Tuesday, January 31, 2006

Med School or the NFL?
An Exercise in Opportunity Costs 

Jean-Philippe Darche was in medical school when his agent called him to let him know he'd been signed as a long snapper by the Toronto Argonauts. He pretty much weighed his opportunities and decided to take a year or two off from medskool to play some football.

As luck would have it, during his first game as an Argo, a teammate fell on his leg and broke it. So Darche, while recovering, was considering his return to medskool.

During that fall, his agent called again to say the Seahawks wanted to give him a tryout.
He figured he was in over his head and his friends agreed. Their advice was: when he got to Seattle and tried out for the Seahawks, he should take as many Seahawks T-shirts and sweat pants as he could stuff into his gym bag. For souvenirs. Just to say he'd actually been there.

No one wanted to be a pessimist, but there was no denying the obvious. Jean-Philippe Darche was Canadian-born and trained in three-down football. He was hardly big (six foot, 246 pounds) and hardly distinguishable from the half-dozen other prospects brought to Seattle's National Football League training facility that day.

Worse yet, Darche was coming off a broken leg, which meant he had to inform his evaluators he couldn't run. That was okay, they assured him. Just bend over that football and snap it.

So he did, and he got a contract. Six years later, Darche is hoping to collect another souvenir, one he can proudly show to his friends back home in Montreal — a Super Bowl ring.
Opportunity costs? Think of them as an investment, too.

Sunday, January 29, 2006

The Economic Impact of Super Bowls 

Mark Yost has written a piece for the Wall Street Journal ($$$ req'd) on the economic impact of Super Bowls and the possibility for Detroit to see a positive net income flow from next Sunday's game. The piece contains descriptions of research by and quotes from a veritable Who's Who of sports economists, including our own King Banaian (every other letter's an A). Reading it gives a good summary of the consensus of the academic profession:
"The NFL says $300 million, but I'd say it's closer to $50 million," says Allen Sanderson, a University of Chicago economist.

... Tell that (Super Bowls generate "tremendous value" to host cities - PM) to Phil Porter, a University of South Florida economist who has looked at the economic impact of six Super Bowls. He found that Miami-area hotel rates and occupancy levels increased only 4.4% for Super Bowl XXIX compared with the same period in the prior and following years. Similarly, he found that Super Bowl XXXIII, also in Miami, had no more than a $37 million impact on the South Florida economy. Economists Robert Baade of Lake Forest College and Victor Matheson of Williams College pegged it at $21 million to $32 million, about one-tenth of the NFL's claims.

... But the key figure, Prof. Porter and others argue, is taxes collected, not taxable sales. With a 7% tax rate, the gross economic impact of Super Bowl XXXIX comes to about $3 million. Factor in that it costs about $15 million in infrastructure improvements, security, overtime for police, fire and EMS personnel, and the economists claim that hosting the Super Bowl actually cost Jacksonville about $12 million.

... "Most economic impact studies implicitly assume the hotel occupancy would have been zero without the event," says University of Texas economists Craig Depken and Dennis Wilson, who looked at the 2004 Super Bowl in Houston.

"The athletes, the chain hotels and restaurants receive money from the Super Bowl and take the money out of the area," notes King Banaian, economics chairman at St. Cloud State University in Minnesota. "This reduces the impact on the local economy."

"They swipe the credit card in Detroit, but that's about all Detroit will see of that money," says Prof. Porter. Furthermore, he argues that higher hotel rates and occupancy have more of an impact on hotel investors in Riyadh than on taxpayers in Detroit.

... Even if a Detroit Super Bowl does draw more new money, the economic impact is still likely to be minimal, says Prof. Sanderson of the University of Chicago. "With league-wide revenue sharing and other external commitments, most of the game-related money will leave Detroit faster than the corporate jets on Super Bowl night. The one thing that remains will be the costs."

On a micro scale, my guess is that relative to Super Bowls in winter vacation destinations, there will be more activity on game day at the airports around Detroit next Sunday.

HT to Fraters Libertas.

Super Bowl Ticket Prices 

Super Bowl week is upon us once again. I'd like to kick off the week here at The Sports Economist with a few observations about Super Bowl ticket prices. Alan Kreuger wrote a nice piece on the topic a few years ago that lays out a number of interesting economic arguments about the price that the NFL charges for Super Bowl tickets. The NFL Commissioner's Office and a group of team owners set the prices for Super Bowl tickets. I am not sure if all tickets to the game have the same face value, but I suspect not, since I saw two different Super Bowl XXXIX stubs on sale on eBay for two different prices ($400 and $500). I treated the price of Super Bowl XXXIX tickets as $500 in the graph below. As Kreuger points out, the prices are set well below market value, based on scalper's prices.

I dug around eBay and the NFL Super Bowl web site to find the face values of Super Bowl tickets since Super Bowl I, and then deflated these prices to express them in 2005 dollars.


Super Bowl I tickets had a face value of $10, quite a bargain at $58.47 in today's prices. Until the mid-1980s, real Super Bowl ticket prices were below $100. After about 1985, someone must have realized that there were rents to be captured even while maintaining the appearance of "fairness" in pricing the tickets. Super Bowl ticket prices have been steadily climbing in real terms since then.

Super Bowl XL tickets have a face value of $600. A glance over on eBay shows that tickets on the secondary market are currently going for around $2,000-$3,000 each. Ford Field's listed capacity is 65,000, so if the NFL had priced the tickets at $2,500 each, they would have earned an additional $123,500,000 in revenues on ticket sales. Of course, as Kreuger points out, there are any number of economic theories that explain why the NFL would price Super Bowl tickets below market value, but that's still a chunk of change left on the table.

