Friday, March 31, 2006

Soccer Referee Malfeasance 

From ESPN comes this ditty about Nigerian soccer officials:
"Football referees in Nigeria can take bribes from clubs but should not allow them to influence their decisions on the pitch, a football official said on Friday."
What's the fun in that?
We know match officials are offered money or anything to influence matches and they can accept it," ( Fanny) Amun (acting Secretary-General of the Nigerian Football Association) told Reuters on Friday.

..."Referees should only pretend to fall for the bait, but make sure the result doesn't favour those offering the bribe," Amun said.
I guess it's too much to increase the officials' salaries, prohibit the taking of bribes, and monitor the officials. Then again, it sounds like bribery is rather ingrained in Nigeria.
Despite a high-profile campaign to stamp out graft in the impoverished African country, Nigeria consistently ranks among the most corrupt countries in the world -- and football is no exception.
So much for the integrity of the game. It sounds like Nigeria, one of the lowest-ranking countries on the Heritage Foundation's Economic Freedom Index, has worse problems.

HT to Sports Law Blog

Tuesday, March 28, 2006

Welcome to Victor Matheson 

The Sports Economist is pleased to add Victor Matheson to the roster. Victor is Assistant Professor at Holy Cross, and holds the unofficial record for publications on economic impact in the wide wide world of sports - Super Bowl, World Cup, Daytona, the Olympics, the MLB All-Star game - he's got them all covered. You can check out his research papers on a variety of topics here. Victor is a dynamo too, and his presence is sure to enliven the blog. Welcome, Victor!

Final Four Economic Impact 

Howdy, folks. Long time reader, first time poster. Anyway, I was in quoted in the Louisville Courier Journal last weekend regarding the economic impact of the Final Four on Indianapolis, and I thought the article made a couple of points that might be interesting to the sports economist community.

First of all, I thought it was a pretty fair article. There is always the danger of being taken way out of context by reporters. For example, I told Ms. Stedman, the writer, "If I were Indianapolis, I would love to host the Final Four every year." But sure enough, Ms. Stedman followed up with the second half of my quote, "The danger comes when people use these inflated estimates to try to justify a new stadium or other public spending."

Here's what is most interesting to me, however. In all of the reports I have heard out of Indy for this weekend's event, including the numbers from this article, the city is citing a $35-$45 million dollar impact, roughly half the size of previous estimates from San Antonio and other host cities. The reason for this lower number is that Indianapolis has not inflated their number with any type of multiplier and the resulting indirect economic impact. Is it possible that us dismal economists (just call me the Dr. Doom of sports) are getting through a little bit?

Mind you, in Indianapolis, even if we won this battle, we have lost the war, as the city is spending millions on a replacement for the less than 25-year old, but economically obsolete, RCA dome. And perhaps the city simply couldn't find a skilled economist willing to sell his or her soul to boost up the numbers, but the city had an obivous opportunity to at least double their published estimates and perhaps they chose not to. One can always hope.

Victor Matheson

GMU Wins The Lottery 

As Skip noted on Monday, mixing dispassionate sports analysis with rooting interest presents challenges. I'm a George Mason alumnus, so my passions have run pretty high since Sunday. Unfortunately, due to other events, I found out about the outcome from a call from my dad. Nonetheless, I've been reliving the highlights at every opportunity.

Enough of the rooting, from an analytical perspective, GMU's win provides a huge promotional value to the school. As a flavor of this, consider Pat Forde's column in ESPN.com

We predict that fans in Indianapolis will embrace George Mason as the collegiate-level, latter-day Milan High School. The home state of the greatest underdog hoops story of them all is going to love the most gorgeous March Madness story since Villanova '85 or N.C. State '83, take your pick. College basketball needed this run -- needed it to make everyone believe again in miracles.

SI.com's Seth Davis adds

It was really special to watch. And my nephew's a college hoops fan for life now. I don't think I've ever been to a sporting event like that, and this kid's seven and he's been to one.

The media attention in newspapers and web portals across the country amounts to millions of dollars worth of advertising. In fact, ad space on the front page coverage of the Washington Post or the first page of sports sections cannot even be purchased.

In an April 2000 Journal of Sport Management article, I reviewed and extended evidence about the effects of athletic success on universities. One bit of descriptive evidence related to newspaper articles about Northwestern University in 8 leading papers before and after their Big Ten championship and Rose Bowl trip in 1995. The quantity of articles jumped by 185% during the fall of 1995. Moreover, the "quality" (placement of articles) improved, including additional front page articles and first page sports section articles. Linked to this ad-space-as-sports-story, the market value of their endowment jumped by an equally large proportion, according to publicly available data. In the case of George Mason, in spite of having two economics Nobel Prize winners in James Buchanan and Vernon Smith in the last 20 years (both of whom migrated to GMU late in their careers), few "people on the street" outside of of Northern Virginia or the Colonial Conference knew about the school. As Pat Forde notes above, it's now a household name among sports fans.

It is important to make clear the GMU impacts, as they are or may be, do not necessarily mean that investments in athletics pay off on average. There are lots of mid-major and minor conference teams who spend money without the extreme, lottery-like outcome of George Mason. Most never even enjoy the success of a Bucknell or UW-Milwaukee over the last couple of years much less that of a Gonzaga with their sustained success over the last decade.

