Friday, July 29, 2005

Becker-Posner Interview on Radio Economics 

James Reese, a professor of economics at the University of South Carolina Upstate, has a new blog entitled Radio Economics that contains podcasts of interviews with economists. The latest effort is with Gary Becker and Richard Posner, an interview well-worth listening to.

Professor Reese also has an interview with the Dean of the Sports Economist, Skip Sauer, available here and one with John Palmer here.

The "Effect" of Education on NBA Arrest Rates 

from the sports law blog:

Update to NBA Player Arrest Study
In my study on NBA player arrest and age/education, I added an education-level comparison of arrested NBA players to all current NBA players. There are some rather striking results that appear to amplify the study's findings.Most notably, though 41.1 percent of all NBA players went to college for 4 years, 57.1 percent of arrested NBA players went to college for 4 years. In contrast, though 14.8 percent of all NBA players either did not go to college or went for one year, only 9.6 of arrested NBA players share the same educational background.
Why would college educated NBA players be more likely to be arrested? Why would those who attend for four years be more likely to be arrested than those who didn't?

One possible explanation is that after four years of suffering from monopsonistic exploitation by the NCAA, the players are less likely to have respect for the law. They see and experience cheating by athletic directors, and they are bombared with bribes.

Another possible explanation: those who go straight to the NBA or who enter the draft early tend to be better players for whom the opportunity costs of being arrested are higher. They have more to lose and less to fall back on. They also have less time to become jaundiced by NCAA exploitation.

Thursday, July 28, 2005

Goodenow Gone as NHLPA Head 

Canadian Press and TSN are reporting that Goodenow is stepping down as head of the NHLPA.

One week after ratifying the NHL's labour deal, the NHL Players' Association announced Thursday that union boss Bob Goodenow is stepping down.


I must say, I'm not surprised. The union held out and held out, and in the end received a deal that was probably worse than the deal offered them in February. Either their strategy was poor or their information was poor.

Wednesday, July 27, 2005

TV Commercials & Sports 

As most any sports fan, commercials during sporting events annoy me-- not the hawking of wares, per se, but the time it adds to the telecast. The idea that commercials are really the price I must pay to see the program (Gary Becker's point) is clear enough. Still, I prefer lower prices to higher ones. Because my time is valuable, I'm willing to invest in devices such as TiVo that lower the time cost of watching. Of course, as such items proliferate, alternative institutional arragenments for programming or using commercials are likely to expand.

This brings me to my main point regarding the institutional arragement of commercials and sporting events. One glaring difference between U.S. sports and the dominant European sport of soccer involves the time cost of commercials. Advertisements saturate American televised sports -- a commercial after the touchdown followed by one after the kickoff rank up there with Oprhah and Dr. Phil as causes of channel hopping. The ability to watch an entire half without a single commercial break contributed to my growing taste for soccer.

Why does this institutional difference exist? This is a question and not an answer. TV revenues are important to European clubs and their media producers such as Sky Sports just as they are in American sports. Cave and Crandall offered some details on TV markets and revenues across the big pond, but nothing they describe offers much in the way of an explanation for my specific question. Someone may suggest -- one is soccer and the others are not, dummy! Maybe the answer is that simple, but one could envision stoppages in soccer too. After all, the number of stoppages in American sports used to be much fewer.

Expanding a bit, sports provides many opportunities for comparing ways of doing things across different institutional structures -- "comparative institutional analysis." The trouble is that such side by side comparisons of institutionals can raise knotty questions. Oh, we might do well enough in explaining differences that alternative setups create. However, the matter of explaining why such institutional differences exist in the first place sometimes creates a circular trap for us as economists. A standard, generic response might be that an institutional structure must be profit maximizing or else we would not observe it. When competing institutional structures are present side-by-side, this fallback position amounts to little more than chasing your own tail. It's much like the biologist who explains why one spider species devours its mate and another does not by exclaiming that the behavior developed as a survival response to its environment. It's a one-answer-fits-everything but really explains nothing dilemma.

Ok, there's the problem. It will be on this fall's comprehensive exam! I would be interested as to any suggestions that my fellow bloggers might have.

Monday, July 25, 2005

In the Stadium Game, the A's Want to Play Small Ball 

Major League Baseball's Oakland A's are having trouble selling season tickets. According to this article, they lead the majors in walk-up ticket sales. It's just one of the reasons they want a new, much smaller, ballpark.

The A's managing general partner is looking for a park so intimate it would make SBC Park or even Fenway Park look almost spacious. It would have about 35,000 seats, Wolff said last week, and that would make it the smallest big-league park.

..."If we had a new ballpark, I think the A's would be extremely successful," Alioto said. "I think the fans would come out. One of the things we have in Oakland is too many seats. There's no urgency to buy tickets.''

That's why Dick Bohling, 52, of Walnut Creek, didn't renew his 20-game ticket plan this year. "The reason is that good tickets are available at game time for most games,'' he said. "Instead of trying to decide in February which dates to sign up for, I can go at the last minute on convenient dates and buy nearly comparable seats. I still go to as many games, but I can better choose according to my schedule.''

