Monday, November 29, 2004

Stadium depreciation 

This item reports that the owners of the Blue Jays have purchased SkyDome for $25 million. The Jays are now the proud owners of their own ballpark, although the bargain basement price suggests that the facility may need sprucing up.

SkyDome was publicly funded, opening in 1989 at a price tag of $600 million. After 16 seasons of baseball, it thus retains but 4% of its original value. Linear depreciation would imply a cost of about $36 million per season, roughly the equivalent of three studs on the payroll.

With the purchase, incentives and property rights are now properly aligned. And if the Jays stay put for a decade or more, Toronto taxpayers will enjoy an improved return on their investment.

Many thanks to David of VodkaFish for the heads up.

Update: The figures quoted above are from a Canadian paper, and represent Canadian dollars.

Baseball Musings links to this AP story on ESPN that reports a sale price of $21.25 million and a construction price of $375 million. The former figure is clearly a translation of $25 C into US dollars, given today's exchange rate ($1C = $0.85 US).

The discrepancy between the $600m quoted in the Canadian report and the $375m figure in the AP story is trickier to explain. Raymond Keating's "Sports Pork" at Cato discusses the subsidy issue, and provides a comprehensive list of stadiums and their construction costs over the past century (and is hence worth reading in its own right). He reports the cost of Skydome at $442m in nominal dollars, presumably US. Exchange rates from that period are quite similar to those in effect today (see here if you are keeping score). Converting back to Canadian dollars, this yields a cost of $520m, consistent with the figure at the Blue Jays own site and others at sites that google turns up. This post from the late Doug Pappas reports that a 1993 audit pegged SkyDome's cost at over $600m. I am guessing that the audit is the source of the figure relied upon in Canadian reports.

The bottom line? The calculations using $25m and $600m seem to be appropriate. The $375m figure is almost certainly in error. $375m is very close to $442*0.85, which would be a correct calculation if Keating's $442m were Canadian, but I doubt he made that mistake.

Nevertheless, since the dollars in my post above are Canadian, the depreciation costs cited there are not the equivalent of 3 studs on the payroll. Make that 3*0.85, or 2 1/2 studs.

If any student readers are still thinking about becoming an economist, more power to you!

Sunday, November 28, 2004

It's not about Ron Artest 

Much has been written about the donnybrook in Detroit, most of it not worth reading. This blow by blow account from Skip Bayless is an exception. If Bayless' description is correct (and I have no reason to doubt it), a greater share of the blame rests on the fans - and by extension, on Pistons management - than is generally accepted.

For some time now, a "heckler culture" has been accepted by the NBA and at least some major league baseball teams. I think this is a mistake. Clearly, a line must be drawn, as UEFA is trying to do with the racist chanting in Europe, most recently at Real Madrid (more here and here).

Two examples illustrate the nature of the problem. In Atlanta a few years' back, some humorous cads behind the Mets' dugout were removed for asking questions about Mike Piazza's hairdresser. Harsh treatment, perhaps, but it sends the signal about the limits of what will be tolerated.

The chair-throwing incident in Oakland illustrates a failure to manage this problem. Media commentary heaped scorn on Rangers' reliever Frank Francisco. But the fact that the chair hit the wife of a heckler, one with season tickets beside the opposing team's bullpen, should give one pause. Unlike the cup that landed on Artest, it missed the target, but not by much. In my view, the culpability of the A's organization was inadequately reviewed in the aftermath. Listen to these quotes from USA Today:
"Tonight, it went over the line," Texas manager Buck Showalter said after the Rangers lost 7-6 in 10 innings. "It was a real break from the normal trash you hear from fans. We've had problems about every time we've come here." ....

"From what I understand, there was some calls made to security early during the game but I have no idea what started it out there," crew chief Joe Brinkman said.
In contrast to Atlanta, the calls to security in Oakland appear to have been ignored (the chair-throwing took place in the 9th inning).

Afterwards, I read of Oakland officials defending the fans involved, and commentators saying that fans can say whatever they want, since freedom of speech is protected by the constitution. Hogwash. The constitution protects our right to make political speech in public. But when you are in my classroom, at a restaurant, or in a theater, you give up those rights in exchange for goods that you value more highly than the opportunity to heckle. The "freedom of speech" defense of Oakland's heckler was absurd.

The Pacers' brawl is not the first instance of a fan being leveled by a player-thrown haymaker. In one memorable incident in 1999, a fan raced onto the field at Milwaukee County Stadium and jumped on Billy Spiers in right field. Spiers' Astros teammates were quick on the scene to defend him. I recall Mike Hampton landing a series of blows to the head of that bozo. Billy Spiers (a former Tiger in addition to being an Astro) was one of my favorite players. Put me in Hampton's shoes and I'd have done the same thing, though not so effectively. Thanks for that, Mike.

