Exploring the link between sport and economics

The recent World Economic Forum had many of the world’s most important leaders talking about the future of global economics. Much of the media attention focused on Donald Trump’s participation in Davos, but it is also a good time to look at the relationship between sport, economics and society.

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Many aspects of sport and economics are interconnected. Sports are becoming a more influential in economics, but economic theories have a place in sport as well. Game theory, for example, is used in both economics and sports.. The theory is traditionally used for economists to figure out how events will unfold based on their goals, motivations and what is perceived to be best interest. It uses numerical models to look at different “players” and how their strategies might affect the other’s gain. Hence, the word “game”, because it replicates what coaches do in sports games but with use of models and statistics.

Sports have taken this economic perspective and used it to make competitions into numerical events. For example, looking at a baseball game, a coach will plug in values representing the other team’s possible strategies and examine what will unfold through a quantitative model. Game theory can therefore be used to create strategies in both economics and sports.

Economics can also linked with sport when it comes to finding new talent. The story is the subject of the 2003 book ‘Moneyball’ and a later film, former Oakley Athletics baseball team general manager Billie Beane used advanced economic techniques to identify players. Baseball had traditionally looked at metrics such as batting average to judge player performance. Faced with financial difficulties, Oakland Athletics could not afford to employ players leading on those areas.

Beane created a system that identified strong players whose skills were undervalued by the market. What was considered an unorthodox approach at the time was very successful. Oakley Athletics were able to compete with teams such as the New York Yankees who had much bigger payrolls and made the playoffs in 2002 and 2003. The approach has since been imitated by other teams in similar situations with some success, for example when the New York Mets made the world series in 2015.

When, in 2009, by Simon Kuper and Stefan Syzmanski published ‘Soccernomics’, it was described by the New York Times as “what ‘Moneyball’ did for baseball”. Making links between football, economics and wellbeing, the authors argued that, like baseball, football needs to take a fresh look at available data.

The book contends that the people managing European football do not have a good understanding of business. If that doesn’t change, they are likely to be overtaken at some point by clubs and national teams in emerging economies such as China and India. Despite the amount of money circulating in football, many clubs struggle to make ends meet – and available data doesn’t even support the idea that high value player transfers create success on the pitch.

Further understanding sports and their link with economics can increase our knowledge of how to use sports in economic development. Much of the sports industry, which can be valuable in promoting social change, has not been given so much attention. Grassroot sports in particular have a lot of potential and support the creative side of economies. In the words of the World Economic Forum,In general, the category of Sport that can benefit society most is actually not receiving the appropriate levels of support from various stakeholders; however, this could change should the Creative Economy find both economic and social value in investing more in grass roots Sport, where innovative partnership models between the public and private sectors could be effective.”

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