Wednesday, September 29, 2004

Voting and the lottery 

Opponents of lotteries make the derisive claim that the games are designed for "people who are mathematically challenged." These people are sometimes politically intense characters too. Hence I'm grateful to Slate's Steven Landsburg for providing me with a ready answer to them:
Don't Vote: It makes more sense to play the lottery
Last time around, about 6.5 million votes were cast for major party candidates in New York state and 63 percent of them went to Al Gore. Assuming an electorate of similar size with a similar bias, my chance of casting the deciding vote in New York is about one in 1.4 times 10 to the 200,708th power. I have a better chance of winning the Powerball jackpot 7,400 times in a row than of affecting the election's outcome. Which makes it pretty hard to see why I should vote.

The traditional reply begins with the phrase "But if everyone thought like that ... ." To which the correct rejoinder is: So what? Everyone doesn't think like that. They continue to vote by the millions and tens of millions.

Even for the most passionate partisan, it's hard to argue that voting is a good use of your time. Instead of waiting in line to vote, you could wait in line to buy a lottery ticket, hoping to win $100 million and use it to advance your causes—and all with an almost indescribably greater chance of success than you'd have in the voting booth.
Put differently, it's not dollars and cents, but the consumption value of these activities that motivates behavior.

Naming rights 

Greg at the Sports Law Blog is running a "name that team contest" for the DC baseball franchise. He's got some good ones for starters, including Lobbyists and Interns. In a slight variant of one of his proposals, I nominate the "Porkers."

Update: Division of Labour has a slew of names too, and may well have a prior claim on "Porkers." Like victories, good ideas have a thousand fathers...

"MLB sweetens Expos' D.C. deal for Angelos" 

Unnamed source to ESPN's Jayson Stark: "I don't see anything now that could gunk this up." The remaining issue appears to be how long MLB's guarantees to the Baltimore franchise will remain in effect.

Tuesday, September 28, 2004

Opportunity costs and the salaries of professors 

I can't resist excerpting the following from The Daily Princetonian. These fine people exhibit a clear understanding of the concept of opportunity costs.
Is your economics professor who can't seem to communicate outside of the supply-demand graph equally as competent an instructor as your fluent Italian literature professor? Regardless, chances are the economics professor is better paid.

Published studies conducted at multiple universities, including the University of Colorado-Boulder and the University of Washington, showed great discrepancies in salaries between departments, some with double the average salary of another department at the same university.

...Caryl Emerson, a member of the Committee of Three and chair of the Slavic languages and literatures department, declined to comment due to her position on the committee. However, she said she didn't feel the humanities were poorly treated in regard to relative earnings.

"After all," she said, "we don't make any money for the University."

In contrast, the professors of the science departments are in high demand, not only in academia but also by large pharmaceutical companies and the biotech industry.

....Similarly, economics and finance professors are sometimes lured away from the business world.

"People in the sciences have other options," art and archaeology department chairperson Patricia Brown said. "For us, the other option is probably a museum."
That's priceless, or damn near it. I wish that this basic level of understanding were more abundant elsewhere in the academy. It is a failure of my discipline that it isn't.

Bankruptcy = free agency? 

The Sports Law Blog discusses an interesting twist in the Ricky Williams case. An arbitrator has ruled that Williams was in breach of his contract with the Dolphins (no surprise), and is on the hook for $8.6 million (ouch!). The $8.6 million includes $3.3m in pro-rated signing bonus and $5.3m in incentives from the past two years. I don't quite understand the logic of tying incentives for past performance in the scheme, but if that is the language of the contract, Ricky must pay.

Except that he probably can't pay, and may now send the case to bankruptcy court. Apparently, the remnants of his contract won't generate much income should he return to football. As a result, a bankruptcy court could negate the Dolphin's rights to his services, making Williams a free agent so that he could earn millions again, and pay off the debt.

Would this be a bad thing for the Dolphins? Yes, but it's not as bad as it seems. Assume that ill feeling is such that Williams could never play again for the Dolphins. (Think Carlos Guillen of the Angels, who has been suspended for conduct in the heat of a pennant race, despite his ability and potential contribution). For the Dolphins to benefit from the current contract retaining its force, they'd have to capture the difference between what Williams would be due under the contract and his market value at the time. The latter is a very hazy concept at the moment, and indeed might not be very much should the contract remain in force. Unleashing Williams gives him the opportunity to capture - indeed make the effort to restore - his potential market value, and in so doing, pay off his debt to the Dolphins. In the absence of this, the Dolphins might not see much of the $8.6m they are owed.

Monday, September 27, 2004

Beer money & the NCAA 

From the Orlando Sentinel (registration):
After Ohio State defeated Michigan on its way to a national football championship in 2002, the folks on campus in Columbus, Ohio, marked the occasion with a riot. Fans overturned cars, uprooted light posts and set looted furniture on fire, and cops had to respond with tear gas.

'And it was almost entirely fueled by alcohol,' Ohio State Athletic Director Andy Geiger said. 'As a community, it was a public embarrassment -- a national embarrassment -- over something that should have been a great celebration.'

Still wincing from the memory, Geiger has been trying to sever the connection between alcohol and rowdy sports fans around an organization -- a university athletic department -- that's supposed to promote higher education and responsible behavior.

But even with the help of a Washington advocacy group, more than 200 other NCAA institutions and a roster of college sports heavyweights, he faces a Herculean struggle in his primary quest: to remove alcohol advertising from televised college sports. .....