Now, how different is Hampton's defense of his teammate from Jermaine O'Neal and Stephen Jackson's defense of Ron Artest? While there are differences, they are mostly a matter of degree. The common thread between the two incidents is the out of control fan.

Many issues are highlighted by the fight in Detroit. The NBA paid service to the media with swift and draconian punishment for the players involved. But to me, fan control is a more serious and more difficult problem than player control. Each time fans rush the court or the playing field after a game, they illustrate the raw power inherent in a crowd that no level of security short of an armored division can manage. The trick for sports management is to short-circuit the potential for a crowd to turn into a mob. Civil behavior must be expected, and to some extent policed by those in charge of sports facilities. The importance of doing this job well (Atlanta) versus poorly (Oakland, Detroit) is now on full display.

Update: Tom Kirkendall's post describes an episode from an earlier era in which the Celtics and Rockets exchanged some vicious blows among themselves, and with a fan or two as well. No ejections or suspensions, although Sidney Wicks "was carted off to the dressing room" for stitches.

Friday, November 19, 2004

Where are the NHL players? 

Half of them are in Europe, according to this story in the New York Times:
According to the International Ice Hockey Federation, 276 N.H.L. players have signed with European teams. That number would stock almost half the prestigious North American circuit, where 30 teams dress 20 players for every game.

The migration to Europe could be a factor in the negotiations toward a new collective bargaining agreement and it illustrates the changing economic dynamics of an increasingly global sport.

But the long-term ramifications are unclear, particularly in Russia, where talented players are working for surprisingly high salaries in a nation where capitalism is new and evolving. Could hockey be headed for a new world order?
The NHL, noting that European wages are about one fifth of what they were paying, dismisses the threat:
The N.H.L. said it was not greatly concerned that European teams were providing alternatives. Bill Daly, the executive vice president and chief legal officer for the league, said "the league and all the clubs understood it was likely to happen" and "I don't think it has any dynamic" in the struggle over a new collective bargaining agreement.

"The players are playing for far less," Daly said. "The N.H.L. is and will remain the premier league."

Devils General Manager Lou Lamoriello said the jobs in Europe had no impact on the lockout despite the players' apparent leverage.

"It all depends on what you call leverage," Lamoriello said. "There is only one N.H.L. There's lots of players still not working."
Meanwhile, at least one player has taken a liking to his new digs:
In the Czech league, players like Patrik Elias of the Devils have been warmly received by their home nation, and he shares the enthusiasm. "The feeling is electrifying, sometimes even better than in the N.H.L.," Elias said. "The quality of play is very high. I think I underestimated it a little bit in the beginning."
Thanks to the competition in Europe, the bargaining game between the NHL and the players is brinkmanship of the highest order. Is Daly in denial?

"Red Line, Blue Line, Bottom Line" 

That's the title of a book book by Marc Edge that covers the history of labor wars in sport, focusing on the NHL and the roots of the present crisis. It's destined for my shopping cart. Here's a snip from a review in the Star-Telegram:
Even for people who aren't fans, the most interesting aspect Edge includes is the sad history of former NHL Players Association chief Alan Eagelson, who, for years, exploited the people he represented to expand his bank account. NHL players displayed a blind faith in Eagelson, who conned both sides before being caught and imprisoned.

Eagelson's presence stunted real player growth in salaries until the early '90s, Edge points out. The balance was so distorted that a guy named Dave Taylor was paid more than Wayne Gretzky when they played for the Kings.
On the topic of player pay, John Palmer has some interesting anecdotal evidence on what former NHL players are earning in alternative leagues. Not much - and many are just hanging out at home. This evidence tempers the implications I drew a few days ago from the stories about star players in Russia, but then again, Edge's prediction in the story above is similar. He forecasts a league war in the future between the NHL and a competitor, the latter stocked with the current NHL players.

Wednesday, November 17, 2004

Facts, please 

Today is a good day for empirical observations at the econblogs:

Craig Depken presents numbers and a nice picture which summarize the growing complexity in the tax code.

The Econoclast lists information which refutes the notion that America is more crime-ridden than our peaceful neighbor to the north.

Alex Tabbarok reports on an experiment confirming that modest public outlays increase student performance within the existing system of education - outlays that mimic what I do for my children.

Returning to the sports theme, Jim Mahar finds that prices for talent in his Fantasy League share common features with equity prices at the stock exchange. Fallen angels may have low P/E ratios, but the low price may be a signal that the future is not so bright.

MLS rethink? 

Eric McErlain dug up this interesting item on American soccer:
Tim Leiweke, president of Anschutz Entertainment Group, told the Los Angeles Times in an interview that change is needed if soccer is to grow in the United States. AEG, owned by Denver billionaire Philip F. Anschutz, has invested more than $400 million over the past decade in soccer.

"I think we kind of lost our way a few years ago, and what we're trying to do now is regain our way,'' he said. "I always thought the mistake we made with MLS was that we tried to emulate the other leagues in this country. This mistake's been made many times with soccer. People have tried to take soccer and conform it to the way we do sports in the United States.

