Friday, January 08, 2010

"Blogometrics" - Ranking the Econ Blogs 

A little shameless self-promotion here. Franklin Mixon and Kamal Upadhyaya have ranked economics blogs in this Easter Economic Journal article entitled "Blogometrics." The abstract:
This study gathers information on a wide array of economics bloggers and blogs in order to develop a ranking of economics bloggers that is based on citations to their academic research. This ranking is used in an iterative process that next presents a ranking of economics blogs that is based on the ranking of economics bloggers, and finally a ranking of economics departments that is based on the ranking of economics blogs. The ranking of blogs included in this study is positively correlated with an external ranking based on their productivity (popularity), whereas the department ranking presented here comports quite well with department rankings in Coupé (2003) and Roessler (2004) that are developed with more traditional measures, such as the impact of the scholarship of an economics department's faculty.
The Sports Economist ranks #21 out of 40 economics blogs. You might remember that TSE was named an honorable mention econ blog in a list of top 25 econ blogs by The Wall Street Journal this past year.

Congrats and beers to all my co-bloggers here at TSE.


Friday, May 08, 2009

Gerald W. Scully: A Note of Appreciation 

As Phil and others around the econ blogs have noted, Gerald Scully has passed away. He is known to us primarily as a pioneer in sports economics, but as John Goodman notes, he made significant contributions to a number of fields. His work in public economics is particularly insightful. Indeed, Google Scholar lists his 1988 JPE paper, "The Institutional Framework and Economic Development" at the top, with 406 citations, besting his 1974 AER classic, "Pay and Performance in Major League Baseball," at 302. But it is the latter paper that is worth celebrating here. Although rudimentary in its method by today's standard, it was an eye-opening analysis with a staggering conclusion: that major league baseball players of that era were paid a small fraction of their marginal revenue product, on the order of 1/5 or less.

My colleague Bill Dougan once told me that he regarded "Pay and Performance" as one of the best pieces of economic scholarship in the last quarter-century, something that I repeat to my students in sports economics classes to this day. Note that we are speaking of economic scholarship, and not just scholarship in the economics of sports. Scully's 1974 paper is evidence that the study of economics in the context of sport can be important, and make a significant contribution to the discipline as a whole.

What made "Pay and Performance" special, you ask? First, it was innovative. It was an early example of employing data from sport to test economic theory, in this case the theory of monopsony. The paper was also very clever. Scully observed that the reserve clause created conditions of monopsony in the baseball players' labor market. Economic theory states that monopsony depresses wages below marginal revenue product, but if so, how much? Scully came up with a simple method to estimate the MRP of pitchers and hitters, and compared this estimate with their wages. Wages were well below Scully's estimate of MRP.

The magnitude of the exploitation generated by the reserve clause -- 80% or so -- is a jaw-dropping figure. This result, combined with the imagination and execution of the analysis, warranted the article's publication in the American Economic Review. But it is what happened next that fortuitously turned Scully's paper into an example of the kind of scholarship that all economists should seek to emulate. Scully's article was published in 1974, the year that Marvin Miller's efforts began to shake the foundation upon which the reserve system was built. The development of free agency in baseball meant that Scully's estimate would be put to the test, because a monopsony labor market would be replaced with competitive bidding for those players. As Rodney Fort subsequently showed, salaries soared for the "first family of free agents", in many cases increasing by a factor of four or more, as Scully's estimates implied.

Sports history had thus subjected Scully's model to a stern test, which it passed with flying colors. It is not common for economic theory and evidence to produce an estimated effect that is so clear and so large as was Scully's (for example, we are still arguing about the size of fiscal multipliers seventy-odd years after Keynes). It is even less common for such an estimate to be tested by events so promptly and directly, and in addition to have these events support the author's work so convincingly.

"Pay and Performance in Major League Baseball" will long be remembered for these reasons. So tonight I will raise a glass and toast the seminal contributions and insights of Gerald Scully. Here's to you, Jerry.