Since the 2002 riots, Geiger has demanded that Columbus TV and radio stations broadcasting Buckeyes games not accept beer advertising. The local radio affiliate agreed -- then told the school it would cut its contract by $270,000 over the course of this football and basketball season.

Geiger winced at the hit, then vowed to find ways to generate the money. He will fill up that airtime with PSAs for his less lucrative women's teams if he can't find other advertisers.
My hunch is that most of the beer money shows up as quasi-rent in the form of coaches' salaries. To the extent there are cross-subsidies between revenue and non-revenue sports, an NCAA ban would have small allocative effects on sports programs. But would eliminating beer ads stop post-championship riots? No way. This has all the earmarks of a "CYA policy."

Issues with Skydome 

The lease arrangement between the Blue Jays and Sportsco, the entity that owns Skydome, is discussed in The Globe and Mail today. Built in 1989 at a cost of $500 million, the park now appears to be "obsolete as a baseball venue." Fragmented property rights - rights likely defined by the politics of stadium finance - appear to limit the potential for renovation.

Sunday, September 26, 2004

Fines and behavior on the PGA Tour 

Here's a great column by John Feinstein about fines on the PGA Tour. Fines are imposed for slow play, profanity, and other infringements of tour rules. They are not publicly announced, but are apparently not uncommon. Tour Commissioner Tim Finchem argues that "there's no need for us to publicize every transgression that occurs. It might give the public an incorrect image because, in truth, most of our players are gentlemen."

But I agree with some of the golfers quoted in the story, who argue that some fines should be announced publicly. The reason is simple: the monetary impact of some fines have basically zero impact on behavior. The potential impact of publicity on endorsement contracts might actually affect behavior, which is the point of enforcing rules in the first place.

That's the economics of the piece. But the real reason to read it is that it's hilarious, and you'll laugh out loud at some of the stories.

Thursday, September 23, 2004

Football commentary is back 

William Krasker is back at it now that the NFL season offers strategic decisions to analyze. His first installment analyzes Denver coach Mike Shanahan's decision to run another play at the Jacksonville 24 yard line, rather than kicking a field goal, when trailing by 2 points with 37 seconds left. Denver fumbled, effectively ending the game. Of course, since the call blew up on him, Shanahan has faced the predictable media criticism.

Note that when faced with strategic decisions, the best choice is generally the one that maximizes the probability of winning the game. With that in mind, here is Krasker's analysis:
From data on all FG attempts during the 2003 regular season and playoffs, which we described in a previous article, it appears that NFL place kickers make about 76% of their field goals from 41 yards. Moreover, the success probability rises about 1% per yard as the distance decreases. Therefore, to a first approximation, a play that (expectationally) gains 3 yards increases the probability of making the FG from 0.76 to 0.79. So, if we let pf denote the probability of losing a fumble, we find that Denver's probability of taking the lead is (1 − pf )0.79 if they run another play, versus 0.76 if they kick immediately. It's hard to see how the probability of losing a fumble can be more than about 0.015. (As a point of reference, in the last four seasons Tiki Barber lost 17 fumbles in 961 carries.) So Denver's probability of taking the lead is about 0.778 if they run another play. Moreover, since Denver's probability of keeping the lead is greater if they use extra time and force Jacksonville to use a timeout, we conclude that Mike Shanahan made the right decision.
It's a close call, but that's what coaches and managers are paid to do: make dozens of decisions in a game, each of which might involve just a few hundredths of a percent of incremental probability.

A coach that makes the right calls repeatedly - say 40 decisions per game with an average gain of .0025 in probability - has a significant cumulative impact on the outcome. By this standard, Mike Tice's tenure in Minnesota won't be very long. Check out the analysis - Tice threw away a big chunk of probability in Monday Night's game.

Wilbon loves me! 

Here he is in today's Washington Post, making the case for public investment on behalf of MLB, Inc.:
I love the economists whose primary arguments against new arenas and stadiums is that such construction doesn't bring permanent and full-time jobs. Of course the construction doesn't bring that, nor do the stadiums themselves. But try to tell the folks in Detroit that the new Ford Field, home to the NFL Lions, hasn't been the centerpiece of radical economic development taking place in downtown Detroit. Stadiums for the Browns and Indians, plus the Rock and Roll Hall of Fame, revitalized Cleveland's center city financially, culturally and psychologically. All those restaurants and bars and nightspots don't employ people permanently? Please. For anybody who has lived here 10 years or more, it's impossible not to walk through the area near MCI, particularly on an event night, and not see the wisdom of bringing 15,000 people or more to a central gathering place.
I love Michael Wilbon too, despite his lame characterization of our argument. And I give him credit for voicing the doubts of his "very smart friend" about the wisdom of the investment. But before writing a check on behalf of 29 wealthy club owners, I'd break out the pencil and do the math. Is it worth $25 million a year (the amortized cost) to build a stadium that supports a dozen or so restaurants and sports bars that would spring up around a well-located, popular stadium? Wilbon's argument is that it is, and I'm not convinced. I'm with his very smart friend.

Also in the Post, Thomas Boswell has a fascinating column on today's executive council meeting of MLB owners. Boswell suggests that Orioles owner Peter Angelos (opposed to any location near his Baltimore club), may get some rough treatment at the meeting: "if (Angelos) wants it rough, he's going to get a full dose of Reinsdorf because the White Sox' owner is the key player on the relocation committee that, after years of study, has finally decided the Expos belong in the District." Hmmm, sounds like a done deal.

