Subscribe
Share
Share
Embed
"The Sports Economist," hosted by Shirin Mollah, delves into the fascinating intersection of athletics and economics, exploring how major sporting events shape local economies and industry trends. From analyzing the Super Bowl's economic impact on host cities to breaking down the complex dynamics of ticket pricing, Shirin brings clarity to the business side of sports through engaging analysis and expert insights. This podcast offers sports enthusiasts and business minds alike a unique perspective on how the games we love drive economic decisions and impact communities across the globe.
00:01
I would like to introduce Dr. Reid from the University of Reading. He's in the UK and he's a sports economist and he's done a lot of work with Oldham Soccer team. And so would you tell us a little bit more about yourself and how you got into the sports economics career? Yeah, sure.
00:27
Thanks, sure. It's a pleasure to be with you as always. You have to excuse my background. I'm in my office. It's quite late at night here as well. So it looks slightly spooky. It's very dark outside. I'm an economist by nature. And while I was studying to my PhD, a fellow PhD student had some data on betting on football matches, called soccer matches, and because I was doing time series econometric work,
00:57
of macroeconomics type stuff. She asked me if I'd have a look at this data. We eventually published a paper looking at the efficiency of markets using that data and published it in a good economic journal and that told me that you can use sport and you can think about sport and it can be economics as well and from there that's kind of what I carried on doing.
01:22
I published lots of papers in mainstream economics journals using sport essentially as an illustration. So in economics, we have all sorts of concepts that we're interested in. Sport has lots of data. And so what we can then do is we can measure lots of these concepts that are quite interesting to us, like market efficiency. And so that's how I got to this point. I've always been a big football fan. This the shirt I'm wearing.
01:49
is the shirt for my team, Oldham Athletic, as you mentioned, Sheun. And about a year and a bit ago, I happened to be at a game and met the chief executive and he said, well, let's get you involved in doing data work with us. And so since then, I've been doing all sorts of different things with the club, aspects of different strategies and things like that. But the main.
02:15
theme has been essentially analyzing data and trying to help the club make better decisions. Yeah, so you probably get this question a lot as well. You know, you're I know that you're a runner as well. You've done several marathons. One marathon, lots of half marathons. One marathon, but you're now training for maybe another one. So, you know, we all running.
02:43
and you know, have conversations and then you bring up sports economics. And you know, I get a reaction of what is sports economics? You know, how do you explain that? Like I explained in my classes, you know, you take these economic concepts and you know, there's also these statistics, but how do you explain it? What do you, what's your perspective after so many decades of just, you know, teaching this, researching this, having conversations and you work with?
03:11
a lot of partnerships that you'll discuss as well. You discuss all of them too, but please tell me how you explain it. I would kind of define economics, if someone asked me, as basically decision-making. We study decisions that people are making, decisions that they're making with scarce resources, and the decisions have outcomes. And those outcomes we often think about as distributions, allocations of resources, things like that.
03:39
And so if you think about economics as that, then, well, sport is a collection of people making lots of decisions, making them under lots of pressure, uncertainty, lots of fiercely competitive environments as well. And we see the outcomes. So thinking about sport is a very natural thing. You can start to think about, well, sport is big business. So that's one way in which you can justify the economics of it and any kind of big business.
04:08
Decision making is a big part of that, you know, to succeed in any kind of business environment, you've got to be making the right kinds of decisions under time pressure, resource constraints, and so on. And so sport fits that bill. The thing that I personally think is brilliant about sport from the perspective of understanding decisions and outcomes is just that there's so many of them and they're all recorded.
04:33
We know in all these sports, if that's a team sport, we know who was playing, who was selected to be on the team on the day. We know what changes were made, what kind of tactics were used, and we know the outcomes. And these outcomes and these matches are happening all the time. You know, there's a bunch of games happening here in England tonight. And there was a lot last night, I was particularly happy, my team won last night, so I was very happy. And that was a function of a lot of decisions that were made by the team in advance of the game. This is the same for...
05:03
for all teams that engage in any kind of sport. So for me, it's about decisions and outcomes. And we observe loads of them and they're recorded in datasets, you know, league tables, websites with readings of data everywhere that we can analyze. So, you know, sports economics is, it's a specialization in economics. We all, you know, specialize in something. But sports econ is, it's a very small niche. It's right. But
05:32
within that niche, what is yours? Because what we think about in sports is that you can't really apply a lot of things from one sport to another, especially in econ. For example, you can't even, it's pretty hard to go and analyze the competitive balance in America for soccer and the UK or Europe because of how the leagues are. But what's yours? And like, what's, I know
06:01
But what is it specifically that you look at? I know when I first began as an economist, you always ask what your specialism is. And it took me a long time to work out what it was. And I thought, well, sport, sport will do that, that'd be my thing that I specialize in. But of course, within sport, as you've pointed out, there's lots and lots of topics within sport. I think the thing that I've looked at the most has been demand for sport, basically, demand for attendance at sporting events.
