What Is Sports Economics?

That’s the question Dennis Coates (President of the North American Association of Sports Economists) asks over at The Sports Economist.

There was less agreement on what sports economics is. One possibility was that sports economics was the study of those “sports” that were commercial, though I think there was unanimous agreement that such a definition was far too narrow. Another possibility was that sports economics is defined by the application of price or decision theory. For example, a study that examines sport using incentives and objective functions or tries to understand, explain, or predict choices in a sport context is sports economics.

Here is my, which I posted in the comments. It is from my book review of John Fizel’s Handbook of Sports Economics in Managerial and Decision Economics.

It is the job of the economist to study interesting phenomena of human behavior, even if the application appears to be limited to the subject studied; thus, when such phenomena occur in sports, economists should study them. Sports games offer a wealth of data on human action in a controlled setting, and that ought to be a sufficient reason to study them.

Neglecting to study puzzles for their own sake can have two undesirable consequences. First, the researcher might fail to discover something that is relevant to non-sports economists, which was not initially obvious. As a general lesson of science, discoveries often happen serendipitously. It was not Rottenberg’s intention to discover a principle that is applicable to areas other than sports leagues. After engaging his curiosity within sports, other economists eventually realized the universality of his findings.

Second, if economists do not explore what is actually going on in sports games, future researchers will lack the knowledge necessary to use sports games to understand human behavior in general. Understanding the games is important, even if it only aides the researchers in identifying the proper control variables to include for studies that are relevant to non-sports economists. For example, to study racial discrimination in sports using performance and salary data—a common exercise in sports economics research—the social scientist must be able to properly value player contributions to insure the empirical models are properly specified. Statistics like the slugging percentage and earned run average in baseball are common measures of productivity, yet they are deeply flawed metrics. Without the proper evaluation, economists are left to trust the “conventional wisdom” of the public, which economists would not do for any other subject.

Ultimately, it is the job of all economists to observe economics everywhere; to study human beings “in the ordinary business of life” as Alfred Marshall put it. As Levitt and Dubner (2005) state in Freakonomics, “Since the science of economics is primarily a set of tools, as opposed to a subject matter, then no subject, how offbeat, need be beyond its reach.” Sports generate many intriguing economic questions that no economist should feel ashamed to answer, and it is probably the “freakonomic” appeal of sports economics that leads most economists to study it.

4 Responses “What Is Sports Economics?”

  1. Rick C. says:

    Great post JC. Just curious, what do you see as the major flaws in slugging percentage?

  2. JC says:

    Actually, I don’t have a problem with SLG. It is that their exist other metrics—separately or in combination—that are superior as controls in multiple regression analyses.

  3. Rodney Fort says:

    I agree with the general thrust of your post. But…

    Please know that a cadre of sports economists are NOT draw by “Freakonomics” appeal.

    I, for one, prefer to let Freakonomics die awell-deserved death.

    Throwing the sports economics lot in with Freakonomics dooms it to cutesy Sumo wrestling observations when it actually is an industry as old and functioning as any born in the industrial revolution.

    In addition to the rest of what it is, sports economics is an industry study, just like any other industry study, from the economic perspective. JEL Codes:
    L8 – Industry Studies: Services.
    L83 – Sports; Gambling; Recreation; Tourism.

    We, as economists, can do better than relegate such an industry to Freakonomics status.

    Just my two-bits.

  4. JC says:

    I like using economics to analyze interesting questions, and there happen to be many interesting economics questions in sports games and the sports industry. I have no problem with freakonomics (the lower-case “f” is purposeful), and this type of analysis was prevalent in the economics literature long before Levitt and Dubner wrote their book. I don’t think its demise will occur anytime soon.