Why Do Research in Sports Economics

This past week Justin Wolfers was guest blogging at Marginal Revolution.  In one of his many interesting posts Wolfers asked the question: Why do economists work on sports?

To this question, Wolfers provided the following six answers (my thoughts, along with the wisdom of JC Bradbury, are below):

Sports provide unique opportunities to test economic theories.  Cribbing from a New York Times article, this is the Richard Thaler defense:

“‘My justification for doing this is that it’s the one really high-stakes activity where you get to watch all of the decisions,” Thaler said. ”If Bill Gates invited me to watch all of his decisions, I’d talk more about that.”

Sports shapes broader national debates.  Sports is a microcosm of our broader society and our national narrative on the important issues, from drugs, to race, to cheating, to sexual harassment often play out on our sports pages.  In honor of a particularly compelling example, let’s call this the Jackie Robinson defense.

Professional sports are an important part of the economy.  I call this the Dog defense, not as a dyslexo-religious statement, but simply because dogs raise an important question: aren’t pets a bigger part of the economy than professional athletics?  If so, why are there so many papers on professional sports and so few on the economics of dogs?

Sports participation is an important activity.  It seems important to learn whether sports make us happier, healthier or more productive.  For instance, it is important to learn, say, what the broader effects of Title IX were.  Under this view, research on sports is part of the human capital agenda, leading me to call this the Gary Becker defense.

Sports provides a useful teaching metaphor.  Many of those teaching Sabermetrics-inspired courses argue that sports provides a useful vehicle for teaching something far more important – basic quantitative reasoning.  When I teach my class on behavioral economics, I do so by analyzing anomalies in sports betting markets.

Doing research on sports is fun.  It was no mistake that the conference I attended was on a Saturday.  Many of the academics in attendance were giving up leisure, not more important work. But for some, sports provides a chance to mix work with leisure; of course, if non of the above arguments holds, then it is just a chance to mix leisure with leisure.

To this list, JC Bradbury (of Sabernomics and The Baseball Economist) added   

Sports markets are themselves unique and interesting. For example, Simon Rottenberg’s curiosity about baseball’s reserve clause-how it affected the allocation of talent across a league-led him to discover (nearly) the Coase Theorem before Ronald Coase. Mohamed El-Hodiri and James Quirk were the first model the unique structure economic structure of sports leagues, which I think economists still do not fully understand. Economists like to study interesting puzzles; because there are many unanswered questions in sports, and many economists follow sports, you are going to see a lot of study in this area.

Having read these two posts I thought I would offer some thoughts as well.  And I want to start with the following question:

Why is it necessary to defend sports economics?

Let me start my answer with noting what Wolfers tells students looking to sports for a thesis topic.  As Wolfers notes, he often advises students not to use sports as a topic.  For graduate students this is very good advice.  The purpose of a dissertation in economics is to finish your degree and land a job.  A dissertation on sports can do the first task, but it would likely prove harmful to the second.  Jobs in sports economics are somewhat rare, primarily because it’s still the case the most universities don’t offer a course in sports economics. 

There is also the perception issue.  Why does Wolfers feel compelled to defend the study of sports economics in the first place?  Or to put it a different way: Why is he not defending his study of divorce or his research on happiness?

In my experience, most academics regard research as a chore.  Research is necessary to get promotion and tenure, but it’s not something that people “enjoy” (my sense is that Justin enjoys all his research topics and in my experience, that is not common in academia).  When my fellow professors learn that I study sports, I sense they suspect that I actually “enjoy” doing research (and of course that’s true). And obviously, that must be wrong. Consequently, sports economists are often asked to defend the study of sports.

My Defense

When I am asked to present my defense, I tend to focus on what Wolfers calls the Richard Thaler argument.  In sports we can see the decisions people make.  Beyond that, we also have an abundance of information about those decisions.  As Lawrance Kahn said in a Journal of Economics Perspective article in 2000:

“There is no research setting other than sports where we know the name, face, and life history of every production worker and supervisor in the industry.”

With data and decisions in hand, we get to see studies like those offered by Jahn Hakes and Skip Sauer.  Hakes and Sauer investigate the “Moneyball hypothesis” in Major League Baseball in a forthcoming article in the International Journal of Sport and Finance.  These authors present evidence -consistent with the argument presented in Moneyball (by Michael Lewis) – that baseball did historically under-value plate discipline or on-base percentage (you can read the paper HERE).   Such a story suggests that decision-makers in sports can make systematic errors (or the same error over and over again).

This story in baseball is similar to what we say in Chapter 10 of The Wages of Wins.  We argue that decision-makers over-value scoring in the NBA.  In the same issue of IJSF where Hakes and Sauer present their baseball story, Stacey, Marty, and I will present an expansion of our study of NBA salaries and voting for the All-Rookie team.  Each of these studies highlight the importance of scoring in the evaluation of NBA talent, and the lack of importance attached to other facets of player performance.

Our work, and the research of Hakes and Sauer, are just two examples of how decision-making in sports has been investigated by economists.   One should note that decisi0n-making can be investigated in a lab by economists.  But sports is a better lab, since the decisi0n-makers tend to suffer real consequences when the choices made don’t turn out so well.  

I should add that decision-making in sports is but one of the great stories we can tell with sports data.  Both Wolfers and Bradbury touched on some of these stories  (race relations, competitive balance, how worker compensation is impacted by bargaining power, etc…).  Even the study of how important sports are to the aggregate economy, which consistently reveals “not much”, tells us something important.  Economists consistently find that sports franchises, stadiums, and events do not generate many jobs or much economic growth.  And yet governments still commit tax dollars to sports.   Again, these studies tell us something about human behavior and decision-making.

Okay, let me summarize.  Research on sports does tell us many things that are “important.” And these important issues are not easily investigated outside of sports.  Hence what I and my fellow sports economists do is worthwhile.

Of course it’s also damn fun.  So when my colleagues suspect that I really “enjoy” my work, they’re right. 

– DJ

Posted in: Sports Econ