From the club's perspective, when it sells a season ticket, it lowers the amount of risk the team is subjected to. If a person buys a full season ticket, that person' seat is sold for 81 games that season and the team has that revenue in hand. Per game, the season ticket is sold at a discounted price relative to the price of a walk-up ticket, but the team is giving the fan a discount in exchange for taking on a little risk (the risk that the team may be so crappy that the fan will not want to attend many games).

HT to Mark Stratton

Sunday, July 24, 2005

Instant Replay Coming to a College Football Game Near You 

Instant replay is coming to a Big XII football game near you.
The Big 12 decided during this past offseason to use instant replay for the coming season after watching its success in the Big Ten. The venture, which the Big 12 has set aside $450,000 to fund, will be utilized in every Big 12 game, televised and not televised, and will be used during non-conference games with permission of the non-Big 12 team. In those non-televised games, Fox Sports Net will supply a television truck and four cameras to supplement stadium television with instant replay.
Many of the factors of production necessary for instant replay are already in place in conferences such as the Big 10 and the Big XII. From a Big 10 FAQ on instant replay in that conference:
All reviewable video will come direct from the television network broadcasting the game (ABC Sports, ESPN, ESPN2, ESPN Plus Television) and no other source. The Big Ten has had 90 percent or more of its 44 intraconference games televised during the past five seasons. If an intraconference game will not be televised, then the Big Ten will arrange for video exposure of the game in order to provide the same, consistent coverage throughout the Conference season.
FOX Sports Net has a contract with the Big XII to broadcast many of its games and, as noted above, FSN is providing the additional equipment for instant replay in the games that are not broadcast. The ACC is also experimenting with the use of instant replay. So are 7 of the remaining 9 D1 conferences. Only the WAC and the Sun Belt have decided not to use instant replay. Regarding the WAC:
The sticking point for the WAC, people in the conference say, is fairness. Without a sizeable financial outlay for equipment and manpower, the conference said it would not be able to implement it for non-TV games. Only about 16 to 20 of the WAC's 36 conference games are expected to be televised, meaning the schools would have to pick up the costs for the remainder or go without it.
It sounds more like economics rather than fairness. The bigger conferences, with many/most of their games being televised, have much of the equipment already in place. Right now, the BCS wants a replay system in for all the bowl games, but since different conferences will use slightly different systems (for example, only the Mountain West will allow coaches to ask for replays), the question is what system to use.

I'll go out on a limb here... I bet there'll be more challenges in the Mountain West than in the other conferences.

High and rising ticket prices 

Tottenham Hotspur have the highest priced matchday ticket in next season's English Premier League at £70, and newly promoted Wigan have the lowest at £12. Both clubs use differential ticket pricing, to reflect the expected demand conditions for each team. It's a safe bet that Tottenham's bottom level price of £41 will be in effect when Wigan come to North London. That, ironically, is the same as the most expensive ticket at Malcolm Glazer's Manchester United.

The Telegraph's Mick Collins writes as if the growing demand to watch football, as expressed in these prices, is a "problem." It may be, but firms surely prefer problems that stem from increasing demand to the opposite.

The NFL has been underpricing the Super Bowl - even at $500 per ticket - for years. But did you know that you could have seen the early editions for less than $10, and some of the classic games of the 1970s for $20? That's what the data say, as reported in this article in the Atlanta Journal & Constitution. Here's the picture:

Thursday, July 21, 2005

On Second Thought... 

The powers that be in the Vikings training camp have scrapped their decision to charge the public for admission to all the team's practices. Had they not scrapped the plans, the Vikings would have been the only team that charged an admission fee to all of its practices.
New Vikings owner Zygi Wilf has agreed to cover the cost of tickets, according to an agreement announced today by the company that manages camp. Wilf will make up the revenue shortfall with Greater Mankato Training Camp, LLC, and also cover the cost for interactive games in the Vikings Village area.
According to the article, the NFL bans scouts from attending practices/events unless the public must pay an admission fee to attend those practices. Had the original plan been in effect, that would have made the Vikings the only team in the NFL that charged admission to all its practices. - and it would have been the only team required to allow scouts in to all of its practices. Whoops!

Wednesday, July 20, 2005

Capital Improvements in Sports 

There's a couple of articles that I ran across this morning about capital improvements in sports. The first, from the Kansas City Star, is a column by Jeffrey Flanagan which begins by desicribing Tom Watson's distaste for today's technology in golf.
Watson, who finished 1 under overall at the British Open, told the London Times that while he admires the way Tiger Woods is dominating the game today, the time is approaching when the brakes must be applied to ball and club technology.

