Sunday, February 28, 2010

Dave Berri Must Love This 

I found this interesting article about the state of the NBA from Bill Simmons at ESPN. The article is worth a read.

I especially like this bit:

They arrived at this specific point after salaries ballooned over the past 15 years -- not for superstars, but for complementary players who don't sell tickets, can't carry a franchise, and, in a worst-case scenario, operate as a sunk cost. These players get overpaid for one reason: Most teams throw money around like drunken sailors at a strip joint. When David Stern says, "We're losing $400 million this season," he really means, "We stupidly kept overpaying guys who weren't worth it, and then the economy turned, and now we're screwed."

This isn't about improving the revenue split between players and owners. It's about Andre Iguodala, Emeka Okafor, Elton Brand, Andrei Kirilenko, Tyson Chandler, Larry Hughes, Michael Redd, Corey Maggette and Luol Deng making eight figures a year but being unable to sell tickets, create local buzz or lead a team to anything better than 35 wins.


I wonder if it might be because the NBA over values scoring, as Dave, Marty Schmidt, and Stacey Brook contend in Wages of Wins and other places. And maybe some NBA executives are beginning to see that.

permalink posted by Dennis Coates @ 8:24 PM

Friday, February 26, 2010

Did they get a 15 yard penalty for excessive celebration? 

It seems the Canadian Women's hockey team took to the ice twice yesterday. Once to beat the US for the gold medal and then again later to celebrate their victory by drinking beer and champagne and smoking cigars while wearing their gold medals.

Apparently this behavior irked some of the IOC. I wonder how much of the finance for the booze and cigars came from the "Own the Podium" program.

For photos and some commentary see the National Post.

permalink posted by Dennis Coates @ 12:05 PM

Wednesday, February 24, 2010

Decline of Portsmouth... and the English PL 

News reports in England imply that Portsmouth Football Club of the English Premier League, perhaps the richest league in world soccer, is within days of bankruptcy. Like an LA condo in 2008, Portsmouth is now operating under its fourth owner this season! This suggests to me that some soccer-owner-wannabes were a bit slow to catch on to the fact that the incredible decades-long growth in the value of sports franchises was destined to stall in the “Great Recession.”

Of course, this is not the first instance of financial trouble for a team in England’s top flight. Leeds United, a club that’s been champion of England three times, imploded both financially and on the pitch in the past decade. Leeds entered the equivalent of American bankruptcy in 2007 and has fallen into the third tier of English soccer. West Ham United, along with other London clubs that have had a periodic taste of the top, such as Crystal Palace and Queens Park Rangers, have faced financial jeopardy in the past year.

As is the case with homeowners, banks, and auto manufacturers, voices have recently been raised in England to “save the clubs from themselves,” if you will. Or alternatively, and inconsistently, to save the clubs from the foreigners, especially the Americans. There has been no American involvement in Leeds or Portsmouth as far as I know, although prominent American investments in top clubs like Arsenal, Liverpool, and Manchester United have brought forth various levels of vitriol from different varieties of English activists. The irony in this activism is that American ownership in English football increases the likelihood that player wages – the key expense which brings ambitious “climbing” clubs to their knees – will be restrained through league agreement. David Conn’s piece in today’s Guardian makes this latter point, and discusses a UEFA initiative to restrain player wage expenses.

A move to bring in some sort of a salary cap would likely find key allies, again ironically, in unusual quarters of the British polity. For example, a restraint on wages tied to club revenue has been advocated by Arsenal’s manager, Arsene Wenger, who fields a team in North London typically bereft of English players. His apotheosis in that regard, the English Football Association, would welcome the effects of a salary cap because it would limit the imports of foreign players and increase the number of Englishmen on the pitch.

In the case of Portsmouth, I suspect that their supporters would welcome just about any owner with the cash to return them to the EPL as soon as possible (they are surely doomed to relegation this year, regardless of who owns the club). As for Manchester United, there is more than one option which appeals to different segments of their supporters. First, a debt-free, free-spending billionaire to come upon the scene, who is willing to buy out the Glazers and spend oodles of money to combat the like of the Russian-financed Chelsea and the recent upstart, the Arab-financed Manchester City. In short, the sugar daddy that English fans pine for, from Wolverhampton to Notts County. Now, it must be said that while such a sugar daddy (a la G. Steinbrenner) might appeal to Man Utd fans, his appearance would surely appall almost everybody else. But regardless, when one takes the view of the league as a whole, this is fancy. How many people are there in the world who are willing to spend a billion plus pounds on a soccer club, in the interest of pure sport? Ultimately, Manchester United is a commercial enterprise, a fate that its sporting success and worldwide appeal has brought upon it.

