By John Considine

The recent controversial Solheim Cup was played at Golf Club St. Leon-Rot.  The club's website welcomes visitors with a tribute to Dietmar Hopp.  Hopp leveraged his success with SAP, a German multinational software corporation, to fund the development of the club.  Not only did Hopp fund the development of golf, he also ploughed an estimated €300m into TSG 1899 Hoffenheim - a investment that has propelled them into the top tier of German football.  All of this information, and much more, can be gleaned from an interview between Mark Barton and Hopp recently aired on Bloomberg.  The programme was called The Hoffenheim Story and it was one of two excellent productions on the business of German football.  The second programme is called Inside Bayern Munich and features Mark Barton interviewing Karl Heinz-Rummenigge and Xabi Alonso.

In an almost stereo-typical approach, Barton asks the Germans about the rules governing football.  There is a discussion of the rules governing the sales of TV rights in German, the 50+1 rule that governs the ownership of German football clubs, and Financial Fair Play.  Both Rummenigge and Hopp clearly explain the gap between the TV money received by German clubs and their English counterparts.  In the case of Bayern, it is a gap that they narrow by their successful commercial revenue generation.  Both Germans reflect the views of many when they say that the operation of Financial Fair Play rules are far from clear.  Hopp expresses an opinion that the proper operation of FFP might make the 50+1 rule obsolete.  The rule is designed to ensure that the club ownership stays in the hands of it fans.  There is a clause that allows private investors, like Hopp, to contribute more where they have been supporting the club for over two decades.  Hopp believes that the rule has benefitted German football by limiting "excessive growth".

The programmes are well worth watching.  Barton has an easy style that hides an ability to address the tough question.  At one point in The Hoffenheim Story, Hopp questions the payment of over £50m for Kevin De Bruyne.  It is clear thinks that this makes it hard for some clubs to compete.  Barton's next question is one that asks Hopp about the desire of the fans to have a private investor that allows the club to make such purchases.  A more aggressive interview might have asked if that was not what Hopp and Hoffenheim were doing on a smaller scale.  Barton's more subtle approach resulted in an more open interviewee and a better answer.

By Robbie Butler

In 2006 renowned institutional economist Geoffrey Hodgson published a paper in the Journal of Economic Issues called What Are Institutions?  Whilst an exact and acceptable definition of what comprises an ‘institution’ remains elusive, most writers acknowledge institutions are a set of formal and informal rules, norms and habits with the objective of providing an incentive structure which human activity relies upon. The following definitions are provided: 

        A rule is defined as “a socially transmitted and customary normative injunction or immanently normative                     disposition, that in circumstances X do Y”. (Hodgson, 2006:3)

       A norm “involves approval or disapproval” whereas rules do not. (Hodgson, 2006:5)

       A habit is “a disposition to engage in previously adopted behaviour or thoughts, triggered by an appropriate               stimulus or context” and require “repeated behaviour” in order to be established. (Hodgson, 2006:6)

These three definitions can go a long way in helping to explain the controversy at the Solheim Cup. For those unfamiliar with golf, the Solheim Cup is the women's equivalent of the Ryder Cup. The 2015 tournament was staged last week in south-west Germany. Mirroring the format of the Ryder Cup, the European Team held a 9-6 lead on Saturday afternoon. Charley Hull and Suzann Peterson of Europe, and Alison Lee and Brittany Lincicome of the USA stood on the 17th green at all square in their game, with American Lee standing over a putt for the hole. Then this happened.

The picture of the right is the moment just after the putt stops beyond the hole. The ball is just visible below.

One of the first rules of golf is that the hole is only complete when the ball enters (and stays) in the cup. Therefore, Lee was required to putt out the hole in order to complete it. However, it's not that simple. Golf relies heavily on etiquette and a sense of what is appropriate and not appropriate on the golf course. Here norms can come into play. Opposition players can instruct the putter to pick the ball up if they believe the putt won't be missed (known as a gimme). 