...
“These days I hit the ball about 10 yards further through the air than I did when I was in my prime,” he said. “(Back) then I hit the ball about 250 yards through the air with my driver, and I was considered one of the game’s longest hitters. If they put a bunker at 250 yards, I really had to work to fly the ball over it. Now 250 yards is nothing. These days, guys can hit that far with a 3-wood into the wind.”
The second is an article from the Minneapolis Star Tribune that details the improved cycling technology(and training) and the various barriers that were punctured when Americans began taking the sport of cycling seriously.
Cycling is a deeply European sport, and it is governed by a multitude of traditions and customs that don't necessarily have any connection to performance. For instance, until very recently, team directors and even some team doctors believed that air conditioning in cars and hotel rooms was bad for riders. I never really understood their rationale, but it had something to do with the idea that cool air led to respiratory infections. As a result, exhausted riders were told to sleep in hot and stuffy hotel rooms, and since they didn't get a good night's sleep, they rode poorly due to lack of rest.

The relatively short history of American cyclists in the European peloton has worked to our advantage. When we arrived on the continent in the 80s, we immediately started questioning the customs and traditions we found. We weren't trying to be disrespectful, but it seemed odd to work so hard trying to win races only to be hindered by practices that existed because "that's how it's always been done.'' American riders were more open to new technologies for training and competition, and that has played a large role in their successes over the past 20 years.
Skip had this post on technology in softball bats. In some instances, the new technologies employed by players generates externalities on the providers of the fields on which the players play. The golf club technology and the softball bat technology effectively diminishes the size of the course/diamond, not in an absolute sense but in the sense that they play smaller. But if all teams/players use the new technology, there will likely be very little impact, if any, on who wins (since winning depends on relative performance).

On a personal note, I like the new technology. If I can ride faster or hit the ball farther, that's a good thing.

Larry, You're Not Bought Out. You're Fired! 

According to the Detroit Pistons, Larry Brown has been fired:

Larry Brown is free to coach another team, and the Pistons will pay him about $6 million not to come back.

Those are the key points of a settlement that led to Tuesday's announcement that the Pistons had fired Brown, who took the team to the 2004 NBA title and Game 7 of this year's Finals.

There's been speculation that Larry wouldn't be back with the Pistons ever since the reports surfaced that he was interested in joining the Cavaliers. He even said that the Knicks was his most-desired destination. Geez... that's like a husband saying to his wife "Ya know, I'd really like to be with such-and-such. She's my dream wife." Heck, given his nomadic behavior, speculation about his tenure probably started the day initial negotiations began back in 2003.

So, was he really fired or was this merely a buyout?
The uncertainty of how much Brown could coach last season was one reason for his dismissal. Brown missed 17 games last season after he had surgery twice -- for a hip replacement and resulting bladder problem. He also underwent further bladder surgery this month at the Mayo Clinic.
... Although Brown said he wanted to coach the Pistons if healthy, his health issue wasn't resolved. He also didn't endear himself to management last season when he said coaching the Knicks would be "a dream job," then agreed to listen to a potential offer to become the Cleveland Cavaliers' president of basketball operations.

Brown told the New York Times on Tuesday that he wasn't interested in a buyout.

"I don't want to negotiate a buyout," he said. "I want to coach."

But, in the end, his flirtations with other teams and his health problems gave the Pistons too much concern.

It will be interesting to see if other teams share the Pistons' concerns. He's a mover, not a stayer, and his health problems have to be a concern. But teams want to win - and yesterday's not soon enough. Larry's a winner, there's no doubt about it and anyone who hires him knows what they are getting.

Tuesday, July 19, 2005

Lets regulate sports! 

Theo Epstein, the Red Sox wonderkind GM, is helping his brother help others through a charitable foundation named ... A Foundation to Be Named Later.

Hooray for that. But for some reason, Theo wishes others in sports were forced to share their earnings with the American Federation of Teachers: "50 years from now the government could regulate sports, and basically cap player and front-office salaries and redistribute some of that money to, say, teachers." Oh, dear. How can somone who is (allegedly) so bright utter something so stupid?

Hat tip: Baylen at To The People.

"You never get there" 

That's Tiger Woods talking.

The man is simply crushing the ball, and has the touch to top it all off. If it were not for a rash of near misses at Pinehurst, he'd be on the cusp of the Grand Slam of Golf. Tiger may never "get there," but how did he get to this point? This article has a few clues.

Footnote: John Feinstein takes a shot at Woods (by way of an unflattering comparison to Nicklaus) in this Washington Post column. I enjoy Feinstein's work, but in my opinion, this piece is a low blow. Feinstein's hit piece levels the charge that Tiger lacks class. Well, "hello pot!" Hat Tip: Tom Kirkendall.

Monday, July 18, 2005

"Drop-kicked by eminent domain" 

The Chicago Tribune has a story today on the use of eminent domain in Arlington, Texas.

Some salient facts:

  • A constitutional amendment forbidding the use of eminent domain for the purpose of "economic development" recently passed the Texas House 132-0. But a bill in the Texas Senate has a grandfather clause protecting the Cowboys' stadium proposal "to attract enough votes for passage."
  • 141 properties must be transferred to the city of Arlington under the stadium plan. So far, only 35 owners have accepted for the city's price for their property.
  • 65 jobs will be lost when a hotel is torn down to build the new stadium. [Hmmm... were these accounted for in the economic impact statements?]
  • The stadium proposal - heavily promoted by Cowboys owner Jerry Jones - was approved in last fall's election with a 54% majority.
I'm not a Bush-basher, but the prior stadium episode in Arlington might have more dirty laundry in it than any medical records from his National Guard days:
How domain helped Bush

Bush, in fact, partly owes his fortune to the best-known previous use of eminent domain in Arlington--the acquisition of land for the Ameriquest Field complex, the Rangers' ballpark.