There's much of interest in the column, but at the end, Boswell clarifies who the primary beneficiaries are:
By negotiating such a favorable deal with the District, Reinsdorf has potentially put extra money in every owner's pocket. If all hurdles are cleared and the day really arrives when the Expos go on the block for the highest Washington offer, the purchase price may approach $300 million -- or nearly $10 million for every owner in baseball.

That's why, right now, Selig and Reinsdorf appear to have the votes. And Angelos doesn't.
It is optimal for MLB as a unit to locate in DC if the valuation of the club there differs from that in the next location by more than the hit it imposes on the Orioles. Compensation to the Orioles for the hit would thus be feasible, and indeed is apparently on the table. My hunch is that "Angelos on the warpath" is a negotiating strategy designed to get as much compensation as he can. Judging from Reinsdorf's skill in playing off DC and five other suitors to jack up the public subsidy, Angelos' task won't be easy. There are tens of millions of dollars at stake. So I agree with Boswell - it could be a nasty meeting.

Wednesday, September 22, 2004

The NHL on thin ice 

From an AP wire report:
European hockey has taken on an NHL look. With an NHL lockout in place, more than 150 players have signed to play in European leagues, including Markus Naslund with Modo (Sweden), Jaromir Jagr with Kladmo (Czech Republic) and Ilya Kovalchuk with AK Bars Kazan (Russia).

Most of the players have lockout clauses that allow them to return to the NHL if and when the labor impasse ends. For now, European teams are taking advantage.

Besides Naslund of the Vancouver Canucks, Modo also signed his teammates Daniel and Henrik Sedin, Niklas Sundstrom (Montreal), Pierre Hedin (Toronto) and Peter Forsberg (Colorado).

Forsberg has indicated he will play the entire season with Modo.

Only 17 Canadian players are headed to Europe, with many others preferring to compete in a four-on-four exhibition series in Ontario and Quebec.
Salary caps are effective at holding down wages when a league has monopsony power. The NHL clearly has market power over labor, for now. But if hockey ever becomes a viable product in Europe, paying sub-market wages would put the NHL in MLS mode, with an inferior product in an international marketplace. The best players would sign with leagues that paid the best wages. Think Brazilian talent, playing for European soccer clubs - or the best North American talent, for that matter. That's not an immediate concern for the NHL, but it could become a reality in the long run.

The story linked above indicates the following: 47 NHL players have signed with the Czech league, 33 are headed to Russia, and 30 to Sweden. Imagine what could happen if a continental-wide European League were developed. If last week's Ryder Cup is any guide, the Euros might just kick ass on the NHL. Hmm, come to think of it, our side sure could have used Mike Weir last week.....

Baseball in D.C., play by play 

Two stories in the Post this morning suggest an announcement that the Expos will play in D.C. next spring may be imminent.

Stadium location and financing details are discussed here. Although $440 million is a large subsidy to a handful of very rich people (the other 29 clubs own and operate the Expos through MLB), the public finance component might possibly make sense:
The proposed new District stadium near the Anacostia River would be part of a $440 million package that would include $13 million for renovations of RFK. ...

The city would finance the proposed stadium with 30-year bonds, according to the plan outlined to council members yesterday. The annual debt service would be composed of $21 million to $24 million from a gross receipts tax on District businesses, $5.5 million in rent from the team's owners and $11 million to $14 million from in-stadium taxes on tickets, concessions and merchandise. City officials said the new tax would be imposed on businesses with gross receipts of $3 million or more annually -- or about 11 percent of businesses in the District.
$440 million amortizes to about $23 million at 3% interest. Hence the gross receipts tax, assuming the numbers are credible, would cover the initial outlay. The taxes are narrowly targeted on large businesses, where there is apparently significant support for the project. If that's not the case, we'll soon hear from them.

Rent plus ticket taxes - about $18m per year - are payments derived mostly from the team, although the ticket tax itself is merely a tax dodge. (To the consumer, a $30 ticket composed of a $5 tax and $25 at face value is the same as a $30 ticket with no tax, but taxable income is reduced in the prior arrangement). Presumably, these payments will go towards operating expenses of the facility.

Before signing off, one would have to look at the financing plan itself to assess its credibility and to confirm that the conjectures above are in the ballpark. That aside, who can complain - other than Orioles owner Peter Angelos - if large businesses in the District are willing to pay for the Senators' stadium on these terms?

The second piece is by Thomas Boswell, who writes:
[T]he Expos are so close to coming to the District right now that, if you were Charlie Brown, you'd be absolutely, positively certain that, this time, you were going to kick that miserable football before Lucy could pull it away.
It had never occurred to me before that Bud Selig had so much in common with Lucy. Look out, Charlie! Humor aside, Boswell's opinion is always worth checking out.

Tuesday, September 21, 2004

Who's next at the Fed? 

The Washington Post speculates on Greenspan's successor, likely to be chosen after the election. A Bush victory is linked to Harvard's Martin Feldstein or Columbia's Glenn Hubbard. Robert Rubin is said to have "right of first refusal" should Kerry win, with Harvard President Larry Summers next in line.

Hubbard, and Summers both have close connections to Feldstein, and Rubin's work in the Clinton adminstration was widely hailed, appropriately so in my opinion. That they understand the key policy issues is not in question. Of these, I'd choose the man with the ability to, first, maintain the Fed's independence in the face of political pressure, and second, to forge consensus on the Board. Those qualities are mighty difficult to discern from this vantage point.

Monday, September 20, 2004

"Football legend Clough dies" 

Brian Clough was a genius. His feat in winning back-to-back European Championships with a club just two years after promotion to England's top division will never be repeated. Here's the BBC's report.