Friday, January 27, 2006

College Coach Rents 

Andrew Zimbalist has a column in the most recent (1/16/2006) Sports Business Journal on the salaries of college coaches, especially those in football and men’s basketball:

One question I always get: Why are the top Division 1-A football coaches paid $1 million to $2 million (and sometimes more) when the top-paid college presidents are paid $400,000 to $800,000?

The standard rationale in the trade is supply and demand. That answer begs the question.

Think of it this way. How much do you think MLB managers would be paid if every major league team was exempt from taxes, was supported by million-dollar operating subsidies from both a university and a state budget and the players’ salaries were constrained by law to be no higher than $40,000 annually (roughly the value of a full grant-in-aid at a top school” And, further; if the team president were told that the more he pays his manager, the more he will get paid.

This is in effect, what happens to college athletic directors with their football and basketball coaches.

The answer lies in the fact that each team would have gads of money that they could not use to compete over players. Instead, they would use it to compete over managers.

Basically, Zimbalist argues, a good portion of the high salaries enjoyed by college coaches is economic rent – payment to a resource over and above what is necessary to have it employed at all.

Salaries to players and coaches are just part of a larger pot of cash: the revenues generated by the “sale” of athletic contests. A related problem that must be solved is the division of the pot: who gets how much? In an ideal world, we’d be able to perfectly identify what each dollar of revenue was spent on.

Suppose that a football team (with one coach) generated $3,000,000 in revenues and that $2,000,000 was spent to watch the home team players play, $500,000 was spent to watch the coach strategize, and $500,000 was spent to experience the stadium. In an ideal world, each resource is paid what it contributes to revenues: the players get $2,000,000, the coach gets $500,000, and the owner of the stadium, presumably the school, gets $500,000.

But because the production of goods is an extremely complex and intricate web of coordination activities, we can’t begin to approach perfect identification of what each resource contributes to revenue.

But then comes complicating factors: income restrictions, for instance. In college athletics, the primary “resources,” the athletes on the field, have huge restrictions placed upon what they can receive in exchange for providing their athletic talent – restrictions placed in the name of amateurism. These restrictions do nothing to the size of the pot, which is determined by fan willingness to pay, but instead limit how the pot can be divided.

In prescription, Zimbalist suggests the following:

I don’t begrudge people seeking whatever the market will pay them. But given that (a) the market for college coaches is rigged by tax exemptions, subsidies, etc.; (b) paying the head coach more than the school president sends the wrong message about a university’s priorities; (c) the star athletes on the basketball and football teams are not allowed to receive a cash salary; and (d) resource allocation would not be affected by a salary limit rule for coaches, it would make eminent sense for the NCAA to pass such a rule limiting head coaches’ compensation.

While this prescription would solve the problem of rents enjoyed by coaches and would send a more appropriate signal to the public regarding the mission of a college, it still has some problems. First, the size of the pot will remain unchanged. People will still go to and spend money at games and the pot must still be divided. If payments to one resource are restricted, then there is more in the pot available for some other resource.

If we restrict payments to players, more of the pot will be available for coaches and athletic directors as economic rent. If we restrict payments to coaches as well, then a greater amount is made available to athletic directors as economic rent. It’s quite possible, then, that instead of worrying about excessive pay of coaches (relative to college presidents), we would then worry about excessive pay of athletic directors.

If, as a response, we restrict payments to athletic directors, then a greater share of the pot becomes available for college presidents. While this arrangement sends a more appropriate signal to the public, the extra share – still generated by players – is still rent for whoever received it. It’s no prettier for athletic directors or college presidents to obtain rent generated by the skills of underpaid athletes than it is for college coaches.

Moreover, since the revenue is generated by the athletes (and coaches), it is also likely that the some portion that would go to players would, instead, go towards providing some non-salary form of compensation – facilities, for example. Therefore, it quite possibly could end up in the hands of construction contractors and their workers: the “owners” of resources that expand and improve athletic facilities and, thereby, help recruit athletes to a school.

So while the prescription will help send a more appropriate signal to the public, it won’t solve the underlying problem: the “resources” fans pay to see cannot be paid a sum commensurate with what they generate.

Thursday, January 26, 2006

Crowds and fines 

Crowd control is a serious policy problem for people in charge of sporting events. Sporting events combine the potential for raw emotion, dramatic shifts in outcome, and mass mob-like behavior - a potentially volatile mix that occasionally combusts. In the wake of the Detroit bust-up last year, this blog was one of the few places which charged arena management with a large share of responsibility for the incident.

Although the print media did not reflect this view widely at the time, it appears to have sunk in. Reaction to the player-fan incident with Antonio Davis is an example. Blame was placed not on Davis (in part due to an appreciation of his character), but rather on league policy.

In the past few days, one policy response to crowd trouble has surfaced in the news. After Tennessee toppled previously unbeaten Florida in a thrilling basketball game last Saturday, the students rushed the court in obligatory fashion. The SEC's response: we have a policy, and it calls for a fine when fans storm the court after the game. Tennessee was thus hit with a $5,000 fine, a threatened increase to $25,000 for the next offense, and $50,000 thereafter. The message to schools: do something, or your upset wins are going to be more expensive in the future.

Last night, South Carolina beat the 4th-ranked Gators in Columbia, but the fans stayed in the stands. The Gamecocks were at risk for the $25,000, having been hit with the smaller fine when students stormed the court after a victory against Kentucky last year. The SEC's policy may be working.

By their nature, crowds may seem impossible to control. But the SEC's recent experience suggests that a plan plus a price offers a way to reduce unruly, and potentially dangerous behavior. The recent games with Florida are just an anecdote however, and I'd be interested in seeing a statistical test of the policy's effectiveness.

Update: Greg at the Sports Law Blog adds to his series of sharp commentaries on crowd control, and links to some fact-checking by ESPN's Andy Katz. Katz notes that the Big Ten is the only conference with a policy similar to the SEC. Their policy begins with a private warning, followed by public admonishment, then a monetary fine of $10,000 for the third offense. The private warning part seems dainty and ineffective. The essence of the problem is to send signals to the public on how they are expected to behave, and the first stage in the Big Ten's policy ducks the issue. But at least they have a policy.