The stadium, owned by the city and leased to the team, as well as additional land the team's owners acquired through eminent domain, helped boost the franchise's value. Bush, who bought his stake in the Rangers in 1989 for $600,000, sold it in 1998 for more than $14 million.

Conservative activists now hope Bush will nominate a strongly pro-property-rights justice to the Supreme Court who might be inclined to reverse the recent decision.

People whose homes and businesses stand in the way of the planned football stadium are not encouraged by what happened with the baseball stadium. Members of the Mathes family, who thought their 13 acres were worth $7.5 million, were offered $817,000 to make way for the baseball stadium. After many years in court and substantial lawyers' fees, they got the $7.5 million.
That last set of facts - an offer of $817,000 for a $7.5 million property - suggests the nature of what we're up against. It looks like grand larceny to me.

The Kelo decision has alerted people to these shenanigans. With that impact in mind, I wonder how effective the Cowboys' propoganda machine would have been,
had the Court's decision come last year rather than last month. Would the Arlington stadium proposal have garnered a majority if the vote had come post-Kelo?

Radio Economics 

Radio Economics is an economics podcast site, created by James Reese of the University of South Carolina Upstate. These are early days for the site but you can already listen to several interesting interviews while you are browsing. Bill Goffe, the pioneer of RFE (Resources For Economists on the Internet), talks about his interest in Computational Economics and how he manages RFE. James Hamilton, the fine applied time series economist, talks sensibly about both oil markets and macroeconomics. (Note: sound commentary on either is an all-too-rare event; you can get both in one listen while browsing today's news.)

Then there's my interview, which may or may not make sense. But I do talk some about sports and economics, and how examples from sports illustrate economics in action.

Kudos to James for setting up Radio Economics, and for conducting the interviews in a relaxed atmosphere.

Friday, July 15, 2005

Death of a Young Man 

You've probably never heard of him. I had, but that's because I follow Missouri Tiger sports. This sort of thing happens all too often to young athletes, who, on the outside, are the picture of health.

Aaron O'Neal, 19, a redshirt freshman linebacker for the Missouri Tigers died following a voluntary conditioning workout on Tuesday. Here is an eerie slideshow produced by the Columbia Daily Tribune showing 18 pictures of O'neal during and after the workout, including his collapse and his being helped off the field. Not long afterward, O'Neal was pronounced dead.

Right now, all we have is speculation as to why Aaron died. The Boone County Medical Examiner, Valerie Rao, has done a preliminary autopsy and has not issued any conclusions. She has issued an array of tests to be done on Aaron to determine what caused him to go into arrest. The tests provide a case study of specialization and comparative advantage.

■ A neuropathologist at Missouri will examine O’Neal’s brain.

■ A cardiac pathologist in Miami will examine his heart.

■ An AEGIS lab in St. Louis will perform toxicology tests for substances including steroids and ephedrine and other drugs.

■ Other labs will do microscopic examinations to search for the presence or effects of other drugs and alcohol in the liver and the lungs, as well as examinations of spinal tissue and fluids.

■ Other tests will be conducted to determine electrolyte levels in an attempt to determine whether dehydration — and heat stroke — contributed to O’Neal’s death.

■ Tests for an occurrence of blood clots in the lungs and brain also will be run, even though Rao said she did not find evidence of embolisms in her autopsy examination. Rao said she even anticipated ordering a test for sickle cell anemia, though she said she saw no indication of that disease.

Athletes often need to be pushed by coaches and peers to realize their potential. In the slideshow, Pat Ivey, Mizzou's director of strength and conditioning (and a former student of mine), is seen urging on Aaron. In reports I've read, fellow athletes also were urging him on. It's the nature of any workout - get the most out of yourself and your teammates. But it's next-to-impossible for those monitoring workouts and scrimmages to tell if an athlete is winded or if he is experiencing a medical emergency. You can tell that simply by looking at the slideshow (especially slide 13). Sometimes, unfortunately (but rarely), something terrible happens.

Thursday, July 14, 2005

The World Cup and Stock Returns 

Jim Mahar points to a recent paper on the intersection of finance & football:
Daily stock returns are 39 basis points lower than average following a loss in a World Cup elimination match. This football-loss effect is robust to changes in estimation methodology and to the removal of outliers in the data. It is particularly strong for more critical games, in recent years, and in countries where football is especially important. Controlling for the pre-game expected outcome, we are able to reject that the football-loss effect is caused by economic factors such as reduced productivity or lost revenues. Coupled with the size of the effect and its concentration in small stocks, we suggest that the football-loss effect stems from the impact of football on investor mood.
The authors promote this result as evidence of irrationality, and support for "behavioral finance." This is a popular topic these days, but I'm not a promoter of that way of thinking. I think its emphasis on anomalies gives short shrift to the first order effects of pricing in financial markets. Nevertheless, we may have a true - and interesting! - anomaly here.