I anticipate there will be a moment of silence in honor of Clough at today's Liverpool-Manchester United match. In contrast to crowds in the States, where chit chat goes on and mumurs can often be heard, these moments of respect are impeccably observed (typically) in England. What accounts for the difference?

A gal with a bright future 

Newmark's Door notes an interesting record of achievement by a Texas lady named Jamie Story. A double major in Sports Management and Mathematical Economics (!) from Rice University, topped off with the title of Miss Texas for 2004. She's also the reigning Miss Arlington. Wonder what she thinks of the Cowboys' stadium issue?

Kahn on changes in the airline business 

The St. Petersburg Times asked a few questions of 86 year-old Alfred Kahn, the Cornell economist who deregulated the airline industry during the Carter administration. With bankruptcy facing one if not two major carriers in the near future, it's a good idea to seek him out and listen to what he has to say. Here's a snip:
Q. What's the short story of how the airline business has changed since deregulation?

It could be summarized as the widespread adoption of the hub-and-spoke operation . . . and the ability to maintain those operations (with fewer passengers) in the face of the recession, 9/11 and the Iraq war with great competition from the low-cost, point-to-point carriers.

The hub and spoke (brought) enormous benefit, not only increased convenience to get anywhere in the world, but convenient service for business travelers to go to a nearby city with a choice of flights in the morning and a choice of flights in the evening.

The advantages in the first 10 or 20 years seemed so great that every one of the carriers who came in to challenge the majors went bankrupt.

We began to worry that the country would be dominated by three to five carriers. These carriers came to dominate hubs with wonderful service, but people would pay a real premium for that wonderful service.

Then, Southwest began to come into various markets. Not directly - in Baltimore rather than Washington, in Providence rather than Boston. At the cost of inconvenience to people but with extraordinary low fares.

They began to take real market share away from the majors, which had to raise fares more and more on the business travelers to where it became really ridiculous. Then there was this falling off of traffic. And we began to fear for the survival of the hub carriers.
Like myself, Kahn is appreciative of great service he's received in the past by USAir. But they failed to meet the competitive challenges posed by the Jet Blues and Southwests of the current era, and must now undergo a painful process of reorganization. Maintaining high fares is not an option. As Kahn notes in the article, he balks at fares of $750 for short flights. "I like them (USAir), but I'm not insane."

Thursday, September 16, 2004

Quick hits 

Boozer in rehab
Carlos that is. Boozer's new agent says he is doing "community service" to rebuild his image. Boozer's credibility was tarnished by an abuse of trust which cost his former employer ten million dollars. Prediction: he will still get booed in Cleveland.

Long memories
The Europeans are still smarting over the boorish American victory dance in the 1999 Ryder Cup at Brookline. James Lawton, a master of the ad hominem attack, is his usual self at the Independent. The Guardian's David Davies throws the same smack at US captain Hal Sutton, but at least owns up to taking a "cheap shot." I hope our boys win, even more so now, and trust that they will compete honorably, whatever the result.

P.S. Good thing Mitch Albom's been keeping quiet on the subject lately, especially since the tournament is in his own back yard.

Emotions & fair play
None of the European stories I've read have mentioned the tactics employed by their own side in recent Ryder Cups. These tactics have tested the limits of sportsmanship. Here's Tim Carroll in the WSJ ($):
Europeans do care more about the Ryder Cup. I'd argue the Europeans sometimes care too much -- and that might not be a good thing, either. Seve Ballesteros, the out-of-control European captain in 1997, ordered rough to be grown across the fairway at about 260 yards out on the par five 17th hole, taking driver out of the longer-hitting Americans' hands. He also ordered the front of the 17th green to be shaved so only high shots -- like those the Europeans would be hitting on their third shot to the hole -- would hold. Even several European players thought they should blow up the hole and start again. In 2002, the only entertaining hole on the Belfry course, the 10th, was altered, again to the detriment of the Americans. And the greens were left to grow until they were the speed of a municipal course. That's the speed the Europeans sometimes play, the Americans never. American putts continually came up short. The captain of the home squad has this right in the rules, but it's not really in the spirit of the thing.
This bit of history (absent in the accounts from Britain), make the American reaction in 1999 more understandable, if no more tolerable.

Interesting contest in the UEFA Cup tonight 

Today's Telegraph has a story on a tiny soccer club from Israel. It's an antidote to the pessimism that comes from reading the political headlines from the region:
History will be made at St James' Park tonight - not because Graeme Souness will take charge of his first match as Newcastle's new manager but because of the appearance of the first Arab-Israeli side to qualify for a European competition.

...Sakhnin qualified following their Israeli Cup final win over Hapoel Haifa, a performance hailed as a sporting first for Israel's Arab minority of 1.1 million, which is nearly a fifth of the country's population. They secured a place in the UEFA Cup first round proper by beating Albanian side Partizani Tirani 6-1 in the second qualifying round.

The team, which comprises both Arab and Jewish players along with a foreign contingent from Africa, will be cheered on by 100 fans from Sakhnin, an impoverished town with a population of 23,000 near Nazareth in northern Israel.
Just scoring a goal against a club like Newcastle would be an achievement. But I felt the same way when Greece played France... Upsets happen, and fortunes change.

It's nice to read about cooperation between Arabs and Israelis, and interesting that sport provides a vehicle for both the cooperation, and the news of it.