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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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Monday, December 15, 2008

Sayonara Arena Football 

At least for 2009. As posted in the comments, here is the story.

My take (as I've said before): investments in new forms of commercial sport will see both fan interest and financial backing dry up, until some sense of order returns to our balance sheets.

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Wednesday, December 10, 2008

Sports Pork 

Oink, oink. Sports pork is adequately represented in this list in my opinion:
On Monday, the U.S. Conference of Mayors went to Capitol Hill to ask for a handout, or as they put it: "We are reporting that in 427 cities of all sizes in all regions of the country, a total of 11,391 infrastructure projects are 'ready to go.' These projects represent an infrastructure investment of $73,163,299,303 that would be capable of producing an estimated 847,641 jobs in 2009 and 2010."

A wish list that is 11,391 projects strong! What vital infrastructure projects would cash-strapped taxpayers get for their $73 billion? Here's a sampling:

- Hercules, Calif., wants $2.5 million in hard-earned taxpayer money for a "Waterfront Duck Pond Park," and another $200,000 for a dog park.

- Euless, Texas, wants $15 million for the Midway Park Family Life Center, which, you'll be glad to note, includes both a senior center and aquatic facility.

- Natchez, Miss., "needs" a new $9.5 million sports complex "which would allow our city to host major regional and national sports tournaments."

- Henderson, Nev., is asking for $20 million to help "develop a 60 acre multi-use sports field complex."

- Brigham City, Utah, wants $15 million for a sports park.

- Arlington, Texas, needs $4 million to expand its tennis center.

- Miami, Fla., needs $15 million for a "Moore Park Community Center, Tennis Center and Day Care" facility. The city is also desperate for $3.6 million to build a covered basketball court and a new tennis court at Robert King High Park. Then there's the $94 million Orange Bowl parking garage you are being asked to pay for.

- La Porte, Texas, wants $7.6 million for a "Life Style Center." And Oakland, Calif., needs $1 million for Fruitvale Latino Cultural and Performing Arts Center.

And you thought infrastructure investment meant roads, bridges and schools. It is clear that any infrastructure stimulus money given to the country's mayors will lead to thousands of tennis centers to nowhere. News alert for mayors: We are officially in a recession. American families have to get by with less, and so do American cities.
That's the view of Robert Poole, who goes on to describe the opportunity costs of these plans. His bottom line:
It was very nice of the country's mayors to hand taxpayers a wish list worth $73 billion. But before taxpayers give them a dime, let's see the mayors rank those 11,391 goodies -- I mean "infrastructure" projects -- based on effectiveness and potential return on investment for taxpayers.
"Stimulus shouldn't be an excuse for pork" is the title. I'm not tickled about bringing up the dark side of the sports business, but there it is, brother.


Wednesday, December 03, 2008

Houston Comets Fold 

A sad sign of the times, I think. Richard Sandomir reports:
Cynthia Cooper-Dyke cannot fathom it: the Houston Comets, the team she guided to the W.N.B.A.’s first four championships, were shuttered Tuesday by the league, which scheduled a dispersal draft of their players, except the free agents, for Monday.

...The league took control of the Comets over the summer from their underfinanced owner, Hilton Koch, a furniture retailer who acquired the team [ed: for $10 million] in early 2007.
But they could not strike a deal with the one interested local investor. Sandomir quotes WNBA president Donna Orender as saying "In another time, would there have been double the amount of interested investors? I don’t know." That's the big question: can the marketplace support the league once the economy gets healthy? From $10 million to zero in value for a speculative asset is not unheard of in the current environment, so there may be better days ahead for the WNBA.

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Friday, October 24, 2008

More news on the sports economy watch 

Sunil Gulati, Columbia economist and president of US Soccer:
Look, economic downturns have negative effects, full stop. For people to say sports is somehow recession proof, that's basically nonsense.
Gong!! I wonder where this term "recession proof" and its relation to sports originated anyway. Anyone know? Here is more from Gulati on the downturn and US soccer.