On a skeptical note, a quick reading suggests that the authors' support for the claim that no real economic effects exist is very weak. Further, Dennis Coates and Brad Humphreys found a small positive effect on a city's economy from winning the NFL Super Bowl. So there is a basis for linking the outcome of major sporting events to the spirit, and the productivity of people in a region.

Both papers suggest that winning (or losing) major sporting events affects the mood of a team's fans. And that mood matters, economically speaking. But I doubt that the effects are confined only to investor sentiment, and nowhere else in the economy.

Wednesday, July 13, 2005

The Tall and the Short of It 

Tall men earn more than short men, according to a paper (subscription required) recently published in the Journal of Political Economy, a prominent economics journal. Economists Nicola Persico and Andrew Postlewaite of the University of Pennsylvania and Dan Silverman of the University of Michigan examined the earnings of a large sample of white males in the US and the UK over several decades and found an earnings premium of about 2% for each additional inch of height at adulthood. Put another way, the results suggest that the tallest 25% of the male population earn about 13% more than the shortest 25%, a sizable (no pun intended) difference.

This carefully executed study explicitly rules out a number of potential explanations for the height premium, including employer's preferences for tall workers or the presence of unobservable, omitted factors correlated with height that might drive the results. Interestingly, the factor that best explained the height premium among adult males was the individual's height at age 16. Tall adult males earn more than short adult males because they also tended to be tall in adolescence. Height at age 11 and 7 had no effect on wages, further pinpointing the age at which height begins to matter for males.

What does this have to do with sports - other than helping to explain why centers earn more than small forwards in the NBA? The existence of a height premium in the labor market raises a number of interesting questions. For starters, what mechanism during adolescence might cause a height premium in adulthood? The results in this paper suggest that participation in sports prior to reaching adulthood plays an important, but not yet understood, role in the height premium. This underscores why economists should pay more attention to sports participation, especially in adolescents. To date, relatively little economic research has focused on the determinants of sports participation. The results in this paper also provide a justification for public subsidies for youth sports, as the height premium implies a corresponding increase in adult male productivity that benefits all of society.

The study also performs a cost-benefit analysis of the lifetime value of a six year childhood course of the human growth hormone somatropin to stimulate growth. The $135,000 cost of this treatment would be worth it (ignoring the nonmonetary costs associated with the daily injections it would require - ouch!) in present discounted value terms, assuming that the parents had access to that amount of money. I doubt that credit markets are efficient enough to generate such a loan, even if any parent was crazy enough to try and get one, but that's not the point of this back-of-the-envelope calculation.

The study neglects a second, potentially more important implication of the height premium. The authors find evidence of a height premium for males but not for females. Many intercollegiate athletic departments in the US comply with the requirements of Title IX by cutting men's sports teams and reducing opportunities for males to participate in intercollegiate athletics, rather than by adding women's sports and increasing the opportunities for females. If the mechanism that leads to the height premium works through age 22 or so, then cuts made to men's sports teams in order to comply with Title IX may have a previously overlooked economic implication. Denying males an opportunity to participate in intercollegiate athletics could reduce their lifetime earnings because of a reduction in the height premium. The unintended consequences of Title IX may be larger than previously imagined.

Tuesday, July 12, 2005

Welcome to Brad Humphreys 

Brad Humphreys' work has been much discussed on this blog, and we are delighted that he wishes to contribute to The Sports Economist on an occasional basis. Brad is a first-rate economist, and is currently an Associate Professor in the Department of Department of Recreation, Sport and Tourism at the University of Illinois. Welcome, Brad!

Addicted to the Tour 

I must confess an addiction to nightly coverage of men riding bikes for five hours. Before last summer, I would have dismissed the idea of being captivated by a such a repetitious event where participants represent a small club of athletes supported by companies with names like Phonak and Fasso-Bortolo. Oh, I had watched an odd summary such as Greg LeMond's stunning last day victory in 1989 that left Laurent Fignon crying like a baby on the side of the road, but my interest did not run very deep. That all changed when OLN's in-depth coverage came bundled with a sports package on my satellite plus a Tivo birthday present last year. Now, I'm strapped in my easy chair receiving my nightly fixes of "the Peleton" skimming over the French countryside. A few observations from my strange trips:

1. As with most sporting events, the Tour supplies a rich laboratory for economics. Before last summer, I thought that the race involved little more than a bunch of guys climbing on expensive bikes and pedaling to see who finished the 2000+ miles first. Instead, the competition for the overall victory involves a long sequence of strategic games between riders and teams. The races within the race for the sprinters title, the "king of the mountains" title, and the young riders title not to mention the daily stage wins also supply content. Each mini-competition incorporates its own strategy, but also the structure of incentives provides interest and drama in addition to the overall winner -- something that U.S. sports could borrow from more heavily. Also, the team dynamics highlight organizational issues. Armstrong's team has one clear leader and objective. In contrast, the T-Mobile team has three riders who have finished in the top three overall in prior years.