College athletics raise many issues both financially and otherwise that are difficult to accurately sort out both conceptually and empirically. I've written quite critically of its features on occassion. Sometimes, however, critics of college athletics or sports "subsidies" can become so strident in their opposition as to be unwilling to admit the large promotional value of athletic success even at the most extreme end. The exact value of the benefits to GMU might require detailed measurement and ingenious methods, but no sophisticated or novel analysis is required to recognize that these benefits exist and are large -- very large.

Monday, March 27, 2006

Major League Baseball Officials: Internet Entrepreneurs 

Ah, I recall the good old days when I could follow the Cubs lose by tuning into WGN 720AM's internet stream. Then MLB officials banned that practice and began selling the rights to their teams' internet broadcasts.

Now MLB officials are becoming quite the internet entrepreneurs ($$$):

More than five million people have flocked to CBS Corp.'s Web site to watch March Madness college-basketball games free online. For that, they and a growing number of sports fans world-wide owe some thanks to the entrepreneurial efforts of another sports leader, Major League Baseball.

It's one of the more unlikely stories of Internet-inspired business evolution: In just a few years, Major League Baseball's Web site (www.mlb.com) has become a major force in providing live streaming video -- the equivalent of live television on a computer -- for large audiences. MLB.com's success isn't just helping to transform the business of sports; it's also transforming consumers' expectations of what the Web can deliver.

MLB.com first mastered the technology to show baseball games live on its own site, itself a wildly popular business. Now, it sells its expertise, having already signed up 25 clients, including CBS, Major League Soccer and the World Championship Sports Network. Entertainers Jimmy Buffett and LL Cool J, too, have hired MLB.com to promote albums and concerts by streaming video of interviews and live performances.

Without providing specifics, MLB.com says that the endeavor has already become profitable, and that an initial public offering of MLB.com stock is a possibility at some point. About 15% of the site's total revenue of $195 million last year came from managing Web sites and other partnerships like the one with CBS. An additional $68 million came from subscriptions to watch live video content on MLB.com, including the 2,400 baseball games it streamed in the 2005 season. The rest of its revenue comes from ticket sales and advertising.

Since bandwidth is subject to the scarcity problem, it will be interesting to see how entrepreneurs go about trying to solve the problem of providing high-quality streaming video.

Mastering streaming video for big audiences isn't easy. The video is bulky; the files that must move across the Internet are typically hundreds of times as large as music files, crowding bandwidth and slowing transmission -- a situation worsened by large numbers of individual viewers accessing the same video at once, as with baseball games.

In fact, MLB.com and other sites that stream video face a challenge from cable and telephone operators, which are pushing to charge more to carry content that requires a lot of bandwidth. If the carriers get their way, sites that don't agree to pay extra would be able to transmit their videos, but the quality wouldn't be as high as for those that paid a premium.

"Just receiving a live feed and sending a compressed version over the Web is difficult," Mr. Bowman says. "We didn't anticipate how in-depth it all was."

The author of the article, Bobby White, compares this internet foray by MLB to the NFL's decision to centrally-coordinate the sale of their television rights in the 1960's. Each MLB team owner gave up the right to maintain its own website and, in exchange, gets an equal share of the proceeds from MLB.com.

Might this coordination, which gave me small bits of frustration several years ago when I tried to follow the Cubbies, make MLB the NFL of the 2020's or so?

Sunday, March 26, 2006

Welcome to Dennis Coates 

Dennis Coates has joined The Sports Economist as a contributor. Dennis has done some of the best scholarly work on the economic impact of sports stadiums, and his post below on the Kansas City referendum is particularly timely.

Here is Dennis' page at REPEC, which has a number of insightful articles on public choice and the economic of sports. One of my favorite articles for lay people is Dennis' CATO piece with Brad Humphreys, "Caught Stealing: Debunking the Economic Case for DC Baseball." It is great to have Dennis on board.

Let me reiterate (once again) that Coates, Humphreys, myself, and many others who have studied these issues enjoy the games. We also recognize that spillover benefits of some magnitude exist (see exhibits 1 and 2, for example). But the argument that wealthy owners and players require a subsidy from taxpayers should be examined critically. Arguments for subsidies are made repeatedly in the popular press based on economic impact. These arguments are theoretically and empirically unsound, and as economists it's our job to point this out. Whether we live and die by the Astros and the Arsenal (I've died many deaths), or not.

Saturday, March 25, 2006

Kansas City to Vote on Tax Increase 

Voters in Jackson County, Missouri (Kansas City) are being asked to vote for a three-eighths cent increase in the county sales tax to pay for renovations for Arrowhead and Kaufman Stadiums. Voting takes place on April 4th. The measure says that the tax expires after 25 years and is expected to raise about $30 million a year. One estimate is that the tax will cost the typical Jackson county consumer $25 per year.

Readers of this blog can already imagine what the economic impact analysis says about spending $777 million on the two stadiums, but here it is anyway:

Using data obtained from the Chiefs, Wizards, Royals and vendor companies at the two stadiums, expenditures for operations and payroll to support professional games at the Truman Sports Complex total about $309.3 million per year. As this money is spent, it creates multiplier effects in Jackson County (not all of the money is directly spent in Jackson County, however). The following impacts during each year after the capital investments can be anticipated as a result of the combined spending for operations and payroll by the two stadiums, the teams, and vendors.

