid these amounts for baseball — America’s dying pastime? A funny thing happened on the way to the funeral — baseball franchises discovered that a substitute was actually a complement. Over the past several years, teams switched to televising most, if not all, of their games via local broadcast/cable/satellite. Teams long resisted such TV saturation, thinking that televised games substitute for fans in the seats. Texas drew almost 3 million fans last season in spite of extensive regional televising of their games. Yes, a few fans, at the margin, will choose to attend fewer games and watch on TV. However, many potential fans will attend very few games regardless. Televising the games becomes a way of extending the stadium capacity to include these households. The TV advertisers along with cable/satellite fees pay for these “at-home season ticket holders.” So instead of these households doing other things, they watch the Rangers. My 70-something parents fit this description.
The televising of Cubs and Braves games in the 1980s on WGN and TBS serve as a precursor for these recent developments. Both teams expanded their fan bases and energized existing fans by putting every game on TV. Even gate attendance increased. Other teams hated it because they saw this as a siphoning of their fan bases. It took a while, but other teams slowly caught on. It also reflects the same views and experience with radio broadcasts, resisted by teams at first because they saw them as a threat to live gate.
Credit Houston Chronicle Business Reporter Loren Steffy with coining a brilliant phrase, “the economic development circus”, in a brilliantly perceptive piece starring the Astros, Rockets, Texas Gov. Rick Perry, and … Apple (wait for the end):
Apparently, while I was gone last week, the circus came to town – the economic development circus, that is.
NBC Sports Group recently leased 32,000 square feet in the Houston Pavilions for a local studio. Like most companies looking to open an office in a new city, it arrived with its hand out. As the Chronicle’s Nancy Sarnoff reported, NBC wanted $2 million in city and state incentives for its Comcast SportsNet Houston, a regional sports network that will broadcast Rockets and Astros games.
Even though the network had “Houston” in its name, NBC planned only a small operation here with the rest run from its offices in Stamford, Conn. Rockets and Astros officials asked the city if it could come up with some incentives that would persuade NBC to set up a local studio, Andy Icken, the city’s chief development officer, told me.
As with any good circus, this one has three rings, and this is the first: a network wants to broadcast local games without a local studio, and team owners, no strangers to lapping at the public trough, convince the city to use taxpayers’ dollars to do the teams’ bidding.
The second ring of the circus comes at the state level. NBC wanted $1.2 million from the Texas Enterprise Fund, the taxpayer-funded candy store from which Gov. Rick Perry doles out corporate giveaways like Reese’s Pieces.
See Steffy’s entire piece for a full account of what happens in the 2nd and third rings of the circus. In short, Gov. Perry splashes the cash on the sadly needy Apple Inc., who made noises about expanding in Austin (& presumably elsewhere, as an alternative). Something is quite screwy here, where state and local governments are transferring funds to companies like Apple, who are sitting on one of the world’s largest hoards of cash. It’s a circus indeed, complete with its hall of mirrors.
Dennis Coates’ post considered the serious nature of the Saints’ bounty system and foreshadowed the stunning response by the league that is now the buzz of sports websites and blogs of all sorts. While the length of Payton’s ban surprised me, I’m totally in agreement with the league’s strong statement and incentive given not only the program’s existence but the coverup by Payton and others, and, even more so, the continuation of the program — see Head Shots, Part of the Game?
How widespread are such systems among other teams? That question lingers, especially among Saints fans. Although retired players have suggested widespread bounty systems, the NFL’s own investigation has not turned up anything as ingrained and easy to track as the Saints’. Of course, the NFL uncovered the Saints’ system only with persistence in rooting out the facts, so one wonders if the “don’t see other situations like this” response by the league speaks more to investigative efforts on these other situations rather than their non-existence.
One step beyond the question of explicit reward systems among other teams is the issue of implicit rewards for violent play and putting people out of games. Do excessively violent players receive compensation in their salaries over time? Did Rodney Harrison’s pay, in part, include a bonus for his intimidating or injuring hits? It’s not an easy question to investigate because no violent hit index by player exists (football needs its sabermetricians!). Further, the impact of such an index would have to be separated from the impact of defensive performance (tackles, interceptions, points, yards, …).