2. The Tour draws attention to the impact of success on further participation in a sport. Twenty years ago, Americans were a non entity on the Tour. Since then, LeMond and Armstrong have won half of the available titles, spurring a surge in U.S. participation and competitiveness as described in a recent Dallas Morning News story. The influences on labor supply and demand involve important feedback mechanisms.

3. Thirty years ago, Becker and Stigler published their piece describing how tastes and preferences may be, in part, driven by prices, incomes, and capital ("De Gustibus Non Est Disputandum" -- AER 1977). I'm living out their model as reality. Not only have my viewing habits changed, but my "preferences" have evolved over the last couple of years due to the changes in the composition of my capital.

4. As a sports fan, even with the complimentary capital of my Tivo and satellite, I have been surprised how appealing the Tour has become to me. The event involves a of monotony. The pool of serious athletes in the sport is small. It's in France -- for goodness sakes. Nonetheless, the Tour is no hyped up coverage of a few guys in baggy pants doing 1080s or some guy named Buck chopping a piece of wood. I can watch those kind of specialty events for about five minutes. Instead, these riders average 30 mph 4 inches from each other for 2000 miles, climb mountains over 8000 feet high, sprint like madmen after riding for five hours, and other amazing stuff that inspires admiration and interest from a sports fan like myself.

Monday, July 11, 2005

The NBA age floor, and a profit opportunity 

The next LeBron James won't be able to play for an NBA team after finishing high school. One option would be to play in the NBA's Development League, where the average salary last season was $20,000. Then there's the college option, where you might skate through a year's worth of classes before jumping to the big show. But why bother with the hassle if you could develop your game under the watchful eye of dedicated coaches (i.e. not the recruiting specialists favored by NCAA rules) at an elite training center in Florida?
Along with the development league, another option would be playing at a prep school for a year or working out at I.M.G. Academy, which was opened four years ago.

I.M.G. is a haven for off-season workouts by N.B.A. players like Chauncey Billups, Al Harrington and Tayshaun Prince. It has specialty programs to prepare players for the draft. This year, it produced its first draftee, Ricky Sanchez, who was picked in the second round by Portland and traded to Denver.

Sonny Vaccaro, Reebok's senior director of grass-roots basketball and one of the most influential people in the sport in the last 30 years, predicted that workout academies like I.M.G. could start the next trend in basketball.

"If I were younger," Vaccaro said, "I would start the Sonny Academy."

Joe Abunassar, I.M.G.'s director of basketball, said that he had already been contacted by Brandon Rush and other top high school players who were not in June's draft.

Abunassar said he expected I.M.G., which he likened to a boarding school, to become increasingly popular among elite athletes.

"For some reason, kids have been looking for a different way to get into the N.B.A," said Abunassar, a former manager for Bob Knight at Indiana and an assistant coach at Wyoming. "We've seen more and more kids leave not because they're in the first round, but they don't want to go to college anymore."
The NCAA is tightening up academic requirements on programs, and the NBA is closing the door to the cream of the crop. So there is a new group of players, replenished on an annual basis, who want no part of English 101. They are likely to find better terms than offered by the NBA development League.

My sense is that Sonny Vaccaro is right: the NBA and NCAA have managed to create a profit opportunity in signing elite players and giving them specialized training. I.M.G. might house a squad or two in return for a share of their first contract. A team from Europe could develop a reputation for training potential superstars on a similar basis.

Wednesday, July 06, 2005

It Isn't Scalping,
It's "Price Discrimination" 

The Chicago Cubs have their own ticket-reselling agency [aka scalper] which sells tickets at prices above the face value. Well, it isn't owned by the Cubs; it is owned by the Tribune Company, which owns WGN, Wrigley Field, and the Cubs. [Thanks to Fabio Rojas of the Marginal Revolution for the link].

Some disgruntled fans filed a lawsuit against the Cubs, arguing that the team is violating the state's anti-scalping legislation. The fans lost. The judge decided that it was really an in-house deal between the Cubs and its reseller.

"It is undisputed that Tribune Company owns the ball club and Premium," the judge said. The Ticket Scalping Act, she said, did not prohibit a single entity like the Tribune Company from owning a sports team and a ticket brokerage, or the team from selling its tickets to its sister company.

Most importantly, the judge said, plaintiffs failed "to prove that the business relationship between them violates any law or violates custom or practice."

Was it really disgruntled fans who were upset by the arrangement? The Cubs don't think so:

During the week long trial in mid-August, the Cubs argued the suit was filed to benefit rival brokers who want to eliminate competition from Premium [the Cubs-owned reseller].
Aahhhhhh. The penny drops. More attempts to use the legal system to restrict competition. It seems that other agencies are allowed to charge more to fans who wait until the last minute to get tickets and/or who do not like to wait in line; they just don't want the competition from the Cubs.

