Monday, February 08, 2010

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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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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Monday, August 31, 2009

Mixed Grill 

The Dallas Morning News reports that the Cowboys "stand to make as much as $4.2 million from the team's new Texas Lottery scratch-off tickets." In May, the NFL dropped a ban on team sponsorship of lotteries, and about half the teams are poised to capitalize this season.

I've puzzled over the NFL's motive in its recent lawsuit to stop Delaware from offering point spread wagers (so far successful, see Brad's post below). This news on the Texas Lottery strengthens my suspicion that the motive behind the Delaware suit is 100% pecuniary. How can they walk in to court with a straight face?

Looking ahead to the NFL and NBA seasons, here are two pieces on the challenge of selling tickets in the current economic environment. NFL teams with strong traditions like the Bears and Broncos (and one suspects, lengthy waiting lists for season tickets) will play before sellouts at home, as usual. But new wrinkles on promotions are being tried in Jacksonville, and across the NBA. The wackiest one: "In Philadelphia, the 76ers are running a Back 2 School promotion: four tickets to the home opener, two backpacks, two T-shirts and two hats for $75." Ay caramba! I'm sure the seats suck, but that's a lot of schwag!

Finally, on a different note, John Tamny has a piece at Forbes on the collapse in the baseball card market. Remember those card shops that sprang up in shopping malls 15 to 20 years ago? The failure rate was enormous: of "5,000 card shops in the early '90s, according to Sports Collector's Digest, there are only 500 now." Tamny points out that the card market was undone by entry: at the peak, "Fleer, Donruss, Score, Stadium Club and Upper Deck joined more established card company Topps in pursuit of large gains." What were once collectibles became commonplace. No matter what marketing spin the card companies could put on a Derek Jeter or Greg Jefferies card, ultimately the flood of cards undermined the essential element -- scarcity -- on which a market for collectibles is based. The card market might come back in a couple of decades, but I'm not betting on it.

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Thursday, August 06, 2009

Zimbalist on "The Sports Recession" 

Andrew Zimbalist is interviewed in The New Yorker. Most of the discussion is about the impact of the economic crash on professional sports -- ticket sales, revenue sources, labor relations, and fans -- but the conversation is wide-ranging and certainly worth a read. Here's a snip:
What kind of effects are we seeing in Major League Baseball?

Attendance is down about five per cent this year. That news comes on the end of a string of thirteen years where attendance went up and revenue went up at a clip of eleven per cent per year. That was the average annual growth of revenue in baseball since the strike of 1994-95. Now that growth has stopped, and we’re probably seeing a reversal.

At Yankee Stadium and Citi Field they have less capacity than they did at the old stadiums, and they’re still not selling out. A lot of sponsors have dropped out. Certainly the automobile sponsors are disappearing in baseball, as they have in other sports. Of course, the sport that has been hit most acutely by the recession is NASCAR—they depend most heavily on the automobile industry.

Did any of the leagues anticipate an end to the boom, or did they just assume that salaries and sponsorships would keep on rising? Did any league prepare itself well for the collapse?

Sort of. Other than Nouriel Roubini at N.Y.U., not many people saw a collapse coming. People in the financial sector certainly didn’t see a collapse coming. You’d hardly expect David Stern and Bud Selig and Roger Goodell and so on to anticipate something that the country’s leading economists and finance gurus didn’t anticipate.

But they did make some moves when they saw instances where the economic problems were creeping up on us. The N.B.A. laid off ten per cent of its front office, and the N.F.L. did something very similar. The N.B.A. is projecting lower basketball-related income going forward, which should, if it holds up, lower the salary cap. Baseball teams have heavily discounted tickets and have increased the number of comps that they’re giving out to the community.

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Thursday, June 11, 2009

2009 ticket demand in Chicago 

From UC's Casey Mulligan:
Gloomy Economic Indicators in Chicago

Two real time crude sports-based indicators of economic activity in Chicago look bad:

(1) My ebay auction for 4 tickets to the (usually wildly popular) Sox @ Cubs game next week has zero bids, even though the price starts at face value.

(2) After my begging them for 10 years in vain to have my season ticket location improved, the Chicago Bulls asked me multiple times today if I would like some better seats next year. I am thrilled to be asked (I said "yes"), but these circumstance must indicate that ticket demand is seriously depressed.
That's the entire post, but do go to Casey's blog to see what he has to say about Keynes.