A tale of two experts 

PBS' Gwen Ifill discussed the state of the economy with Robert Barro and Robert Reich a few days ago. Barro's observations are always worth reading. He has keen insight, keeps a close eye on the data, and bases his analysis on sound economic principles. Reich has been claiming for the better part of a quarter-century that things are getting worse for the average American.

Here's the transcript. One of these guys must be off-base. Compare and contrast.

More on the Cowboys' stadium plans 

A few weeks ago, we referred to the economic impact study on the Cowboys' stadium as an example of "billboard economics." This article in the Fort Worth Weekly takes a critical look at the study. Here are some highlights - quotes on the study by economists that study sports:
Craig Depken: "It is complete garbage... How they say that Arlington is going to get $4 million in grocery sales is amazing."
Mark Rosentraub: "That hotel room number sounds really inflated."
Andrew Zimbalist: "It's one of the silliest studies I've ever seen."
Studies such as this are gibberish masquerading as economics. The only way to stop them from having their intended political effect is to expose them. These guys are doing a good job.

Wednesday, September 15, 2004

"Aaron Director, Founder of the field of Law and Economics" 

Aaron Director, an economist whose influence is underappreciated but difficult to exaggerate, died last weekend at the age of 102. Here is a snip from a commemoration at the University of Chicago:
[I]t was his appointment to the faculty of the University of Chicago Law School in 1946 that marked the beginning of his greatest influence. With fellow faculty member Henry Simons, Director first began to apply the principles of economics to legal reasoning, eventually training generations of law students and even his colleagues on the faculty in this then-new way of thinking about the law. His many students and colleagues, including future Federal Judges Richard Posner, Robert Bork and Frank Easterbrook, spread his ideas further, creating what has been called "the greatest innovation in legal thinking since the adoption of the case method."

"Aaron Director was first and foremost a teacher of teachers," said Douglas Baird, Professor and former Dean of the University of Chicago Law School. "Take any course in antitrust or turn to any law review and what you encounter are the ideas and insights Aaron Director and Edward Levi debated in the classroom in the 1950s."

Director’s own publications were modest in number, but his contributions to his colleagues’ thinking were considerable. University of Chicago colleague and future Nobel laureate, the late George Stigler often said, "most of Aaron’s articles have been published under the names of his colleagues."
A considerable amount of knowledge is transferred among scholars not in print, but through an "oral tradition." Director is a perfect example of this, for his influence came not through his published work, but through civil argument with his colleagues. I came to know of Director in the same way during graduate school at the University of Washington. Director had many champions there, including John McGee, who loved to tell a tale. One of his favorites was about the Chicago faculty's initial reluctance to accept the Coase theorem, an issue that was resolved through argument at a post-seminar dinner at Director's house.

Appreciations have already appeared at Atlantic Blog, whose author is a Chicago graduate and fellow UW Ph.D., Cafe Hayek, which includes a note on Director's influence on McGee, and Marginal Revolution. We all share a debt to Director's "absolute intellectual integrity," and his willingness to clarify and shape the ideas of others.

Tuesday, September 14, 2004

Would a fine be appropriate? 

Gregg Easterbrook's Tuesday Morning Quarterback has returned with the start of the NFL season (link via Offwing Opinion). Among the many interesting observations in the column is this:
Sour Play of the Week
With Jacksonville facing fourth-and-14 from its own 34 with 1:18 remaining and trailing by four, the Jags sent their best receiver, Jimmy Smith, deep along the sideline. The clock is almost spent, the opponent is in desperation mode, where oh where might the pass go? Maybe up the field! Yet Smith was single-covered on the fly pattern while two Bills DBs stood in the center of the gridiron like sculptures, apparently guarding each other. Forty-five yard completion when corner Nate Clements absurdly went for the interception -- gotta get my stats! -- rather than knock the ball down and ending the game. Clements caught the pass, then Smith wrestled it away. The stage was set for Jacksonville's improbable final-play victory.

High school players are taught that on fourth down, you never try to intercept, just knock the pass to the ground. Midway in a game, a fourth-down knockdown usually results in better field position than an interception. In the waning seconds, a fourth-down knockdown wins the game. The Official Oldest Child of TMQ, Grant, plays junior varsity football for Churchill High School in Montgomery County, Md., and TMQ reserves the right to boast about this program as may be appropriate. I called out, "Hey Grant, it's fourth down for the other team, you're in pass defense and the ball is coming directly toward you, what should you do?" Without hesitation, he replied, "Knock it down!" Here, Clements admits to Scott Pitoniak of the Rochester Democrat & Chronicle that he tried to intercept. There is huge monetary pressure on corners to get INTs -- Clements is coming up on his contract year and each interception he records will add large sums of money to whatever deal he is offered. Last December, Clements' name received Pro Bowl consideration. If he receives Pro Bowl consideration again this December, voters should bear in mind that Clements placed his own stats over victory for his team.
Could someone demonstrate that the frequency of "good plays made" matters more than "high profile stats" accumulated by a player? It wouldn't be cheap, but its possible.

A cogent explanation for why players go for the "stat play" as opposed to the right play would be a welcome bit of economic analysis. I think, as does Easterbrook (I presume), that such behavior often occurs in sports. What is the source of this apparent market failure?

