Category: Sports
Signaling credibility in Spain
A deal announced last week between the Spanish government and the soccer league (LFP) aims to force soccer clubs…to pay off the 752 million euros they owe in taxes, along with a further 600 million euros in social security payments by 2020. Those that fail to follow the guidelines face expulsion from competition, says the LFP.
José María Gay…says that the 20 clubs in Spain’s top division had total combined debts of about 3.53 billion euros at the end of the 2010-11 season, up from 3.48 billion euros the previous year. Much of the debt dates back to before the first of Spain’s most recent two recessions began in 2008, and is linked to disputes the clubs lost against tax authorities, he says.
What percentage of 7-footers are in the NBA?
An actual accounting of 7-footers, domestic or global, does not exist in any reliable form. National surveys by the Center for Disease Control list no head count or percentile at that height. (Only 5% of adult American males are 6’3″ or taller.)…
The curve shaped by the CDC’s available statistics, however, does allow one to estimate the number of American men between the ages of 20 and 40 who are 7 feet or taller: fewer than 70 in all. Which indicates, by further extrapolation, that while the probability of, say, an American between 6’6″ and 6’8″ being an NBA player today stands at a mere 0.07%, it’s a staggering 17% for someone 7 feet or taller.
There is much further discussion at the link, and many more ins and outs to ponder.
Would I lie to you?
The subtitle is “The problem with buying sports “experiences”” and it is now up on Grantland.com. Co-author Kevin pulled out this excerpt:
The biggest issue is that our own desire for thrills often works against our better judgment. As a species, we derive pleasure from thinking about what will come — how nice that powdery snow on the slopes is going to be. So we turn off our critical faculties at the worst possible moment in hopes of maximizing the value of the anticipation and getting a bigger buzz. This is particularly bad when it comes to sports experiences, which are rife with “asymmetric information” — when the seller knows something you don’t. Your best defense, of course, is to be aware of your vulnerability and maximize your information, as any smart shopper does when in the market for a used car. But when it comes to shopping for experiences, emotions all too often rule.
Read the whole thing.
Markets in everything there is no great stagnation
The sOccket harnesses the kinetic (motion) energy of the soccer ball during normal game play and stores it for later power needs. After play, small electrical appliances, like an LED lamp, can be plugged into the sOccket. Learn more about our first mass-produced sOccket on our blog.
The web page, with lots of pictures, is here. It’s not just free energy, one goal is to prevent so many people from dying from kerosene lamps.
For the pointer I thank Brent Depperschmidt.
Has baseball become an inferior good?
From John D. Burger and Stephen J.K. Walters:
World Series telecasts are now an inferior good. Income and the time cost of consumption interact so that a ten percent income increase reduces viewership by 1.8 million households. Increased availability of substitutes reduces ratings but increased drama improves them.
What does that say about the future of the sport? About the future of television?
For the pointer I thank Kevin Lewis.
The public choice of higher French tax rates
Remember last week when Hollande and the Socialists proposed a top marginal rate of 75% and enjoyed a boost in the polls? Suddenly the idea is meeting with greater public resistance:
Even though the vast majority of earners in France wouldn’t be liable, Hollande’s tax has been a headline-grabber in the presidential campaign, partly because football is proving to be among the most vocal of its critics. Only income above 1 million euros ($1.31 million) would face the top whack of 75 percent. The first million earned would be taxed at lower rates. Just 3,000 of the highest-earning taxpayers in France are likely to be affected.
From French league president Frederic Thiriez down, the refrain is often the same: top players will flee to countries with lower taxes, leaving France — the 1998 World Cup champion — with second-rate football. Thiriez estimates 120-150 players — about one-quarter of those in France’s top division — earn enough to make them liable for Hollande’s tax. In Italy, Germany, England and Spain, which have Europe’s strongest leagues and clubs, top income tax rates range from 43 to 52 percent. The current top rate in France is 41 percent.
“It would be the death of French football,” Thiriez told sports newspaper L’Equipe. To RMC radio, he spoke of a “catastrophe” and of France relegated to “play in the second division of Europe, along with Slovenia or countries like that.”
Michel Seydoux, president of current French champion, Lille, said Hollande’s tax would produce “an impoverished spectacle.”
Still, there is pushback:
He’s thrown back the criticism from football, suggesting it is living too well. Specifically, he cited the multimillion euro salary the Qatari owners of Paris Saint-Germain reportedly pay their Italian manager, Carlo Ancelotti.
“Football administrators need to clean house a bit,” Hollande said. “Does the level of our league justify such astronomic salaries?”
…”When you see their cars in the garage here, it makes you sick,” said Thomas Mascheretti, a fan who approved of Hollande’s proposal.
File under: Ideas have Consequences.
The article is here, and for the pointer I thank Fred Smalkin.
