Earlier this month one of the pioneers in sports economics – Gerald Scully – passed away. Given Scully’s importance to the field of sports economics I wanted to offer a few thoughts.
Scully and the Developing Field of Sports Economics
In about six weeks the Western Economic Association meetings will convene in Vancouver. A perusal of the preliminary program reveals that at least 16 sessions will be devoted to the topic of sports economics. Over all, nearly 60 papers will be presented at these sessions, written by economists from around the world.
After these papers are presented and discussed, many will be submitted to academic journals (where they will be reviewed again). Within the field of sports economics there are now two journals: The Journal of Sports Economics and the International Journal of Sport Finance. In addition, Economic Inquiry – one of the top general interest journals in economics – has recently declared that it considers itself one of the primary outlets for work in sports economics. And beyond these three choices, sports economics research has been published by a number of other journals, including the American Economic Review, the Quarterly Journal of Economics, and the Journal of Political Economy (perhaps the top three journals in all of economics). In sum, the study of sports economics is now considered a legitimate – and rapidly growing — field within economics.
If we go back 35 years, though, this was hardly the case. In 1974 Gerald Scully published – Pay and Performance in Major League Baseball – in the American Economic Review (again, the top journal in economics). Prior to Scully’s work, sports and economics had been touched upon in seminal works by Simon Rottenberg (1956), Walter Neale (1964), and Mohamed El-Hodiri and James Quirk (1971). Each of these works, though, was a theoretical treatment of sports economics. And beyond these papers, little else had ever been said. In sum, the study of sports and economics was not considered something economists should spend much time upon.
Scully’s work caused this to change. What Scully did is demonstrate that the productivity data generated by sports (i.e. all those stats people love to discuss) could be used to answer fundamental questions in economics.
When we look back on Scully’s paper we are struck at how an empirical paper written more than three decades ago has managed to stand the test of time. Although computing power has increased dramatically – and along with this data availability and econometric technique – the essential story Scully told remains true. When workers are faced with a monopsonistic employer (or employer with buying power), workers will tend to be exploited (wages will be less than marginal revenue product). Tony Krautmann, Peter Von Allmen, and I have just had a paper accepted that examines recent data from baseball, football, and basketball that reaches the same conclusion.
Beyond providing an empirical test that has endured, Scully also did something even more important. He demonstrated that sports data could be used by economists to conduct research on topics of interest to the entire discipline (not just sports fans). As a result, a host of economists have turned to the study of sports. If we go back to the 1970s and 1980s, this interest was somewhat sporadic. Today, though, a number of economists have essentially focused their entire research program on the study of sports (including myself). Again, I don’t think this is possible without Scully’s paper in 1974.
So when the sports economists convene in six weeks to discuss the latest research in the field, we will all be thinking about the work of Scully’s that did much to get the whole field started. Without him we might all be doing something else that is far less interesting.
More Comments on Scully
In addition to my thoughts, let me repost the words of Phil Miller, Skip Sauer, and JC Bradbury (three sports economists who were much quicker in discussing the importance of Gerald Scully).
Gerald Scully has died of pancreatic cancer. Every sports economist is familiar with his books and his seminal 1974 AER article in which he estimated how much MLB players were underpaid relative to their marginal contribution to team revenue under baseball’s reserve clause. His estimation involved examining the determinants of revenue and the determinants of winning percentage. From this he was able to estimate a player’s contribution to team productivity and, consequently, to team revenue.
I personally have cited his work extensively in my sports economics classes and had two students undertake independent studies that built upon Scully’s pioneering work in the economics of sports.
Here is David Henderson’s write-up at the Library of Economics and Liberty. Here is a piece by John Goodman. Here is a piece at Marginal Revolution. Here is Scully’s write up on the economics and sports at the Concise Encyclopedia of Economics.
Thanks to John Chilton for the heads-up.
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.
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.
A few years ago, I recall hearing Skip say something like this, and I was nearly knocked off my feet at how right he was. Skip also pointed out to me that Scully understood the problems of ERA long before sabermetricians began arguing over DIPS. In 1974, he used strikeout-to-walk ratio to proxy pitcher quality instead of ERA, which would have seemed to be the intuitive choice. Scully knew better.
A great pioneer of sports economics has passed on.
Jerry was one of the most prolific, innovative and imaginative economists of our age. One of the most fundamental building blocks of economics is the idea of “marginal product.” Jerry was the first economist to ever measure one. He did it in, of all places, baseball.
He pioneered sports economics and went on to make many contributions in other fields. One of his most important contributions was the “Scully Curve.” Jerry showed that the size of government can contribute to economic growth in a nation’s early stages, but at some point, the size of government becomes a burden – reducing the rate of growth and causing national income to be lower than it otherwise would be.
I never met him, but his work greatly influenced my own. RIP Dr. Scully.
– DJ
The WoW Journal Comments Policy
Wages of Wins Journal 
JLewis44
May 19, 2009
“One of his most important contributions was the “Scully Curve.” Jerry showed that the size of government can contribute to economic growth in a nation’s early stages, but at some point, the size of government becomes a burden – reducing the rate of growth and causing national income to be lower than it otherwise would be.”
If only Mr. Obama was as familiar with Mr. Scully’s work as you are!