Category: Regulation

International Players and Team Performance

28/11/2018

by Declan Jordan

Earlier this week David Butler posted on the English FA's proposal to limit the number of non-homegrown players in senior squads, a move that has not gone down too well with the Premier League. I agree that the proposal may damage the quality of the Premier League. The justification reminds me of Brexiteers blaming UK economic problems on immigrants, when in reality, just as it is with the Premier League, immigrants are the potential solution to economic issues rather than the cause of them.

There is recent evidence however on the impact of foreign players on club performance in a recent paper in the Journal of Sports Economics (requires subscription). A colleague, Vicente Royuela, and his co-author Roberto Gasquez, from the University of Barcelona examined the influence of foreign players on the success of football clubs.

Using data from 971 clubs across the top-tier of 71 leagues, the paper shows that clubs in leagues with a higher proprtion of foreign players tend to perform better than clubs in leagues with less foreign players. However, within a league, having more foreign players does not have a significant effect on a club's performance.

This has implications for the FA's new policy on caps on foreign players. Fewer foreign players will negatively affect the quality of the clubs in the Premier League, damaging the 'product'. This indicates why the Premier League would oppose the move. At the same time, the relative performance of clubs with the Premier League will be unaffected. The most important determinant of within-league performance according to the authors is a club's wealth.

This suggests that those clubs that can afford to sign better quality foreign players will still be relatively better able to sign them. It highlights of course that the most important part of performance is not from where players come, but how good they are.

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Tottenham Hotspur vs. Archway Sheet Metal Works Ltd

11/4/2015

By David Butler

Some weeks back it was announced that Tottenham Hotspur Football Club were free to build a new stadium after Archway Steel, a local business, dropped its legal challenge against the club. The sheet metal manufacturing firm has been in an on-running legal dispute over the redevelopment plans at White Hart Lane. Recently the High Court in England rejected a challenge by Archway Steel over a compulsory land purchase granted to Tottenham. Archway Steel then dropped its legal action and entered negotiations with Tottenham. On the 31st of March Tottenham reached a private deal with Archway Steel.

This is interesting in light of the Coase Theorem. In his famous 1960 article, The Problem of Social Cost, Chicago Economist Ronald Coase provided us with a means to understand an interaction like this. While Coase is credited with this theorem, he didn’t name it and it is not really a theorem per se. The idea can be traced to Adam Smith and a standard bargaining solution in Economics was formalised by John Nash in 1950. In a nutshell what Coase did was make the crucial connection between institutions, transaction costs, and neoclassical theory.

Coase implied that if there was well defined property rights between two parties, such as Tottenham and Archway Steel, and that both could bargain without cost, then the private market would solve the problem. Even though an externality exists (Tottenham imposing costs on a private business) both parties have a shared interest in finding a solution.

The first half of Coase’s 1960 paper suggests that in these incidents resources will be allocated efficiently if negotiations take place, meaning that they cannot be rearranged in another way to make anybody better off while not harming others. He implied that this will happen regardless which side the law is on. Simply put, everyone has their price – Tottenham can pay Archway Steel to keep quiet or Archway Steel can pay to Tottenham to halt their plans. The structure of the law only determines the division of the value. If we take all of our standard assumptions regarding how individuals make choices and how markets operate, bargaining can actually solve the problems - no third party is required.

Of course, Coase then went on to show the essential irrelevance of his argument given that markets are not frictionless and transaction costs associated with bargaining are pervasive. As Professor Steven Medema, an expert in the work of Ronald Coase puts it, the theorem is a ‘logical fiction’ - it is purely intuitive, not amenable to mathematical proof but is logically sound.

Our initial reaction to the Tottenham vs. Archway case is often to look toward the law to see who has the rights. Cases such as this can often be framed as the 'poor little guy'. Thinking about the problem through the Coase theorem gives us an alternative way to reason and shows us how externalities are reciprocal – if Tottenham were prevented from building their new stadium, their utility sure would be diminished too.

Usually the Coase theorem allows us think about world that doesn't exist but in the Tottenham vs Archway case we have a neat real life event to think about the theorem (that's pretty similar to the examples used in the textbooks). For more of this on a similar theme, John Considine recently spoke about the Chicago School of Economics and Chelsea.

Sports Sponsorship Ban Deferred

29/1/2015

By David Butler

Two weeks ago I raised several questions about a clause in the Public Health (Alcohol) Bill that sought to prohibit the alcohol industry from sponsoring sport in Ireland. Last Friday it was announced that this clause has been dropped from the new Bill. A backlash from major sporting associations and a failure to secure replacement funding was cited as the cause for removing the clause. Other pricing and information measures in the Bill are set to be maintained. The Irish Independent reported that the ban has been deferred and a study group will report on the issue in a years’ time. This delay will hopefully provide time for more research to be undertaken and may also provide a window of opportunity to seek alternative funding – an unenviable challenge to say the least.