1. Overall economic activity, or economic output, in the county would be boosted by $412.0 million each year in Jackson County from operations at the two stadiums because of the multiplier effects.
Of course, both stadiums are already in operation, leaving one to wonder if the renovations are supposed to raise operating expenditures by $309 million generating the implied $412 million in new economic activity, if the intent is to confuse voters that new activity will be generated when in fact the figures are what is already occuring, or if the consultants ' report involves the implied threat that both the Royals and the Chiefs will leave without the renovations.
2. Personal income of county residents would be expected to be $73.0 million per year as a result of the multiplier effects in the county triggered by the operations at the Truman Complex.

3. Jobs created for the county labor force (i.e., residents of Jackson County) would average 3,260 each year, including jobs held by Jackson County residents at the Truman Complex (i.e., players, coaches, front office, vendors, etc.). Obviously, a great many of the jobs at the stadiums are part-time positions for only part of the year, many at relatively low levels of hourly compensation, but each of these jobs is counted in the 3,260.
At least they aren't claiming these are 3260 full time equivalent jobs.

Also up for a vote is a use tax to fund a rolling roof that can be moved from covering Arrowhead Stadium to covering Kaufman Stadium. The use tax would be imposed on Kansas City residents who make transactions with out-of-state vendors such as catalogue and direct market sales. Estimates are that the use tax increase would raise $12-$14 million a year. The base for the tax includes a $2000 per year exemption. The tax may be collected automatically if the vendor has a facility in Missouri, but if not, the buyer must file a return with the state. But don't worry if you don't pay, because the state does little enforcement on individuals failing to pay use taxes, according to Gary Markenson of the Missouri Municipal League.

It is clear that everyone involved needs to learn some basic tax incidence. as this quote from the Kansas City Star demonstrates:
Even though businesses would pay the bulk of the tax, they could raise prices to make it up, stadium opponents note.

Thursday, March 23, 2006

Now that's a business model 

Carl Bialik attempts to pin down the probability of picking a perfect bracket in an NCAA tournament pool. He gets help from math profs at Cal Tech, Penn, and NYU, but to say this sharpens the estimate overstates the case. Carl's naive coin flip model yields odds of 1 in 9 million trillion. The math profs' estimates range from one in 2 billion to one in 250 billion. Who was it that said economics is imprecise?

Still, all modelers agree that the probability is really really small. This fact has emboldened companies to offer seemingly large prizes to anyone who enters the perfect bracket:
Papa John's is dangling one million pizzas. America Online is offering $1 million. Gambling site Sportsbook.com has put up $10 million, and says it may offer even more money next year.
But they aren't that bold. Non-bookie firms (presumably AOL and Papa John's) insure against this miniscule risk, presumably on the principle that they don't bet the company on an advertising gimmick. They purchase insurance from a Dallas company, SCA Promotions.
SCA, founded by 11-time world bridge champion Robert D. Hamman, has taken on the insurance risk for roughly 50 perfect-bracket prizes -- including a Sporting News offer of $1 million in 2001, according to vice president Chris Hamman, the founder's son. In the 12 years it has been doing so, SCA has never had to pay out a claim. Mr. Hamman declines to disclose the fee structure for these risk-transfer contracts, but says, "It's pretty normal for sponsors to spend about 2.5% of the prize value. If it's a large enough prize, [the percentage] could easily go up." (Sportsbook, for its part, says it hasn't bought any insurance to hedge its $10 million offer.)

Mr. Hamman says he has had inquiries from companies eager to launch similar contests for this summer's World Cup. The soccer tournament features 48 games and three possible outcomes -- win, lose or tie -- for the first 32 games, making it even harder to perfectly predict than the college-basketball tourney. He compares the odds of having to pay out for the basketball or soccer tournaments to a local bar's promotion that SCA once insured, offering cash prizes if, on a given day, aliens landed in the bar's parking lot or Elvis showed up.
SCA, it seems, has found a license to print money.

Hat tip: Pablo Halkyard.

Wednesday, March 22, 2006

The bottom line on the World Baseball Classic 

From Stefan Fatsis in today's WSJ (hat tip to Carl Bialik), a few salient points:
[T]otal attendance of nearly 740,000 and solid TV ratings in the U.S. and abroad. Baseball executives said the event is expected to turn a profit of $10 million to $15 million. ...

The idea for a tournament including the world's top pros modeled on soccer's World Cup was first presented to baseball owners in 1999. MLB secured agreements from the union, baseball's international governing body, and pro leagues in Japan, South Korea and Taiwan. Two of the 16 participating countries posed hurdles: Japan wanted a bigger cut of profits, and Cuba initially was barred by the State Department.

The tournament cost $45 million to $50 million to stage. MLB and the players' union will divide half of the profits. The other half will go to the participating national federations in order of finish. Japan will get 10% and Cuba 7%; teams that didn't advance past the event's first round will get 1%. The countries have to spend half of their shares on development programs. Most of the rest will go to players. ...

Live games on ESPN attracted an average of 1.4 million viewers. A U.S.-Mexico game last week drew about 2.5 million viewers, nearly double the network's average audience for the National Basketball Association this season.