Monday, July 04, 2005

Economic Impact of the 10th Annual Redneck Games 

From Yahoo.com and the Associated Press [with thanks to cmt]:

Bobbing for pig feet, the mudpit belly-flop, the armpit serenade — they're all part of the Redneck Games, a series of good ole'ympic events for the ain't-so-athletic celebrating their 10th year in middle Georgia....There's also hubcap hurling — think junkyard discus — and redneck horseshoes, played with toilet seats.

... Organizers estimate 95,000 attended the July event during its first decade in East Dublin, a rural pit stop of 2,500 residents between Macon and Savannah.
What do you suppose the economic impact would be from holding these games in the community? I would guess that the games bring in quite a few tourism dollars and have a small diversion effect from other spending in the community, so the local multiplier could be substantial; but I would want to know more before hazarding a guess about its size.

Willie Paulk, president of the Laurens County Chamber of Commerce, said no economic impact studies have been done on the Redneck Games, though she says it's the third-largest public event in the county, behind the St. Patrick's Day celebration in neighboring Dublin and the Possum Hollow arts and crafts festival in nearby Dexter.

"While we appreciate the novelty of the Redneck Games, I don't think it should be looked at as the sole determinant in labeling a county," Paulk said. "So far it hasn't stopped our industries from locating here, which is wonderful."
I may consider applying for a grant to study the economic impact of these games on the economy of the local community. Anyone wish to co-author the study? Rest assured, it isn't opera.

Sunday, July 03, 2005

Soccer financials 

A couple of years ago I had lunch with Roger Noll in London on one of his visits to the LSE and we talked about the availability of financial data in sports. We both agreed that anyone researching English soccer is incredibly blessed to have full public accounting records for all the teams going back at least 40 years, and in some cases back as far as 1907! The reason for this is an oddity of British law, which requires all limited companies to file annual accounts open to public inspection, even if the shares are privately held and not traded on any stock market. Moreover, so far no English clubs have been absorbed into larger commercial organisations with all the potential to hide information and conceal profit in ways that Rod Fort and others have documented so well. Hence the accounts of English clubs are really very informative on issues relating to revenues, costs and cashflow. So much so that Deloitte's have been publishing a summary of the accounts for the 92 professional English since 1992 and the latest edition, covering the accounts for the year 2003/04 was published in June.

Deloitte's summary is very helpful, since they not only report the data on a consistent basis across clubs, they also provide some useful analysis of the data. Unfortunately, they also now charge for the report, although I suspect academics can get it for the reduced student rate of £30 on request. Alternatively, if your library has access to databases such as FAME, you can download the full accounting records yourself. In fact, this website also has a page of football finance related sites here. I have posted some earlier summary versions of the accounting data that I have collected on my own webpage, and plan to do so again when I have got used to my institution's new website (!). Perhaps I should send it to Rod to post on his site.

I have used this data extensively in my research, and indeed, I doubt that I would ever have become involved in sports economics had it not been for the availability of this data, but I think it remains remarkably underutilised in sports econ research. That's why I remember Roger telling me that once American economists got wind of this data, they would enter the market and we would see an explosion of papers using the data. As yet this hasn't happened- but I think it would be no bad thing if it did.

Saturday, July 02, 2005

Scale economies in Nascar 

The days of the "one-car team" in Nascar - i.e. an owner & driver operating out of their garage - are over. And the two-car team may soon be a thing of the past.

The old days:
"For a while there weren't people who could make a two-car team work," [Owner Ray] Evernham said. "Junior Johnson tried it and then when Rick Hendrick went to two and three, everybody told him he was crazy."
The present and future:
"Right now you've got to look at your competition," Evernham said at Daytona International Speedway on the eve of today's Pepsi 400. "Even though there are eight owners (who own the majority of cars), there's (five owners) who have won races. It's really hard to say where it's going to stop. ...If we don't get a handle on it, it could be 10 (cars per team) next year, who knows?

Where does that leave the eight one-car teams, not to mention the four two-car teams? In fact, do one-car teams still have a chance?

"Sure they've got a chance," said Evernham. "But they don't have as much chance as a guy that's got five. And the handwriting's on the wall. The one-car teams are kinda going by the wayside and soon it will be the two-car teams because if you look at it, the majority of them are having three (teams).
What conditions create scale economies from running a multi-car team? My guess: increased financial incentives to win, coupled with the gains from pooling information obtained by campaigning multiple cars. Do a little R&D with a couple of cars, find what works, then give that formula to your best mechanic and driver. Just a hunch, though.

Update: John Palmer emails: "Not to mention strategic driving..." He's right, of course; like it or not, "helping" other drivers has long been part and parcel of motor racing.

Deals for help were once (and can still be) made on the spot, taking advantage of momentary circumstances. But "teams" enforce contracts better, which affects pre-race planning and strategy. How much of a factor is this in the move towards multi-car teams? I'm not sure, but ponder this, from one of Danica Patrick's teammates in the KC race on Sunday (they start 1-2-3, with Patrick in pole position):
The three Rahal Letterman Racing teammates say they will be patient with one another throughout today’s race.

"We have to take care of each other in the race," said Meira, the 2004 race runner-up. "Buddy and I did that last year, and we’ll have to do it again. We know we have good cars, and let’s make a train at the front and go for it."