Less controversial would be an English takeover which reduced the club’s debt/equity ratio. But again, this issue is poppycock. Basic economics implies that ownership will improve the club when it makes sense, regardless of how much debt the club has on its books. Man Utd’s debt had little or nothing to do with the transfer of Ronaldo, who was destined for Real Madrid regardless of who owned the club. Moreover, Wayne Rooney is still on board, and the purchase of Berbatov for 30 million pounds looks if anything, to be extravagant. Now, some people in finance may be exploiting the current imbroglio to lower the asking price for Manchester United, but I doubt that the Glazers are intimidated by this tactic (in the U.S. the Glazers might consider a lawsuit).

Back to the issue of Portsmouth and bankruptcy. Bankruptcy will dock 9 10 points from Portsmouth and ensure their relegation beyond all doubt. Portsmouth could easily end up where Leeds United is, toiling about the bottom tiers of the Football League. But were they wrong to reach for the stars by buying the best players they thought they could afford? I’m willing to let the league table -- and their FA Cup trophy from 2008 -- pass judgment. As much as I want Arsenal to triumph over the new money of Chelsea and Manchester City, and as much as I’d like to see the likes of Portsmouth and Wolverhampton spared from the trap door of relegation, there is something ultimately appealing about the no-holds-barred competition of the English Premier League. Long may it reign.

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permalink posted by Skip Sauer @ 12:13 AM

Tuesday, February 23, 2010

Free Agency Coming to the Australian Football League in 2012 

The Australian Football League (AFL) and the Australian Football League Players’ Association (AFLPA) today announced agreement on the introduction of free agency to the AFL labour market, to commence in 2012, after the competition expands from 16 to 18 clubs.

For readers not familiar with Australian football and the AFL; the labour market has been governed by a combination of a reverse-order player draft, a hard total player payments cap (per club, the 2010 TPPC is AUD $8.21m for player payments + $537k for additional marketing agreements), and player list restrictions giving each club a maximum primary list of 40 players. This system has been in place since the mid 1980s and has come to be one of the most restrictive system of labour market regulation in any professional team sport in the world. The only way players could move between clubs was to enter the draft system again or to be traded for other players and/or draft picks. Following the precedent in the High Court of Australia case, Buckley v Tutty, such a system was highly likely to fall as an unreasonable common law restraint of trade; but it is worth noting this model of free agency has been negotiated without recourse to the courts or industrial disputation. The system of free agency is summarised as follows:

1. Delisted players:

- All players who are delisted by a club are unrestricted free agents.

2. Listed players with at least 8 seasons at one AFL club, who are out of contract for the first time since reaching 8 seasons of service:

· Restricted free agency for such players who are in the Top 25% of player salaries at that club. Restricted free agents have the right to negotiate with any new club, but their current club has a right of first refusal, which allows current club to match an employment offer lodged by a new club. If the current club chooses not to match the offer, the current club will receive compensation in the form of an additional draft selection if the current club has a net loss of free agents. If the current club does choose to match the offer, but the restricted free agent does wish to leave his current club, the player can only do so by being traded, or by re-entering the pool of players eligible to be drafted.

· Unrestricted free agency for such players who are in the Bottom 75% of player salaries at that club.

3. Listed players with 10 or more seasons at one AFL club, who are out of contract, and have already come out of contract once before in the period of 8+ seasons at one AFL club.

- All such players are unrestricted free agents.

------

The AFL website is the best place for news on the specifics of the deal:

The sports pages of the Melbourne-based newspapers, the Herald Sun and The Age, have interesting coverage of the full spectrum of opinions; ranging from applause for a well-balanced deal, to claims this is a portent of impending doom for the competition; in particular, see the colourful report by Patrick Smith inThe Australian newspaper.

Specifics of how the Top 25% of players at each club will be determined, along with the value of compensation for a net loss of free agents are yet to be determined.

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permalink posted by Robert Macdonald @ 6:14 PM

Monday, February 22, 2010

More than a Game 

I am reading More than a Game, written by Brian Billick, former head coach of the Baltimore Ravens and current analyst for Fox and the NFL Network. It is an interesting book on several levels.

Two points I want to bring up here I found interesting. The first is that Billick is quite forceful in arguing that finding a quarterback is very difficult, saying that nobody knows anything. People who have been very successful at picking/finding quarterbacks have all indicated that they were high on some of the bigger quarterback busts in draft history (think Ryan Leaf). Billick mentions in passing that scouting and player evaluation uses regression models. I would love to see those equations. The implication is that evaluation of other players is more successful. I wonder if pro football evaluators feel they are doing a good job in picking wide receivers.