06:30
So you're probably aware that certainly in England and Scotland for that matter, a lot of the numbers of people that turn up at football matches is recorded. And obviously the outcomes of those games are recorded as well. And so I've always been quite fascinated by that. Thinking about aspects of the demand for the sport, you know, to what extent do we care about how uncertain the outcome is, to what extent do we
07:00
who the home team is, to what extent do we just want to go and see our team win? And you can start to try and understand that by using structural econometric methods, you can get a sense of to what extent does a home win preference or a loss averse type preference system dominate what we observe in the numbers of people turning up to football matches relative to do they actually want to watch something that's quite uncertain? Of course.
07:29
Stadium attendance isn't the only thing. People watch games on their TV, on their phone, all sorts of devices. And that's a broader way of looking at demand. But that's probably the main one. Obviously, I mentioned that I've been working more in depth with my team over the last year and that's moved in the direction of analytics. So thinking about things like, you may be familiar, there's a paper.
07:58
by Ignacio Plesios Huerta, who looked at penalty shootouts or penalty kicks and kind of thought about them as a game theoretic interaction where you've got two players in the game and they've both got two actions essentially. He decided it was shoot left or shoot right and the goalkeeper can dive left or dive right. And because the penalties shoot such a short distance they've got to make their decisions simultaneously so this satisfies a lot of conditions of famous game theory situations like the prisoner's dilemma and so on.
08:28
And so these are strategic decisions that you can then look at because you've got thousands and thousands of penalty kicks happening all the time. And there were other decisions in a football match, you know, there's corner kicks. What's your strategy from a corner kick? What's your strategy when you're going to free kick to even whilst you're in the game, you know, your your striker and you're bearing down on goal. Do you choose to pass to your fellow player or do you choose to have a shot on goal? And what's the what's the best option? And even if that's always the best option, should you always play it given that a mixed strategy?
08:57
might be a better idea given what your defenders, what your opponents might choose to do. So I've begun to move a bit more into that direction more recently. But I think most broadly, I just, I find the whole thing fascinating and I wish I had more time in the day to be honest, because there are so many things that I'd like to look at and just never have enough time to finish them all off. Yeah, whenever you think about demand, even when you teach introductory economics for demand.
09:25
You know, you have these factors that influence the demand curve. Um, but in the real world, there's just so many things that go into it. But for sports, it's like every single game and every single, like, you know, team sport is just so unique that it's sports economics, especially demand and and supply, but
09:52
Mostly for like the ticketing, that, you know, all of that for the teams is very useful. Um, but you also brought in, whenever you talk about sports economics, you're always thinking, okay, you're thinking about that consumer demand, but then you're also thinking, okay, what about the players? And you were talking about, um, you know, game theory with the, there's, there's sports economics with, um, you know, the, the player and their strategy behind it. Thought of, I thought of, uh, min-max also. Um, but, uh, so.
10:23
Um, I always talk about how there's like basically two markets. You're looking at that labor market for the athletes, and then you're also looking at the market for the tickets, but it's not, it's not very, there's so much to do it, to go into, especially in like the modeling, but yeah, I find that fascinating as well. All right. So, um, I think, you know, the most interesting part here is what teams do you work with and why do you work with them?
10:52
I mean, any team that happens to be willing to work with me, I'm almost certainly, you know, well, it doesn't go that far, actually. You know, I'm working with my team because my team has been my team my whole life, and it's not going to privilege to do that and to try and help them do better. My wife said to me, you know, well, what if Manchester United comes in and asks you to do work for them? And she was disappointed when I said there's absolutely no way in a million years I would ever do anything for Manchester United. So.
11:18
if you're not familiar with rivalries and so on in English football, most people who don't like United absolutely hate them. And I grew up in Manchester, Alderham is just outside Manchester. And so I grew up in Manchester, we were winning things and my team was dropping down the divisions. And so I learned to hate United quite, quite passionately. But over the years, what have I got? I mean, through contacts within the university, we've
11:47
to do work with Reading Football Club, of course, that's the team in Reading. They had three years in the Premier League, but they're now in League One and they're in the midst of a very difficult ownership situation, which is quite, well, very problematic. The fans are protesting and it's all a bit of a difficult situation. I also have connections at Brentford Football Club with one of the directors there, and so we've done...