Gaming it: Incentives, Cheating and the Grey Area in Sport

18/7/2014

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by Declan Jordan

A book I really enjoyed during my summer holiday (and would recommend highly) is Stillness and Speed by Dennis Bergkamp. It was written with David Winner, who also wrote the wonderful Brilliant Orange - The Neurotic Genius of Dutch Football.

While watching (and supporting the Dutch at the World Cup - in part influenced by Winner's earlier book) I was struck by the reaction of TV commentators and analysts to Arjen Robben's propensity to fall in a heap at the slightest touch from a defender. Even when it was clear that Robben had been fouled he made sure the referee noticed it.

I was reminded of a passage in Dennis Bergkamp's book:

In Italy you have two strikers against five defenders, so you have to find ways to protect yourself. You have to find ways of keeping the ball, doing your job properly and doing it well. So, if you are up against five defenders and you get the ball and you get a little touch, you go down. Is it cheating? In England it is cheating. In Italy it's just part of the game. So you adjust to the Italian game. It's normal. And then you come to England and you realise, wait a minute, you can't do that here. It's not acceptable. I'm not sure...I don't call it cheating. I have seen players who cheated. It's very difficult to say, but I sometimes used it. But I think most of the time I was honest.

A lot of times you get pushed or you feel a little touch and that stops you reaching the ball. If you run on you won't get a free-kick because no-one noticed it. So you have to react a little bit more. And then you get the free-kick. (You exaggerate a little to bring it to the referee's attention). But there has to be contact before I go down. I think cheating is something different. For me, cheating is if you go past the defender, there is no contact then you roll over, you go down. The schwalbe, as the Germans say. That's real cheating. I didn't do that. But if there is contact, it's a matter of how do you exaggerate? If you don't, you won't get a free-kick. If you do you might get a free-kick or a penalty or whatever.

Interviewer: But too much of that is also cheating surely?

Yes, but it's a really difficult area. For me, it's not acceptable if you don't get touched but go down because you still want a free-kick. I really don't approve of that. But where you are always battling with the defender and he's touching you and you stay on your feet, you're not going to get a free-kick. I think you have to act a little bit..."Jeez, come on ref!" There are plenty of times where a foul is committed and you don't get a free-kick. What do you call tha then? That's the other side of it. You get pushed and the referee doesn't see it. Is that cheating by the defender? That doesn't exist does it? It's cheating. He's cheating. The referee didn't see it, but he pulls you back. That is the other part of cheating, I feel. Doing something behind someone's back and that happens all the time. I got really frustrated in my first season at Arsenal. I'm definitely not a cheat and I don't think people see me in that way. (Pages 175 -176)

I think there is a lot in that long quote that explains Robben's attitude and behaviour, as well the attitude and behaviour of other players and commentators. It's quite interesting to me how Bergkamp refers to 'diving' or at least 'exaggerating' in the context of doing his job properly and doing it well. It's also clear from this passage that cheating is not a black and white issue. There are cultural differences. The label of cheating is contingent on the circumstances. For example, handling the ball in the middle of the field in a mid-table league game (that may even eventually lead to a goal) is not considered cheating in the way that handling the ball in the opposition's penalty area in World Cup play-off game in Stade de France might be.

I made a presentation to the UCC Economics Society conference last February that addressed this grey area in cheating from an economic perspective. I've saved the presentation to YouTube and it can be seen below.

The central argument I make is based on questioning an implicit assumption in the classical economic approach (attributable to Gary Becker) that sees cheating - and other crimes - as a sort of cost-benefit analysis. A potential cheater will (perhaps sub-consciously) calculate the costs of being caught (a red card or the opprobrium of fans) times the likelihood of being caught (is the ref looking). This will be weighed against the benefits of cheating (getting a penalty or stopping an opponent from scoring). This assumes though that the cheater knows each of these elements. Perhaps this is not unrealistic. On this blog we've already seen work on the cost of a red card.

However, the other assumption implicit in this approach is that the cheater knows whether the action he or she is about to take is cheating. This isn't an issue perhaps when we talk about taking down a player that's through on goal or blocking a shot on the goal line or injecting oneself with EPO. But what about something like diving or losing a game to get what one feels is a better draw in a subsequent round? Can these be agreed to be cheating? Dennis Bergkamp alludes to differences in culture between Italy and England determining whether the same actions on the pitch were cheating or not.