Another interesting side-story is the body language of European Peterson (blue jumper above) who strides off the green once the putt is struck, with only one glance behind, after Lee has picked up her ball. Those familiar with golf would probably agree this is the behaviour of a player that has deemed the hole to be completed. This may be a habit of Peterson that has developed over years of playing the game. Lee may also habitually pick up putts inside two feet and assume they are gimmes. One would have to know the players better to confirm this. 

The end result of course is that the putt had not been conceded and Lee's decision to pick up her ball resulted in Europe winning the hole, and eventually the four-ball. Neither Peterson broke any rules. However, former World Number One Laura Davis hit the nail on the head when she said "Suzann was within the rules but it's just not in the spirit of the game and in the spirit of the Solheim Cup".

Pettersen has since apologised and said: "I've never felt more gutted and truly sad about what went down on Sunday. I am so sorry for not thinking about the bigger picture in the heat of the battle and competition.I was trying my hardest for my team and put the single match and the point that could be earned ahead of sportsmanship and the game of golf itself! I feel like I let my team down and I am sorry."

By Stephen Brosnan - Stephen is currently working as a research assistant in the Department of Economics in University College Cork and he will shortly undertake doctoral study in the same university. His primary area of interest is regional growth and development but has an emerging interest in sports economics

The relationship between economic principles and Fantasy Premier League (FPL) has been previously explored on this site by Robbie Butler, which can be found here. Fantasy Premier League is the most popular online fantasy football game with over 3 million participants. Each participant assembles an imaginary team of real life footballers and score points based on those players' actual statistical performance or their perceived contribution on the field of play. Robbie discussed the principle of opportunity cost in relation to squad selections for the upcoming season and this got me thinking about other economic principles at play in the game.

Firstly, the basic fundamental economic problem is scarcity i.e. problem of having seemingly unlimited human wants in a world of limited resources. In FPL terms, each player is given £100 million to spend on 15 players. Ideally, one would like to choose all the top scoring players in the game yet due to scarce resources, each player must make choices. Selecting Sergio Aguero currently costs a player £13.2 million, over 10% of overall budget. As Robbie notes the opportunity cost of having an Aguero is perhaps giving up a Costa or Rooney. Because of scarcity people choose and all choices have an opportunity cost.

Another basic principle of economics is Price signals i.e. the information conveyed to consumers and producers, via the price charged for a product or service, which provides a signal to increase supply and/or decrease demand for the priced item. In Fantasy Premier League, players can buy and sell players in a virtual market. The idea is that underperforming players may be replaced by in form players. The basic principle of supply and demand are at play in the market. When demand for a player goes up significantly, price rises. When demand for a player drops significantly, price falls. Mahrez (Leicester) has had the highest price rise so far this year with his price increasing by 0.6 million in the first four game weeks of the season, with 1.14 million players purchasing the player since the season began.

Finally, economic (dis)incentives are at play in FPL. Under the rules of the game, players have unlimited trades each week. However, only one of these transfers is for free, with each additional transfer costing the player 4 points. Essentially, FPL places a tariff on all trades after the initial free trade. This measure discourages managers to make too many transfers every week as the point’s reduction reduces the benefits of potential transfers.

It is evident that the virtual market of FPL complies with many of the basic principles of economics. However, my current overall rank (somewhere in the region of one million+)  indicates an inefficient use of available resources.

by Declan Jordan

Fifpro, the international football players' union, launched an action with the European Commission last week to seek the abolition of transfer fees in professional football. They also want to see capping of agents' fees, limits to squad size, an end to the loan system, and limits to contract lengths. The latter points are necessary to address some of the implications of an end to transfers, as clubs could respond by keeping players on long contracts with perpetual loan periods which would be too expensive for players to break.