12:16
a little bit here and there. And then most recently, I've been working with all football clubs in England and in Scotland have essentially a charitable arm, which will do kind of social good type things and make use of the club crest. So in every town that's got a football club, the football club has some kind of aura about it, which enables it to do things that ostensibly other organisations couldn't. So, you know, so if I'm in Reading,
12:46
And I've got a top on that's got the University of Reading crest on and I walk into a secondary school. Probably no one knows who I am, what this crest is, but if I walk in with the Reading football club crest on, you know, straight away people know what's going on. But all football clubs have what are called community trusts and Southampton Football Club's community trust got in touch. They were quite keen for us to try and help them out to analyse their charity work in.
13:15
local community doing things like helping kids who were excluded from school who were offending, helping elderly people to be better on their feet and fall over less and other types of interventions. So we've done a little bit of work with Southampton Football Club as well. And more broadly the point that I always think about, you know, the connection between sports teams and universities actually goes back to the labour market which you mentioned.
13:45
And so because the players themselves in the team sports that attract the most money, so NFL and soccer here in England, they're the ones that really determine the results. Literally 99.9% of the budget goes on the players and everything else has to be the sticking plasters to make sure that things work in every other aspect of how the club, all these sports clubs work. And so what that means is they're resource poor when it comes to things like analysing the social good.
14:14
that they do, analysing all sorts of other things like their pricing strategies for the tickets. You know, there's a really interesting situation in that, you know, football clubs, sports clubs know all about their consumers, but if they raise prices for those that are willing to pay more, you know, this is a terrible thing to do and there's uproar and everything, everything falls down basically. So a lot of economics doesn't really apply when it comes to sport, but basically
14:44
Universities on the other hand, you know, we're full of students, especially students keen on sport, often playing sport, I think a lot more in US universities than here in the UK, but you're keen on sport, if you like sport you're often a little bit more quantitative, you don't mind numbers and so working with Southampton was fantastic because I had a bunch of students on my module who took on these projects as their project which got them 40% of their final grade.
15:12
and they went down and presented their projects, the results of what they found on these programs that Southampton are doing in the local community, presented them to the football club at their stadium. Basically universities are much more, have more in terms of resources for doing the kind of analysis that sports clubs would like to know more about but just don't have the resources to do it because they're spending it all on employing the players basically. Yeah I think when I first met you
15:41
And we went on a run and we were talking about this, like where that connection of the university and working with these teams is more than just, analyzing the data, you're also making this social impact. Especially you mentioned also the community, a lot of it, even when we work here with the LA Rams, is they have like youth programs and that's where like,
16:09
more of the analysis for economics can help, but it's, you know, college students are a big component of, you know, making the way leading. So, yeah, so I was, we'll get to competitive balance in the UK soccer, but so one of your works, I want to go into like the interesting aspects of competitive balance, but one of your works talks about
16:34
competitive balance measures and uncertainty outcome hypothesis in European football. So what is it that makes European football so exciting? Without any of the economics behind it, just do you find your own perspective of the United States and the UK between competitive balance but then bring in your economic analysis? Yeah. Over here, well.
17:04
when we kind of think about US sports relative to our sports. For some reason, the thing that most people focus on is the fact that here we have promotion and relegation, so teams will move up and down. Whereas in America, they obviously have a franchise system and the membership of league is fixed. That often seems to be something that I think fixates a lot of people. I think the more interesting thing actually is that American sports are much more heavily regulated.
17:33
than a lot of European sports. Yeah, so relative to, I mean, basically, NFL to the Premier League, you know, the Premier League is the Wild West, basically compared to the NFL. You know, there's no draft for how players come in. There's no revenue sharing. You know, there's nothing in terms of salary caps or anything like that. You know, it's a real kind of Wild West, essentially what happened.
18:01
in English football, but a lot of European football is that over the years, regulations, all these kinds of regulations have been stripped back and abandoned. So that's kind of the really obvious difference to me is that, you know, we have a much less regulated sporting environment, really. And it has its effect because what it means is that actually, if you look at something like the number of different winners of
18:30
the Super Bowl in NFL and you know the other major sports in the in North America, obviously I know Canadian teams play, my wife's Canadian so I'll keep up with these things. Lots of different teams win the competitions whereas here when you look at England and football it's you know it's Man City, it's been Manchester City for the past four years before that it was you know.
18:53
But basically, we have long dynasties of teams winning things. You look in Scotland, it's always Rangers and Celtic. You look in Spain, it's always Barcelona and Real Madrid. France, it's always Paris Saint-Germain. Germany, it's always Bayern Munich. Italy, it's always Juventus. It's very, there isn't that same level of uncertainty. Yet, of course, billions of people watch all of these sports.