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Tuesday, March 03, 2009

The Sports Page Comes to the WSJ 

The WSJ unveiled its sports page today. The lead article is an interesting one on incentives, or the lack of incentives in today's NBA:
Beyond the Los Angeles Lakers, Boston Celtics, Cleveland Cavaliers and Orlando Magic -- all of whom have won at least 70% of their games -- only the San Antonio Spurs have better than a 10% chance to win the NBA title, according to lines offered by Las Vegas oddsmakers. Four teams are on track to lose at least 75% of their games, which hasn't happened in 11 years.

For the first time in NBA history, team owners, executives, and fans in numerous markets say they have resigned themselves to the idea that their teams are not going to be competitive this season and that, given the state of the economy, they could not make the sorts of expensive moves that would help them improve. "We all want to win, but we have to be aware of the uncertainty of our future revenue," said Dallas Mavericks owner Mark Cuban.

Beyond the obvious disappointment for fans, what's most troubling about this situation is that for the first time in the long history of North American professional sports, the majority of the teams in one league have no financial incentive to improve. Most will be better off financially if they do nothing, and in many cases, will fare even better if they make personnel moves that are certain to make them worse.

Adding to the trouble is the fact that next year, an unprecedented number of the league's best and most desirable players will become free agents -- a group that includes young superstars LeBron James, Dwyane Wade, Chris Bosh and Amar'e Stoudamire.

Wake me up when the Finals reach game 5....

More seriously, I take issue with the perspective of the article. College football is interesting and attracts fans year after year, despite that fact that 90% of the teams that participate have a minuscule chance at winning the BCS Championship. No doubt, the article is correct in that the financial incentive to improve has diminished. But the first order impact is that the financial cost of competing will decline. The sporting aspect of training, strategizing, and improving is no less diminished by the financial crisis. To be sure, general managers must be wary of the conditions in the aggregate economy -- the article is correct on that point. But the compelling aspect of sport lies not in player contracts, but in competition on the court. That should not change, and teams that recognize this better than others will increase their chances of improving, and perhaps competing for the title, this season and next.

As for the WSJ's addition of a sports page, I'm intrigued. But sports sections have been a staple of local newspapers for decades, and they haven't saved newspapers from financial failure. My hunch is that new media competition in sports has been as strong as in any dimension of the news business. Indeed, the loss of newspaper circulation may be disproportionately due to ESPN.com, MLB.com, Tigernet, etc. Having said that, the Journal has a different take on things, and the new sports section is certainly welcome in this corner of fandom!

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Monday, February 23, 2009

Three soccer clubs in trouble 

In La Liga, recent champion Valencia has not paid its players this month. The players were touted as "keeping their focus" on playing, despite the financial condition of the club. But eight players were booked and one sent off in yesterday's 1-1 draw with Deportivo, which is not an encouraging sign.

At least they showed up. In England, players from Weymouth in the Blue Square Premier League refused to play on Saturday. And in Uruguay, Villa Espanola's players didn't even get the chance to strike, as the league expelled the club for failing to pay wages to former players. The tournament will go on with the remaining 15 teams, with Villa Espanola relegated to a lower division for next season. These clubs lack the economic scale of Valencia, but the stories provide more evidence that the weak economy is taking its toll on commercial sport.

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On sports and the economy 

Ownership structure in Japan is changing, as corporations continue to abandon the wholly owned subsidiary model of a sports club.

Royal Bank of Scotland, now a ward of the British government, has 200 million pounds of outstanding sports sponsorships, including a commitment made just last month to sponsor the Six Nations Rugby Tournament through 2013. I wonder what Chris Dodd would have to say about that, if RBS were an American Company?

Staying in Connecticut, the reporter who challenged UCONN coach Jim Calhoun about his salary explains himself here. He thinks the governor should get paid more than the basketball coach in his state. It's fine with me if he wants to waste Connecticut's taxpayer money on the governor.

Cost-cutting in F1.

Cost-cutting in Vermont, where the university is scrapping the baseball program.

A pitcher in the Marlins' organization gives an educated take on countercyclical policy. Burke Badenhop graduated from Bowling Green with a degree in Economics, earning a 3.94 GPA. He'll probably keep mum about the following quote, from Professor Tim Fuerst: "One issue was whether it makes sense to use state money for new stadiums, and I remember Burke was skeptical about using public money,'' Fuerst said with a laugh. "You better not tell that to his employers!''

