Friday, 29 December 2017

The increasing role of economics in sports, and teaching sports economics

The Conversation has been running an interesting series on the increasing role of economics in sports this week. It's not clear to me how you can access the whole series (which is in the Australian Business + Economy section), but here's the first of the articles, by Tim Harcourt (University of New South Wales). He writes:
If you look closely at your favourite sport nowadays, it’s hard to miss the influence of economics. It’s evident from the way players are drafted or how much they are paid, through to individual coaching decisions, and even strategic shifts across entire leagues.
This has been particularly driven by the rise of game theory in economics. Game theory uses mathematical models to figure out optimal strategies, such as what pitches a baseball pitcher should throw, or whether American Football teams should pass more.
Sport lends itself to economics and game theory because players, coaches and agents act similar to the hypothetical rational decision-makers in economic models.
I love sports economics, and made a failed bid to start teaching sports economics at Waikato some years back. A 2009 article in the journal Australian Economic Review (sorry I don't see an ungated version online) by Ross Booth (Monash University) does a really good job of explaining why teaching sports economics is a good thing:
There are basically two schools of thought on the value of teaching sports economics. The first is that, as many students like sport more than economics, the combination of the two is likely to be appealing and you will learn some economics ‘almost as an aside’, as it were: it is a way of engaging you with economics, of reinforcing and applying some key economic concepts. The other school of thought is that it is an industry worth studying on its own merits and, as it is datarich, it also can provide a useful test of economic theory. Of course, both views are not mutually exclusive.
If you have access to the article, Booth provides a good (though somewhat dated now) list of helpful resources for teachers wanting to make use of sports economics insights in their teaching. I use a few sports economics examples in my teaching, and have blogged on the subject many times (see this search for a current list of blog posts with the tag 'Sports'). Sports economics is most useful for teaching applied microeconomics, and Booth notes that includes:
...the principle of comparative advantage in team selection, the economic welfare implications of several methods of ticket distribution and some sources of market power of sports teams and the ways in which they are used.
In particular, many sports economists are interested in competitive balance, since more balanced sports competitions have been shown to attract more fan interest (and more revenues and profits). However, sports economics is also having a direct impact on the sports themselves and the way they are played, as Harcourt notes:
In basketball, Robert D. Tollison is largely behind the explosion of three point shooting in the National Basketball Association. Tollison’s research identified that even though three pointers are less accurate than other shots, over the course of a game and season it makes sense to take more three pointers.
Data analytics and economics are definitely gaining an increased following among sports administrators and managers. Given the increasing role of economics in sports, it makes sense for use to make more use of sports in the teaching of economics.

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