Recently The Economist “In a league of its own” explored the reasons the NFL has been so successful. One of the reasons listed is the institutions that exist in the NFL, such as revenue sharing or a cap on team payrolls. Given these institutions the article argues that “… teams are far more evenly matched competitively than those in other leagues.” Let’s take a second and see if this holds up.
The article contrasts the NFL with the English Premier League. While the article is correct that the Premier League does not share revenues or cap payrolls like the NFL, and that the market value of the NFL teams is higher than the Premier League, the article is incorrect to go on and say that those internal incentives — revenue sharing and payroll caps –lead to greater competitive balance. In our book, The Wages of Wins, we look at competitive balance with the Noll-Scully measure; which is simply the ratio of the actual standard deviation of wins or standing points to the standard deviation that would exist if a league consisted of equally competitive teams. In simple words, the Noll-Scully compares reality to a world of perfect competitive balance.
From 1976 to 2005, we find that the Noll-Scully ratio of competitive balance in the NFL averaged 1.49. The English Premier League was a bit worse, with an average of 1.61. If we expand our attention to the other soccer leagues, though, we see little difference between competitive balance in American football and World Football. The average Noll-Scully in the German Bundesliga 1, Italian Serie A, Spanish Primera Division, and the French Ligue 1 from 1976 to 2005 was respectively: 1.45, 1.58, 1.42, 1.40. In sum, all football leagues, regardless of whether revenue is shared or payrolls capped, have very similar levels of competitive balance.
To put these results in further perspective, consider the NFL before and after the cap on payrolls was instituted in 1992. From 1992 to 2005, the Noll-Scully measure in the NFL was 1.483. From 1976 to 1991 the Noll-Scully was 1.487. In simple words, competitive balance did not improve in the NFL with the institution of the cap on payrolls.
How about a bit more perspective? The NBA shares television revenue, like the NFL, and also has a cap on payrolls. The NBA even adds a cap on individual salaries. But relative to both versions of football, the NBA is not competitively balanced. The average Noll-Scully from the 1976-77 season to 2005-06 in the NBA was 2.70.
What does all this mean? League policies like revenue sharing and caps on payroll are not shown to improve competitive balance. These policies, though, do lower player salaries. Perhaps the players should ask: Why again are the players being asked to take less in the name of competitive balance?
- Stacey
3 responses so far ↓
Steve // May 22, 2006 at 12:53 pm
Your analysis shows that within a given season, the NFL is about as competitive as the big European soccer leagues. The Economist article was referring to something else, though – dominance over multiple seasons.
Applying similar analysis to teams’ finishing positions in the various leagues over several years, do you get similar results? Are final positions from year to year more highly correlated in soccer than in the NFL?
Are the Arsenals, Man U’s and Liverpools more dominant from year to year than the corresponding NFL teams? Are recently promoted Premiership clubs more likely to do poorly in subsequent seasons than the corresponding NFL bottom feeders?
Will Hutchinson // August 8, 2006 at 7:36 pm
I have two major questions with this:
1) As the previous poster asked, how much is this measuring changes in the same team’s performance season-to-season. Obviously, in a perfectly balanced league there would be no correlation between one year and a previous year, and surely we want our teams to maintain some consistency from year to year. But it may also be the case that more good teams are much more strongly locked into being good teams (and bad teams similarly locked in place) thatn we would want.
2) The comparison from one sport to another to determine what affect policies like revenue sharing or salary cap have seems very flawed by the games themselves being very different. A small edge in ability between one basketball team and another may result in that team winning a much large percentage of games than, say, one baseball team to another, as different sports amplify the skill disparity to different degrees.
This could be analyzed further. What is the average win percentage expected by a baseball team that wins 2/3’s of its games when playing a team that wins only 1/3? And for basketball? I believe I recall seeing numbers to suggest that better basketball teams only are likely to lose games against other top teams or in the second game of back-to-back games. But a good baseball team might have a more consistent record whether they are playing equally strong teams or weaker ones.
The big thing that seems absense from the post is, what has been the change in the Noll-Scully measure of the NBA in the 70’s from what it is today? How does that correlate or not to when the NBA instituted new policies like revenue sharing or salary caps? That could add more to the suggestion that salary-limited policies do not affect competative balance, or else it may suggest the opposite entirely.
(And of course, even this is still not conclusive evidence either way, since there are clearly a million other uncontrolled variables involved in whether leagues become more or less competatively balanced. It could easily be that the policies the NFL has implemented to make the league more competatively balanced have in fact done exactly that, but other factors in the past decades have even more strongly worked in the opposite direction to make the league less balanced. The game has changed in lots of ways, and those policies are only one of the changes.)
Dashingprince // July 1, 2008 at 2:24 pm
NFL is not Football and its not a league, its a cup.
Cups are more based on luck than skill.
Odd debate.
The Premiership football has more viewers worldwide than baseball, gridiron and basketball put together.