A paper referred to in my presentation by Burrus, McGoldrick and Shuhmann in 2007 (subscription required) finds a difference in perceptions and self-reporting of cheating among students before and after definitions of cheating are provided. This suggests to me that a definition of cheating is needed. I suggest a distinction between cheating and gaming where cheating is the breaking of rules to gain advantage while gaming is the breaking of etiquette to gain advantage. The latter is not cheating - even if it may be unsporting. It is up to sports bodies to decide by codifying their rules what behaviour they wish to punish. They cannot then punish players who seek advantage while observing the rules set out by the sports bodies.

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Pirlo and paying for wins

11/7/2014

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by Declan Jordan

Over my two week summer holidays I caught up on some sports reading. One of the books I brought with me was Andrea Pirlo's autobiography "I Think Therefore I Play". The book failed to live up to my expectations (much like the Italian team in Brazil 2014) but he had an interesting take on the betting and match fixing scandals in Italian football in the mid to late 2000s.

Anyone who has read the wonderful "Miracle of Castel di Sangro" by Joe McGinniss or who has paid even a little attention to Italian football's woes will be aware that betting and match fixing has been a significant problem - particularly in Serie B and Serie C (the divisions just below the top Serie A) though Serie A has also had its well-publicised problems including calciopoli.

Pirlo argues that the root of the problem lies in legalised betting. He says "For me, the authorities should take a drastic decision with regards to Serie B and Serie C: make it impossible to bet on those leagues". In these leagues there are players that have not been paid for weeks he says and so they get together to fix games. He recognises this will simply be replaced by illegal betting through the Mafia but this is a problem to be be sorted out subsequently.

His further suggestions are perhaps more unusual. He says:

In addition to getting rid of betting, there should be incentives for winning. I'll give you an example of how it might work. Team B are second in the league and up against Team C, who don't have anything much to play for. If Team B lose, Team A (currently top of the table) go on to win the league. So Team A approach Team C and say: "Here's some money. It's yours if you beat Team B."

My initial reaction on reading this was not positive, though this may be a visceral objection to one club paying another club to perform. It just doesn't sound right. But let's think about this. Can there be a strong objection on moral grounds to something like this? Paying a team or players to lose a game is certainly questionable as it goes against the spirit of competition where each player and team does their best to win. So can providing a financial inducement to encourage a team to try to win be considered wrong? The players are already receiving win bonuses from their own club and their wages and value are linked to their on-field performances, including their ability to help their teams win. This would simply be another reason to do what they should be doing anyway.

The issue is the involvement of another club in the payment. Pirlo doesn't make clear whether his proposal is that Team A would make payments to Team C or the players of Team C. This is probably important. Would players be particularly inspired if their club received a bonus? They certainly would if they were to receive it directly. However, it isn't difficult to conceive of a situation where it may be in players' interests at some clubs to see a large pay day if their own club is mid-table ("so lets not push for the final Europa League spot") and they face a title-challenging rich club on the final day of the season.

Also, it opens the door to larger and/or richer clubs paying players at other clubs to do better against all the other clubs or a select few throughout the season. And if every club was to pay every other clubs' players?

The initial objection on fairness or moral grounds may not stack up but there is probably more than enough potential for perverse incentives and unforeseen consequences, as well as efficiency arguments, to keep Andrea Pirlo's proposal under wraps.

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NFL settles $765m concussion lawsuit - other sports must take note

31/8/2013

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by Declan Jordan

In a recent post I considered the need for regulation by sports bodies for players suffering from concussion. Such regulation would protect them from themselves and coaches and clubs that may put pressure on them to continue playing while concussed.

It was interesting then to see that the NFL have agreed to settle pending lawsuits from 4,000 retired players. The players claimed the NFL did not properly warn them of the dangers and did not do all it could to help the players suffering from the effects. The settlement is $765 million. It's unclear if that will be enough to address the health needs of former players suffering from long-term effects of the hits taken in the sport.

What is particularly noteworthy though is that a settlement was made at all. It does not come with any admittance of liability, but this outcome has to be a concern for other contact sports and suggests that they need to develop prompt regulations around concussion and protection for players. Even if not for the good of its players, the sports bodies need to act in their wn long-term financial interest.

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Regulation in sport - yes for doping but not for concussion

19/8/2013

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by Declan Jordan

Recently David Butler wrote about the economics of doping and referred to the freedom of choice as one of the arguments for allowing athletes use performance enhancing drugs (while presenting other arguments for and against). This means athletes should be allowed to weigh up the benefits and costs and make an informed decision. This would imply that sports bodies shouldn't regulate for performance enhancing drugs, allowing a 'free market' decide on the optimal level of drug use in sports. There are similar arguments used to oppose regulations in life outside of sport, in arguments on the use of graphic images on cigarette packages and the banning of large sugary drinks in New York.