"I keep on trying to say, 'You know, after the hundreds of millions of dollars people have lost, when are we going to wake up and figure out that we need to convert the American way of doing business to the way soccer is organized around the world?'

"We're beginning to acknowledge that we have to become part of the rest of the world scene in soccer, whether it's on the pitch, whether it's from a business standpoint, whether it's from a competitive standpoint.''
Interesting. Does he mean switching to an open system where teams and cities could play their way to the top level - or plunge to the bottom? The dog-eat-dog competition that results would make American soccer far more interesting. The results - promotion to the top or relegation to the minors - would demonstrate the competitive farce that is baseball for clubs that refuse to compete beyond the month of June.

But here's the bottom line: MLS owners are unlikely to give outsiders the chance to boot them out of the league. The one scenario which might generate such a move would be the emergence of a competitive threat from a "rest of the world" system. While this may be the long run path for American soccer, don't expect such a change overnight. It seems more likely that local competition within MLS motivated Leiweke's remarks:
Leiweke also looked ahead to the addition of the Mexican team Club Deportivo Chivas USA to the Los Angeles soccer scene. The expansion squad of the popular Chivas team in Mexico will begin play in April.

The Los Angeles Galaxy's season ended with a Western Conference finals loss to the Kansas City Wizards, and "they can't afford to go through another year next year like they did last year because Chivas won't allow that,'' Leiweke said. "Jorge (Vergara, Chivas USA's owner) wants to put us out of business. He's serious about it too.''
Putting two teams in LA is a step away from the regional monopoly model. Uprooting monopoly will make the league more competitive and more entertaining for fans. Still, taking the gloves off and engaging in a no-holds-barred competition between the clubs would require rule changes within MLS, and would result in increased talent costs. Let's hope Leiweke and his forces can take MLS in this direction. It would certainly make for a more interesting league; of that there is no doubt.

Update: Chivas and the Galaxy could turn LA into a soccer town! No way the NFL stands aside and lets this happen. John Topoleski (in his comment here) may be right - are you ready for the LA Saints?

Tuesday, November 16, 2004

Colts to Indy: Cash, please... or else 

A clause in the contract between the NFL's Colts and Indianapolis requires the city to "make payments that bring the team's revenues up to the league median." The NFL sent an affidavit to the city on Monday certifying that the difference for last year was $12.6 million. If the city fails to make such payments, the Colts can exercise an escape clause in the contract, and flee to the arms of their next lover. Ah..., the romance between club and city. The Colts left Baltimore for Indianapolis some twenty years ago. Time to find another suitor?

Monday, November 15, 2004

DC stadium: local development or wasteland? 

Peter Whoriskey tackles the question by contrasting Denver's Coors Field with Seattle's Safeco Field. Coors Field is a poster-child for development boosters, whereas Safeco is the skeptic's counterexample.

Bottom line: Safeco was built in an area too industrial for consumer-oriented spillovers to take root. Coors was built in a historical but run-down area ripe for re-development. It may have been a catalyst, but then chasing out the crack dealers might have revitalized the neighborhood on its own.

Here's the story, from today's Washington Post. It's a balanced piece, without hyperbole; worth a read and a think.

Sunday, November 14, 2004

New Orleans financials 

This story in the Times-Picayune has extensive information on the financial agreements between the state of Louisiana and its professional sports teams. Here are some facts on the lease agreement with the Saints:
The team's rent is capped at $800,000 a year until the lease expires in 2018, and the team pays no in-stadium game-day expenses, such as the cost of ushers and ticket-takers. The Saints also get 42 percent of the money generated by game-day concession sales, 100 percent of that from game-day parking, 100 percent of Superdome tours year-round, 100 percent of annual box suite revenue and 100 percent of game-day Superdome advertising.
The rent amounts to $80,000 a game, or less than $2 per seat. On that score, the Hornets do event better:
Besides getting use of the arena rent-free, the Hornets get 42 percent of gross concessions revenue and 100 percent of net parking revenue from their games, 100 percent of advertising and sponsorship revenue, the first $1.1 million of game-day staffing costs, plus 100 percent of the revenue (licensing fees and ticket sales for their games) from the arena's 56 luxury suites and 2,800 premium-price club seats.

They also get a subsidy to compensate them for the fact the state has failed to sell naming rights to the arena. That subsidy began at $1.5 million the franchise's first year in New Orleans and grows by 5 percent a year, meaning it's up to $1.65 million this year. If the naming rights are eventually sold, the Hornets would be entitled to more than $2.5 million a year.
The two teams claim that they "needed the payments to help them compete against franchises in larger, richer markets." If you buy that, let's play some cards. These subsidies are a wealth transfer, and do little to increase the incentive to put a competitive team on the field.

