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Giving economics a sporting chance

By Andrew Leigh - posted Wednesday, 25 June 2008


Who let the economists out of the closet? As anyone who has followed economic research over recent years will have noticed, the profession has undergone a major shift in focus over recent decades. In the 1980s, most articles in the leading journals dealt with issues such as tariffs, inflation, growth and wages. Today, many economists are exploring corruption, happiness, drugs and religion. Issues that would once have been regarded as the exclusive domain of sociologists, medicos, or educationalists are now fair game for the dismal science.

Among the topics to which economists have turned their hand is the economics of sport, which has come off the bench and onto centre-field for one simple reason: researchers have shown that studying the sporting field can provide fundamental insights into human behaviour.

One sports economics classic is a paper by Pierre-Andre Chiappori, Steven Levitt and Tim Groseclose (PDF 188KB), who ask the question: are soccer players more likely to score a penalty if they aim at the left, middle, or right of the goal?

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Travelling at up to 200 kilometres per hour, a penalty kick reaches the line 0.2 seconds after coming off the boot. So the goalie must decide which direction to jump before the ball is kicked. Consequently, it isn’t surprising that penalty kicks score a goal 75 per cent of the time. But for those that are kicked to the middle of the goal, this rises to 81 per cent. So why don’t more players aim at the centre?

Writing on his Freakonomics blog, Levitt points out that players face a difficult problem: “If you kick it right down the middle and you don’t score, it is damn embarrassing. … There are some things that are even more important than winning, like not looking like a fool.”

Herein lies a useful lesson for managers: workers care about saving face as well as doing a good job. Seeing their players avoiding the middle too often, a clever soccer manager might offset the risk of embarrassment by secretly offering to pay players a cash bonus for every penalty kick scored down the centre.

What about that old couch potato question: does a good player make a good coach? Studying data from the US National Basketball Association, Amanda Goodall, Lawrence Kahn, and Andrew Oswald (PDF 236KB) test what happens when a team hires a former star player as its coach.

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?

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In the most controversial sports economics study of recent times, Joseph Price and Justin Wolfers (PDF 427KB) test whether referees discriminate in favour of players of their own race.

Using data from the NBA, where the assignment of referees is essentially random, they find strong evidence of an own-race bias. The more white referees, the fewer fouls that white players receive; the more black referees, the fewer fouls that black players receive. Since the referees tend to be whiter than the teams, this gives a slight advantage to teams with more white players.

Although the study sparked outrage among the NBA, its findings accords with experimental evidence, which finds that when people are forced to make rapid decisions under pressure, subconscious racial biases come to the fore. And it suggests that when we ask individuals to make split-second decisions (police traffic stops, intense business negotiations, emergency rooms), we should expect to see discrimination rear its ugly head.

With its mix of competition and teamwork, high-stakes and high visibility, the sporting field turns out to be a valuable laboratory for testing many of the most interesting theories in economics. Optimal incentives, good management and racial discrimination are just a few of the questions upon which sports economics can shed light. As baseball great Yogi Berra said, “You can observe a lot just by watching”.

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First published in the Australian Financial Review on June 17, 2008.



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About the Author

Andrew Leigh is the member for Fraser (ACT). Prior to his election in 2010, he was a professor in the Research School of Economics at the Australian National University, and has previously worked as associate to Justice Michael Kirby of the High Court of Australia, a lawyer for Clifford Chance (London), and a researcher for the Progressive Policy Institute (Washington DC). He holds a PhD from Harvard University and has published three books and over 50 journal articles. His books include Disconnected (2010), Battlers and Billionaires (2013) and The Economics of Just About Everything (2014).

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