19:19
people turn up, especially the Bundesliga has 50, 60,000 fans turning up to loads of games all around the country, even though Bayern Munich will win the league title yet again, you know, this season. And it points to, obviously, the fact that that isn't the only thing that matters. You know, I guess each team has its own set of expectations, and if each team exceeds its set of expectations, you know, that's what matters most. And also that community within your own team.
19:48
as well, I think matters, most matter, I guess, is the implication given that there's just a very different level of competitive balance here relative to what you have in most major sports in the US. You tie this back to uncertainty of outcome hypothesis. And would you mind explaining that? And how does that take place? And you know, making a decision to watch a game for, like you mentioned, demand, right?
20:17
the consumer's decision to watch one game versus another. And that's why we use this economic theory model to look at. Yeah. So I mean, there's a kind of intuitive idea that we like games to be more uncertain. The more uncertain a game is, the more likely we are to watch the game is the idea. And it's been essential to sports economics since the beginning, basically. And it obviously must be true.
20:47
you wouldn't go to a match if you knew with 100% certainty what the outcome was going to be, I don't think. But of course it's only one of a number of factors that determine, you know, the choice that any individual makes to go to a sports event. My own take on competitive battle when it comes to my team is I don't want it. I really don't want it. So this game last night...
21:15
we scored in the 17th minute, you know, the game's in 19 minutes long, and we could have scored more, but we didn't. And so it meant that as the game drew on, it was still 1-0, and we let in one goal and the game's a draw, or we even lose the game. You know, for me, there's far too much uncertainty. You know, I'd like it to have been 4-0, you know, nice, easy, formal formality of a win. So I don't much prefer that because I, yeah, I have a home win preference or a preference for my team to win.
21:43
Now, of course, if my team did always win, I knew they were going to win because I knew, you know, for example, the games were fixed for whatever reason or another, then maybe I might make different choices. So what I'm trying to say is I think there's a multitude of different factors that affect our decision to attend. Of course, there were other things, you know, there's distance. I can't get to games because I live 180 miles from the stadium, so I can't get to a lot of games. There's a cost involved there for travel costs. There's a cost in terms of, well, if I go to the game, I'm not spending time with my family.
22:13
doing X, Y and Z. So there's all sorts of other decisions that come into place when you're thinking about sports attendance. But the one that people focus on, I think fixate on to some extent, is the idea of competitive balance. You know, and a lot of, almost all the academic studies, I would say, that have looked at this have certainly found that when it comes to stadium attendance.
22:38
there isn't a preference for uncertainty. There's a preference for the home team to win basically, there's a loss of version within that preference for the home team to win. And yet despite that, league organizers believe that this uncertainty of outcome hypothesis really matters and that's the thing that they've really got to focus on maintaining through regulations of different types. Yeah, you mentioned about, you mentioned stadium attendance.
23:08
So I only went to the one that was in Oxford and do they have several stadiums and have they built it over time? And do you think it was good? Do you think it was a good investment and like for the economy, maybe one that was built like recently and we, you know, we were doing some similar research together as well. But it's more on the teams. But what about the stadiums? If they build a stadium.
23:37
especially in the UK, a lot of them have a few local teams, but is it positive? Is it, was it not a good outcome? What were you guys kind of thinking? Yeah, so I mean, I think you're right to ask questions about, you know, stadium finance. I think this is a big thing in the US and it's kind of interesting. I know this is a big issue because I talked to lots of US economists who are sports economists.
24:06
It's not something that is on the radar for sports fans here. You know, if they were going to say, here's the difference between UK sports and American sports, they wouldn't say stadium finance. No, I think I don't know. I don't know why that is. I think it's possibly just because we don't necessarily care as much as you might do about where your tax dollar is going. And it's it's always been my observation that Americans are much more concerned about, you know, what governments are doing than we we tend to be.
24:36
over here. But yeah, you know, it's still the case that stadiums, well, stadiums have to have an impact, right? There are particular type of land use, there are particular, you know, public resource, essentially, or, you know, trade on public resources. Alternatively, if you went to Oxford United Stadium, I used to live around the corner from Oxford United Stadium. And if there was a matchday, we knew that we couldn't go.
25:04
that way past the stadium because you just couldn't get anywhere. People might park, you know, legally in front of our house when there's a game on that kind of thing. And there are always signs around saying do not park here and so on. But, you know, there's only a limit to which these kinds of things can be effective. But also, you know, it's like any kind of big mass public event. You know, there's all sorts of aspects of that which are good and bad. And so stadiums obviously have an impact.