In the land of the giants (NFL & EPL), viewing is stable, but broadcast revenue is under pressure:

At a conference on the globalization of sports held ahead of Sunday's NFL game in London, Goodell also reiterated that the league will face challenges in the current economic climate, but that the NFL is "incredibly strong" and should weather the downturn relatively unscathed.

However, he said network partners are already reporting that advertisers are pulling back, both on a local and national level.

"The sales market is different than it was even several weeks ago," Goodell said during a panel discussion with Richard Scudamore, the chief executive of the English Premier League. "We see it primarily on a local level, which I think is through a large extent a reflection of what is happening in the automobile industry. But it has now in the recent weeks gone to the national level. It's had an impact. The fortunate thing is that it hasn't had an impact on our viewership."

As in the classic case, price adjustment in the face of an aggregate downturn is key. This story reports adjustments from St. Louis and elsewhere:
The Cardinals cited the uncertain economy this week as a reason for freezing prices on 70 percent of their season-ticket packages. The team is prepared for attendance to be below last season's 3.4 million.

The Blues, who last season opened unsold luxury boxes to noncorporate buyers for individual games, are finalizing a new ticket program -- described by a team official as "creative" -- to meet their goal of 30 sellouts.
If prices were "right" last season, is freezing them the right move? Moreover, the language suggests price increases for 30% of the Cards' tickets. Perhaps last year they were underpriced?


Monday, October 20, 2008

Sports & the economy 

An informative AP wire story on current and past troubles in the market for stadium sponsors, with quotes from Depken & Zimbalist.

Darren Rovell is watching the Jets' auction of PSLs, and thinks the results imply they'll have to cut some ticket prices. Either that, or 50 yard line PSLs are at steal at $14,300.

On the humorous side, Joe Queenan argues the case for a "skybox bailout," and USAToday's Del Jones seeks business advice from MLB umpire Randy Marsh. An odd choice Del, since Randy is a union mug!


Wednesday, October 08, 2008

Spillovers from finance into sports 

From the Independent (U.K.):
Sport feeling the pinch

By Rich Jones, PA
Wednesday, 8 October 2008

Sport has become the latest victim of the credit crunch as a wave of financial turmoil threatens to throw some of the world's biggest names into crisis.

Football and Formula One look most in danger as global economic problems deepen, with leading figures in both sports yesterday voicing concern that the lavish spending of recent years may no longer be sustainable.

On a day when Football Association chairman Lord Triesman claimed debts totalling £3billion could leave some English clubs in "terrible danger", West Ham were forced to play down concerns over their financial future.

The nationalisation of Icelandic bank Landsbanki left Hammers chairman Bjorgolfur Gudmundsson with a major shareholding which at a stroke became almost worthless.

Already talk has turned to the effect Gudmundsson's problems may have on manager Gianfranco Zola's plans as the club looks to reduce costs, although chief executive Scott Duxbury was last night confident that the disruption would be minimal.

He said: "The position of Landsbanki has absolutely no effect on West Ham United and Mr Gudmundsson's ownership of the club.

"Mr Gudmundsson is an investor with a large portfolio, of which Landsbanki was just part. He remains as committed as ever to West Ham United and is not looking to sell the club."

The Hammers also lost their shirt sponsor when travel company XL folded, owing the Londoners £2m.

West Ham are far from the only Barclays Premier League club suffering as a result of the economic downturn.

Liverpool chief executive Rick Parry admitted at the weekend that the Merseysiders' new stadium would be delayed until credit markets improve.
Finance for Liverpool's new stadium has been iffy since last fall, and was one of the early signs to your bloggerspondent that the credit crunch was not-trivial and having an impact on the "real" economy.

There's more to the story. By the sound of it,Formula One Racing may be in serious trouble.