Darts and long term contracts in baseball 

From David Andriesen in the Seattle PI:
Many of the contract battles this winter will be as much about length of term as money. A key reason is that insurance companies have ceased covering contracts exceeding three years. Call it the Albert Belle Effect -- insurance and the Orioles got stuck for $39 million when a hip injury forced him to retire.

"The ability to predict a player's performance for one year is difficult," DePodesta told the Los Angeles Times. "Two to three years out is more difficult. Beyond that, you are throwing darts."
I'm waiting for the response from Scott Boras.

Friday, November 12, 2004

Two puzzlers from the racing world 

A satchel full of jockeys have been banned from riding at Churchill Downs. The reason? They want someone else to pay for their insurance, and threatened to boycott the races. The issue has heated up because track-sponsored insurance caps benefits at $100,000, and supplemental insurance is not cheap. This is a sport where injuries are a fact of life (a serious spill injurying rider Tony D'Amico prompted the action), with the potential for enormous costs. It's a very risky job.

Lets look at the basic economics of this. Horse owners pay jocks to ride their horses. To a first approximation, they don't worry about where the money goes, what matters is simply the price. The boycotting jockeys are asking that money be awarded them from a different pot - the purses that racehorse owners compete for. If you reduce that size of that pot, what happens to the amount owners are willing to pay the jocks to ride for it? Not to mention that much of the jockeys' earnings are derived directly from a designated percentage of purses!

For some reason, the logic of the Coase theorem never seems to apply in the world of racing. My hunch is that the contracting failure is rooted within the jockey colony. There is a real problem here, and they are tossing it to the industry in order to solve it. But the racing industry is a notoriously disorganized set of warring institutions, so that doesn't look like a promising bet either.

If you find all of that puzzling, try this: Smarty Jones almost pulled a Michael Jordan - a comeback from retirement:
Smarty Jones was retired Aug.2 after it was discovered he had bone bruises in his feet, the effects of a grueling 3-year-old campaign that fell just short of a Triple Crown sweep.

Chapman said she and her husband, Roy, were stunned during the retirement conference call when prominent veterinarian Dr. Larry Bramlage said: "We bring horses back from this all the time. It's not a structural problem, and the prognosis for full recovery is excellent."

Chapman said it was the first time they had heard such a favorable prognosis and that their vet in New Jersey had said that Smarty's ailment was serious enough that he should be retired.

After Bramlage's comments, the Chapmans waited two more months and had Smarty Jones re-examined, hoping he would be healthy enough to resume training for a 4-year-old campaign. But an ultrasound exam in October revealed cartilage erosion in the left ankle, ruining any hopes of a comeback.
Cartilage erosion? That's the first we'd heard of that.... There's always a mystery at the races.

"Predicting No-Hitters" 

Great post by JC Bradbury at Sabermetrics. JC takes Bill James' nifty but simple approach to the problem, applies an appropriate touch of econometric sophistication, and solves the riddle. The second table also suggests an answer to the following: why does John Smoltz keep pressing the Braves for a return to the starting rotation? (Assuming Clemens is retired, Smoltz would place third on the active list).

"The D.C. Baseball Stadium Sideshow" 

That's the title of an op-ed by Dennis Coates, a significant contributor to research on the economic impact of sports. The column neatly summarizes some of his work with Brad Humphreys, and includes an interesting bit of trivia you should know about P.T. Barnum. I missed it in last week's Washington Post, but Cato reproduces it here.

Thursday, November 11, 2004

The return of the flat tax 

To the political stage at least. Stanford economist Robert Hall was promoting the efficiency of tax simplification in the late 70's and early 80's. Now he's happy that the issue is back in play:
"I haven't had a journalist call me on the flat tax in years .... I thought it was an ice-cold issue."
Could this be Bush's unifying theme for the second term?

When queried by reporter Caroline Baum, Hall opined that the likelihood of adopting a flat tax is "zero in a pure form... But there's such a gap between ideal and steps you might take." I'll take incremental progress, and with a unified government, a baby step or two in that direction might be politically feasible.

Presidential commentary: In my view, Clinton's otherwise superb record on economic policy was compromised by his eagerness to litter the tax code with gimmicks for favored programs. Bush has a chance to play a bit of catch-up here.

Sports teams and external benefits 

Daniel Akst, guest-blogging at Marginal Revolution, discusses an intriguing paper which estimates the effect of an NFL franchise on property values in US cities. The authors, Gerald Carlino and Edward Coulson, find that the presence of an NFL franchise raises the average household rent in a city by about 7-10%. They offer this as evidence that sports teams generate significant external benefits that are not captured by team owners. Akst compares this "existence value" to the value some folks put on old growth forests.

There is no question that such benefits exist, and that they are of considerable magnitude. Indeed, a more direct indicator of external benefits from commercial sport are sports sections in newspapers. No other industry has a section of the paper devoted to it on a daily basis. People love sport, and enjoy following their teams, whether they purchase tickets or television rights or not. Newspapers capture some of this value. Landowners in cities with sport franchises might capture some as well.