Wednesday, January 25, 2006

Grandstand seating 

The problem of building a facility like the Indianapolis Motor Speedway, which sits idle for all but 2 weeks of the year, has always intrigued me. With a capacity of 250,000, Indy is the world's largest sports stadium. But would it be rebuilt on the same scale today if owner Tony George had to start from scratch? This article suggests that the answer is no.

The article states that the cost of building Indy today would approach $700m. The average ticket at Indianapolis goes for $100. While that's not exactly peanuts, it's also a small fraction of the racetrack's fixed cost per seat ($2800). Given what people are paying for 60 minutes of NFL football in nearby Detroit, one wonders if Mr. George's recipe for the future involves less congestion around Memorial Day, and a ticket that's much harder to come by.

The irony here is that both idle capacity and managed scarcity are required to make the sporting show first, a mass spectacle, and second, a money-spinner. Of course, the late and great Sherwin Rosen had that figured out long ago.

Tuesday, January 24, 2006

Necessary Condition for Success at Football 

"Coyote blog" posts:

You hear a lot of debate about what wins NFL Championships - is it offense, defense, the running game, the quarterback?

Well, if we look beyond what is probably the most important determination of success -- don't have any injuries -- I think the last few games have really proven the importance of having a great offensive and defensive line. The Indianapolis Colts, the team that supposedly had everything, lost because the Steelers penetrated their O-line at will. Both the winning teams yesterday won in large part because their lines pushed the other team's around the field.

Having great offensive and defensive lines is an important ingredient to championship football at any level (Peyton Manning said as much after the Steel Curtain part deux spent much of the afternoon a week ago setting up shop in the Colts' backfield). But looking at the NFL draft since 1994, it's not clear that team draft choices seem to bear that out. I got draft data from nfl.com and did a little manipulating (grouping all linebackers together (inside, outside, and middle) and calling them "linebackers" and lumping all cornerbacks and safeties together and called them "defensive backs"). Here's the entire period counted by position:


Just looking at the offensive side of the ball (and ignoring the free agent market), there were more tackles and guards drafted from 1994-2004, but since there are two guards, two tackles, and one QB on the field for offensive plays, there were only 104 tackles, 78 guards, and 87 centers for each position and 130 QB's. Does this mean that teams find QB's, on average, more valuable to draft? If so and if we take teams to be profit maximizers, then where does the additional value of QB's come in: from the output side and/or fan willingness-to-pay side?

Sunday, January 22, 2006

Myles Brand on College Athletics 

NCAA President Myles Brand has contributed a post to an NCAA sponsored blog, Double-A Zone. In his first post, Brand addresses the issue of increasing costs at NCAA Division I institutions. According to Brand

...there is a financial problem with the funding for college sports, but it is not what the critics allege – too much money. The problem is that there is not enough money!
Brand contends that operating costs at Division I-A schools are growing faster than revenues because of the eternal quest for on-field success. Economists call this the "arms race" effect in college athletic costs. Brand argues that the increased spending -- primarily on lavish athletic facilities and higher salaries for coaches -- can be justified by the non-pecuniary benefits generated by the athletic department. In particular, intercollegiate athletics imparts important "life skills" on participants that cannot be taught in the classroom and also increases the identification of the student body with the institution, leading to improved student retention and graduation rates.

I find Brand's argument unconvincing. The link between the primary cost driver -- the quest for on-field success -- and the non-pecuniary benefits is unclear. Is it only successful athletic programs that impart important "life skills" on student-athletes? Is it only winning athletic teams that increase student's identification with the institution? I don't know. But absent such links, Brand's argument boils down to "someone stop me before I hand out another ten year contract extension" and the mentors in the athletic department should be handing out those important "life skills" on the same field where the co-eds play ultimate frisbee, not in a 80 million dollar state-of-the-art practice facility.

Thursday, January 19, 2006

Detroit Gets Icy Reception 

With the NFL's first cold-weather Super Bowl in 14 years, and only the third one in the event's 40-year run, just three weeks away, many of the firms that arrange Super Bowl hospitality trips report that clients are not as eager to go this year.

The tepid response is largely due to the expected cold weather, with the average high termperature in February in Detroit at 36 degrees. That combined with the city's lackluster reputation, have led some clients to depart for other locales such as Vegas and the Caribbean for viewing parties, or simply taking a pass and booking early for the 2007 game in south Florida.
Well, so much for building a stadium to get a Super Bowl to promote the city!

That's from the latest issue of the Sports Business Journal. The article starts out by mentioning that Dan Marino and John Elway will be raising money for their charities during Super Bowl week - in Las Vegas. Ouch!

Technology allows people to watch games live all over the world and they can do so from more pleasant climes than the Motor City (you are now free to move about the country). Perhaps other politicians and citizens of other northern cities who have visions of Super Bowls dancing in their heads - if only they could get public funds for a new stadium - should pay heed.

Wednesday, January 18, 2006

BYU Goes Pro (Sort of) 

ESPN Soccernet's Frank Dell'Appa posted a thoughtful consideration of whether college soccer helps or hinders the development of professionally-capable U.S. soccer players. His assessment, or the current consensus, seems to be that one or two years is ok but any longer comes at a price of too many lost games and training sessions.

He finishes his article with reference to BYU soccer:

It would be interesting if college soccer opened the door to the professional world a little wider. Brigham Young University disdained NCAA soccer, entering its club team in the PDL. In time, BYU could compete at the fully professional level, or at least against pro teams in cup play. Such a progression is not imminent, but if BYU started recruiting, say, high-level Brazilians (as the school did in building its basketball program in the 1970s), then went deep into the U.S. Open Cup tournament, there might be a temptation to accelerate its professional ambitions.