The second point I wanted to bring to people's attention is that Billick mentions the research by David Romer on fourth down. He points out that after the appearance of that paper, the share of fourth downs on which the teams go for it rose each year until 2008. Economists may not get politicians to understand that subsidies are not the best use of public funds for job creation but at least one economist may have successfully convinced head football coaches to go for it a bit more often. Billick also points out that Romer's model does not account for things like media criticism. That is an interesting perspective. Better to do the conventional, if wrong thing, to avoid media criticism, than to give your team a better chance to win the game.

Billick's perspective is interesting and worth a read.

permalink posted by Dennis Coates @ 8:30 AM

Sunday, February 21, 2010

Special Issues of Note 

Two recent publications may be of interest to readers of The Sports Economist.
1. The journal Economic Analysis and Policy (2009, vol. 39(2)), has a special issue on the economics of sport, with articles of varying interest and quality. All articles can be freely downloaded and the best articles cover issues including the economics of doping/cheating, measurement of competitive balance and an interesting take on perverse incentive effects upon sport team performance.

2. Robert D. Tollison is well known for his contributions to many fields of economics including public choice, the economics of religion and, of course, sports economics (or ‘sportometrics’). The latest edition of Public Choice (2010, vol. 142(3/4)) publishes a range of essays in honour of Prof Tollison; many by regulars at TSE and a couple co-authored by the man of honour himself (on economic issues in golf, baseball and NASCAR).

Enjoy!

permalink posted by Robert Macdonald @ 10:30 PM

Support for Olympic Curlers (and other athletes?) 

As I have watched the curling from the 2010 Olympics, I have heard several of the commentators tell us that so-and-so from such-and-such country is a full-time curler. S/he is sponsored by their government and unlike Canadian curlers does not have to have another job to support themselves. There is always a whinging, wistful tone to such pronouncements, suggesting that in Canada we should also provide government financing for our top curlers.

I find this tone and its implications offensive for two important reasons:

  • It ignores the considerable sponsorship and prize money for curling that is provided by the private sector in Canada. Top curlers earn an acceptable (though probably not luxurious) living when their winnings and sponsorships are added up. This private support for curling in Canada is monumentally greater than the private support for curlers in other countries.
  • If the government were to provide support for Canadian curlers, who should receive that support? Only the top teams? If so, how might the gubmnt bureaucrats determine which are the best teams? And keep in mind that the fourth best team in Alberta could well be considerably better (and more likely to win on the international level) than the best teams from some of the other provinces. Governments are notoriously bad at "picking winners" in other industries, and I see no reason for them to be any more successful at picking winners in sports.

In fact, one might well argue that one of the several reasons for Canadian success in curling (aside from years of practice and inculcation) is that curlers in Canada must compete for sponsorship and prize money. Those who aren't very good don't receive much money; those who are better tend to receive more money. There is a huge incentive to improve one's game.

I doubt if these arguments would apply to all Olympic sports, but they certainly are important when discussing sponsorship for curlers (and probably most other sports for which private sponsorship and prize money are sizable).

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permalink posted by EclectEcon @ 10:00 PM

Friday, February 19, 2010

Vancouver Olympic Blitz 

Paragraph 4 of this from the Sports Business Daily is priceless.

Can you say substitution effect? Or, as Craig Depken calls this particular example, the "skedaddle effect".

Thanks to Craig for alerting me to this article. Here is what he had to say at Division of Labor.

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permalink posted by Dennis Coates @ 3:11 PM

Kiffin to USC: Cover Band? 

On CollegeFootball Talk/NBC Sports, Keith Arnold makes a funny observation:
If the goal of hiring a Carroll disciple was the goal, then the search party found what they wanted. But make no mistake, a Beatles cover band isn't the Beatles.
Maybe in college ball, at an upper tier college program like USC, it is. The Kiffin hire screams "let's keep-the-system-going" as Arnold's Beatles allusion highlights. If he can recruit and stay off probation (big ifs), he will be successful.

Performance outcomes in sports reflect a combination of player recruitment/attainment, systems ("technology"), and managerial customizing of these inputs -- adjustments (game-to-game, season-to-season, player-to-player). My working idea is that players always matter but the relative importance of the other two factors differs between college and pro with system being relatively more important for college programs. This is my explanation for why coaches making the college-pro switch often struggle regardless of the direction of the move. Many of them try to impose their managerial template from the other level.

Steven Spurrier's success at Florida hinged on a system. He recruited good players, coached them (especially QBs) up for his system, and won big. That recipe didn't work so well with the Redskins. Player abilities are too close. Other coaches are customizing their players/strategies too much. Bill Belichik's success in New England reflects a high degree of customization across players, games, and seasons, not merely some attachment to a particular offensive or defensive strategy. Of course, all of this is conjecture and a big simplification, but with some creativity, conjecture that could be put to a test.