Carlino and Coulson's paper is an interesting attempt to measure this effect. But something has never sat right with me about the study. I find the magnitude of the rent increase implausibly large. Eight percent of housing expenditure? On average across all the citizens of a city as large as New York? That would generate a significant increase in property values, and thus property tax collections. The paper puts this figure at $7.1 billion in present value for NYC. That's enormous (although so is NYC).

One problem with the analysis is that factors which make a city attractive to the NFL also make the city an attractive place to live. The NFL is not looking to locate where people ain't. Carlino and Couslon do what they can to control for these factors, and note this issue in the paper's conclusion. But they can't be sure that that the NFL variable is uncorrelated with unmeasured attributes of NFL cities that drive both the NFL to locate there, and independently, people too. If there is any correlation of that sort, their estimate of "the NFL effect" on rents is biased upwards, and I suspect that to be the case.

Another measure of the external value of a sports team was constructed by Johnson, Groothuis, and Whitehead. Their paper is the source of the $5.57 figure in Akst's post - the amount the typical citizen in Pittsburgh is willing to pay (in taxes) to ensure the Penguins stay there to play hockey. The figure comes from a survey taken when the Pittsburgh hockey franchise was a relocation risk as it was going bankrupt in 1998. As Akst states in his post, this figure translates into $66 million in value over a 30 year horizon. That might not pay for an entire hockey rink, but it's not small potaoes either. For comparison, Carlino and Carlson obtain a property tax revenue gain of $128 million for the Pittsburgh Steelers. The Johnson et al. figure is an upper bound, so these figures are not wildly at variance with each other.

I think everyone understands that these "existence values" are not trivial sums. But whether they are in the tens or hundreds of millions of dollars is beside the point. What "obstructionist" economists object to is the use of studies projecting a large economic impact on jobs and income to promote stadium subsidies, when all evidence suggests the contrary. As Tom Kirkendall argues, the subsidy pitch can be made without recourse to junk science. We've been saying this for quite some time, but the argument keeps falling on deaf ears (save Tom's).

Notes: 1. Monopoly control over franchises is critical for the subsidy game to work. Economists have objections to the monopoly aspect of this issue as well. But one can accept that, and the consequence that subsidies will follow as owners of artificially scarce franchises play off one location against another. Junk science is another matter.

2. You can obtain an earlier version of the Johnson et al. paper here, or from the Journal of Sports Economics if you have access. Similarly for Carlino and Coulson's working paper, and the recently published version at the Journal of Urban Economics. I'm not sold on the numbers, but both papers are decent attempts to quantify an elusive concept. And their numbers will rule until someone comes up with something better.

3. The budget woes of Pittsburgh are problematic for the Carlino-Coulson calculations. Pittsburgh's stadium subsidies do not look like investments that are paying for themselves.

Tuesday, November 09, 2004

"Why I'm No Fan... 

of the Stadium Financing Plan." That's that title of an op-ed in the Washington Post by Henry Aaron, an economist at the Brookings Institution. Aaron's lengthy body of work cannot be described as "obstructionist" when it comes to spending public money, and the piece clearly implies that he's a fan who places a positive value on having a baseball team in DC. Here's the bottom line:
The mayor and others who negotiated this deal warn that the matter is settled and that if the City Council does not ratify it, the Expos will go elsewhere. The proper answer is that a better deal is not only possible but that negotiating one is the only fiscally responsible thing to do.

Washington is a valuable site not only for a new team but also for the other teams that will play here and share in gate receipts that are expected to vastly exceed Montreal's. A Washington team will enhance the value of Major League Baseball's television contract, which brings added profit to all teams.

A deal that passes part of the gains from a successful franchise to the taxpayers of the District should be possible if the District's negotiators do not engage in preemptive surrender. If a better deal is not possible, then perhaps the Expos should go elsewhere. As valued as a major league team would be, it is not worth jeopardizing the financial health of a city that only recently was near bankruptcy.
Here's the piece, worth reading in its entirety. Via Ian at Truck and Barter, who has useful observations on the likelihood of a local economic impact.

Monday, November 08, 2004

A note on the NHL's problem 

The story is title "Money no object." When it comes to competition among Russia's oligarchs, this bit of hyperbole is not far from the truth. Roman Abramovich, Chelsea's big spender, is spending a sufficient portion of his billions to get Jaromir Jagr to play in Siberia, for a club named Avangard Omsk (or Omsk Avangard, depending on which story you read).

One consequence of the "battle of the oligarchs" is that there is significant competition for hockey players, competition which might render a hard salary cap unworkable for the NHL:
The NHL all-star game hasn't been cancelled after all. It's just been moved to Russia.

The agent for New York Rangers winger Jaromir Jagr confirmed Monday that the Czech star had joined Omsk Avangard while competing Russian club AK Bars Kazan continued its mind-boggling spending spree...