This certainly will not happen anytime soon. But should other college soccer programs break away from NCAA restrictions (yes, I know they might risk losing funding and even jeopardizing the institution's tax-free status), they could set up international rivalries with UNAM Pumas, UANL Tigres, Universidad Catolica, Universidad de Chile. D.C. United was eliminated by Chile's U. Catolica in the Copa Sudamericana last year. Maybe the University of Maryland could take up the challenge.

Those two little paragraphs came as a big surprise to me. For the unaware (like myself) PDL refers to the Premier Development League (United Soccer Leagues), a 50+ team professional minor league.

There are several interesting angles to this development. One is that a Division I NCAA program has opted out in a specific sport for the purpose of competing against professional or or semi-pro teams. Such a development brings to mind all kinds of institutional variations that might arise -- whether they will or not is not so much the questions here, but the possibility is something in itself.

Second, it is surprising that BYU is doing this without bringing down the NCAA's wrath. NCAA Rule 3.2.4.5 stipulates that NCAA bylaws apply to all "varsity" sports sponsored by the institution and in which the NCAA conducts championships, it is designated as a "varsity sport" by the institution, and the sport is administered by the athletic department. I can't find anything else in the NCAA manual that would suggest such an arrangement would fly. Maybe readers of the blog have useful information on this. In looking over the BYU athletic website, men's soccer does not appear, so maybe BYU is pulling an organizational end-run to get around the bylaws and treating its soccer team much like a rugby club on campus.

This aspect also brings up the murky world of the NCAA and antitrust issues. Outside the eligibility rules regarding student athletes, the NCAA has not fared very well on monopoly or monopsony cases as in the 1984 TV case or the assistant basketball coaches case. It's hard to predict what federal courts might decide on this issue with the issue not directly involving the eligibility of the soccer players at BYU, but institutional practices instead.

Monday, January 16, 2006

It was no accident 

Crossposted at SCSU Scholars:

Was it an accident that Jackie Robinson was picked by the Dodgers to break the color barrier in professional baseball? Reflecting on the new movie Glory Road, about the integration of the basketball team at Texas Western by Don Haskins who won a championship and broke the color line in collegiate basketball in the South, HedgeFundGuy makes a point that discrimination creates an opportunity for those who will not:
...when discrimination is at work, there's an opportunity. If the truth diverges from conventional wisdom, it's better to take advantage than lament. The West likes a winner more than anything else. As unfair as life is, it is still ultimately meritocratic more than ever before, and much more than many believe.

Texas Western at the time Haskins took over was not a collegiate power, and not even a very good team. It was his first job after three good high school programs, and as he says in this interview in November he was just trying to win the game, not to break down barriers. The responses to these three questions are fascinating:
We all look now and see how important that game was. Did you realize it at the time?
We hadn't played in the Deep South, that much ... well, none. We had played teams in the Midwest and in the Southwest that had a black player or two, although not all five. It wasn't that big a deal. Of course, I'm looking at Duke and Kentucky with Moe Iba, my assistant, getting ready to scout the game [at the Final Four]. I had Moe, who was a lot better scout than me, take Kentucky, and I took Duke. We both made comments about it looked kind of funny seeing two teams that were totally white.
Did you have any second thoughts about starting five black players for the title game?
Not really. No. I was trying to win.
Did you get any reaction after the title game?
That's when I first realized that this wasn't just a game. I was young, and I wasn't thinking. The hate mail started coming in by the baskets. One person wasn't enough to open them. Finally, I got really, really frustrated. I doubt that there's anybody that has ever won a national championship was more down than I was two weeks after it was over. ... A lady in our office said we must have gotten 40,000 letters. Of course, they were all from the South. Normally, crudely written [and] all starting with "N-lover." The ones that bothered me the most were from several black leaders that we had in the country in 1966. They were nicely written, but they said I was an exploiter.

So was Branch Rickey an exploiter? In the way I think the letters to Haskins from black leaders put it, yes. They were judging Haskins' motives -- he was just trying to win a game. That it opened up a new frontier for collegiate athletes was immaterial. Branch Rickey put Jackie Robinson on the Dodgers because the Dodgers were a bad team and Rickey saw that Robinson could help his team win. As Gwartney and Haworth showed more than thirty years ago, those baseball teams that integrated first had a competitive advantage in the 1950s over those that did not (the last was my beloved Red Sox, contributing to their 86 years in the wilderness).

The point being this: If you have a taste to discriminate, markets make you pay for your taste. We want people to do not discriminate because they are enlightened, but putting a price on bad behavior doesn't hurt.

Saturday, January 14, 2006

What is the Marginal Revenue Product of Prayer? 

It may well be that church attendance and membership are declining throughout North America, but chapel services in professional sports (baseball, anyway) seem to be gaining increasing acceptance. From the WashPost,
In 300 ballparks across the country, volunteer chapel leaders hold English and Spanish services for major and minor league teams. ...

Once derided as a sign of weakness by managers and trainers, Christian prayers are now accepted and even encouraged before baseball games.
If you were a general manager who was indifferent about religion, what would be your attitude toward clubhouse chapel services? Would you encourage them?

On the negative side, not permitting clubhouse chapel services might make some players perform less well . In addition, denying them the opportunity to worship in an unused section of stadium facilities (in the bleachers or elsewhere) might be bad for public relations and hence ticket sales.

On the positive side, permitting players to hold chapel services on location might help them perform better; it might also be good for the club image.

I have never seen a systematic study of these hypotheses. My guess is that most general managers, regardless of their own attitudes toward religion, see clubhouse chapel services as having no effect on player productivity. I would also expect they see encouraging the services as not hurting the team's revenue, whereas banning them might.