"The (Other) NFL Blackout Rule" 

Brendan I. Koerner pens a nice column in Slate explaining the genesis of the Sports Broadcasting Act. As discussed in the comments section of this post below, the Act enabled the NFL to escape antitrust scrutiny of its league-wide TV contracts. The price of this legislation, however, was a de facto ban on televising NFL games in competition with college games, which is why nobody got to see the Titans-Dolphins game last Saturday (rescheduled due to avoid hurricane Frances). Here's a snip:
This bit of athletic protectionism traces back to the days of the NFL's competition with the rival American Football League. Struggling to get the upper hand in the spring of 1961, the NFL took the then-unusual step of selling league-wide TV rights to CBS. But in July, a U.S. District Court ruled that the contract violated the Sherman Antitrust Act, since the deal prevented the individual teams from "determining the areas within which telecasts of games may be made."

NFL Commissioner Pete Rozelle, an astute lobbyist, quickly mobilized to push Congress for an antitrust exemption, arguing that small-market teams like the Green Bay Packers could survive only if the league "pooled" its TV rights. Congress was mostly happy to capitulate, save for a number of representatives who worried that the budding NFL would diminish interest in college and high-school football. Rozelle was keen to have the legislation pushed through in time for the fall season, and so his congressional allies made the compromise regarding the Friday night and Saturday broadcast bans. The act became law less than three months after the court decision voiding the CBS pact.
Koerner is the best thing going at Slate. Any student of the economics of sport should read this piece, and save a copy for future reference.

Another margin for coaching 

Joe Gibbs has a reputation as both an innovator, and a coach who understands that violence is at the core of American football.** As a result, his teams are well drilled and well disciplined. As Tom Boswell stated yesterday, "strategy and game plans are great, but emotion, discipline and commitment to team usually carry the day" when crunch time arrives in the NFL.

But the masters leave no stone unturned. Bob Tollison directed me to this article in today's Post, which describes Gibbs's use of a new entry on the personnel chart: his own personal NFL official.
His duties include attending every game to advise Gibbs on replay challenges, overseeing the referees hired to work practices and tabulating all the penalties called in practice, looking for tendencies of individual players.
Back to Boswell's piece:
[L]ast year's Redskins had 124 penalties (including 17 in one game), as well as 43 sacks and 28 turnovers -- a total of 195 conspicuous screw-ups or an average of a dozen a game. Those infamous mistakes, especially of the mental variety, were the centerpiece of six defeats by four points or less. Unnecessary blunders defined the team.

In Gibbs's opener, the Redskins had three penalties, one turnover and no sacks (emphasis added) -- just four mistakes -- or less than in any Redskins game all of last season. What a shock!
I imagine that Gibbs must have been pleased, but not shocked, to see his investment pay off. Something tells me that the game has not passed him by.

--------------------
**Footnote: For better or worse, it's true. To my taste, the casualties incurred from a typical NFL contest mar the game. The athletes are too big and too fast to play a boys' game without serious physical repurcussions. The NFL is quite a show, but the price is high.

Monday, September 13, 2004

Bhagwati on Dobbs 

Jagdish Bhagwati (no friend of protectionists) has an op-ed column on John Kerry's trade policy in today's WSJ ($). It's a highly informed and entertaining screed. But what got me was that Bhagwati's sharpest retort was leveled not at Kerry, but at CNN's grand poohbah and pontificator, Lou Dobbs:
Sen. Kerry went so far as to describe firms that invested abroad as "Benedict Arnolds." The silliness of this charge puts him in the same camp as Lou Dobbs, whose outpouring against sundry forms of imports and outward investment is a farrago of nonsense, offered by him with a list (on his CNN program) of traitor firms that "ship jobs abroad." As I contemplate his slip of a book titled "Exporting America," and subtitled "Why Corporate Greed is Shipping American Jobs Overseas," I think to myself: If firms that buy cheap abroad suffer from "corporate greed," is Mr. Dobbs -- whose girth and success doubtless suggest that he buys for his supper French brie and Burgundy rather than Milwaukee beer and Kraft cheese -- to be accused by the same logic of "shipping jobs abroad" because of "Personal Gluttony"? (What is sauce for the corporate goose must be sauce for the journalist gander.)
"A farrago of nonsense"!! Yeah, baby! It's about time Dobbs got his comeuppance in a prime time publication.

Sunday, September 12, 2004

More doping 

This time, it's pigeons. And the Royal Pigeon Racing Association is trying to put a stop to it! I kid you not:
"The droppings are collected from the loft, placed in the containers, put into the bag and sent back to us here at Cheltenham."

The reason the association needs to get tough is because there is big money at stake in pigeon racing. Competitors can win up to £20,000.
If pigeon-handlers will dope their birds, is there any hope for drug-free racing of any kind?

"The seamless revolution" 

I've heralded the managerial skill of Arsenal's Arsene Wenger before, but there are always fresh observations and new insights that a good writer can uncover. Alex Fynn does so in today's Guardian. Wenger transformed George Graham's effective but "boring boring Arsenal" side into a creative, goal-scoring dynamo at a fraction of the expense incurred by other high-flying clubs. As Fynn notes, the process is referred to around Highbury as "the seamless revolution."

The story is chock full of clues to the character that makes Wenger so successful. Here is a quote that startled me:
Since I came here I feel that I've helped this club not only to win, but also to put the club on a different level. The training ground, the new stadium, the youth set-up - which has become international at the top level. But to think that nothing major can happen to the club now makes me sleep easier. For example, tomorrow, if the club has financial trouble, I can guarantee you it will not be relegated with the players we have.
Arsenal have not been relegated since 1913, yet this prospect is something Wenger believes is worthy of consideration! Hmmm. He certainly covers all of the bases.