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permalink posted by Brian Goff @ 10:59 AM

Thursday, February 18, 2010

Ballplayers and Bankers 

Cartoonist Ruben Bolling riffs on President Obama's recent comparison of bonuses for bankers and baseball players "who are making more than that and don’t get to the World Series." It's at Salon.com, and makes for a pretty good populist chuckle.

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permalink posted by Skip Sauer @ 2:58 PM

Wednesday, February 17, 2010

NFL Uncapped Year 

The NFLPA and the NFL are negotiating a new collective bargaining agreement. As you may know, the NFL decided that it would not extend the current CBA set to expire soon. A number of issues about the "uncapped year" arise, but they are for another day.

Today's issue is "How we arrived at this point in NFL labor" which just happens to be a post heading (dated February 10th) at NFL Labor News, the league's website dedicated to explaining the issues. The NFL tells us
"The principal issue is ensuring that the agreement is structured in a way that provides incentives for the clubs to invest, innovate and improve the game for the benefit of the fans over the long term."
I doubt the players would see that as the principal issue. Rather, I would guess the players would take the subtext of the following as the underlying issue:
"The NFL clubs earn very substantial revenues. But they also have very substantial expenses. The largest of these expenses is player compensation. The clubs have been obligated by the CBA to spend more than half their revenues on player salaries and benefits. In addition, the clubs must spend significant and growing amounts on stadium construction, operations and improvements to respond to the interests and demands of our fans."
In other words, the owners want a bigger slice of the revenues that professional football generates. Ownership views ALL the revenue as theirs, and only agreed to give a substantial portion of it to players because they were forced to do so. Like there would be any revenue without players. I wonder how many people pay to see the Cowboys because Jerry Jones is the owner? I am sure many Redskin fans would pay to get that franchise AWAY from Daniel Snyder.

The NFL view continues with:
The current labor agreement does not adequately recognize the costs of generating the revenues, the majority of which go to the players; nor does the agreement recognize that those costs have increased substantially — and at an ever increasing rate — in recent years.
Lest we forget, clubs do actually AGREE to player contracts. When Matthew Stafford signed his rookie contract with the Detroit Lions in 2009, worth $72 million with $41.7 million of it guaranteed, the ownership of the Lions had to sign too. The thing about contracts entered into voluntarily is that both sides can say no if the terms are not to their liking. Labor costs aren't rising all by themselves; the owners are influential participants in their increasing.

But more importantly, the logic is backwards. Players and owners negotiate a share of the revenues from the enterprise that will be paid to the players. If the revenues rise, then the dollars going to players rise too, but the percentage is fixed. Likewise, if revenues rise, the dollars going to the owners also rise but, again, the percentage is fixed. In other words, player compensation goes up because revenues go up. And the only ways player compensation goes up at an ever increasing rate are 1) if revenues do, 2) if the owners negotiated a contract that calls for the share of revenues going to players to rise each year by an ever increasing amount, or 3) both 1) and 2) hold. The CBA that the owners opted not to extend called for player shares of revenues net of benefits of 57.5% in 2008 and 2009, and player shares of 58% in 2010 and 2011. These figures mean the share going to player compensation is only rising at an ever increasing rate if revenues are doing so or if benefits are doing so. Perhaps it is benefits, on which I have no information, but I doubt that is the main issue.

This post is already getting too long. I commend the NFL Labor website to anyone interested in learning about the uncapped year and the issues at hand. Just remember this website is the NFL owners' view of the situation. Players surely will view it quite differently. As a football fan I can only hope that the two sides reach an agreement quickly and amicably so we fans don't have to go through a strike, lockout or canceled season.

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permalink posted by Dennis Coates @ 1:34 PM

Saturday, February 13, 2010

Let it snow, let it snow, let it snow 

The Room for Debate blog at the New York Times runs a series of short opinion pieces today about the lack of snow in Vancouver at the opening of the Winter Games. Here's my contribution.
Economists have shown time and time again that the rosy estimates of economic benefits put forward by sports boosters are at odds with actual economic data from cities that host mega-events like the Olympics and the Super Bowl.

In the face of that evidence, the boosters often turn to the potential “indirect” benefits to be reaped. For the Olympics, the claim is that the games can serve as a huge advertisement for the host city. But of course, the image left isn’t always positive.

The bribery scandal that surrounded Salt Lake City’s 2002 Winter Olympics bid sullied the area’s squeaky clean image. The terrorist incidents at the 1972 and 1996 Summer Olympics cast their host cities in a bad light. Even successful events may do little to promote a city. The 2005 Super Bowl in Jacksonville, Fla. went off without a hitch, but many visitors left the city with the impression that it had little to offer tourists.