How has AK Bars Kazan lured 11 NHLers, five of them all-stars, to a Russian outpost? By offering the kind of money no other European club can afford to.

"Absolutely, it's not even close," Jay Grossman, the agent for Khabibulin, Kovalchuk and Morozov, said Monday. "These teams (AK Bars and Omsk) are competing salary-wise with what the NHL would pay."
Here's the story. Read it and you'll see that it's not so much the talent that's suffering in this strike, but the owners, to a much greater degree at least. It's one thing for MLB or the NFL to keep wages down by playing hardball with the player's union. But it's a whole new ballgame when there are other viable competitors out there willing to snap up the talent. Do the owners understand the nature of the game they are playing? This isn't your typical North American monopoly sports league. If the NHL were to go the MLS route and pay sub-market wages, the top European hockey players will catch a plane and go (more or less) right back where they came from. European hockey on Fox, anyone?

Seeing is believing on stadium subsidies 

In the interest of equal time, here's Michael Wilbon, going off on people who might threaten public funding for a baseball stadium in DC:
The people who do all the screaming in the town hall-style meetings probably don't make it to Denver or Cleveland to see what sports stadiums and arenas have done to revitalize those cities, to lure businesses that create new jobs, and lure developers who want to build new housing, which creates real-estate taxes. Sometimes, I can't believe the stupid junk I read from academics who spin their silly obstructionist excuses on what stadiums don't bring, when all you have to do is look at what they actually contribute in Cleveland and in Denver, or for that matter along 7th Street near MCI Center, which around here ought to be Exhibit A.
I get it: seeing is believing.

Wilbon's reading of the riot act to "academic obstructionists" was prompted by the emergence of a surprise stadium proposal by a member of the DC council. (Note to Wilbon: stop the junk "studies" produced by stadium promoters, and there will be no need for us to set the record straight.) The alternative proposal has the benefit of being 20% cheaper, but offers less development potential and would perhaps implicitly renege on prior agreements between MLB and the city.

Final Note: I was around the MCI Center earlier this year, and failed to notice the benefits that Wilbon alludes to. The side I saw (North?) was nothing more than a long brown wall. There were not many people about, nor much commerce. I'd be grateful if someone could fill me in on what I missed.

Update:See the interesting and useful observations in the comments section. Also, Division of Labour notes that the run of facility construction in Cleveland is not exactly associated with an economic boom. The Census Bureau has ranked it as "the biggest poor city in the country" with a 31 percent jobless rate.

Competitive balance & league stability 

A paper on Competitive Balance by Jonathan Michie and Christine Oughton has prompted considerable discussion in the better British press. The paper is good at what it does: it documents that competitive balance has worsened in the last 15-20 years in top flight English football, discusses the factors contributing to this result, and potential remedies. The paper addresses a real problem in a sensible way. Its weakness is that it fails to analyze what I view as the root cause of the problem: the increasing scale of competition, and the need to abandon the concept of the domestic-only league. It simply assumes that a European Super League is something that must be avoided by policy. I agree that the stability of the English League is adversely affected by the increasingly unbalanced nature of the competition, but I doubt seriously whether they can return to the days of old.

The decrease in balance is real, and may be a factor in declining attendance at Premier League Games. Patrick Barclay discusses this, and the proposed remedy of more equal sharing of new media revenues in Saturday's Telegraph. This proposed remedy is actually quite modest, and amounts to shifting the scale of revenue sharing a bit more towards the NFL. Currently, much of the media revenue is split according to the position where a team finishes the season, which provides an incentive to compete, but also concentrates the wealth among the wealthier clubs.

Michie and Oughton use several measures of balance; one of the simplest is the percent of the total points earned by the top 5 clubs each year. This percentage has been increasing since the mid-1980s:
Michie and Oughton's paper can be obtained here (45 pages, pdf). The work of US scholars such as Depkin, Fort, Humphreys, Zimbalist and others that have been mentioned here are referenced. Again, though I have a different view of the problem (see the post below), it is certainly a paper that anyone seeking to be knowledgeable on the topic should read.

Sunday, November 07, 2004

The scale of competition 

Over the past century, the scale of sporting competition has increasingly moved from the local to the national and international stage. The great Brazilian soccer players no longer play in their home country, but for top teams in Europe. The best American talent plays there as well. Asian and European players now dot the landscape in American baseball, basketball, and hockey (should they ever get started again).

Players go where the money is, and increasingly, the money has been generated by media in recent decades. Television concentrates the world's eyes on sport not from a seat at the stadium, but the couch in the living room. Given this newfound visual mobility, spectators naturally focus on the teams and leagues where the best collection of talent is on display. The best leagues, filled with the best talent, are what captures interest in the international television marketplace.