ESPN paid about $5 million for the rights to the event. Len Deluca, ESPN's senior vice president for programming and acquisitions, said the network could devote more attention to the event next time around. "We did this on three months' notice; we did it with no chance to sell it; we did it with barely a chance to schedule it,'' he said.

The next Classic is planned for 2009, to avoid conflicts with the Olympics and World Cup, and then every four years after that.
With the U.S. performing poorly, American viewers might not take the tournament for granted next time. My hunch is that the U.S.'s failure to make the final four will stimulate interest in the next iteration. I expect the ESPN hype machine to be running full throttle in 2009.

Paul Hagen adds more perspective in the Philadelphia Inquirer. His bottom line? "Give it a solid B-plus. And the bet here is that, as it continues to evolve and needed changes are made, it will get even better."

Tuesday, March 21, 2006

Signs of life in U.S. soccer 

American demand is soaring, at least for the World Cup. From today's WSJ:
In the past, Americans haven't clamored for World Cup seats nearly as much as fans in traditionally soccer-obsessed nations like Argentina and England. But this year, interest has soared. U.S. fans snapped up more team-specific tickets to this World Cup than any other country, according to the U.S. Soccer Federation. The federation also sold out its own pool of tickets -- amounting to 8% of the seats for each U.S. game -- in one day. (The wait list is full, too.) In past overseas World Cups, the group never sold out its share before the beginning of the tournament.
Now, if MLS could find a way to bring a credible product to club soccer, we might really have something to cheer about.

Monday, March 20, 2006

Super Bowl impact numbers 

I have not seen the study, but here are some figures, as reported by Tom Walsh in the Detroit Free Press:
Each out-of-town visitor spent $363 a day on average, not including airfares, lodging or tickets to the game.

The biggest beneficiaries of Super Bowl spending were the region's hotels, the casinos and other entertainment spots, and food and drink providers. Among them, these businesses took in 54% of the $170 million in direct spending by out-of-town visitors, according to the study by Sportsimpacts, a research firm run by Patrick Rishe, an economics professor at Webster University in St. Louis.

The overall economic impact figure of $273.9 million is greater than the direct spending by visitors because it includes the pass-along effects of extra spending by Detroit-area businesses and employees who quickly re-spent the extra money they took in from visiting Super Bowl fans ...
That's a modest multiplier, which lends some credibility to the figures. But I'm not sure what to make of the notion that businesses "quickly respent" their revenues. And $363 in the absence of lodging? I would not be surprised if survey respondents did not convert correctly from a per family/group to a per capita basis. But maybe the excess was just spent on strippers. Bring the Super Bowl to town! Benefit you local stripper community!!

Seriously though, it is clear that having the game in a cold-weather city displaces fewer would-be visitors than is the case in say, Miami:
On Super Bowl weekend, the Detroit-area hotels sampled by Smith Travel Research of Hendersonville, Tenn., reported occupancy rates of 82% on Friday, 92% on Saturday and 88% on Sunday. On the comparable weekend a year ago, those hotels were only 45%, 48% and 33% full on average.

What's more, the average hotel room rate on Super Bowl weekend was $210 a night this year; triple the $70 per night for the same weekend a year ago.
Those price differences and occupancy rates are a clear sign that the Marriott, Hilton, etc. enjoyed a healthy windfall from the game being played in Detriot. But the commentary on this issue remains just plain silly. Surely Professor Rishe would not conclude his analysis as Mr. Walsh did, with the statement that "Whether one uses the largest so-called gross impact number or the most conservative net impact estimate, Detroit's return on the $265,000 spent on presenting the Super Bowl bid was at least 500 to 1." Let's at least account for the true costs, Tom!

I'd welcome any discussion in the comments section, and thanks to Jahn Hakes for the tip.

Barry Bonds and Positional Externalities 

A positional externality is a cost or benefit realized by a third person which occurs when a payoff, however it's defined, depends upon a person's relative performance. One of the reasons given for banning steroid use (besides the fact that they have known health risks) is that it improves one athlete's performance, possibly, at the expense of another athlete who has not chosen to use steroids. The loss of position by the non-user gives him an incentive to become a user to regain his relative position. A steroids-arms race is a possibility.

The authors of the new book about Barry Bonds entitled Game of Shadows: Barry Bonds, BALCO, and the Steroids Scandal that Rocked Professional Sports (by Marki Fainaru Wada and Lance Williams of the San Francisco Chronicle) suggest that Bonds' alleged use of steroids occured after the 1998 season, the season when Mark McGwire and Sammy Sosa stole the show:
The excerpt spells out in vivid detail what attracted Bonds to performance-enhancing drugs: his intense jealousy of McGwire's 70-home run season and the national hero worship it created.
...McGwire's historic season drove Bonds to wander into territory he had previously avoided, according to the excerpt.

"To Bonds it was a joke," one passage reads. "He had been around enough gyms to recognize that McGwire was a juicer. Bonds himself had never used anything more performance enhancing than a protein shake from the health-food store. But as the 1998 season unfolded, and as he watched Mark McGwire take over the game -- his game -- Barry Bonds decided that he, too, would begin using what he called 'the s -- .' "


If true, it would seem that the positional externality was of Bond's making because, in his mind, his payoff depended on his placement in the hierarchy of players. The authors suggest that BB couldn't handle being outdistanced by McGwire in terms of the attention given to him by fans and reporters. According to the article, Bonds once got pissed off because Giants officials had placed a rope around the batting cage in their home stadium to control the crowd that gathered when McGwire made Apollo rockets out of baseballs. So to get back to the top of the heap, Bonds started using "the s--."