Markets in everything
By Sunday morning, four National Football League teams were linked to a “bounty” scandal that came to light in Friday’s NFL announcement that New Orleans Saints defensive players were paid for “big hits” that took opponents out of play. “Knockouts” were worth $1,500 and “cart-offs” $1,000, with payments doubled or tripled for the NFL playoffs.
Here is more detail, and for the pointer I thank Sheldon Gilbert.
Charles Duhigg’s The Power of Habit
The skills necessary to ride a bike are multifaceted, complex and not at all obvious or even easily explicable to the conscious mind. Once you learn, however, you never forget–that is the power of habit. Without the power of habit, we would be lost. Once a routine is programmed into system one (to use Kahneman’s terminology) we can accomplish great skills with astonishing ease. Our conscious mind, our system two, is not nearly fast enough or accurate enough to handle even what seems like a relatively simple task such as hitting a golf ball–which is why sports stars must learn to turn off system two, to practice “the art of not thinking,” in order to succeed.
Habits, however, can easily lead one into error. In the picture at right, which yellow line is longer? System one tells us that the l
ine at the top is longer even though we all know that the lines are the same size. Measure once, measure twice, measure again and again and still the one at top looks longer at first glance. Now consider that this task is simple and system two knows with great certainty and conviction that the lines are the same and yet even so, it takes effort to overcome system one. Is it any wonder that we have much greater difficulty overcoming system one when the task is more complicated and system two less certain?
You never forget how to ride a bike. You also never forget how to eat, drink, or gamble–that is, you never forget the cues and rewards that boot up your behavioral routine, the habit loop. The habit loop is great when we need to reverse out of the driveway in the morning; cue the routine and let the zombie-within take over–we don’t even have to think about it–and we are out of the driveway in a flash. It’s not so 
great when we don’t want to eat the cookie on the counter–the cookie is seen, the routine is cued and the zombie-within gobbles it up–we don’t even have to think about it–oh sure, sometimes system two protests but heh what’s one cookie? And who is to say, maybe the line at the top is longer, it sure looks that way. Yum.
System two is at a distinct disadvantage and never more so when system one is backed by billions of dollars in advertising and research designed to encourage system one and armor it against the competition, skeptical system two. Yes, a company can make money selling rope to system two, but system one is the big spender.
Habits can never truly be broken but if one can recognize the cues and substitute different rewards to produce new routines, bad habits can be replaced with other, hopefully better habits. It’s habits all the way down but we have some choice about which habits bear the ego.
Charles Duhigg’s The Power of Habit, about which I am riffing off here, is all about habits and how they play out in the lives of people, organizations and cultures. I most enjoyed the opening and closing sections on the psychology of habits which can be read as a kind of user’s manual for managing your system one. The Power of Habit, following the Gladwellian style, also includes sections on the habits of corporations and groups (hello lucrative speaking gigs) some of these lost the main theme for me but the stories about Alcoa, Starbucks and the Civil Rights movement were still very good.
Duhigg is an excellent writer (he is the co-author of the recent investigative article on Apple, manufacturing and China that received so much attention) It will also not have escaped the reader’s attention that if a book about habits isn’t a great read then the author doesn’t know his material. Duhigg knows his material. The Power of Habit was hard to put down.
Why is there a shortage of talent in IT sectors and the like?
There have been some good posts on this lately, for instance asking why the wage simply doesn’t clear the market, why don’t firms train more workers, and so on (my apologies as I have lost track of those posts, so no links). The excellent Isaac Sorkin emails me with a link to this paper, Superstars and Mediocrities: Market Failures in the Discovery of Talent (pdf), by Marko Terviö, here is the abstract:
A basic problem facing most labor markets is that workers can neither commit to long-term wage contracts nor can they self fi nance the costs of production. I study the effects of these imperfections when talent is industry-specifi c, it can only be revealed on the job, and once learned becomes public information. I show that fi rms bid excessively for the pool of incumbent workers at the expense of trying out new talent. The workforce is then plagued with an unfavorable selection of individuals: there are too many mediocre workers, whose talent is not high enough to justify them crowding out novice workers with lower expected talent but with more upside potential. The result is an inefficiently low level of output coupled with higher wages for known high talents. This problem is most severe where information about talent is initially very imprecise and the complementary costs of production are high. I argue that high incomes in professions such as entertainment, management, and entrepreneurship, may be explained by the nature of the talent revelation process, rather than by an underlying scarcity of talent.
This result relates also to J.C.’s query about talent sorting, the signaling model of education, CEO pay, and many other results under recent discussion. If it matters to you, this paper was published in the Review of Economic Studies. I’m not sure that a theorist would consider this a “theory paper” but to me it is, and it is one of the most interesting theory papers I have seen in years.