The consequence of this form of globalization is that traditional, local-based competition faces serious challenges. This scenario has been played out before. Competition in intercollegiate athletics has become competition not so much against your local or regional rivals, but competition to gain a share of attention on the national stage, in a national market. The result: conference expansion beyond a regional footprint has been the trend for the past thirty years or so. In 1978, the Pac 8 nicked the Arizona schools from the old Western Athletic Conference, morphing into the Pac 10. The Southwest Conference, a league with seven Texas schools plus Arkansas, imploded in the early 1990s for these very reasons. Its major sports programs were picked off by the Big 12 and Southeastern Conferences, both with a more extensive national footprint. The recent ACC expansion to twelve teams is a delayed reaction to the same fundamentals - economic forces which have increased the scale of competition.

Local rivalries suffer from this as a consequence. The Clemson-Georgia series in football - a source of heart-stopping games in the 80s when both programs won national championships - is no more, despite the fact that the schools are but 80 miles apart. The tobacco road round robin in basketball, a feast for ACC basketball aficionados, has also been thrown over the transom. These losses are real, and it is true that athletic directors and conference commissioners have "sold out" to the almighty dollar by abandoning the forms of competition that their fans adore. But the scale of competition in modern intercollegiate athletics dictates that this cost be incurred, if schools want their programs to be prominent on the national stage.

European soccer has to come to grips with these forces as well. UEFA currently mandates that its member clubs compete in domestic competitions. This rule precludes countries like Ireland and Switzerland from generating enough support to field a team that can compete with the best on the continent. Demand clearly exists for teams like Celtic and Rangers to compete with the Barcelonas and Bayern Munichs. But the competition from other teams in the Scottish League is too poor to generate the interest, and thus the financial support for these clubs to acquire the necessary talent to win in Europe's king of competitions, the Champions League. In the absence of UEFA's rule, Glasgow as a town could support world-class soccer, but with UEFA's rule in place, Scotland cannot.

The Champion's League is UEFA's response to the same economic forces that have increased the scale of competition in NCAA athletics. It has expanded the old European Cup into an extended form of semi-league, semi-knockout competition among the elite clubs in Europe. UEFA understands the consequences of the Champion's League's success on soccer at the local level. This is from an article in today's Guardian, "Champions League 'is killing football'":
The Uefa president, Lennart Johansson, privately blames the Champions League's financial rewards for ruining domestic football. 'He feels that Uefa created this fantastic competition in 1992, but that it has now become a monster that has produced this unequal struggle between haves and have-nots in countries across Europe,' said a source who has discussed it with Johansson.

Gaillard added: 'Previously, you could play for or support Ipswich Town, Nottingham Forest or Derby County and have a chance that in your lifetime they would win the league or FA Cup. But today that chance is becoming more remote. These mid-size teams have made the history of European football. There are a lot of glorious names today that, if nothing is done, in 20 years' time will be threatened with extinction. They have no possibility of getting to the top eight or 10 of the top division in their countries.'

Uefa's only proposed solution is a plan to force clubs to include up to eight 'home-grown' players in their squads from 2006. But Johansson concedes that Uefa are all but powerless to reverse the damaging trends.
The home-grown rule is no solution. The claim that UEFA is "powerless to reverse" the trend is more nearly correct.

The economic forces are aligned with the big clubs. The demand is for these teams to play each other, not for them to tinker with modest domestic rivals. The big clubs will thus abandon Uefa if it remains a barrier to financial gain, and go off on their own.

So how would a rational UEFA react to this threat? Look at it this way. The ban on "non-domestic" league competitions is not so much a ban, but a rule which allows non-domestic competition (i.e. the UEFA Cup and the Champions League), so long as it is run by UEFA itself.*** UEFA's response is likely to be a proposal for a UEFA-sanctioned "super league" composed of the best clubs in Europe. If they don't, the top clubs will simply do it on their own, because the stakes are so high.

In the US world of intercollegiate athletics, there is no effective barrier to entry, as in the domestic leagues of Europe. As a result, competition in both is more fluid than in the monopoly professional leagues of the US. But there is an important difference. In the US, collegiate conferences were able to reshape their leagues in response to media-driven economic change. UEFA policy has limited that adjustment so far in Europe. It will not be able to do that much longer.

***Note: The ban on multi-country leagues may not withstand antitrust scrutiny in the EU. EU rulings in recent decades have nullified anti-competitive clauses in player contracts, enabling a form of free agency, and limits on the number of foreign players that a team could field. Is it fanciful to imagine that Celtic and Rangers could win an antitrust lawsuit, should UEFA attempt to squash the formation of a league among teams in Scotland and Holland?

Thursday, November 04, 2004

The rich get richer 

Jerry Jones got the Arlington voters to fork over the subsidy for the Cowboys' stadium. Craig Depkin has a number of interesting posts on this at Heavy Lifting. If you haven't been there yet, just go to the main blog and check out the lot of them.