Vancouver is an appealing setting. But the warm weather and last minute scramble for snow might well damage perceptions of the city as a reliable winter sports destination. (Why book a ski vacation there when snow might be unpredictable?) That would be a shame, but it wouldn’t be the first time that a big event had a negative effect on a city’s image.

Of course, yesterday's tragic death of luge athlete Nodar Kumaritashvili only further decreases the chance that people will come away with a positive image of Vancouver after the games.

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permalink posted by Victor Matheson @ 12:08 PM

Wednesday, February 10, 2010

More on Super Bowl Betting Profits 

Here's a brief follow up on my Sunday night post on how much money sports books made on Super Bowl wagering. I pointed out that, based on the volume of bets placed on the sides and overs at offshore sports books, Super Bowl betting was profitable for sports books. The Nevada Gaming Control Board put out an information release on Tuesday detailing the returns to the 182 legal sports books in Nevada. $82.7 million was bet on the Super Bowl, and Nevada sports books earned $6.8 million, for a 8.3% return.
Year Volume Won by Books Return Game Results
2010 $82,726,367 $6,857,101 8.3% Saints 31 Colts 17
2009 $81,514,748 $ 6,678,044 8.2% Steelers 27 Cards 23
2008 $92,055,833 $(2,573,103) -2.8% Giants 17 Pats 14
2007 $93,067,358 $12,930,175 13.9% Colts 29 Bears 17
The rate of return is quite variable, but the only year sports books lost money on Super Bowl betting in the past few was when the Giants upset the Patriots. The patriots were 12.5 point favorites in that game, and the bet volume was 61% on the Giants and 39% on the Patriots. The over/under was 55. Sports Illustrated reports that some books lost money because of proposition bets ("props") that paid off on the game. Prop bets typically pay long odds for rare events, and the two that hurt sports books were the two point conversion prop and the "pick six" (int returned for a TD) prop. Update: No idea why Blogger insists on adding that whitespace before the table. Grrr.

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permalink posted by Brad Humphreys @ 4:33 PM

Should the NCAA Expand Its Men's Tourney? 

The NCAA is considering expanding its men's basketball tournament from 65 to 96 teams. According to Joe Walljasper, the last time the tournament expanded was in response to the creation of the Mountain West Conference. When the MWC was created, that essentially created another automatic qualifier to the tourney, simultaneously taking away an at-large bid if the NCAA stood pat.

The NCAA didn't stand pat. Instead, it created a play-in game whose winner gets the honor of being squished by the top dog in the tourney.

One of the tradeoffs the NCAA needs to consider is the simultaneous increase and decrease in interest this would cause. The expanded tournament would redistribute the bubble, putting some teams on it and taking others off it. Is the net marginal effect on fan interest positive?

In addition, this proposal would lead to a basketball version of grade inflation. While getting an A is great for the individual tudent, it's not necessarily true if everyone gets A's (the fallacy of composition). A given grade no-longer reflects the willingness and ability of a student to do quality work. As Syndrome said in The Incredibles, when everyone's super, no-one is.

Similarly, the more teams that get into playoffs, the less interesting the playoffs become. This also has to be accounted for when thinking about the net marginal effect on overall fan interest.

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permalink posted by Phil Miller @ 11:13 AM

Baseball Players vs. Bankers 

Today in his blog, Paul Krugman blasts President Obama for comparing banking executive pay to baseball players' earnings. In a recent interview Obama stated, while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

Krugman has two main criticisms of the president's remarks. First he notes, "To my knowledge, irresponsible behavior by baseball players hasn’t brought the world economy to the brink of collapse and cost millions of innocent Americans their jobs and/or houses."

Well, maybe not baseball players, but I would direct readers to the recent post here at TSE about the role of the 2004 Olympics in the current economic crisis in Greece.

Second, Krugman writes, "These bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state."

Sure, but aren't baseball teams also guilty of tugging at the public purse-strings? The "Big Four" professional leagues in the U.S. have received well in excess of $10 billion dollars in direct and indirect subsidies for stadium construction and operation over the past two decades. As a percentage of operating revenues, sports teams are almost certainly more heavily subsidized than financial institutions.

While I tend to agree with Krugman about the banking executives, let's not let the athletes and owners off so easily.

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permalink posted by Victor Matheson @ 11:06 AM

Monday, February 08, 2010

It's all Greek to Economists 

Financial turmoil has roiled Greece over the past several weeks. There is real concern that budget deficits in that country will lead to its government defaulting on its debt and in the worst-case scenario the potential unraveling of euro currency itself. So, how did Greece find itself in such dire straights? The 2004 Olympics are a large but overlooked piece of the puzzle.