J.C. Bradbury emails me on the allocation of talent
I hope you are doing well. I have a Micro III question that I thought might interest you. I often have such Tyler questions, but keep them to myself, yet this morning I decided to share with you.
What does Jeremy Lin tell us about talent evaluation mechanisms? This article ( http://www.wired.com/wiredscience/2012/02/what-jeremy-lin-teaches-us-about-talent/?utm_source=dlvr.it&utm_medium=twitter ) argues that the standard benchmarks for evaluating basketball and football players at the draft level are flawed. The argument is that Jeremy Lin couldn’t get the opportunity to succeed because his skill wasn’t being picked up by the standard sorting procedure. This got me thinking. Baseball sorts players in a different way than basketball. In professional basketball (and football), college sports serve as minor leagues, where teams face a high variance in competition (the difference between the best and worst teams in a top conference is normally quite large), with very little room for promotion. There is some transferring as players succeed and fail at lower and higher levels, but for the most part you sink or swim at your initial college. This is compounded by the fact that the initial allocation of players to college teams is governed by a non-pecuniary rewards structure with a stringent wage ceiling, which likely hinders the allocation of talent. At the end of your college career, NBA teams make virtually all-or-nothing calls on a few players to fill vacancies at the major-league level. In baseball it’s different. Players play their way up the ladder, and even players who are undrafted can play their way onto teams at low levels of the minor league. At such low levels, the high variance in talent is high like it is in college sports; however, promotions from short-season leagues through Triple-A, allow incremental testing of talent along the way without much risk. I have looked at metrics for predicting major-league success from minor-league performance and found that it is not until you reach the High-A level (that is three steps below the majors) can performance tell you anything. Players in High-A who are on-track for the majors are about-the age of college seniors. Performance statistics from Low-A and below have no predictive power. Baseball is also much less of a team game than basketball, so this should make evaluation easier in baseball but it is still quite difficult by the time most players would be finishing college careers. Also, a baseball scout acquaintance, who is very well versed in statistics, tells me that standard baseball performance metrics in college games are virtually useless predictors of performance (this is contrary to an argument made in Moneyball). Even successful college baseball players almost always have to play their way onto the team.
Back to Lin. He played in the Ivy League and his stats weren’t all that bad or impressive in an environment that is far below the NBA. If Lin is a legitimate NBA player, he didn’t have many opportunities to play his way up like a baseball player does. In the NBA, he experienced drastic team switches, and even when making a team he received limited opportunities to play. MLB teams often keep superior talent in the minors so that they can get practice and be evaluated through in-game competition. An important sorting mechanism for labor market sorting is real-time work. Regardless of your school pedigree, most prestige professions (lawyers, financial managers, professors, etc.) have up-or-out rules after a period of probationary employment where skill is evaluated in real world action. Yes, there is a D-League and European basketball, but the D-league is not as developed as baseball’s minor-league system, and European basketball has high entry cost and may suffer from the same evaluation problems faced by the NBA. Thus, I wonder if the de facto college minor-league systems of basketball and football hinder the sorting of talent so that the Jeremy Lins and Kurt Warners of the world often don’t survive. Thus, another downside of these college sports monopsonies is an inferior allocation of talent at the next level.
J.C.’s points of course apply (with modifications) to economics, to economies, and to our understanding of meritocracy, not to mention to how books, movies, and music fare in the marketplace. Overall I would prefer to see economics devote much more attention to the topic of the allocation of talent.
Here is J.C. on Twitter, here are his books.
Is Jeremy Lin a fluke?
Nate Silver says no. I say that in Mike D’Antoni’s offensive schemes a lot of point guards reap more than the statistics they would pick up on other teams and from other offenses, and since the D’Antoni scheme is not very generalizable, or capable of winning a championship, the “other team” metrics are more or less the correct ones. Who else thinks the Knicks can continue to steamroll through victories like this, with or without their two “stars”? (ZMPers I call them.) I say he’s been toasting a number of teams that don’t have real defense against good attacking point guards, such as Washington and the Lakers. I think he will be very good but maybe someone like Fat Lever or Kenny Smith is the right comparison. That’s stillgood. In the playoffs, with a real defender on him, I suspect he is just another good player. He was by the way an economic major at Harvard, let’s ask Mankiw.
Addendum: Via Ben Casnocha, here is Metta to Lin.
Markets in everything the culture that is Sweden (England)
The odds were always going to favor the Swedes; after all, the sport originated in the small southern town of Varalov in the 1970s, and Swedes have been breeding show-jumping rabbits since the 1980s. Today, close to 1,000 active bunny jumpers can find at least one competition somewhere in the country most weekends, and there are two national championships a year. The U.K., on the other hand, hosts just a handful of competitions a year and is home to only about 10 rabbit jumpers.