The proposals are radical, though probably seem even more so simply because football supporters, clubs, and players have become so used to transfers as a part of the game. This is despite the huge changes in player rights and transfer rules through the years - the most significant of which was the Bosman ruling enabling players to move clubs without a transfer fee after their contracts have expired.

The transfer system is a hang-over from the way football organised itself through the nineteenth and early twentieth centuries, when club owners retained huge power and players were badly paid and treated. This has meant that there is persistence in seeing football players as assets of clubs, which have come about through investment in player training and coaching. However, this would be a very peculiar view to take of players and would be inconsistent with every other industry, who also train staff and invest in them; and we would think it odd if a IT company sought a transfer fee for one  of its workers moving to a competitor. (Of course firms will always say that their greatest asset is their people - best not to go there). 

The existence of a transfer fee system limits the movement of players from employer to employer and requires a form of "ownership" of players, creating very highly payed slaves. It is difficult to see how the European Commission can rule that the football industry should be treated differently to all others and decide that the transfer system should be retained. It should be noted that Fifpro does not object to contracts for players (similarly to other industries) and that players would be required to honour contracts. However, it is presumed players can buy themselves out of contracts and clubs can end contracts by paying up the remainder of the money due under the contract. This is the case currently with managers.

So, what will be the impact of the removal of transfers? Stefan Kesenne of the University of Antwerp presented on this topic at the recent European Sports Economics Association conference in Zurich. The paper does not seem to be online but a similar presentation is available here. Prof Kesenne makes a very strong argument for the abolition of transfer fees. He recognises however that there may be implications for smaller clubs who invest in player coaching only for those players to move on to bigger clubs, who would act to hoover up top talent. This may not be dissimilar to the current situation of course, but the smaller clubs would lose out on the 'compensation' of a transfer fee. This may result in clubs under-investing or not investing at all in player development.

Prof Kesenne's solution is a Training Compensation Fund, where all clubs pay in an amount in proportion to their turnover and each club is paid from the fund based on the quantity and quality of their coaching schemes - irrespective of whether the player stays or leaves the club. This is a radical and potentially very positive proposal. There are some difficulties that I can see with such an approach, but these may be surmountable. The fund is managed on a league by league basis, but there are increasingly player movements between countries - so such a fund would need an international dimension. Also, it generates a strategic game (just like the current system does in a different way) in that it creates a known amount that a club must pay for player development e.g. 10% or 20% of their budget. Larger clubs could decide to forego this amount and not invest in player development, instead sitting back and taking the best talent from the other clubs' schemes. The method of assessing quantity and quality of player development at each club would be problematic, and this is an essential element of the fund to make it worthwhile for smaller clubs to invest. 

The paper prompted me to think of other alternatives to a transfer system that would still incentivise clubs to invest in player training. This is a problem in all industries of course where staff training may make employees attractive to other companies who then hire them away. Research and development involves a similar type of approach to player development in football. Some players will be successful and some will not - just as some R&D will result in new products and some will not. In the absence of some way of appropriating the returns to R&D, businesses will under-invest in knowledge production because competitors could simply imitate without incurring the fixed cost of generating the knowledge. To overcome this problem, there are patents which provide a monopoly right to use a piece of knowledge for a specified period, after which it becomes freely available. Perhaps a similar solution is possible for football talent, where a club that develops a young player is granted a right to a royalty for a specified period of time (though the problem of identifying which club should hold such a right may be difficult where a player moves clubs at a young age). So, in this case a club would be entitled to a fee - linked to the player's wage level and perhaps payable by the player himself - for a period of 5 years. This would incentivise clubs to invest in developing young players and making them as good as they can be to maximise the value of their investment.

There is little doubt that transfer fees are unlikely to persist in the medium-term. Innovative solutions will be needed to avoid a situation where football becomes even more polarised between elite and other clubs.

Eight of the top 10 payers are football teams, including the top four, while three come from baseball and one from basketball. Two of the 10 top payers are based in the USA, and four in England, with two in Spain and one each in France and Germany. The best paying sports teams in the world, in other words, come from elite European football and major league US sport. And the report notes that they are increasingly funded by oil.