Greece's federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.

But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.

Of course, the Olympics didn't usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.

While its hard to place all of the blame for the current Greek meltdown on the Olympics, the lingering debts from the Games are undoubtedly exacerbating an already difficult situation.

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permalink posted by Victor Matheson @ 8:37 PM

The Psychology of Winning 

You can put me in the skeptic's camp when it comes to claims that a winning team boosts productivity, wages, and the local economy. But evidence matters, so I have an open mind, even a cautiously optimistic one, in the wake of the victory by the New Orleans Saints in yesterday's Super Bowl. Hooray!!

Prior to the Super Bowl, there were a number of stories in the press on this topic. At Newsweek, Molly O'Toole links to several of them. Even better, she cites the academic literature on the economic and psychological impact of winning, including the recent Davis and End paper that Brian discussed here at TSE a few days ago. It's the psychological and medical evidence that particularly intrigues me:

Prof. Len Zaichkowsky of the sports-psychology program at Boston University School of Medicine and School of Education compares the “eustress,” or good stress characteristics, of spectating to the stress-relieving benefits associated with sexual activity. The heart rate increases in a moderate, controlled way, which improves cardiovascular strength, and the accompanying endorphins highly correlate with longevity and the absence of disease. Just cheering for your team is enough to provide a positive rush, but a victory produces an even stronger boost.

A winning team is also able to boost the collective confidence of its fans, which in turn creates tangible results, says Indiana University psychology professor Edward Hirt. (That the study comes from Colts country makes no difference.) In his study of Big Ten basketball, Hirt found that many fans identify so strongly with their teams that victory and defeat become personal. On a range of tests, fans basking in their team’s reflected glory after a win felt more optimistic about their own abilities, from mastering mental puzzles to resisting romantic rejection.

This sense of confidence and camaraderie has far-reaching benefits. “In this country, we can’t even agree on a bill in Congress,” says Dr. Richard Lustberg, founder of the Web site Psychology of Sports. “But the city of New Orleans is united around the Saints—the tremendous degrees of euphoria, connectedness, this provides, all the psychological benefits … you can’t underestimate those kinds of connections.”

Those benefits include a noticeable boost in the city's health. Zaichkowsky calls this phenomenon of collective feelings associated with a team “community mood states.” He first observed the trend in anecdotal evidence in Boston, where patients’ health seemed to improve in hospitals when the Red Sox were having a successful season. According to Zaichkowsky, worldwide observations of this occurrence have carried it well beyond the anecdotal; measurements of mood fluctuations based on fans’ own reports show lower rates of distress and depression for whole groups with the success of their favorite team. The powerful impact that sports teams can have on the mood of entire cities says that for our society, it’s more than “just a game.”

Bill Plaschke's piece on the subject is also interesting. Plaschke extends this line of thought in an entertaining way to the entire nation. With the exception of Indianapolis, of course, and they'll soon get over it.

Enough of the celebrating. For the sake of these academic studies and well-wishers like me, it's time for New Orleans to roll up its sleeves and get to work!

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permalink posted by Skip Sauer @ 11:31 AM

Sunday, February 07, 2010

Super Bowl Wrap Up 

The Saints beat the Colts 31-17 for their first Super Bowl victory. It was a thrilling win, with the outcome in doubt until Tracy Porters' 74 yard "pick six" with 3:12 left in the game and the Colts driving for the potential tying score.

The other big winner in this game was sports books. Evidence shows that bettors love two things: favorites in point spread betting and the over on total betting. According to sportsbook.com, as of about 4pm Eastern on Sunday the line was the Colts -5 and the over-under was 57. Based on action at off-shore sports books, 63% of the sides betting was on the Colts, and 66% of the totals betting was on the over. The Colts didn't cover, and the 48 point total was well under 57. Given the bet-110-to-win100 payoff structure on sides and totals, and the fact that the Super Bowl is the most popular sporting event to bet on all year, that translates to a big payday for sports books.

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permalink posted by Brad Humphreys @ 10:19 PM

Friday, February 05, 2010

Does NFL Success Matter for Communities? 

Maybe only steroid discussions stirs the blood of sports economists quite like questions about the impacts of sports on communities, largely because of the tie-in with debates over public funding for stadiums. Let me be very clear on a couple of points. 1) The quantitative work in economics by people such as the TSE's Brad Humphreys and Dennis Coates casts serious doubt on the supposed tax revenue and direct economic development benefits of sports stadiums beyond the imaginations of civic "boosters." 2) The existence of broader, indirect impacts on income, wages, or intangible enjoyment by some citizens do not provide a sufficient rationale for large-scale public-financing of stadiums. Public financing requires a controversial transfer of tax dollars from non-sports lovers to sports lovers. In addition, great stadiums can be built without widespread use of public dollars as certain cities and even whole leagues (like the EPL) demonstrate.