In Sweden, where the fluffy competitors train for up to two hours a day, there is an established network of breeders who are always looking for talent. “Our bunnies are so used to competing, so they know what to do,” Ms. Hedlund says.
Choosing the right breed of rabbit is also important. Sweden’s 200 or so breeders are experimenting widely, and charge more—up to 1,500 kronor ($225)—for a rabbit with prizewinning parentage.
“You want mini lop for the cool and positive attitude and hare for the bigger size and long back legs,” Ms. Hedlund says. “But you don’t want too much temperament; you’d want a mix of a cool and a competitive attitude.”
Here is more, and it goes without saying, interesting throughout! And the sport is supposed to be good for the animals. For the pointer I thank Richard Herron.
p.s. Not all is well in Kaninland:
Despite their dominance of the sport, Swedish bunnies are bested by their Danish neighbors when it comes to world records. In 1999, a Danish rabbit called Yaboo set the world long-jump record when he flew over a three-meter, or nearly 10-feet, hurdle, while his compatriot Tösen bounced 99.5 centimeter, or about 40 inches, to nab the high-jump record in 1997.
Addendum: Photos and video here.
What would the end of football look like?
Kevin Grier and I have a new piece up on Grantland, on that topic. It is perhaps hard to excerpt, but here is the close of the piece:
Another winner would be track and field. Future Rob Gronkowskis in the decathalon? Future Jerome Simpsons in the high jump? World records would fall at a rapid pace.
This outcome may sound ridiculous, but the collapse of football is more likely than you might think. If recent history has shown anything, it is that observers cannot easily imagine the big changes in advance. Very few people were predicting the collapse of the Soviet Union, the reunification of Germany, or the rise of China as an economic power. Once you start thinking through how the status quo might unravel, a sports universe without the NFL at its center no longer seems absurd.
So … Tennis, anyone?
Markets in everything China bid of the day
Wealthy Chinese have been snapping up contemporary art, top wines and some the world’s most expensive cars. Now they’re adding pigeons to their must-have list.
A Chinese shipping magnate last weekend spent 250,400 euros ($328,000) for a Dutch pigeon, a new world record according to Pipa, the firm that ran the online auction.
These aren’t your ordinary birds that eat scraps in the park but ones bred for the arcane sport of pigeon racing, which has a cult following in England, Belgium, Netherlands, Germany and, increasingly, China.
The buyer, Hu Zhen Yu, runs Zhenyu Holding Group in Wenzhou. He told Pipa that he wants to “focus more and more on the pigeon sport.” Zhenyu last year sponsored a pigeon race in Wenzhou that awarded 7 million yuan ($1.1 million) in prize money.
But all is not well with the pecuniary externalities:
Pigeon racing has traditionally been a rural pastime, and the entrance of wealthy Chinese hobbyists is ruffling some feathers. The Telegraph quoted veterans of the sport complaining about the high bids and loss of the birds to another continent.
The link is here and for the pointer I thank the excellent Daniel Lippman. Here is also another MIE in China link. Here are China’s hard landing odds, updated.
Why is NBA TV viewership up so much?
The first 325 games of this NBA season averaged attendance of 17,094. That’s better than 89 percent of capacity, and a hair better than the first 325 games of last season, which averaged 17,057.
But almost every other indicator blows those in-arena numbers away. Viewership is going a bit nuts:
- ABC has had just three games, so it’s hard to say anything conclusive, but the audience is up five percent compared to a year ago.
- ESPN viewership is up 23 percent.
- TNT viewership is up 50 percent.
- NBA TV viewership is up an insane 66 percent.
- NBA on regional cable sports networks are up 12 percent.
- Local over-the-airwaves broadcasts are up 36 percent.
NBA TV is particularly interesting. Five of the channel’s ten most viewed games ever have been this season, with January’s Lakers-Clippers game the most viewed game in network history.
That is from Henry Abbott, here is more. Many people thought the strike would hurt fan interest, but apparently not. (It did hurt my interest, but not out of any grudge; I tuned into a few early games and found them unspeakably bad in terms of quality. By now most players seem to be in shape, although blowouts and lopsided low scores remain too common. I believe the spread of the “team coordination” variable has increased.) Is this a behavioral effect? Like taking the peanuts away and making people crave them more?
Do more frequent games, in response to the strike-shortened season, spur a greater “habit formation” demand? Do more frequent games imply that a major star is playing on TV virtually every night? That is my hypothesis. How will the NBA respond?
By the way, I have a longstanding custom of predicting, or rather failing to predict, the NBA championship winner each year. This year I say it is wide open, yet to be determined, and ask me again after the trade deadline. MLE is Miami, but a well-coordinated lesser team could knock them off, especially if they remain injury-prone.