  • But why are sports different from so many other businesses?
  • Do Wal-Mart or Target provide chapel space for their employees? Do manufacturers? Not that I've heard of, though perhaps some do.
  • So why does there appear to be a postive net revenue for prayer/chapel in sports but not other businesses?
  • Does god have more of an interest in sports than in manufacturing or retailing?
  • Are athletes more likely to think that prayer/chapel helps their productivity?
  • And why do we hear about religion in baseball but not in basketball, hockey, or football?
What's the difference?

Friday, January 13, 2006

More on replay review 

Kevin Donahue at Fanblogs commented on the NCAA's plan to impose a uniform replay review system in College Football next season. That departures from uniform rules are costly was made clear during the bowl games over the holidays. Asking officials to do a different job in the bowl game than they're accustomed to produces poor results. Another obvious point is that the games are too long. The ratio of downtime to action is unacceptably high in college football.

With that latter thought in mind, consider Kevin's wish that the NCAA adopt the "coaches' challenge system" used in the NFL. One conference, the Mountain West, allows coaches to challenge and thereby obtain a review of calls on the field. This has a ring of fairness to it, but the data persuade me that it's not the best option. The Mountain West led all conferences in reviewed calls - at 1.76 reviews per game, the game is stopped more often than in the other conferences, who average 1.04 per game. Most reviews in the MWC are futile as well; the 20% reversal rate tops only Conference USA's 12% (other conferences reverse about one call in three).

Booth reviews are a good thing when there is substantial doubt about the correctness of an official's call. But as we see in the NFL every week, coaches make liberal use of their challenges, particularly in last gasp scenarios. These slow down the game when every TV viewer in the land can see that the challenge is hopeless. Officials are imperfect, but the motives of coaches do not uniformly align with the interests of the paying public either.

The key issue in choosing between systems is the decision to review. I think it is clear that coaches choose "too many," and it is arguable that the booth officials choose "too few." So, as always, there is a tradeoff. On balance, the booth officials did a decent job this year, with a few high profile exceptions. Unless evidence accumulates that these guys are napping on the job or otherwise failing to oversee calls properly, the official-initiated review system seems superior to the coaches challenge, and lest we forget, is a huge improvement over what we had before.

Wednesday, January 11, 2006

A New Twist in Public Involvement in Sports 

Usually when I think of public involvement in the professional sports industry, I think of efforts to lure a team or efforts to build/renovate a stadium. But Don Boudreaux over at Cafe Hayek tips us to a new level of public involvement in the operations of the New Orleans Saints:

The New Orleans City Council on Monday unanimously passed a resolution calling on the Saints to hire Doug Williams as the team's new coach.

The resolution urges both Saints owner Tom Benson and general manager Mickey Loomis to give "strong consideration to naming Louisiana's own Doug Williams as the Saints head coach or as a high level administrator within the Saints organization."

According to the article, Williams has plenty of qualifications for the job - from the point of view of the New Orleans politicians:

The resolution said that Williams, who grew up in Zachary, La., had coached both high school and college levels, including at Grambling State, and had a stellar career in the NFL, which more than qualified him for the Saints job.

Mr. Williams was a fine quarterback in the NFL and he had success as the head coach at Grambling, leading the program to three consecutive conference championships. My question is this: if the Saints really thought that Mr. Williams was the best person for the job, why haven't they contacted him? And if Mr. Williams was really interested in being a head coach, why hasn't he applied for the multitude of head coaching jobs in the NFL?

Tuesday, January 10, 2006

Boomer on QB Value 

I happen to catch the tail end of an interview with Boomer Esiason on the NFL Network last night. In his remarks about the playoff outlook the rest of the way, he used QB quality as a key indicator. He said, "This is a quarterback's league." Obviously, he knows that their value is little without sufficient compliments such as a decent O-line but that as team become very competitive, QBs can be the difference makers.

Specific and sophisticated tests could be envisioned to examine the value of QBs, although there is difficulty in separating out individual productivity in a sport with as many interrelationships between players as football. The relative rise in importance of offense relative to defense since the 1970s would lend some support the idea of the rising value of QBs. [See Defense & Championships]. Within the offensive numbers, the increase in passing yardage relative to running since the 1970s provides further support. Over this time frame, several rule changes as well as offensive strategy and personnel usage have helped elevate the passing game to prominence and sustain it in view of defensive adjustments. More to Boomer's playoff outlook, all of the Super Bowl winners had QBs who would be rated as very good to great based either on QB ratings or more subjective evaluations with the exception of Trent Dilfer with the Ravens in 2001. This year, all of the team's remaining with the exception of Chicago, have relatively highly rated QBs (although one could question the value of such ratings after watching Mark Brunnell last Sunday -- still, he's down near the middle of the pack).

In contrast, a genuinely silly article by Yahoo's Charles Robinson questioned the idea that the loss of Carson Palmer influenced the Bengals-Steelers game much. Oh, I suspect that losing the leauge's second-rated passer had some substantial effect -- but that's just a guess.

The question of QB value has big draft day implications, but I'll save that for ldown the road as the draft approaches and Mel Kuiper's hair expands.

Monday, January 09, 2006

An Options Market for Sports Tickets 

Have you ever wanted tickets to a big game your favorite team was playing in, but couldn't afford scalper's prices? A new web-based service, The Ticket Reserve, has a solution to your problem. This company has created an options market for tickets to championship sporting events. After opening an account, members can buy options to purchase tickets to a number of specific championship sporting events - NFL postseason games, BCS bowl games, NCAA Men's basketball Regional Finals and Final Four, etc. - at face value for a given team. For example, I could currently purchase the option to a ticket to the Final Four to see my alma mater, West Virginia University, for $27. If the Mountaineers make the final four, I would pay the face value of the ticket ($140, according to the web site), plus my $27 option. If the Mountaineers didn't make the Final Four, my option would be worthless and I would be out $27.