Monday, October 06, 2008

Sports econ potpurri 

NFL ticket prices are up this year, in some venues. The average price is 8% higher.

But the bloom may be off the rose. Along with other bits of anecdotal evidence, David Moulton reports that 10,000 seats are covered with a tarp in Jacksonville. Moreover:
Something strange happened on our radio show this week. We had Miami Dolphins tickets to today’s game against the San Diego Chargers to give away.

No one wanted them! Free tickets to an NFL game and they had less value than a station T-shirt. 2007 Dolphins tickets, I could totally understand, but these guys just drilled the Patriots.

Now, this moment could have been a fluke, but I don’t think so. I think the sports landscape is changing.
The question is whether the change is cyclical or permanent. Here's more on the cyclical worries for franchises.

At Time Magazine, Sean Gregory discusses the new "Jock Market" at, where you can trade shares in players. Problem is, there is no intrinsic relation between the value of a share at OneSeason and player performance, other than what traders think of it. I refer to it as "the ultimate beauty contest" and state that I expect the market to collapse. Which would be too bad, because the market is based on real money transactions and the price changes would be interesting to study. Stocks and real estate are passe', so perhaps OneSeason is the next bubble ;)

Finally, anyone who has read this far must be a TSE junkie, so here's the obligatory stadium subsidy piece. This installment has facts and figs on the new stadium for Real Salt Lake, which will have its debut on Thursday. The pics are pretty (pdf).

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Monday, September 29, 2008

The BCS and bowl matchups 

Al Roth's foray into sports economics, "Unraveling Yields Inefficient Matchings: Evidence from Post-Season College Football Bowls" is pretty interesting (pdf). Roth is perhaps the foremost economist interested in the process of match-making, and college bowl games provide an interesting set of matchups to study.

While every fan with a laptop or a mike piles on the BCS system of matching teams for every conceivable sin, Roth and his co-authors do what economists are paid to do: examine the data in light of a) relevant theory and b) a potentially important policy change: the implementation of the BCS system in 1992. Roth et al. find that the matchups improved. Roth is more interested in the efficiency of kidney exchanges, doctor-hospital matches etc., but in the bowl system study, he and his colleagues provide "as far as we know, the first direct evidence and measurement of the inefficiency due to early transaction times in a naturally occurring market."

That's a good example of using the availability of sports data to attack an economic question that might be less tractable elsewhere. But the results are also relevant to the debate over how the bowl system should be structured. Here is Roth's interview on the topic at Working Knowledge, a daily newsletter from the Harvard Business School. Roth's answer to the opening question suggests he has no dog in the BCS fight.
Q: "What led you to research football teams? Are you a sports fan?"

A: "I'm a matching fan."
While Roth agrees with most commentators (presumably) that "the current organization of bowl games leaves much to be desired" his anecdotes and analysis are informative and cut to the heart of the problem:
Q: What particular changes do you see in the design of matching?

A: For football bowls, the Bowl Championship Series helps to delay bowl matchups until the completion of all the games in the regular season, so that the top teams can more often be matched with each other in a championship game.
We all have our gripes with the BCS, but when it comes to matchups, it really is as simple as that.

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Wednesday, September 24, 2008

NFL Team Valuations & the Corporate Stadium 

Forbes has their annual valuation of NFL franchises up.***

Some of the interesting bits:

--The average NFL team is valued at $1 billion, up 8% from last year and 66% from five years ago. Dallas is worth the most, at $1.6 billion. Minnesota props up the valuation table at $839 million.

--Each of the top ten teams is playing in a modern stadium, or will be by 2010. Minnesota, Oakland, Atlanta, and Buffalo are not, and are listed as likely "to be sold or moved to a new city."

--The NY Giants and Jets are each "expected to net an additional $125 million" in annual revenue from their new (shared) stadium.

--TV revenues "no longer cover player expenses. Team owners now dig into cash from luxury suites and stadium advertising to pay players." (Poor Jerry Jones!)