For example, Paris St. Germain recorded the highest spending on players’ salaries with the club paying out average salaries of £5.30 million per player in 2014-15. The club had not featured on the previous edition of Global Annual Survey Report but the takeover by Qatar Sports Investments in 2012 has transformed the club into the world’s richest clubs. Paris St. Germain spend on average £101,898 per player in 2014-15.

Another aspect of player’s wages, particularly in soccer, is the migration of top players in Europe to leagues across United States, China and India. Sean O Conner wrote here about the highest earning players in the MLS which featured many players who previously played with some of the best clubs in Europe. The top 50 ranked clubs based on player’s average salaries includes six teams from the Indian Premier league, which was formed in 2013. Marquee players featured former stars of European football, Luis García (Kolkata Knight Riders), Elano (Chennai), Alessandro Del Piero (Dehli Daredevils), Fredrik Ljungberg (Mumbai) and David Trezeguet (FC Pune City).000

By Brian Corcoran

One of the most striking aspects of the modern game of Gaelic Football is the free-taking goalkeeper. Hardly a game goes by nowadays where a cannon-legged custodian doesn’t amble upfield from his solitary post between the sticks to attempt to land a long-range free. The most recognisable among the free-taking goalkeeper is of course Stephen Cluxton, who has attained cult status among fans and pundits for his unerring accuracy from kicks out which has, in part, helped to revolutionise that aspect of the game. Dublin’s ability to develop complex patterns of running which bamboozle their opponents and allow them win the battle for primary possession are based largely on the dead-ball prowess of their captain. Dublin’s customary stranglehold over their own supply of clean, primary possession gives them the ideal platform to develop their high-paced game with attacks starting from deep within their own territory. The success of Dublin in dominating Leinster and winning two All-Ireland titles within 3 years from 2011 to 2013, and the importance of their goalkeeper to this, has not gone unnoticed, with all the top teams now employing net-minders of considerable technical ability when it comes to striking the ball from the ground. Of these Paul Durcan of Donegal is the closest challenger to Cluxton’s mantle as king of the restarts with his scything kicks not only possessing extreme length but also dead-eye accuracy. The younger brigade of Robbie Hennelly and Niall Morgan too can lay claim to being some of the finest strikers of a football in the land.

With such a wealth of riches in terms of pinpoint kickers it is entirely unsurprising that teams began to use their goalkeepers to take long range frees and 45s. Ever since Cluxton’s high-water mark moment in 2011, when his late free from long range sealed Dublin’s first All-Ireland final victory since 1995, the flood gates have opened for free-taking goalkeepers. Tyrone, Mayo, Roscommon, Kerry and Kildare, among others, have all used a free-taking goalkeeper over the last number of years at various stages of the league and championship, to varying degrees of success. Indeed it’s possible that peak free-taking goalkeeper was reached this season when Cavan dropped their long-term Number.1 for a wing forward Raymond Galligan, who had never played a game in goal due to his free-taking ability. As the cult of the goalkeeper grows however it seems as though teams are missing a trick in terms of picking up easy scores, which can be so vital in tight championship matches.

This brings us back to the game theory part. When the goalkeeper trots up the field to take a free the defence can take a moment to breathe and reset themselves. They know that the ‘keeper is coming up the field to have a shot at goal. This is a particularly useful piece of information to have, one which changes the behaviour of the defending team considerably. Knowing that they are about to be confronted with a direct shot on the posts the defence can afford to drop an extra man or two back to crowd up the area around the goalmouth and snaffle up any free which drops short of the target. Knowing, as they do, that the ‘keeper is going to have a direct shot at the posts the defending team have nothing to lose by failing to mark space out the field and everything to gain by using the extra man or two to prevent forwards winning frees dropping short and scoring goals as a result, particularly during the closing stages of a tight game when conceding a goal would be disastrous.