The web site appears to be a fully functioning options market. Owners of options for tickets can sell them at any point in the future for any price that the market will bear, with the possibility for profits or losses. If West Virginia's basketball team plays poorly in the upcoming months, the value of my option would fall; if they play very well, the value of the option would rise. Well developed options markets already exist for many commodities, so it's not surprising that this one has appeared.

The economics of ticket scalping is interesting. Most models of scalping assume the existence of two types of consumers: "die hard fans" who buy tickets long in advance, rearrange their schedules, and sometimes travel long distances to see the event, and "busy professionals" (both terms appear in the literature) who cannot commit in advance to attending events, but only find out if they want to go a short amount of time before the event takes place. Event promoters cannot easily distinguish "die hard fans" from scalpers who buy tickets early and sell them to "busy professionals" at a higher price later, and scalpers can always undercut the promoters if they try and hold back some tickets to sell to "busy professionals" close to the time of the event.
(A good discussion of the economics of ticket scalping can be found in "Some Economics of Ticket Resale" by Pascal Courty in The Journal of Economic Perspectives (2003), vol. 17, no. 2, pp. 85-97.)

The Ticket Reserve is clearly aimed at "die hard fans." One problem faced by "die hard fans" is that, no matter how far ahead they might plan, tickets to some sporting events - the 2006 Rose Bowl, for example - have such high demand that it is very difficult to purchase any tickets at all in advance. And transaction costs and information assymetries might also keep "die hard fans" from purchasing tickets to events that will take place many months in the future. Based on information on the web site, The Ticket Reserve has access to some number of tickets to these sporting events. Although they sell the tickets at face value (presumably to avoid anti-scalping laws), they make money by selling many different options to the same tickets - potentially hundreds of options to each Final Four ticket depending on how many fans of different teams want an option to purchase them.

Hat tip to Tyler Cowen at Marginal Revolution for the link.

Taxes and talent 

The tax rate on income for soccer players varies substanitally in Europe. This should obviously have an important impact on the distribution of talent across countries. Sebastien Gay pointed this out to me when we met for a job interview in Boston, and lo, here is a story in today's Guardian discussing it. Since Britain's tax rate is high, the Premier League is at a disadvantage relative to France and Spain. The story begins with this:
English football clubs have missed out on a string of the world's best players, including Barcelona's Ronaldinho and Inter Milan's Luis Figo, because ministers refused to ease "draconian" tax rules, international tax specialists claimed yesterday.

Ronaldinho was destined for Manchester United and Figo was linked to Liverpool before Spanish and Italian clubs moved in with better offers.

Tax advisers at IFS said the continental clubs were able to offer improved deals because their governments allowed the wealthy to pay less tax. Also, more income can be held offshore, benefiting from cheaper tax rates in Jersey, Gibraltar or Liechtenstein. The firm said a player seeking net pay of £50,000 a week would need a £100,000-a-week gross salary in Britain compared with £66,000 in Spain.
Since players can now move freely across Europe, draconian taxes place their country's leagues at an obvious competitive disadvantage. This creates a political demand to reduce those taxes which did not exist when footballers were restricted to playing in their own countries.

This has a parallel in the "real" economy. The decline of barriers to the movement of labor and capital in Europe allows them to flow to counties with better institutions and tax systems. This puts serious competitive pressure on high tax countries in Europe to reduce tax rates and wasteful government expenditure, something that Dan Mitchell of Heritage has been pointing out for some time.

This offers hope for the future of old Europe, including Sebastien's home country of France. In the meantime, I'm looking forward to reading his working paper on taxes and talent in the post-Bosman football leagues of Europe.

Thursday, January 05, 2006

The Vince Young Show 

Two observations about last night's Rose Bowl.

1) Many articles around the country joined this one from SI.com in stating the obvious

Young Steals the Show
Texas' Versatile QB Outshines USC's Heisman Winners


That Reggie Bush won the Heisman was not a travesty -- he put up some big numbers. His margin of victory, however, points out just how political and media-influenced the Heisman voting is. If Young's Rose Bowl performance were an extreme outlier, it would mean little. It wasn't. He is the only player to run for more than 1000 yards while passing for more than 2500 (he went over 3000). He scored 36 touchdowns. His passing yardage was a bit below Matt Leinart's Heisman season in 2004, but Young's QB rating was higher. Moreover, the stats mattered in helping Young to lead his team to an undefeated regular season while acquiring a huge road victory from the ultimate #4 team in the country (Ohio State). Yet, the likes of Brad Banks, Josh Heupal, Tommie Frazier, Ki-Jana Carter, and a boat load of other second place finishers came closer to winning the trophy than Young.

Kudos to Skip for being on top of the overblown hype surrounding the Trojans in his Trojan Antidote. I like the Trojans but hate the talking heads to whom data or relevant comparisons are meaningless. I just hope Skip really took Texas and the 7.5 points!

2) When will someone in the NFL figure out how to really use guys like Vince Young. I discussed this a bit after Donovan McNabb's "One Carry-One Yard" in the Super Bowl. Yes, I know that Michael Vick, Steve Young, McNabb and others have enjoyed success. And, yes, I know that throwing the ball effectively is critical in the NFL. Nonetheless, Chan Gailey as coordinator with the Steelers in using Kordell Stewart (not just as "Slash" but as the main QB) is still the only coach that I have seen that really got it. Once Gailey moved on, Stewart stunk with the Steelers and elsewhere. Sometimes, the QBs themselves seem to be intent on becoming known as throwers and limit their running. In most cases, it seems to be coaches bound and determined to fit the square peg in a round whole. They player may have some success but still operates largely with half of a hand tied behind his back.