Which leads me to ... the January issue of Economic Inquiry, in which Michael Davis and Christian End find a small positive impact on metro area wages and income from bad NFL teams getting better -- an effect that diminishes as a team becomes very good. They also identify a small positive effect of winning the Super Bowl, overlapping with the 2002 Coates and Humphreys article, while differing from the results in a 2006 article by Robert Baade and TSE's Victor Matheson. D&E check their results for several econometric issues, some of which confirm them and some don't.

The D&E study is neither the first and nor the last quantitative word on this subject. One nagging question in this and related studies centers on whether the football factors are appropriately measured. D&E include team existence, performance, stadium, playoffs, and Super Bowl as well as similar variables for other sports. However, the effects of these variables may be bound up together and figuring out how to disentangle them or look for combined effects is no simple task.

Nonetheless, the ongoing investigation of team performance and economic impact will likely be easier than the measurement of the impact of the existence or entry/exit of clubs. The D&E results, themselves, point to problems for this front -- showing an NFL presence lowers wages/incomes while an MLB presence raises them. Given the relative popularity of the two sports in recent decades, that result makes little sense.

The vigorous exchange between Carlino-Coulson and Coates-Humphreys in The Journal of UrbanEconomics regarding the C&C finding of 4 percent higher rents in cities with NFL teams further highlights difficulties of identifying whether the presence of a team matters. A major problem is lack of variation. All large cities, except LA, host teams with most entry/exit on the lower end (and not a lot). Even there, the entry and exit that occurs is not easy to disentangle from expectations. When the Oilers left Houston, did Houston residents have very low expectations of a future franchise? This expectation problem plagues "event studies" in general. Given that even a presumed sports impact is relatively small versus the influence of non-sports factors, finding a positive effect is not easy and is always subject to valid criticisms while rejections are relatively easy and have low "statistical "power" My own fiddling around with simulation work where the "true" impact is positive but these kinds of problems exist confirms the difficulty of coming to a definitive answer.

The D&E findings don't send up red flags for me. Unlike some of my colleagues in the sports econ community, my default position is that sports teams have a positive impact, at least on the psychological enjoyment of sports-loving citizens in a community. The psychology literature, partially surveyed by D&E, provides supporting evidence. A 2008 article by TSE's Stefan Szymanski using "contingent valuation" survey methods echoes this literature. Much less sexy, Coasian-style accounting work quickly backs the idea of a positive impact. For example, some estimates of fantasy football players puts the number at about 30 million who average 9 hours per week in time. At $19 per hour (average wage and benefits) for 17 weeks, this amounts to over $80 billion in time value and does not even begin to include the time spent talking about the team, reading about it, and so on (of course, it may also lower productivity on the job). Players unions have tried to capture some of this value. Whether these values should accrue to a particular team or the league as a whole is disputable.

The time spent on sports, the attention in media (outside of sports pages) to teams like Northwestern during their Rose Bowl run, the sports-related merchandise, and even the popularity of this blog all point toward sizable intangible effects for sports relative to the size of its revenues. Again, let me reemphasize, even the existence of large effects does not provide an open-and-shut case for supporting publicly-financed stadiums.

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permalink posted by Brian Goff @ 9:02 AM

Thursday, February 04, 2010

College Football Scheduling 

State legislators across the country have periodically inserted themselves into the scheduling of athletic events of their state's universities and colleges. During the period when the Southwest Conference was breaking apart, Texas legislators threatened funding of UT and Texas A&M if they split the conference. The argument at that time was that there was value to the state of games played between the Longhorns or Aggies and other Texas institutions like Rice and the University of Houston. (Craig Depken and I have a paper in the Eastern Economic Journal looking at sales tax collections in the cities that host major college football in Texas motivated in part by the assertion made by the Texas legislators.) A similar argument was made by the governor of West Virginia who wanted WVU to schedule Marshall. Likewise, a state legislator from North Carolina introduced legislation a few years ago that would have mandated that UNC and NC State schedule games against East Carolina University. Again, the supposed economic benefits to the state of such games was touted.