Sunday, March 19, 2006

Risk and Return in the NFL:
Owens and the Cowboys 

This isn't an old maid's portfolio we're dealing with here.

That is how Dallas Cowboy's owner, Jerry Jones, described their internal assessment of the expected risks and returns involved with signing Terrell Owens on the weekend. [Washington Post, reg. req'd].

Jones, the savvy NFL owner who has found more ways to circumvent the salary cap than there are galaxies, explained the risk-return trade-off so that even football mediots could understand it:

Jones said the Cowboys, after failing to reach the playoffs the past two seasons, believed that Owens's gifts as a pass receiver made signing him worth the risks. He said there are risks in signing any player, and added: "That's just life in this game. You take risks. This isn't buying bonds.

In other words, Jones and Cowboys know full well that if the signing works out, they have a very good chance of making the playoffs and doing well financially. They also know that if the signing does not work out well, the team stands a good chance of having a losing season. The Cowboys are way out on the risk-return frontier [the Markowitz efficiency frontier] .

The sad thing is that most of the NFL mediots won't get it. They don't grasp the basic economics of risk and return trade-offs. If Owens works out well, for the Cowboys, the mediots will

1. Hail Jones as a genius, or
2. Condemn him as a lucky idiot.

and if the signing doesn't work out, the mediots will

1. Condemn Jones as an idiot, or
2. Sympathize with him as an unlucky genius.

All four possible responses would be ex post assessments of the signing. As the mediots analyze this signing ex ante, as one must assess any decision when one makes it, we see the difficulty of assessing the signing of Owens. Jones' statement reveals that he understands very well that this signing might not work out. Also, the structuring of the contract makes it clear that both sides understand the risks involved: there are large bonuses if it works and annual "outs" for the Cowboys if it doesn't.

My own, ex ante assessment, is that this is a good gamble for the Cowboys to take. Parcells is a coach who probably has a better chance of working with Owens than many others, and Owens skills as a wide receiver are superb. I.e., my assessment is similar to that of Jones.

But we both might be wrong.

Cross-posted at The EclectEcon

Friday, March 17, 2006

This is nuts 

From the Albuquerque Tribune:
Studying whether New Mexico could lure an NFL team should cost no more than $400,000, but the state has earmarked $500,000 for it.

A football team could prove an economic gold mine, says Gov. Bill Richardson, who's expected to fly to Mexico today to test regional interest in the idea....Richardson said the money will be well spent.
He can't be serious!
"Attracting the NFL franchise to New Mexico is a huge economic development opportunity that could create good jobs and new opportunities for business in our state," the governor said. ..."We clearly are not ready today to host an NFL team, but we could be in five years," the governor said. "If we are going to accomplish this ambitious goal, we need a clear road map, with clear objectives."
I thought Richardson was a political player with cojones, but this makes him look like Don Quijote.

Thursday, March 16, 2006

Economic angles to the NCAA bracket pool 

With 3 hours to get your picks in, you can listen to the experts, or the economists, as you fill out your bracket. Here are some tips from economists:
--Peek at the point spreads. "If you're going to pick some underdogs in the first round, check the Vegas line to see what the experts think," says Andrew Weinbach, an economics professor at Savannah's Armstrong Atlantic State. "It has been consistently demonstrated that Las Vegas point spreads are, on balance, very reliable and unbiased predictors of the outcome of the games.

"In basketball, as in horse racing, the long shots sometimes win, but it's important to know whether the horse has a tender foot or a broken leg."

--Don't go too bonkers picking upsets. "Too often, too much thought goes into the whole darn thing," says Justin Wolfers, assistant professor of business and public policy at Penn's Wharton School. "You're often best to stick with the strongest teams and forget all the reverse-reverse-reverse psychology.

"There's a reason that favorites are the favorite: They tend to win."
My advice? The pools are puzzles. If you like puzzles, dawdle over your picks and enjoy the process. Otherwise, combine the Wolfers and Weinbach approach, and try to grab a couple of "soft" upsets.

If you want to consider the "weak guards" and "strong defense" philosophies you can waste many hours of office time. For advice on how to do that, see the full compilation of angles from Jeff D'Allessio at the Atlanta Journal-Constitution.

And there is always the possibility that your office pool is poorly designed. In which case you can adopt the Craig Newmark approach, which both capitalizes on the error, and forces an improvement in pool design for subsequent contests.

Update: Via the comments, Mike Giberson points out another market-based indicator, which he discusses at Knowledge Problem.

Look out, world 

An economist, Sunil Gulati, has taken charge of the US Soccer Federation, the organization that runs the national team. On his first day in office he reduced the size of the USSF board from 40 to 15. Excellent move!

Mr. Gulati teaches at Columbia and works for the World Bank when he's not involved in the beautiful game. His parents along with mentor Jagdish Bhagwati felt he was wasting his time with soccer. Apparently not! Rob Hughes covers this interesting story in the IHT.

Wednesday, March 15, 2006

An Impact of the NCAA Tournament? 

