The World Cup and Economics

Posted on June 23, 2006 by


The United States – who entered the World Cup with supposedly the fifth best team in the world – has been eliminated from the World Cup.  Once again the United States has failed to find much success in the world’s most popular sport.  How can it be that a nation that so consistently succeeds in a wide variety of athletic competitions fails so miserably in soccer? Is it just because we refuse to call this sport football?

Okay, the answer goes a bit deeper than this.  I think the answer begins with the Olympics. In 2000, two economists — Andrew Bernard & Meghan Busse — wrote an article in the New York Times predicting how many Olympics medals each country would win in the 2000 Sydney games.  The economists did amazingly well.  There were 36 nations who fielded teams in Sydney who in the 1996 games won at least five medals.  Forecasting medals won for these 36 nations before the Sydney games, the Bernard-Busse model was right on target once, within one medal nine times, and only off by three medals 23 times. 

How could two economists predict the Olympics so well?  Well the answer did not lie in a detailed study of each sport and the athletes each nation sent to the games.  No, the economists simply focused on past Olympic performance, the size of each nation’s population, and each nation’s per-capita GNP. 

One might think predicting the World Cup would be similar.  At least, that is the approach taken by Goldman Sachs’ in their The World Cup and Economics 2006.  Interestingly the results indicate that soccer is not quite the same as the Olympics.  Specifically, a nation’s GNP is not related to success on the soccer field.  This is not surprising given the training cost of fielding an Olympic team, which is huge, and the training cost for producing soccer talent, which is relatively small.

Although money is not the key, the size of a nation’s population does seem to matter.  At least population explains the success of nations in Europe and Latin America.  Unfortunately, if it all it took was people the United States should dominate nations like Italy, Czechoslovakia, and Ghana.  But that is not what happened this year. 

The lack of success of the United States appears difficult to explain given it relatively large population. I think, though, that the answer can be found in The Wages of Wins.  And this is surprising, since at no point in the book do we ever talk about the World Cup.

We do talk about the role population size plays in sport.  Specifically, we note the impact the size of a population available to play a sport has on competitive balance in the sport.  Think about basketball for a moment.  Basketball probably follows soccer on the list of most popular sports in the world.  Although many people have played basketball, the population that the NBA draws upon is actually quite small.  To play in the NBA one must be extremely tall.  And as we note in the book, there is a short supply of extremely tall people.

As a consequence, NBA teams will employ very talented tall people like Shaquille O’Neal and Michael Jordan.  But because there is a short supply of tall people, teams must fill out their roster with less talented players.  The result is large differences in playing talent and a lack of competitive balance in the NBA. Applying this argument to soccer we see why the United States struggles playing the world’s game.  Although the U.S. has a large population, it does not seem to have large numbers of people who like to play soccer.   It is estimated that, in the United States, 8 million play soccer at all levels, with 3 million youngsters under 10 playing competitively [see Oliver (2000)]. 

Given that 38% of the US players are under the age of 10, something must happen along the way.  By the time they reach middle school or high school, they may be playing football – but that football involves a pigskin, pads, and touchdown passes.  And one might wonder if those who continue to play soccer in the U.S. play with the same intensity children play this sport in other nations.

With a relatively small population dedicated exclusively to playing the sport in the U.S., we expect the supply of extraordinary athletes is also small. And when a team that lacks many extraordinary players faces a nation with a larger supply of such players, the outcome is generally the less talented get to be unhappy.  Of course as soccer becomes more popular in the United States this will change.  And although it may be hard to believe after the U.S. failed to defeat Ghana, someday the U.S. will be able to compete on soccer’s – I mean football’s — biggest stage.

– Stacey

Posted in: Soccer Stories