world Economics Forum

This is why economists are increasingly studying sports

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.

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Economists are looking at sport and game theory to help solve fundamental economic questions.
Image: REUTERS/Ricardo Moraes
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.

The economics of professional sport

If you’ve seen or read Moneyball you’ll understand how economics can be used to put together a team. This is the true story of Billy Beane, the former general manager of the Oakland Athletics baseball team. Beane became famous for using economic ideas to identify undervalued players.

Baseball scouts and agents often focused too much on unimportant factors like how hard someone could hit a ball. Using advanced statistics Billy Beane could identify players who were undervalued by his competitors, and play them in ways that made best use of their strengths.
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.

In some cases economists have been hired to solve specific problems. For instance the AFL was worried about clubs “tanking” (purposefully losing) to get favourable draft picks (not mentioning any names, Melbourne).

So the AFL asked Melbourne University Economics Professor Jeff Borland to come up with an objective measure of club performance (based on team performance, win-loss ratios, previous finals appearances and injuries).

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