A state Delegate from Maryland has recently offered a bill that would require the University of Maryland to schedule games against Towson University and Morgan State University. The Baltimore Sun article reporting the bill does not indicate that economic benefits to the state are a primary motivation for the Terps to play games against the Tigers and Bears. Instead, the rationale is that the Terps, an FBS institution, schedule FCS institutions from out of state (last season they played James Madison University), so they should play in-state FCS institutions Towson and Morgan State instead, at least once every four years. The kicker is, FBS schools make big payouts to schedule FCS institutions. If the FBS school can make a big payday for an out of state FCS, why not make that big payday for an in-state FCS? In other words, the athletic department from College Park ought reasonably to subsidize in-state schools rather than out-of-state schools.

Why such subsidies and the attendant micro-managing implicit in the legislation is good public policy is not explained. We are told by the athletic director from Morgan, however, that "It would help us enhance our student support programs, invest in summer school programs and would be a key part in our budget planning." Kerr also commented that while the scheduling might be good for Morgan, "I'm not sure about legislation being necessary to accomplish it". In fact, both Towson and Morgan are already scheduled to play games against the Terps in coming years, and this scheduling occurred without the threat of the legislation.

A broader issue is what happens if Maryland passes this legislation, and then fails to schedule games against out-of-state FCS schools. Perhaps other states pass similar legislation. Then the out of state FBS schools that have scheduled Towson and Morgan will be unable or unwilling to do so. The Maryland colleges will no longer get the subsidies from FBS schools from out-of-state. Even if that does not happen, the games against the Terps reduce the number of available games for scheduling out-of-state FBS teams, and reduce the subsidies Towson and Morgan will collect from them. Whether the scheduling of games against the Terps is a net gain or a net loss for Morgan and Towson is not obvious. In any case, it is likely to have little material impact. Of course, alternate legislation could impose the restriction that Morgan and Towson must schedule games against out-of-state FBS schools, as doing so results in revenues. (Whether those revenues cover the travel and other costs is another issue.)

So, for me, legislation such as this is a) likely to have little benefit or cost, and b) the best people to make decisions in the best interests of the institutions are the people leading those institutions. Regarding the first point, if there is little benefit or cost, it is hard to imagine that state legislators don't have better things to do with their time than debate such "issues". Regarding the second, it is clear that adding constraints cannot result in an improved ability to attain the institutional goals. Reducing the ability of the institutions to find scheduling arrangements that are the best for them by limiting their options will, at best, have no effect and at worst make matters worse.

permalink posted by Dennis Coates @ 7:47 AM

Wednesday, February 03, 2010

"Own the Podium"? Why bother? 

The 2010Winter Olympics will soon begin in Vancouvre, BC, and environs. In the media build-up that is taking place in Canada, we are beginning to hear more about a programme called "own the podium", embodying the goal of some politicians, athletes, and bureaucrats for Canadian athletes to win more gold medals than the athletes of any other country.

Alan Adamson is distressed by this programme:
Why should my taxes pay to support aspiring athletes? This simply seems absurd to me. We have an idiotic program called 'Own the Podium' - apparently the government's goal is for Canada to score magnificently at the Olympics. This for a country of 30 million against countries with a lot more people, and also some, like Norway and Austria, with a lot fewer people, but a lot more fundamental and historical excellence than Canada has ever managed. ...

What is the point? A gold medal is useless to me unless I win it, and if I want it, I can decide to train for it. There are real rewards, and lots of people with crazy dreams and a poorly developed sense of reality will train to win gold medals. But why should I pay?

I think we need to change 'Own the Podium' to 'Let the Podium Go to Those Who Care Enough to Spend Their Own Money and Time and not Take away any of Mine'. That is of course too simple for the CBC or likely for our government.

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permalink posted by EclectEcon @ 7:43 PM

Monday, February 01, 2010

Football vs. Football 

While the United States is focused this week on the Super Bowl, a report released today by the consulting firm Initiative states that soccer's Champions' League Final attracted a higher global television audience than the Super Bowl last year. 109 million viewers watched the game in its entirety, eclipsing for the first time the 106 million fans who watched the Super Bowl . Given the worldwide popularity of the game of soccer, the report also noted that the Champions' League Final also had substantially more room to grow.

While America's premier event may have lost its perch atop the worldwide television ratings, the Super Bowl still dominates its competition when it comes to inflated economic impact statements. The NFL claims the 2007 Super Bowl generated $463 million in economic impact for the South Florida region while the 2008 Super Bowl produced over $500 million for Arizona. By contrast, this compares to a mere 35 million euro ($49 million) windfall for Moscow in 2008 and 45 million euro ($63 million) for Rome in 2009.

Of course, the Europeans aren't trying as hard to justify large subsidies for sports franchises. Either that or American economists consultants are just more talented at making stuff up than their European counterparts.

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permalink posted by Victor Matheson @ 3:19 PM