NFL Even MORE Competitively Balanced than We Thought

With the NFL regular season having reached its (customarily gripping) climax moments ago, sports economists will take note, as usual, of the within-season competitive balance measures, based on the end-of-season standings.  The figures generated from these measures are often used in the literature on the effectiveness (or otherwise) of labor market and revenue-sharing policies used by leagues to maintain/improve competitive balance. 

On the basis of these measures, it is generally accepted by sports economists that the NFL has been the most competitively balanced (on average) of the four major leagues over the last few decades.  However, there is continued debate as to the degree, if any, to which this outcome has been generated by various NFL policies that are not used by the other major leagues – for example, the comprehensive revenue-sharing arrangement from the centralized national broadcast contract.

The 2010 season was, according to the popular actual-to-idealized standard deviation ratio, the second-most balanced NFL season since 2002, and it is the same story if one instead uses other popular measures, such as Gini coefficients or Herfindahl indexes.  This result is favorable to those that believe in the invariance principle – that arguably, this is some (albeit very limited) evidence that the salary cap was not previously contributing much towards making the NFL so balanced.

Another policy that is often ignored in this analysis is fixture design.  One thing that distinguishes the NFL from the other major leagues is that the fixture has a strength-balancing element to it.  Specifically, as explained in the Wikipedia NFL page:

Each team plays once against the other teams in its conference that finished in the same place in their own divisions as themselves the previous season, not counting the division they were already scheduled to play.

With this in mind, one might be tempted to wonder to what extent the higher level of balancedness in the NFL is attributable to this scheduling policy.  After all, if below-average teams are playing other below-average teams more often (think: NFC West), mutatis mutandis for above-average teams, then the standings could arguably provide a distortive impression of balancedness.

In an attempt to answer this question, I extended a model from a paper just published in Economic Modelling (on the Australian Football League) to adjust the win percentages of the 32 teams, according to the strength of the schedule that each faces, prior to calculating the within-season measures.  The upshot is that the power-balancing aspect of the fixture does very little to create an illusion of greater balancedness, and that this is overwhelmed easily by other biases in the fixture, specifically the design requirement to play teams in one’s own division more often than teams in other divisions (especially so for divisions in the other conference).

Ultimately, on the basis of the adjusted win percentages, the NFL is found to be even more competitively balanced than on the basis of the original win percentages in every single season over the 2002-2009 sample, according to each of the four measures used.  Furthermore, the average difference is statistically significant.  A draft of the paper can be found here (any comments welcome).  For the record, 2010 produces the same outcome yet again (note that higher means less balancedness): the actual-to-idealized standard deviation ratios are 1.474 (unadjusted) and 1.362 (adjusted); the Gini coefficients are 0.264 (unadjusted) and 0.203 (adjusted); and the Herfindahl indexes of CB are 1.136 (unadjusted) and 1.116 (adjusted).  Furthermore, while the adjustments almost always dictate some differences in playoff outcomes, 2010 was highly unusual in the sense that the adjusted standings would have produced the identical 1-6 playoff seedings in both conferences.

Some economists argue that the NFL is, if anything, too balanced.  Therefore, you can interpret this result as you like.  Nevertheless, having repeated the exercise using NBA data and finding that this ‘unbalanced schedule’ adjustment makes no difference, we can conclude that for comparative purposes, accounting for differences in strength of schedules is an important element of using empirical major league evidence on competitive balance policies.  This is especially the case if one wishes to compare the major leagues with the major soccer leagues of Europe, in which each team plays all other teams the same number of times.