On the Importance of Competitive Balance, Again

Posted on May 9, 2006 by

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My post regarding competitive balance in the NBA generated a few responses at The Sports Economist blog.  I posted a response at the Sports Economist which I thought I would make available for vast millions – okay, one or two – people reading this blog.

The responses to my post center primarily on the issue of how to measure competitive balance. Let me respond by noting that I agree that focusing only on playoff outcomes is not the best way to get at competitive balance. My purpose in taking this approach, though, was to note the relative predictability of playoff outcomes in the NBA, or from the other side of the coin, the unpredictability of playoff outcomes in the other sports. Frankly I just think that is a neat story.

As it turns out, when we look at “better” measures of competitive balance, such as the Noll-Scully — which compares the standard deviation of winning percentage to the ideal standard deviation that would exist if the league were balanced — the same story is told. The standard deviation of regular season winning percentage in the NBA has been 2.7 times the ideal over the last three decades. In the National Football League, National Hockey League, American League, and National League the ratio of actual to ideal has been less than two over this time period. One can tell the same story if you look at the last 10 years or last 20 years.

What is neat about the Noll-Scully metric is that it allows one to compare balance in different leagues. This is important because for one to say competitive balance is “good” or “bad” one needs to establish a reference point. With the Noll-Scully one can say competitive balance in the NBA is not as good as what we observe in the other major North American sports. That is also the same story I told by looking at how regular season performance predicts the playoffs. Again, I think the playoff story is still neat, but I fully acknowledge metrics like the Noll-Scully are better measures of balance.

Once one has a measure of balance, you next need to address whether balance and attendance are linked. In our published research, as well as work by Brad Humphreys, a statistical link between attendance and balance has been uncovered. The economic impact of balance on attendance, though, is quite small. In other words, it is not clear that fans truly care about the levels of balance they have observed in baseball and basketball. These findings, already reported in the sports economics literature (and –pardon the shameless self promotion — our forthcoming book The Wages of Wins) are also consistent with what I was saying in my post about recent attendance records and balance in the NBA.

In sum, if we compare baseball to basketball, it is hard to argue baseball has a competitive balance problem. Furthermore, even if you could argue that there was a problem in baseball, it is not clear that fans actually care very much. So I come back to my original point: If fans do not care that much about balance, then aren’t attempts to fix this “problem” just another excuse to take money away from the players?

– DJ