The entire situation is highly reminiscent of the study of the behaviour of two firms who hold a competitive advantage over one another. Both, therefore, have what is known in game theory as a dominant strategy to utilise their competitive advantage and maximise their return. However, if both do so neither will maximise profit. As such, if a firm wishes to maximise their return they must not only engage in their dominant strategy but also deter their competitor from engaging in theirs. They must send a credible, understandable signal to their competitor that they are going ahead with this specific course of action and to challenge them on it is to invite ruin upon oneself via, for example, a costly price war. There are countless examples of this form of signalling one could think up but perhaps one of the most dramatic and easily understood is the decision of Christopher Columbus to burn the Pinta, Nina and Santa Maria on arrival in the “New World”, a clear “Death or Glory” message to his men. There would be no turning back. Adapt or die.

Bringing up the goalkeeper is, in effect, a similar form of signalling. In doing so Team A announces to Team B that they’ll be having a shot now, no need to stand a man near the kicker to prevent a short free being taken, thank you very much! Taking this signal to be credible the defending team duly oblige, dropping men back to protect the area in front of goal. This, of course, creates a huge amount of space for the attacking team to exploit. A savvy manager should see the potential to play the free short to an unmarked forward in acres of space giving him a free shot at the posts from an easier location with no pressure being exerted on him from any member of the opposing team. While this may be only a feasible option once a game, or indeed once or twice ever as teams cotton on to the possibility, the choice to exploit this inefficiency could be something which is the difference between championship glory or dejection.

Indeed, returning to our poster boy of free-taking goalkeepers, Stephen Cluxton, a recent example can highlight the point being made here. Falling from a high of 12 points in the 2013 season Cluxton has yet to score in this year’s championship. As recently as last Sunday, in the semi-final versus Mayo, he had three attempts on goal in the closing stages all of which sailed wide of the target. In the end the match turned out to be a draw. What if Cluxton, realising that Mayo expected him to shoot on every occasion, had slipped the ball to sharpshooters Bernard Brogan or Diarmuid Connolly, before he received his marching order, and they had duly swung the ball over the bar? It is something that can be seen with relatively high frequency in games of all levels when a snoozing defence neglects to mark a runner and a free taken short is popped over for a handy, cheap score. It is amazing to think teams pass up on this sort of opportunity, enhanced by the signal of a direct shot coming from the goalkeeper’s presence, with impunity. Dublin would now be preparing for another All-Ireland final had they exploited a glaring opportunity created by their own actions. In the event of the ploy failing they would have been no worse off, given the 0% return they have come to expect from Cluxton’s shots at goal this season. Of course it is disingenuous to suggest that Cluxton’s lifetime expected points per shot is zero but, given the lack of comprehensive statistics on the success rate of goalkeeper frees, one is left to wonder whether teams are missing a chance to add to their points tally relatively easily in a game where defences now rule the roost and scoring is at a premium.

By Robbie Butler

It was interesting to hear both Ronnie Whelan and Eamon Dunphy pass judgement on Georgia’s performance against Ireland in light of their FIFA World Ranking. Both pundits were surprised at the standard of play of the team ranked 147th in the world behind the likes of Guam, Aruba, Bermuda, and Belize. On the balance of play against Ireland, one would have to fancy Georgia against the likes of Guam despite being ranked below them. 

A countries co-efficient is calculated over a four year period using a number of metrics (I provide a full explanation here). To  quickly recap, the number of points that can be taken from any given match is dependent upon four variables:

1. The result in the match (M) (three points for a win, one for a draw, zero for a loss).
2. How important the match is e.g. finals game, qualifier, friendly, etc. (I).
3. The world ranking of the opposition and (T).
4. The confederation to which the countries belong (C). 