Case studies for Kelo 

Sports stadia provide a visible example where promises of economic development are used to drain tax revenue from the public. This unseemly practice received a boost from the Supreme Court's decision in Kelo, which equated "economic development" with "public use" in eminent domain cases.

The stadium game shows that much mischief can be carried under the banner of economic development. But stadiums have company as case studies for Kelo. Like stadia, convention centers have been shamelessly promoted as engines of economic development, excessively so. Here's Steven Malanga in the City Journal:
Dozens of new centers have opened over the last decade, creating a nationwide glut in convention space. ... Some 40 more projects now in the pipeline will only worsen the convention-center glut, a recent Brookings Institution study concluded.
An investment glut, of course, gives rise to failed projects, and city convention centers are no exception. For example, Malanga reports that at Boston's new convention center, "bookings and attendance are only one-sixth of what the city projected. Taxpayers now find themselves on the hook not only for the center'’s construction cost but also for its operating deficit." (Naturally, the center is subsidized, and was built using the power of eminent domain.)

Boston is not an isolated case. The problem is systematic, and as with stadia, so is the use of pie-in-the-sky economic projections. As in our post a few days ago, Malanga criticizes the credulous Justice Stevens for taking these glossies at face value:
Writing for the majority in Kelo, Justice John Paul Stevens seemed suitably impressed, pointing out that the city of New London, Connecticut, whose use of eminent domain was at the heart of the case, had carefully studied the proposed public development project and believed it could offer a big economic payoff.

But the track record of government-sponsored economic studies supporting the construction of stadiums and convention centers is dismal. Urban policy expert Heywood Sanders of the University of Texas at San Antonio analyzed more than 30 studies supporting convention center construction and found them "consistently flawed and misleading." They offer "no real basis for public investment and serve to bias public decision making and choice," Sanders observed.
Let's reflect for a moment on the apparently mothballed plans for a stadium on Manhattan's west side. Wait, that was to be a stadium and a convention center combined! The boondoggle to top all boondoggles! The scholar in me wishes the thing had gone ahead just so someone could document the waste it was sure to generate.** Malanga made an excellent case for that expectation in "How Not to Develop the Far West Side."

Professor Sanders' work appears to inform Malanga's writing and is thus worthy of attention. "Flawed Forecasts" is a good candidate for further reading, as is his Brookings Institution paper on the convention center glut. Next time I have library access, I'll check out "Convention Myths and Markets: A Critical Review of Convention Center Feasibility Studies," Economic Development Quarterly, August 2002, pp. 195 to 210.

Memo to Supreme Court Clerks: Put these on Justice Stevens' reading list.

**Malanga reports in his Kelo piece that the California legislature is setting up a Frankensteinian sports authority, armed with the power of eminent domain. Perhaps they'll come up with an even better boondoggle.

Friday, July 01, 2005

Media Matters 

Many players fly under the media radar, or, at least, only make fleeting appearances despite tremendous achievements. Roy Oswalt is a prime example. A pre-season piece from the Cincinnati Post discusses his relative obscurity and achievement (even finding a feature-length piece on Oswalt was a challenge):

Now 27 and entering his fourth full season in the majors, Oswalt has quietly emerged as one of the best pitchers in the majors with none of the fanfare that accompanied better-known peers ... He's gone 63-27 with a 3.11 ERA since moving up to the majors in May 2001, giving him the second-best winning percentage (.700) in the National League and fourth overall among active pitchers over the same time. That also registers as the best in club history, which is even more impressive considering All-Stars such as Nolan Ryan, Joe Niekro, and J.R. Richard once pitched in Houston.

His 2005 ERA is only 2.54 for a current career ERA right at 3.00. His winning percentage, ERA, and strikeout-to-walk ratio place him eye-to-eye with the best pitchers of the last generation. When one remembers that runs per game have been about half a run higher since the mid 1990s, his numbers appear even stronger. He has finished 3rd, 4th, and 5th in NL Cy Young Voting but hardly gets mentioned outside of games in which he pitches. Probably a number of factors contribute to his obscurity. One is the East Coast or mega-market bias. Another is pitching in the shadow of others such as Wade Miller early in his career and Roger Clemens the last two seasons.

There are many more examples like Oswalt. This past weekend was a prime example. The media has turned Michelle Wie into a household name even though 18 year old pro Paula Creamer and 17 year old Morgan Pressel have accomplished more to date in terms of junior level wins and making a splash on the LPGA circuit.

My broader point here is that media coverage has effects. For a long time, economists treated the media as little more than a wire through which information flowed from events to consumers. Assuming that TV producers or newspaper editors want to maximize profits does not imply a "neutrality" of coverage or effect. Dan Sutter at Oklahoma has devoted considerable attention to media effects in politics, but this kind of serious attention to media coverage and effect is still not widely accepted among economists. In fact, at a professional meeting, one economist's prior beliefs about the neutrality of coverage ran so deep as to even question why someone would investigate the nature and effects of media coverage.