Greg Skidmore at the Sports Law Blog discusses the Cowboys' vote and other ballot issues tied to sports. Greg states that he's "sure this is not sitting well" with me. Well, it does offset the joy flowing from South Carolina's elimination of the "minibottle clause" from the constitution. But not much. As for Craig, it hits him in the wallet, so any sympathy should be directed to him. His Tiebout reference does suggest that he might be voting next with his feet.

The main impact of stadium subsidies is to transfer money out of the pockets of people like Craig and into the bank accounts of people like Jerry Jones. Every thing else is a second order effect. To quote the infamous Earl Pitts, Wake up America!

"Big spenders" 

Here's an excellent article by Carol Slezak in the Sun-Times on financial matters in MLB and their implications for competition on the field of play. It's full of useful stats and quotes from people who know their economics, and the financial side of the game.

Wednesday, November 03, 2004

Selling the Rams 

Among other good posts at Market Power, here's one on how St. Louis was able to move the LA Rams to their fair city.


No, not that race. Here in SC, the voters passed the "minibottle amendment" by a 59-41 margin. This removes a constitutional provision passed in 1972 which forced bars to serve liquor from minibottles, i.e. the type most folks find only on airplanes.

Fortunately, the state's minibottle distributor duopoly was not a strong enough interest group to keep the amendment off the ballot. Nor did they have much influence on the vote, though they tried, with lies and gibberish masquerading as campaign commercials.

I'm curious about the politics which got that crazy rule tacked onto the state constitution in the first place. Regardless, here a toast to the minibottle: Good riddance!

Justice on Hunsicker & McLane 

Sportswriter Richard Justice now has a blog at the Houston Chronicle. This entry discusses the shocking (to me) resignation of Astros GM Gerry Hunsicker. What I should have known all along was that working for Drayton McLane is no picnic, and despite Hunsicker's remarkable success in putting competitive teams together, enough is enough.

Justice and others have asserted that replacement Tim Purpura is more than capable. I could be convinced of that if he signs Carlos Beltran.

Monday, November 01, 2004

Tradesports and the election 

I've been following Tradesports ever since they offered wagering options on Saddam Hussein being toppled from power. This is the first presidential election they have written contracts for. There haven't been too many surprises, although there are suggestions that a nut job or someone with money to burn has attempted to manipulate this particular market.

Be that as it may, here is one contract that was just brought to my attention, and the current prices:
2004 Presidential Election is Certified on or before Dec 13 2004

Bid: 79.5
Ask: 86.0
Last: 88.0
I presume that December 13 was chosen because that is the normal date for certification. Now, as an optimist, I think this is a profit opportunity. But as a citizen, and an economist who understands that these prices are generally close to true probabilities, I think this is a disaster. Now, the bid-ask spread is big, but nevertheless these prices imply there is a 15-20% chance that lawsuits and the like are going to gum up this election. That is a magnitude which I find utterly unacceptable for a civilized country.

Update: Dahlia Lithwick puts a positive spin on the lawyering that went on during this election.
The real reason Ohio didn't become Florida isn't just that Kerry lost the popular vote, unlike Gore four years ago, or that the margins were too close to beat. The reason was that much maligned lawyers all around the country did their jobs. There's a reason we all talk trash about ambulance chasers, yet would never dream of buying a house, or writing a will, without an attorney: Lawyers are troubleshooters and problem-solvers, sherpas through ambiguous terrain. This election they did precisely what they were meant to do: learned from the last time, monitored the rough patches, interceded in the close cases, and backed off when it became irrelevant. The law, at its best, anticipates trouble and builds systems to protect against it. That is what John Kerry recognized this morning, and we are all better off for it.
Amen, sister.

More on momentum 

Dan Lewis at The ArmchairGM has been crunching some numbers on momentum. Here's the bottom line:
World Series teams down 3-0 have gone a putrid 2-15 (note: in game 4) over the period of my survey. That’s a .117 winning percentage, which over a 162 game season extrapolates to nineteen wins.

There is simply no way that a skill differential or even dumb luck can account for a large portion of this fall-off. The conclusion must be that the adage "'Momentum' is the next day’s starting pitcher" is entirely untrue when down 3-0 in the Series, and quite possibly in the LCS as well. The psychological barrier a team faces is exceptional, and perhaps more than most people realize.
I think that self-belief is a big part of streakiness, and it works both ways. Winning breeds confidence, and losing erodes it.

Post-season baseball is an interesting experiment due to its terminal nature. Suppose you randomly sampled 100 regular season games after a team was swept in a 3 game series. Even though the chances are that such teams are differentially poor, what are the odds they would win as few as 12 out of their next 100? Post-season series are tailor-made for producing streakiness, because the psychological weight is much bigger.

Again, as I've said before, television announcers tend to over-hype such phenomena. Dan's next post wonders if a late 1st half score truly shifts momentum in a football game. It was prompted by the commentator in yesterday's Giants-Vikings game, and is filed intriguingly under "Media Madness." He's offering an opportunity to be an Armchair GM for the best attack on the puzzle.