These arguments for allowing athletes use performance enhancing drugs assume that they possess all of the knowledge to make an informed decision and that they possess sufficient power to resist doping where that is required by, for example a coach or the rest of their team. It is clear that sports bodies accept that regulation is necessary to protect athletes from undue pressure and/or from themselves. And yet in other situations these bodies seem very reluctant to regulate to protect players.

Recently we heard about the first case of early onset dementia caused by playing rugby. This coincided with the International Rugby Board's (IRB) decision to continue with its concussion protocol that allows players leave the field for 5 minutes to assess concussion and then to return if they pass by answering certain questions. Rory Lamont, a former Scottish international, has claimed that players can cheat that test and are under pressure to play through concussion injuries. Brian O'Driscoll has been equally praised and criticised for carrying on playing while suspected of concussion, most notably against France last season.One of those who criticised him was his uncle Dr Barry O'Driscoll (also a former Irish international). He has advocated for a stronger regulation of concussion in rugby. He suggests that:

the advice of the World Conference on Concussion in Sport, which has unanimously recommended that there should be no return to play on the same day of a suspected concussion, should be the template on which rugby bases its approach.

The same Conference also recommends that a graded seven-day assessment should be undertaken after a concussion.

There is an inconsistency in the stance of the IRB which implements an anti-doping policy while at the same time refusing to regulate to protect players from coaches that may wish to keep their best players on the pitch (their decision horizon is much more short-term than a player's may be) and also to protect players from themselves.

As the players, the hits and the prizes get bigger in this sport it is likely that a crisis point will come and regulation will be forced on the IRB. Of course this is not just a rugby issue but affects all athletes in contact sports. Davy Fitzgerald, the Clare hurling manager, showed how the pressure on coaches and back room staff can lead to bad and potentially dangerous decisions being made in relation to concussion when he called for an independent doctor to assess suspected concussion. The GAA recently published welcome guidelines on managing concussion. It says that a player with a suspected concussion injury should not return to current game or training. It will be interesting to see whether this will be the case and Davy Fitzgerald seems to indicate that players and managers can't be trusted to call it. This is hardly surprising in light of the recent survey by the Gaelic Players Association (GPA) that revealed that 58% of intercounty players admitted to playing on in a game while concussed.

There is a significant problem in sport where injuries to limbs, muscles and bones are given time to heal while brain injuries are not treated with the same gravity. This may be due to asymmetric information where athletes and coaches aren't aware of the implications and/or by asymmetry in the power structure between players and coaches/managers. Where these arise in an economic relationship there is often a response to regulate to protect the party with less information or less power. It is past time that appropriate regulation was introduced for concussion.

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Planned alcohol sponsorship ban could lead to a short-term financial boost for sports

14/8/2013

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by Declan Jordan

The Irish government has kicked to touch on the issue of alcohol sponsorship of sports. The Minster for Sport, Leo Varadkar, and the Minister for Arts and Culture, Jimmy Deenihan, (who may also be worried that a ban for sports will be extended to a ban for cultural events), have accepted the arguments from the Health ministers for a ban. However, providing a really good example of regulatory capture, said the ban cannot go ahead until alternative funding is identified to compensate sports organisations.

It's notable that the ministers should take the line of the sports organisations that they should be compensated. It is hard to think of another industry or commercial organisation that would demand compensation from a government decision to implement policy designed to improve health. The government didn't compensate pharmacists when it introduced restrictive regulations on the sale of codeine-based products. It didn't compensate retailers when introducing plain packaging for cigarettes. Then again I suppose those industries don't have ministers representing them at cabinet.

There is of course politics at play. The ministers want to protect their budgets and pressure on income for the sporting bodies may result in greater call on scarce public funding for sport. There are legitimate questions regarding public funding for professional sports (including rugby, football and GAA - the latter being amateur in terms of players but not in terms of the organisation).

The announcement of the government of it's requirement that alternative funding be put in place to compensate sports bodies after a ban on alcohol sponsorship creates a potentially counter-productive incentive for sports bodies and the drinks industry. The larger the gap that needs to be filled the more difficult it will be to implement such a ban. This means drinks firms could have an incentive to dramatically increase their sponsorship of sports organisations to make government think twice when they come to look at how much compensation will cost them. It would be in the government's interest to indicate that compensation will be based on 2012 levels.

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International Players and Team Performance

Tottenham Hotspur vs. Archway Sheet Metal Works Ltd

Sports Sponsorship Ban Deferred

Gaming it: Incentives, Cheating and the Grey Area in Sport

Pirlo and paying for wins

NFL settles $765m concussion lawsuit - other sports must take note

Regulation in sport - yes for doping but not for concussion

Planned alcohol sponsorship ban could lead to a short-term financial boost for sports

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