On reflection, all you have to do is look at the example of Leeds United. Like Arsenal, Leeds are former champions of England, and four seasons ago were competitive in the Champions League. Since then, they foundered on financial shoals, were forced to sell their best players, and lost their top-flight status in a dismal season last year. Leeds' reach exceeded their grasp, and when they unwound their investment in talent, they had a mere shell of a team to compete on the pitch.

Lest the quote on relegation give you the wrong impression, here's the final exchange between Fynn and Wenger.
Fynn: What's next?

Wenger: To win it [the Premiership] again.

Fynn: If you do that and reach the semi-finals of the Champions League that would be terrific.

Wenger: No, final.

Fynn: But the semi-finals would be further than Arsenal have ever gone before, and it would mean you are one of the four best sides in Europe.

'Final,' states Wenger. 'Final, final, final.'
A final note for student readers: Wenger's university degree is in economics, and he's referred to as "the professor" for his analytical approach to football management. Here's more on Wenger, if you are interested. Also, here's a New York Times piece which discusses the use of economic reasoning by Patriots' coach Bill Belichick.

Friday, September 10, 2004

The NFL's blackout policy 

Earlier this week, John Topoleski from the University of New Orleans wrote asking about the NFL's blackout policy. The Saints were 5,000 tickets short of selling out Sunday's game vs. Seattle, and were thus facing the threat of the NFL's blackout policy. No sellout by midweek, and the game would not be televised in New Orleans. They didn't, and it won't.

John said: "For the life of me I can't figure out what the blackout rule does except punish the fans of the city. It seems that everybody loses with a blackout (which is why the local TV station often buys the remaining tickets). But I guess in a repeated setting where there's a threat of a blackout each week, maybe it somehow makes sense?"

Maybe. The blackout rule is the only rule of its kind that I know of. For it to make sense, as opposed to being an anomalous mistake, there must be conditions unique to the NFL which make it an optimal rule for them, but not any other sport.

The NFL is an exceptionally well-run league. Their growth - propelled in large part by television - is a phenomenal success story. So any potential critic such as myself should recognize that they know what they are doing.

It is generally accepted that televising games nation-wide helped transform the NFL from a regional entity into the most popular game in the country. Today, most of the NFL's revenue is derived from national, league-wide TV contracts. The blackout policy generates extra incentives for teams to "put fannies in the seats." A full house in Tampa or Seattle makes for a more compelling television spectacle in Richmond or Salt Lake City. The blackout policy balances two interests: the interests of the league in televising games attended by a full house, and the interests of the local team in collecting advertising revenue from local broadcasts of their games.

One point I make repeatedly to my students in sports economics is that pricing a game such that it's a sellout is profit-maximizing only under special circumstances. Absent other considerations, it generally makes sense to price games such that capacity is not fully utilized. Specifically, it makes sense for teams to raise ticket prices above the level that would sell out the game (unless the capacity of the stadium is lower than what is optimal in the long run).

But sold out games full of crazy fans makes for a more compelling spectacle to the marginal, national fan. The NFL's blackout policy limits the incentive of teams to raise ticket prices by putting local advertising revenue at risk. It is a restraint on teams' exploitation of local market power, a restraint which makes the game more appealing in the national television market. The NFL has shown repeatedly that it is more unitized than other leagues. The blackout policy may be another manifestation of that.

John, thanks for writing. This answer is my best guess for the moment. Comments welcome.

Update: David Tufte left a comment which grew into a post at Voluntary Exchange. He suggests that the blackout rule is a simple substitute for full blown collusion, while building in a limited margin of tolerance for cheating. Also, he points out that Steve Landsburg's Armchair Economist discusses why some forms of entertainment routinely sell all seats available, and others do not.

Betting on politics 

At MSNBC.com, Mike Brunker has a very nice story discussing gambling markets and presidential elections. He covers the gamut -- the current election, the Iowa Electronic Markets, internet firms, and historical markets run in pool rooms and stock exchanges.

Brunker quotes a number of interesting people who work on these topics. Here are two contrasting views, one from an economist who helped establish the IEM, and one from an executive with the Gallup Organization.
The markets work the same way that the pari-mutuel system works at the racetrack, where the crowd is better at picking winning horses than any individual handicapper, said Forrest Nelson, co-director of the Iowa Electronic Markets at the University of Iowa.

"It's the wisdom-of-the-crowd argument," said Nelson, an economics professor at the university's Henry B. Tippie College of Business, which has been running a political futures market since 1988. "No one person understands very much and the nature of their information is very different. (The markets) fail when there is no information out there or the traders don’t have access to the information. But if the information is out there and just spread around, the markets have a good chance of getting it right."
Here's the pollster:
Eric Nielsen, senior director of media strategies for the Gallup Organization, said that the markets are of limited usefulness because trading is confined to a sophisticated group of Internet users.

"It's just not representative," he said. "They may get lucky and pick the election, but when we go out and do a poll, every American adult has an equal chance of being contacted."
His polls have been repeatedly "blasted" (not my term - read the story) by predictions from betting markets, yet the claim is that "markets may get lucky"??? Like "old media," it would seem that Mr. Nielsen and the Gallup Organization have their heads in the sand. My bets are on Professor Nelson & company.

Wednesday, September 08, 2004

Selig strikes again 

Leave it to MLB to emerge from Hurricane Frances squabbling about fines and forfeits, due to the tardy arrival of the Devil Rays for Monday's doubleheader in New York. The Yankees' Brian Cashman wants retribution: "We were told by baseball that they were ordered up here and will be dealt with harshly."

If you take Cashman at his word, the blame for this fiasco rests with commissioner's office. Nice going Bud! Negative publicity seems to be the guiding principle Selig's stewardship.