The story oddly fails to consider the implications of a strategic focus of the NFL and pro sports in general on corporate money. On this issue, Bob Ryan has an interesting "Don Quixote rant", written in the context of the new Yankee Stadium: "You do not matter. The Yankees are only interested in the kind of people who will populate the luxury suites and who will pay somewhere between $500 and $2,500 per person, per game, to sit in the first five to eight rows of the new ballpark."

Ryan's rant and associated quotes from the Yankee marketing effort are quite eye-opening, but the big issue is how the focus on corporate money will work out given the meltdown in the financial sector. This Forbes story - How Wall Street's Woes May Whack Sports - states that one quarter of the $10 billion in annual corporate sponsorship in sports comes from the financial services industry. That's not chump change. My hunch is that the market price of luxury suites will be moving up and down with the value of CDOs for at least the near future.

***(Here is the Forbes story, with lots of links to stats, but sundry annoyances too. Here is a cleaner presentation of the story at Yahoo Sports.)

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Wednesday, June 25, 2008

Two good reads 

Gregg Bell on the Sonics trial. The Sonics are making the argument that Seattle pols have been playing dirty pool, which would not be surprising. As I've said before, there are no angels in the stadium game.

Andrew Leigh, an Australian economist, opines on the economics of sports. He links a paper by Goodall, Kahn, and Oswald, which studies the impact of coaching changes in the NBA. Leigh's commentary:
They find a large positive impact: if a team replaces a coach who never played NBA basketball with one who played many years of NBA All-Star basketball, it can expect to move six places up the ladder.

One possible explanation is that a coach cannot push top players to their limit unless he has competed at their level. Or perhaps effective NBA coaching involves a considerable degree of ego-management, and only a former champion can win the players’ respect. Either way, the results have important implications for any high-performance workplace where the CEO must manage a large number of experts. From law to technology to universities, could it be that the best boss is a former all-star?
The paper seems worth putting in your stack of things to read. Leigh has a blog too, which looks interesting.

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Wednesday, May 14, 2008

Sport as a window on society 

The Uefa Cup Final will be played today, between Glasgow Rangers and Zenit St. Petersburg, of Russia. The occasion reminds me of Frankin Foer's book, How Soccer Explains the World.

I will root for Rangers, who could complete a remarkable season by winning three trophies in the next eleven days, with this year's CIS Cup already in the bag. But Rangers are emblematic of sectarian violence, as discussed by Foer, and I won't be singing along with chants against the pope tonight.

Zenit are favorites to win their first European trophy. A Zenit victory would symbolize the rise of the Russian economy, and the rise of Russian football as well. Zenit, as well as Russian football, are emerging from relative obscurity. How far can they - and the economy itself - go? There are some eye-opening facts about Zenit in this story from the BBC, including the fact that Zenit are owned by Gazprom, now the fourth largest company in the world. Gazprom has been pouring money into Zenit - making Zenit the Russian version of Chelsea, who are also lavishly funded by Russian oil wealth.

But the most amazing, and disturbing thing in the article is the following discussion about race. Zenit is an all-white team, by design according to their coach Dick Advocaat:
Unfortunately the club also have a hard core of racists among their supporters. Zenit are the only club in Russia never to have signed a black player, and their fans were accused of racist taunts during the Uefa Cup win over Marseille earlier this season.

Marseille defender Ronald Zubar said: "They threw a banana at us and made monkey sounds."

Manager Dick Advocaat has even admitted that the fans' attitude has affected his transfer policy.

"The problem is our fans," he says. "I would be happy to sign anyone but the fans don't like black players.

"I don't understand how they could pay so much attention to skin colour. For me, there's no difference between white, black or red.

"But the fans are the most important thing Zenit have. That's why, in future, I have to ask them outright how they'll react if we sign a dark-skinned player.