In Ireland’s case, the results against Georgia is worth the following points:  3 (M) x 2.5 (I) x 53 (T) x 1 (C) = 397.5

Georgia's calculation looks like this: 0 x 2.5 x 149 x 1 = 0. A bit harsh I would think. Scotland's calculation against Germany looks like this: 0 x 2.5 x 199 x 1 = 0. Again, harsh on the Scots. Regardless of how a country performs in a match, no points are awarded for a loss.

Given that Georgia have to compete against Germany, Poland, Ireland and Scotland in Group D of the EURO 2016 qualifiers, their best hope of accumulating ranking points is against the lowest ranked team (Gibraltar). Teams based in other continents, whilst carrying a lower confederation ranking, play against less competent teams all the time. This may explain why Georgia are so poorly ranked. It’s not that they are weaker than the likes of Guam, Aruba, Bermuda, and Belize, it’s that they are in the UEFA confederation and are drawn to play against some of the best teams in the world. So be it 7-0 or 1-0, the outcome is the same - multiplying by zero, regardless of any other factor, will always produce zero!

It’s time for FIFA to (again) revisit it’s method for calculating these points. Surely, the Scots deserve something for their two goals against the world champions. The current system seems to create vicious and virtuous cycles. This further explain why Wales are now 9th in the world.

By Paul O'Sullivan

It was reported on Wednesday that Anthony Barnett, the agent of Gareth Bale, claims that Bale has missed out on “millions and millions of pounds” by choosing to play for Wales rather than England. Bale was born and raised in Wales but was also qualified to play for England through his grandmother.  Barnett’s argument is that if Bale played for England, then ahead of next year’s Euro 2016 championships, he would be in a much better position from sponsorship and advertising deals. While Wales look likely to qualify for their first major championship since 1958, major companies are unlikely to throw highly lucrative deals at a player from such a small country.

Even if what Barnett says is correct, it does not take account of what Bale may have gained by playing for his own country. In economist jargon, there are likely to be intangible benefits to Bale in playing for Wales. Surely being part of a Wales team that qualifies for Euro 2016 will give Bale a level of satisfaction that he may not have attained had he done so with England. To simply play for the country that one grew up in and to represent one’s family and friends can give an emotional benefit that outweighs any monetary loss from not playing with a different country.

If Barnett was an economist, he might claim that Bale acted irrationally in choosing to play for Wales. It is worth noting, however, that while Bale is now the world’s most expensive footballer, in terms of transfer fee paid, not many people would have predicted this in his early days with Tottenham, whom he joined as a full back from Southampton. At the time that he declared for Wales, the expected monetary benefits from choosing England were likely much lower that the levels that Barnett now believes that Bale could earn. Even if Bale would change is mind, which is unlikely, that does not mean that he made the wrong decision at the time that he chose to play for Wales. As well as that, Bale may be happy to avoid the hype, intrusion, and often vitriol, that goes with being England’s latest great hope, especially when England again fail to win a major tournament.

Of course, while Barnett may be concerned about the financial well-being of his client, he is more likely to be thinking of himself. As Bale’s agent, Barnett would likely be entitled to a share of these “millions and millions of pounds”.

An interesting addition to the story is that Barnett is also the agent of Jack Grealish, who is yet to decide whether to play for England, where he grew up, or Ireland, who he qualifies to represent through his grandparents. I wonder what Barnett will advise Grealish to do!

By Robbie Butler

Regular readers of this site may recall that I followed Dermot Weld trained horses at the Galway Festival in July to see if it is possible to beat the market. This year was the third time we tested the hypothesis and it was our least successful to date. Assuming a €2 per horse per race, a total of €66 was punted which resulted in a return of just €32.33.

Galway has it usual mini-Festival in September, which started last Monday for three evenings. On Monday night Weld sent his only five runners of the three days to post in four races (two lined up against each other).

He saddled the winner in all four races and had a one-two in the 6.35pm. Returns as follows applying our normal rules: 

Stake: €12.00 Return: €33.75. A €1 rolling bet on all four winners was a massive 636-1.