One of the more amusing reasons given for why sports are not boons to local economies is that they drive more unproductive watercooler discussions at the office. As another case in point, consider the upcoming NCAA Tournament:
The NCAA men's basketball tournament costs CBS $6 billion over its 11-year deal to air the games. But March Madness is costing more than half that -- $3.8 billion -- in lost worker productivity this year alone, according to an estimate that's been repeated on CBS, in the Boston Globe and by the Associated Press.

The estimate comes from Chicago-based outplacement firm Challenger, Gray & Christmas Inc., which last year said March Madness would cost businesses a mere $889 million. (I wrote about it last March.) The firm assumes that all workers who are college-basketball fans will surf the Web for news about the tournament (it further assumes that all workers have Internet connections), and that the time they spend isn't made up for elsewhere in the workday. Thus, Challenger figures the "cost" to businesses is equal to the salary paid to those workers while they're surfing.

...Not exactly. Last year, Challenger relied on a survey from the NCAA in 1997 that found 22.9 million Americans are college-hoops fans, meaning about 14.3 million working Americans follow the sport (Challenger used Census stats on the proportion of Americans in the work force). This time, Challenger used an unrelated Gallup poll, conducted in 2004, that yielded a number four times larger than the NCAA's for the proportion of Americans who are fans of the sport.

Gallup's managing editor, Jeffrey M. Jones, told me in an email, "I don't agree with the estimate," citing the concern that not all self-identified fans will surf the Web, even if they can. He added, "To be fair, they probably should compare how much is lost to productivity by surfing the Web or sports sites on a typical day, and subtract that from their estimate since companies probably lose money every day by employees surfing the web, not just during March Madness. They also mistakenly assume that there will be lost productivity over a three week period. There are only two days where there are games during the working day, the rest are at night and on the weekends."

$3.8 Billion? That's about a 0.023% decline in Nominal GDP for this year.

Me-thinks that in the absence of the NCAA tournaments (or sports for that matter), people would find other ways to pass the time at work. Besides, if someone is stuck on the answer to a problem, perhaps all that's needed to clear the mind is a little rousing chat about whether so many mid-majors should be allowed in the tournament.

The column points out that David Nicklaus is skeptical too.

HT to Hypothetical Bias.

Friday, March 10, 2006

"The Truth" on Bonds 

This week's Sports Illustrated cover story excerpts parts of the new book, Game of Shadows, detailing the evidence about Barry Bonds' steroid use. SI.com also carries the story. Their documentation, drawn public domain evidence from the BALCO investigation (emails, notes, schedules, statements of defendents) as well as interviews with identified and anonymous sources, makes the Dowd Report on Pete Rose seem like hearsay. Here are some observations:

1. While subject to criticism on moral grounds, it appears that MLB has played their cards right. Baseball came out of the 1994 strike needing a boost with the fans and the chemistry-enhanced home run explosion fit the bill. As the steroid use became more apparent, Bud Selig and the owners faced a dilemma -- crack down and potentially jeopardize fan interest or take a "I don't see anything" stance that might jeopardize fan interest as more data came to light. MLB chose the latter even when it seemed to be living in complete denial, yet fans have not appeared to penalize MLB so far, and my bet is that they probably will not.

2. The failure to penalize MLB as a whole has been interpreted by some as proof that fans do not care about steroid use. I disagree. Many fans are slow to believe rumors of use in the face of substantial but not overwhelming evidence. My own mom is a good example of such a fan. However, once the evidence mounts to a critical, "believability" threshhold, attitudes of all but the most rabid supporter of the individual radically shift. People, in general, don't like cheaters. MLB as a whole may escape fan wrath, but Bonds will not now that his cheating ways have have been more clearly documented. That's my take on why Sammy Sosa -- a player who had been a fan favorite for many years -- could be jettisoned from the Cubs with so little fan response. McGwire (like Florence Griffith-Joyner) got out before his believability index dropped as low as it has or will for some others. Flo-Jo also helps break down the racial element sometimes suggested in the difference in views toward Bonds and McGwire. The key variable is "believability" and not race.

3. While it's difficult to cast Bonds as a tragic figure given his sullen and selfish persona, the story does highlight the "externality" problem of steroid and related chemical use:
As McGwire was celebrated as the best slugger of the modern era and perhaps the greatest who had ever lived, Bonds became more jealous than people who knew him well had ever seen. To Bonds it was a joke. He had been around enough gyms to recognize that McGwire was a juicer. Bonds himself had never used a performance enhancer more potent than a protein shake from the health-food store. But as the 1998 season unfolded and, as he watched Mark McGwire take over the game -- his game -- Barry Bonds decided that he, too, would begin using what he called "the s---."
Personally, I'm very inclined toward a live-and-let-live philosophy. Generally speaking, I support freedom for adults to engage in activities that do not directly harm others. In athletics, all sorts of advantages exist -- nutritional, training regimen, genetic -- so that all influences on outcomes are not and never will be equal. If some guy at the local gym wants to pump up on powerful chemicals, lose his hair, get acne, and shrink his testicles, its not a big deal to me as long as he steers clear of juveniles. That's not the case in organized sports. One person's drug use has a direct impact on their performance relative to others in venues where it's all about relative performance. As I have written before, one would think that players' associations such as the MLBPA would have taken a firmer stance against the issue, but "politics" often inluence outcomes in private collectives and not just government organizations, especially not-for-profit entities where the output and performance measures are ambiguous.