More on Athletic Success and Donations 

Bowl season is finally over. We know who was successful on the field -- my alma mater West Virginia University, for one -- but what kind of economic success will colleges and universities reap in the upcoming months as a result of the bowl season? As Skip recently pointed out, there is a perception that donations to a college or university respond to athletic success.

Over the past 20 years, sports economists have formally tested the hypothesis that athletic success leads to increases in donations to colleges and universities. I have a working paper, written with Micheal Mondello from Florida State University, that takes another look at this relationship. We analyze the determinants of restricted donations (those earmarked for a specific purpose) and unrestricted donations (those made to the general fund with no restrictions on use) at all 320 colleges and universities that played at least one season in NCAA Division I over a twenty year period.

We found that, at public universities, a bowl appearance this year was associated with an increase in restricted donations the following year by about 12% at the mean, and was not associated with any increase in unrestricted donations. An appearance in the NCAA men's basketball tournament was associated with an increase in restricted donations the following year of about 8.5% at the mean and no increase in unrestricted donations. National championships in either sport did not increase donations of any kind. Neither did appearances in the final top 20/25 polls in football or basketball.

At private universities, NCAA men's basketball tourney appearances were associated with about a 10% increase in restricted donations in the following year but bowl appearances had no effect on donations. A basketball national championship also led to an increase in restricted donations at private universities.

The donations variables have a lot of skew in them, as many colleges and universities get little or no donations in most years, and a few universities have enormous annual levels of giving. For schools with low annual restricted giving, the increase can be quite large. For example, the increase in restricted donations following a bowl appearance at a public university at the 25th percentile of the distribution was over 200%.

Universities appear to be able to parley athletic success into increased giving, but the additional donations do not go into the general fund. This finding is consistent with what has been found in the literature before by some studies. The results in my working paper are based on estimates from a panel data set with large n (=320) and t (=20) dimensions using a two-way fixed effects estimator. The empirical models control for variation in many observable and unobservable factors that might influence donations, and explain between 60% and 90% of the observed variation in donations across time and across schools.

Unfortunately, the data source (IPEDS) does not provide sufficient detail to determine where these restricted donations are targeted, but I speculate it's the athletic department. On average, about 22 cents of every dollar of restricted donations to public universities goes to the athletic department.

The results indicate that public universities who appeared in bowl games this bowl season, especially those with low levels of annual giving, can expect an increase in donations next year. However, those additional dollars of giving will likely have strings attached, and may end up padding the athletic department budget, not the economics department.

Wednesday, January 04, 2006

News from Los Alamos 

Those of you who believe that the US has excessive weaponry will be pleased to know that the folks at Los Alamos have been busy studying ... sports! Their finding? Soccer is more exciting than American football.

How on earth did they come to that conclusion? Here's how Paul Maidment describes it at Forbes.com:
The researchers, Eli Ben-Naim, Sidney Redner and Federico Vazquez, looked at the unpredictability of results in the five sports, with the working assumption that the more frequently upsets occurred, the more competitive and exciting the sport.

The matches analyzed date back to 1946 in the NBA's case and more than a century for soccer and baseball--a data set of more than 300,000 games. The pecking order that emerged: soccer, baseball, hockey, basketball, football.

The underdog won 45% of the time in soccer, but just 36% of the time in football. The numbers for baseball, hockey and basketball are 44%, 41.5% and 37% respectively.
Now, 45% seems awfully high. As I'm off to Boston, I'll just link their paper here, and rely on Brad and Rod, who have contributed mightily to this topic, to sniff out what's going on. It's only two pages boys, and no, they don't cite any of the economic literature on outcome uncertainty in sport.

Designer players 

Alan Barra has a notable article in today's WSJ ($) on the evolution of players in college football. He begins by comparing today's national title contenders, USC and Texas, with the NFL's 1985 Bears.
It's increasingly difficult to distinguish top-level college football from the professional game. Some comparisons between the 2005 Trojans and Longhorns and the 1985 Bears are eye-opening. The '85 Bears had perhaps the greatest defense in NFL history; according to the Sports Encyclopedia -- Pro Football, Chicago averaged 271 pounds a man across its defensive line. This year's Trojans outweigh the Bears on the defensive line by an average of four pounds a man. The Longhorns are even bigger, averaging out to 290 apiece.

The difference in the offensive lines is even more staggering. The mean for the '85 Bears' front offensive five was 267 pounds; their 2005 USC and Texas counterparts average 312 pounds a man. Excuse us -- did we say the 1985 Bears? The offensive lines of this year's first- and second-ranked college teams outweigh that of the defending NFL champion New England Patriots by nine pounds a man.
The comparison suggests that NFL-quality players (i.e. those recruited to top programs) have gotten much bigger, but why? The answer appears to be that players and teams have adapted over time to changes in the rules, rules which encourage specialization, speed, and strength.
ESPN has been broadcasting segments in which commentators compare the Trojans and Longhorns to great college champions of the past, but to many veteran sportswriters the comparisons are irrelevant. In an interview last year, longtime college-football writer Dan Jenkins said, "Comparing the best college teams of the past five or so years to legendary champions of the past is like comparing supersonic jet fighters to propeller-driven World War II planes. The game has really changed that quickly. Most of the players I see on top teams today look like they were manufactured in laboratories."

If so, the laboratories were designed by the NFL. Up until 1963, college football players were expected to play on both offense and defense, and the most important attribute for a football player was quickness and stamina, not sheer strength. As late as 1965, Bear Bryant's Alabama national championship team still averaged little more than 200 pounds a man. But as rules changed to allow unlimited substitution, specialization took precedence over versatility and, as players spent more and more time in the weight room, their size began to increase dramatically. This development was perfect for pro football, which no longer had to guess what a player's best position might be when he was drafted; by the time the player turned pro, he already had two or more years of experience at his particular position.
Interesting.