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Sunday, February 01, 2009

Super Bowl Economics 

University of South Florida Economist Phil Porter is referred to here as the "Dr. Doom of sports economics," presumably for throwing cold water on economic impact claims surrounding the Super Bowl. That's what you get for telling it like it is, even if your abode doesn't sport ... unusual wall hangings. Some figures of the mundane variety (and not all that pretty) are here.

In spite of the gloomy reports on the economy, NBC is reporting that advertising revenue will hit a record $206 million for the game. This despite the fact that American car companies will be absent from the ad lineup. Frankly, I prefer the VW ads to the ones for Ford Trucks, and am somewhat heartened that my bailout contribution won't occupy my TV screen during the Super Bowl broadcast.

This report has a several interesting anecdotes on economic impact in Tampa. Most interesting to me was the following:

The Federal Aviation Administration is expecting about 1,000 more small private planes and bigger corporate jets than usual to use Tampa-area airports over the weekend - about the same increase that Phoenix saw for last year's game.

But this year some of those who favor deluxe private air travel may be staying home. Nathan McKelvey, chief executive officer of Jets.com, which books charter flights on private aircraft, said last year he booked 55 trips to the Super Bowl - many of them in premium aircraft with seating ranging from six to 12. This time around, McKelvey has booked 18 trips.

With fewer luxury planes in the sky, there also will be fewer courtesy vehicles - a mix of Cadillacs and Chevys - on the ground in Tampa. That's a reflection of the crunch at General Motors, which cut 14,000 jobs last year.

GM, which recently received $9.4 billion and is scheduled to receive another $4 billion in government bailout money, says it scaled back on the fleet of courtesy cars it makes available to the NFL for the weekend and it decided not to buy a costly in-game ad this year.

"We are cutting the courtesy fleet in half and providing the NFL nearly 200 vehicles," said GM spokeswoman Kelly Cusinato. She also said that although in the past GM hosted a dealer party in conjunction with the Super Bowl, this year "we are not hosting any dealer meetings and no GM executives are attending the game."

That seems prudent. Maybe Donald Fehr should take a lesson from GM rather than John Thain. It's only one quote, but Dave Zirin's interesting piece on sports & the economy quotes the MLBPA Chief as saying: "Historically, baseball has been recession resistant." Fehr could be posturing for the purpose of collective bargaining, or he could be ignorant. Or he could be referring to real output -- i.e. attendance and viewing in general, in the presence of lower ticket prices and player wages. But I don't think so. The 22% drop (annualized) in consumer purchases of durable goods last quarter, along with data from earlier eras, suggest to me that "resistance" could be an ill-timed strategy for baseball players.

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Thursday, January 22, 2009

Web Q&A on Sports and the Economic Crisis 

I just wanted to let TSE readers know that I am doing a live web Q&A on sports and the economic crisis on the Globe and Mail website at 1pm eastern today.

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Monday, January 19, 2009

Notes on the economy & sports 

Nascar tracks are cutting prices and being more creative with discount packages, from coast to coast. This story at USAToday -- "Tough economy fuels creative ticket plans" -- has a list.

The city of Vancouver is picking up the tab for financing the Olympic Village, after credit was cut off from the developers last fall. (Earlier TSE commentary is here & here.) But the city's charter had to be changed in an emergency legislative session in order to avoid a public referendum. The political maneuvering behind the charter change is described as bitter, with the government operating in a "culture of secrecy and government arrogance." Ah the Olympics, we are all one big happy family, eh?

Wagering on the Super Bowl in Nevada fell in 2008 to $92.1 million from $94.5 million in 2007, despite a compelling Giants-Patriots matchup. Will bettors make the trip to Vegas to party and get a big bet down for the Cards vs. Steelers? My money is on another decline in Super Bowl wagering, in the 5-10% range. The Steelers are favored by a touchdown.

Finally, Andrea Adelson has a good story on sports and the economy in the Orlando Sentinel. She lists an array of "economic indicators" (including price cuts for tickets on the backstretch at Daytona, from $99 to $55), and discusses the tradeoff that franchises face between chasing corporate dollars and maintaining their appeal to the average fan. She includes a quote from yours truly that fits the facts she describes rather well: "Hard times in the economy are hard times for sports ... the notion that sports are recession-proof is just a myth."

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