Wednesday, March 08, 2006

Point shaving in the NCAA 

David Leonhardt reports on Justin Wolfers' research with point spreads in today's New York Times. The title of the piece is "Sad Suspicions About Scores in Basketball" -- NCAA basketball, that is.
Mr. Wolfers has collected the results of nearly every college basketball game over the last 16 years. In a surprisingly large number of them, it turns out that heavy favorites just miss covering the spread. He considered a number of other explanations, but he thinks there is only one that can explain the pattern. Point shaving appears to be occurring in about 5 percent of all games with large spreads.

... Smaller favorites -- teams favored by 12 or fewer points --— beat the spread almost exactly 50 percent of the time, showing how good those oddsmakers are at their jobs. But heavy favorites cover in only 47 percent of their games. There is little chance that the difference is due to randomness.

This is not persuasive by itself, because there are some obvious explanations besides point shaving. Heavy favorites may remove their best players at the end of the game, for instance, or simply slack off, not caring what their winning margin is.

But here's Mr. Wolfers's smoking gun: this slacking off seems to happen only when a game is decided by something close to the point spread. Heavy favorites actually blow away the spread just as often as everyone else. But they win by barely more than the spread a lot less often than slight favorites do.

There is a strange dearth of games in which 12-point favorites win by, say, 13 or 16 points. And there are a lot of games that they win by 11 points or slightly less. There is just no good explanation for this.
No explanation, unless you think that someone is shaving points. Here is the paper, and here is much more of Wolfers' work on betting and prediction markets.

Through correspondence, I know that Wolfers is also looking at NBA data, under the hypothesis that long term monetary incentives limit the practice in the pro game. That is ongoing work which is not in the paper or in Leonhardt's story.

Another view of this topic will be presented at a Symposium on Sports Law at Willamette College next week. Among other papers is "The Beauty of Bets: Wagers as Compensation for Professional Athletes," by Jeffrey Standen. Beauty is in the eye of the beholder, it seems. Hopefully that paper, along with others from the symposium, will be available soon as well.

Tuesday, March 07, 2006

Chelsea Goes Down 

Although many writers have voiced concern that Chelsea would merely buy both EPL and European championships, a few lessons come out of their dismantling by Barcelona.

1. The composition of teams needed to win domestic championships are not perfectly correlated with those needed to win shorter competitions. The deep, player-in-player-out squad that helps Chelsea dominate the league may actually hinder them when playing against equals or near equals. The situation is not unlike the Atlanta Braves -- good to very good and deep starting pitching dominated the divisions over 162 games for many seasons, but in a 5 or 7 game post-season, a small number of great starters, timely hitting, and some luck make the difference. In other words, one cannot rely on the law of large numbers in small number situations.

2. Chelsea is not Porto. Jose Mourinho took Portugal's Porto -- a very good club but not among Europe's elite in terms of cash -- to the European title with a very conservative strategy. Often, that is portrayed as "the way" to win in Europe. He's now gone with the same strategy for two years at Chelsea to be knocked out Barcelona while scoring 2 goals in 2 games this year and scoring none against Liverpool in two games last season. Unlike Porto, Chelsea has the stallions to win games scoring 3 or 4 goals -- last year's thrilling comeback against Barcelona in the second leg was an indication. The same coaches who are great against better teams are not always as great against equals, especially when their strategy and tactics are inflexible. A highly conservative style benefits teams with lesser talent. As John Wooden said, "I learned that I had to either adapt or fail."

3. Dollars matter but so does management in sport -- whether at the owner, GM, or coach level. Yes, Chelsea's dollars make them a cinch against the likes of Sunderland -- probably not such a bad thing. Yet, they are not a cinch against Barcelona or even Liverpool or ManU. Their dollars ensure that they will be near the top of the EPL table; however, their dominance over the past two seasons of the top of the table owes itself just as much to issues (transitions, poor decisions, ...) among the other top tier teams such as Arsenal, ManU, and Liverpool (improving but still very short on reliable strikers).

Monday, March 06, 2006

Customer Service or "Please Don't Bother Us?" 

Was the sign a, um, sign of customer service or did it serve some other useful purpose? From the NY Times (reg req'd):
It is clear by now where George Steinbrenner stands on the World Baseball Classic. Steinbrenner, the Yankees' principal owner, likes it about as much as a 20-game losing streak.

But the tournament is happening, even though the Yankees never voted for it. Now Commissioner Bud Selig wants Steinbrenner to stop complaining.

Selig ordered the Yankees to remove the sign at Legends Field that apologizes to fans for certain players not taking part in exhibition games. Five Yankees — Johnny Damon, Derek Jeter, Al Leiter, Alex Rodriguez and Bernie Williams — left the team Thursday to participate in the Classic.

Here is the sign (sorry for the blurriness - a clearer version is in the NY Times article):











Steinbrenner said through his spokesman, Howard Rubenstein, that he did not sanction the sign, which misspelled the word Yankees and instructed fans to direct their comments to the commissioner's office or the players association.

"He had nothing to do with it," Rubenstein said. "It was the ticket office who put it up. They sold all the seats, and they felt that if there were any complaints, people should call the commissioner. But George said they were going to take it down."

Steinbrenner has said publicly that he would rather his players focus on preparing for the season, and he praised Hideki Matsui last week for staying with the Yankees instead of playing for Japan. Whether or not he posted the sign, the wording was consistent with Steinbrenner's feelings.