"If the fans don't agree with me, I won't do it. I won't buy a player who won't be accepted by the fans."
Customer discrimination is a concept that dates back to Gary Becker. The fans' behavior in this case is awful, but not without precedent in Europe (hence the kick racism out of football campaign). What is quite remarkable though, is the explicit policy statement of customer discrimination by Zenit's manager. I've not come across anything quite like it.

Ultimately, virulent discrimination is a limiting factor for any football club, indeed any economy. Perhaps Dick Advocaat should be channeling Bear Bryant, who learned that lesson long ago. Bryant integrated the Alabama football team after getting whipped on the field by black players from Southern Cal. Although some argue that he was late to the party, better late than never.

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Friday, February 29, 2008

More on Golf and the Economy 

Me speaking on Las Vegas NPR, with the AP's award winning writer, Tim Dahlberg, on the decline of golf (lengthy discussion). I blame it on the gals, in part, for reasons pooh poohed in Phil's post below. I think the sustained increase in women's labor force participation over the past several decades affects intra-household bargaining in a way that keeps the guys off the course. If golf could jettison its image of a male bastion of privilege (hello, Augusta!) and make the clubhouse and course more lady-friendly, that might help. Hot babes in the LPGA like Natalie et al. might, in an ironic way, help bring that about.

On the economy in general, I spoke with Sportz Undercover's Jared Zwerling also this week (interview here). I argue that the economic slowdown will have a minor and perhaps negligible impact on the sports industry. This reflects my assumption that the downturn is temporary and the long term trend, which is a strong positive for the sports markets, will be maintained.

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Thursday, October 18, 2007

Why Study Sports Economics? 

I am a bit late to the party on this. About two weeks ago, Justin Wolfers wrote his thoughts on why people study sports economics. Summarizing Wolfers' key points:

  1. Sports provide unique opportunities to test economic theories.
  2. Sports shapes broader national debates.
  3. Professional sports are an important part of the economy.
  4. Sports participation is an important activity.
  5. Sports provides a useful teaching metaphor.
  6. Doing research on sports is fun.

JC Bradbury at Sabernomics adds one of the primary reasons to study sports:

I agree with all of these, but I think he is missing one. Sports markets are themselves unique and interesting. For example, Simon Rottenberg’s curiosity about baseball’s reserve clause—how it affected the allocation of talent across a league—led him to discover (nearly) the Coase Theorem before Ronald Coase. Mohamed El-Hodiri and James Quirk were the first model the unique structure economic structure of sports leagues, which I think economists still do not fully understand. (There are other examples, but I am on my way to a meeting.)

Add to that Walter Neale's 1964 QJE paper on the "peculiar" economics of sports. Neale noted that the best position for a typical firm to have is monopoly. In sports, a monopoly spells disaster (who will you play????). That peculiarity is interesting to think about and study.

Sports leagues are interesting per-se because they are, essentially, cooperative arrangements that blend single-entity styled cooperation with cartel-styled cooperation with a dash of economies-of-scale cooperation (for example, having the league handle team websites, as in MLB, to standardize their development and to avoid duplicating costs). These cooperative arrangements are also interesting to think about and study.

The labor market for talent is also interesting. Modeling the market as a competitive labor market gives us some insights on wages using a simple and familiar model, but it has its shortcomings. One of the shortcomings deals with the question of "does all the available talent play in the league?" In leagues such as the Bundseliga or the English Premier League, as I understand them, a lot of top-notch talent plays in other national leagues throughout the world. In that sport's labor market, there are many teams competing for that talent and there are many top-notch players, so the competitive market model is at least a plausible way to think about labor market for soccer.

But what of leagues like the NFL? There are no other similar leagues anywhere in the world that play this game at this level. It is accurate to assume that all the best available football talent plays in the NFL and if a team wants to sign additional players, it must lure them from other teams in the league. That raises some interesting questions on competitive balance, among other issues.

So why study sports? Wolfers makes valid and useful points, but his list is incomplete. Many of us study sports because they are simply interesting.

Dave Berri has some thoughts here.

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