Tuesday, January 03, 2006

Contributions and athletic success 

The folks at the Longhorn Foundation are hard at work, hoping to capitalize on Texas' run towards the national title in football. Based on prior studies, the expectation of a windfall in contributions is not great. But in the article is this little nugget:
Much of foundation giving is based more on expectations for next year [rather] than satisfaction with this year's performance.
That's an interesting proposition, one that I've not seen tested in the literature.

Monday, January 02, 2006

5th and Goal. What to do? 

The infamous "Fifth Down game" of 1990 is forever in the annals of Missouri Tiger and Colorado Buffalo history.

A good Colorado team, ranked No. 12 in the country, was going into Missouri for just another Big 8 conference game against a relatively bad Missouri team. Little did everyone know that the controversy that would ensue would only grow as the season went on. Down 31-27 with 31 seconds to play, the Buffaloes had the ball first and goal on the Missouri three. Quarterback Charles Johnson spiked the ball to stop the clock. Second down: Running back Eric Bieniemy, who ran for 217 yards on the day, barreled down to the one. Colorado called time out with 18 seconds to go. On third down, Bieniemy was stuffed. The officials stopped the clock with eight seconds to go saying Missouri wasnt unpiling fast enough. Fourth down: Johnson spiked the ball again to stop the clock. Why? The down marker said third down as they failed to flip it after second down. Soooooo.Fifth down: With two seconds to play Johnson forced it in from the one, getting in by just the nose of the ball, if at all, for the winning touchdown. The officials didnt signal for a touchdown and the fans rushed the field even tearing down one of the goalposts. When an official signaled touchdown, a riot erupted on the field. After Missouri tried to change the outcome, they were informed that, under NCAA rules, it couldnt.
It's not the first time a team had gone for it on 5th down:

Cornell is undefeated and atop the national rankings. Dartmouth is 3-4 but leads 3-0 in the last minute when Referee Red Friesell loses track of downs and awards Cornell an erroneous extra play. The Big Red scores. The "Fifth Down" error is confirmed on film. The next day Cornell concedes its 7-3 victory, the only time a college game's result has been decided off the field. After the season, Blaik departs to coach at Army.
So, should CU officials have conceded the Mizzou game back in 1990?


Tiger fans remain bitter about the 5th Down loss, with good reason. That game was played on the also-infamous Omni Turf, a synthetic turf that actually became more playable when it was wet. When it was dry, like it was on October 6th, 1990, it was very slippery and fans "credited" the turf with numerous tackles when there was no-one within 5 yards of the man with the ball. Buff coach Bill McCartney (and a former Tiger football player - with Buff ex-coach Gary Barnett as one of his assistants) blamed the turf and the fact that they brought the wrong shoes. Tiger fans have never forgiven McCartney.

Draft Smackdown 

Alan Milstein, guest-blogging over at The Sports Law Blog, puts the smackdown on the NFL draft.

Oh those NFL schedule makers. How do they do it? The final week in the NFL pits Houston against San Francisco with so much at stake one can barely watch the game. The loser, of course, wins the Reggie Bush sweepstakes, a prize more valuable than any division crown. In this season of watching fans root for their team to lose, it’s time to challenge the bedrock assumption of the American professional sports monopolies: the necessity of a college draft with the worst teams getting the top picks.

The rationale has been the subject of so much propaganda no one challenges the concept: We do it for the fans; otherwise the same teams will get all the best players and win every year and the smaller market fans will have nothing to root for.

Bull.
Well, while it may not have been as exciting as a relegation match in soccer, at least there was some reason to watch the 'Niners and the Texans.

It's well-known that revenue imbalance (i.e. imbalance in fans' willingness to pay for sports) leads to competitive imbalance in sports (pro and college!) and in the absence of transactions costs, players tend to move to the teams that "value" them the most. In other words, whether a team's owner obtains value from profits, "consumption" of the team, or some combination of these two things, players tend to play where they have the highest marginal contribution.

The draft, as Alan points out, limits the number of teams that can negotiate with each player. It does not, however, determine where the highest marginal contribution is and it does not limit the number of teams that can try to get the player. So teams still negotiate to land players/draft positions - they don't negotiate much with the players, but with themselves.

In other draft news, Maurice Clarett is apparently wanted on armed robbery charges.

Pricing and Politics 

While we are on the subject of ticket pricing (see the comments to this Sports Economist post by Rod Fort), I thought I'd pass this little ditty along.
The practice of handing them (tickets to luxury boxes) over to lobbyists seeking influence has survived waves of Washington scandal and reform. When Wizards owner Abe Pollin built the MCI Center in the mid-1990s - following anti-incumbent rebellions earlier in the decade - he priced luxury-box tickets at $48, which it just happens was under the new congressional gift limit of $50. There are still loopholes galore for getting around such rules. But politicians, having gone shy, are wary of being seen in luxury boxes.
Erect a barrier and smart, rational people will find a way around it.

The quoted paragraph comes from a Wall Street Journal article entitled "As Scandal Looms, Politicians are Facing Whole New Ballgame" from the December 30th WSJ, page A1. You can access the entire article here at AOL Money & Finance.

My experience with luxury boxes is that they are rented for a period of time and the posted ticket prices for their seats are largely illusory, so there would appear to be lots of leeway in "setting" those prices.

Sunday, January 01, 2006

"NFL's big game leaves some businesses cold" 

That's the title of a news story on the economic impact of the Super Bowl, in today's Detroit News. (Detroit will host Super Bowl XL next month). Although the chair of the Super Bowl Host Committee is quoted a bit credulously -- "The Super Bowl has been the ignition for downtown Detroit to have its revitalization" -- reporters Louis Aguilar and R. J. King do a good job digging beyond the hype machine. Examples which illustrate the week-long bonanza for the tourist trade are juxtaposed alongside the concerns of businessmen who cater to locals anticipating congestion, increased parking rates, and street closures.