This sounds more like a case of the ticket people not wanting to be bothered by any more fan complaints (or trying to head off fan complaints) with the tacit approval of the Boss.

Saturday, March 04, 2006

The NCAA's APR Teeth: Punishing David to get Back at Goliath? 

Last week, the NCAA released a list of the programs that will lose scholarships under its new Academic Progress Rate. Pat Forde quips:
This is a little like the old 1980s compliance joke, "The NCAA is so mad at Kentucky, it's going to give Cleveland State three more years' probation."
Indeed, the list given by the NCAA lists no programs that most people would consider to be a major program in either football or men's basketball (the money sports). Cynics would argue that the NCAA is going to tread a bit more lightly when it comes to disciplining, say, UNC's basketball program or the Ohio State University's football program. Consistently excluding such teams from post season play sends signals that could conceivably lower the value of the NCAA tournament or the Bowl Championship Series to media providers while excluding the Prairie View A&M's of the world sends no such signal.

One could also argue that the traditional powers get the best and the brightest recruits anyways, leaving the rest for the non-powers, so an unintended consequence of the APR is further entrenching of the elite.

TSE readers, what's your take on this? Is this a case of "The NCAA is so mad at Kentucky, it's going to give Cleveland State three more years' probation."

Friday, March 03, 2006

Life in Krzyzewskiville 

Ticket scalping is apparently an offense, and the punishment is exile:
A Duke University economics major was testing the law of supply and demand when he thought about accepting $3,000 for a courtside ticket to Saturday night's Duke-Carolina men's basketball game.

But instead, Tristan Patterson, a freshman from Raleigh, got a lesson in the value of tradition.

Fellow students evicted him from Krzyzewskiville, the tent village that sprouts every year outside Cameron Indoor Stadium as students wait for tickets to The Game.

Patterson had lived in Tent 16 with 11 other students since Jan. 9, staking claim to a close-up view of one of college sports' biggest rivalries.

Then, a week ago, another village dweller noticed an ad on Craigslist, an online flea market. The person who posted the ad was looking for someone who could pass as a student and would pay big bucks to see the game from the Duke student section.

The buyer also would get a wristband and ID, extras that presumably would make the package legal under the state's law against scalping tickets.

Patterson says he was trying to find out whether a seat in the student section would sell for more than a seat in the upper arena.

But he got stung.

Jeff Kovacs, a former Cameron usher, posed as "Tim" and responded to the Craigslist offer. The two settled on a price.

"At that point, I never committed myself to selling the ticket," Patterson said. "I'm not sure what I would have done. Three thousand dollars is a lot of money for a college student."
I'm pretty sure what I would have done. Three grand is a lot of money for a college prefessor too.

Wednesday, March 01, 2006

The Long-Run Economic Impact of the Olympics 

The flame was extinguished last Sunday. The Torino Winter Olympic Games are over. But in terms of assessing the long-run economic impact of the games, the fun is just getting started. Much of the alleged economic impact of sporting mega-events like the Olympic Games and the World Cup comes from the increased visibility and enhanced image these events provide to the local community, and on the ability of the locals to convert this exposure into a long-run increase in tourism.

We won't know how much of a bump in tourism Torino will experience as a result of hosting the 2006 Winter Olympics for some time. But this seems like a good point to take a look back at past Winter Olympic Games to see how other communities fared. One interesting, and unfortunately obscure, retrospective study of the long-run tourism impact of the Winter Olympic Games was done by Jon Teigland ("Mega-events and impacts on tourism; the predictions and realities of the Lillehammer Olympics," Impact Assessment and Project Appraisal, December 1999, vol. 17, no. 4). As Teigland points out, Norway's Olympic-related construction projects, which amounted to somewhere in the neighborhood of $2 billion in current dollar spending including operation costs, were based on forecasts of very large increases in tourist visits to Lillehammer long after the games were over. The Norwegians built a lot of new hotels, restaurants, and ski resorts in and around Lillehammer in anticipation of a large increase in tourist visits for years to come. Teigland calls them "predictions based on boom visions."

Unfortunately, these forecasts were not very accurate. Tourist visits to Lillehammer and its environs increased sharply during the games, and for a few years after the games, but by 1997 the increase in foreign guest-nights in the area was only 8% higher than the overall increase in foreign tourism in the entire country. The effect of over-building on local businesses was predictable. As Teigland states:
40% of the full-service hotels in Lillehammer have gone bankrupt.
The two new large alpine facilities have been sold too for less than
US$1 each to prevent bankruptcy because of uncovered large debt.
Teigland's research is an important cautionary tale for those who believe that capital investment for sports mega-events like the Winter Olympic Games will always be justified by future increases in tourism.

Some media reports indicate that Albertville, France, was able to parlay the 1992 Winter Olympics into increased tourism, but some of this might have been gained at the expense of other nearby ski resorts in the French, Italian, and Swiss Alps. I know of no published research on the long-run effects of the Winter Games on Salt Lake City, Nagano, or Calgary. There is clearly room in the literature on the economic impact of mega sporting events for more of these retrospective studies. At minimum, the experience in Lillehammer highlights how planners can easily over estimate the long-run tourist-related benefits of hosting a sports mega-event.