The player's union may have played a role as well. Here's Gene Orza:
"Rocco Baldelli called me last week about it," Gene Orza, the union's chief operating officer, said in reference to the Devil Rays' outfielder. "I told them not to go to New York before the hurricane hit and their families were secure. Then they had an obligation to make a reasonable effort to get here in time."
That makes sense to me. But it's not consistent with the Devil Rays being "ordered up here." Cashman may be lying, but more likely, the commissioner's office mis-managed the situation. Place your bets!

Footnote: Blogger burped on this post when I composed it in my Mozilla Firefox browser, and would never successfully publish it. So this is a day and a half late getting here.....

Monday, September 06, 2004

Fans and bubbles 

England blew a 2-0 lead to draw in their World Cup qualifier vs. Austria on Saturday. On the heels of an unfortunate exit against Portugal in Euro 2004, the public mood seems to have turned against the team. In the Telegraph, Paul Hayward likens fan enthusiasm to something familiar to economists of late: a bubble.
House prices have started to dip at last and so has the public's unconditional support for the England football team. The previously unthinkable has happened twice in a week, and now the fever that took hold with David Beckham's last-breath free-kick against Greece three autumns ago has broken.

This was the sense we had in Vienna when England trudged off after surrendering a 2-0 lead against Austria. Historians may now identify the Age of Optimism as starting with Beckham's curler and ending with an Austrian's shot slipping under David James. After the France, Portugal and Austria setbacks, the flags are limp.
The odd thing is that Beckham's goal against Greece (in the qualifier for the 2002 World Cup) was a low probability event. And without it, England's hope of participating in the finals in Japan/Korea looked grim. The tide of enthusiasm turned on that kick.

Hayward has a point - popular feelings for teams ebb and flow in a manner well characterized by bubble psychology. More so than the economic analogy of house or stock prices, I must say.

Sunday, September 05, 2004

The economics of Kevin Brown's hand 

Kevin Brown broke his left hand with an angry punch to the Yankees' clubhouse wall. The Yanks are reportedly "delving into contract language that would free them from paying Brown's salary until he's cleared to pitch again."

Reader Pat Carey writes to ask why such language is not routine, so that players are "not paid during the time it takes them to heal."

Good question. Clearly, there are similar clauses in player contracts which let teams off the hook for guaranteed contracts in case of injury from risky ventures. Snowmobiling, motorbiking, and skiing come readily to mind, as do the off-season injuries of Aaron Boone (basketball) and Jeff Kent (err, washing the pickup truck???). The Kent case, apparently stemming from a spill while "popping wheelies" rather than a slip at the car-wash, points to the difficulties in writing a contract which is effective in deterring unwanted and uneconomic behavior.

Stupid things that happen during the season are less likely to be effectively addressed by a contractual provision. What's the difference between cutting your finger while peeling potatoes and breaking a bone punching a wall? In the first case, the player is fixing dinner for himself, an ordinary activity. He might have stupidly looked up at Stuart Scott on SportsCenter, and lost his concentration on the paring knife. In the second, he's letting off steam in a traditional, but still pretty stupid manner. In both cases, my hunch is that player contracts don't have clauses which cover the action, so the team still owes the dough.

Why? I can think of several reasons. First, these are small risks spread evenly over all players with MLB contracts. Their impact in most cases amounts to a fraction of a game won each year. Second, distinguishing between a stupid punch at a wall and goofing around in warm-ups and tearing an achilles tendon would get messy. Costly litigation (see Jeff Kent) is avoided by honoring the payments under a guaranteed contract for both types of injuries.

Finally, to put a clause in the contract stopping payments in a Brown-type situation generally harms the player more than the team. Teams are able to spread such risks over seasons, and over the roster. Players only have so many income earning years. To take this to the extreme, suppose the injury was career threatening, and was clearly an accident. Relatively speaking, the player has an enormous amount at risk from this. It is less costly for the team to insure the contract than the player, if the team wants to avoid absorbing the risk. Many teams carry such insurance on player salaries.

In the Kevin Brown case, the Yankees are likely to settle on a fine. The Player's Association will certainly fight to ensure the fine is not equivalent to a dock in pay for games not pitched due to the injury. I'm guessing $50,000 would be the maximum fine they'd be quiet about. $50,000 is enough to send a message, but not enough to change the culture of trashing the water cooler or bashing the clubhouse wall.

I'd personally like it - and imagine that most fans agree - if the boorish aspects of baseball's culture were abandoned to history. Perhaps a standard clause in all player contracts - no pay for broken bones when trashing the clubhouse - could get these guys to act like grownups. But would the players union buy into that? I doubt it. The financial benefits would not accrue for years to come, and the costs would be borne by the likes of Kevin Brown, i.e. the union members with the most at stake.

Wednesday, September 01, 2004

College football is just a game 

The Citadel has already cancelled its game against Charleston Southern, originally scheduled for Saturday. FSU vs. Miami - made for TV on Labor Day - is looking iffy too.

Why? The name's Frances, and as nifty the picture below looks, Frances will be as ugly as can be when she hits the southeast coast. Let's give thanks for science, and the ability to give fair warning.



Personal footnote: On our tarpon trip this summer, we stayed in a charming old village that took a full frontal assault from Hugo in 1989. While there, we had nice conversations with the neighbors and a local historian. They told us that in the aftermath of Hugo, dead seagulls were found in the 2nd story, and dolphins in the living room, of the lovely house we'd made our own for a week. Can you imagine that? These storms have no mercy.