25:34
Should they be, if they're built, how should they be built? Essentially is the question. And most of the time here is with private money. So there isn't too much public money that's going into into those developments. There'll be, there'll likely be some public support in, you know, things like the infrastructure, you know, so Metrolinx and
26:03
and maybe road developments and maybe favourable deals for land or real estate around the stadium, for example. But by and large, the stadium itself will be privately financed. An example currently being talked about a lot is Manchester United. Everything comes back to Manchester United at the end of the day, but they want to redevelop Old Trafford, their stadium. And the government has said that they will support United in doing this.
26:33
But they're very clear that they're not supporting United in building a nice 100,000 t-shirts of stadium for them to use, because that's for them to use. You know, how the government will help them is they will help with the infrastructure around the stadium. One difference, again another difference between US stadiums and European ones is we don't have a stadium and then vast acres of parking lots or car parks as we call them. Most stadiums will have very limited car parking.
27:03
And it'll be public transport that you'll be getting to and from the stadium on. Um, so that's where the public support will often come in the, in the form of. Improving public transport, uh, links to and from, uh, sports stadiums. I guess what I would be thinking is that they, there's more teams. So if there's a state, so I think about it in terms of like, when we have a mega event like Olympics, sometimes it's not always.
27:31
know, it's not always positive outcome. They don't always gain. They sometimes lose. And so I wonder when we're looking at a stadium and, you know, a certain team, I mean, we're doing this, but in other variables. But if we have, let's say, you know, some of the teams are so close to each other, and if there's stadium built, but that team's not really doing well, then, you know, are they making
28:01
I mean, that's going to be the long run. That's over several years and that's a lot of analysis, but I guess in perspective, I wonder like, cause of so many teams in that area, whereas like in the United States, like it's used for a lot of, a lot of different teams, but it's, it's like, there's a really big investment and it's like in one area. You have this research on noise and how a team does.
28:30
Uh, would you be able to explain more about it? Cause I found that really interesting. And you know, you go to games sometimes and they say, um, let's get loud. And it's like, why what's the outcome? Yeah. I mean, fundamentally that's what we'd love to be able to kind of say is something about, um, essentially the impact of, of supporters, I suppose when I'm, when I was talking about stadium demand and numbers of people in the stadiums and so on.
28:58
The other thing that often I'm interested in with my research has been what's the impact of those fans on outcomes. There's been a number of studies over the years that have tried to look at this. You find, of course, that if you do a simple correlation type analysis, the correlation is that the higher is the attendance, the more likely is a home win. And you can say, oh, look.
29:25
more fans, therefore the home team does better. You know, they cheer them on and everything's great. But of course, equally, there's more fans because the home team is better. You know, they've got a good home team so more fans can watch them. So it isn't obvious that the causality is one way or the other. And even if you can establish causality, what's the actual mechanism? You know, so I'll talk about football or soccer because it's what I know best. But you know, if you're thinking about soccer, you're thinking about a soccer game, it could be that the crowd's getting there and they're cheering on the players and the players feel really
29:54
motivated and they do better and they run faster and they shoot better and all this kind of stuff. That's one mechanism, the players. It could be the officials, it could be the referees, the umpires and so on. The linesmen or assistant referees and so on in football. It could be that they hear, you know, subconsciously they hear the noise and they make a decision. If you went to a football match when you were in Oxford Shearing and you may have heard the noise when the ball hits.
30:24
a player somewhere near here, literally everyone in the crowd shouts handball, you know, and I don't know, maybe it doesn't have any effect, but equally at the same time, you know, if all the crowd suddenly shouts something, you know, psychologically it must have some impact in terms of what the referee and the assistant referee is hearing and what they decide. And again, there's been studies on this and lots of studies made use of COVID, of course, because in COVID time there were empty stadiums and sport taking place with empty stadiums.
30:53
And so you've taken out the effect of crowds and lots of people. I also wrote a paper on this as well, a couple of papers where we looked at the effect on the awarding of yellow cards. So discretionary decision made by referees. And we found that in the absence of crowds making noise, referees gave fewer yellow cards to players on the away team. So that's an argument that there's a mechanism through the referee to
31:23
to favour the home team when there's a crowd. They give more yellow cards to the away players. And again, that's arguably because they shout for decisions and the referees and assistant referees are influenced by them. So that's two mechanisms. The other one is that the management team, the coaching staff make different decisions, perhaps more aggressive decisions, more early decisions, different decisions that mean that the home team does better with more fans in the stadium. And so there's at least three mechanisms. And even if...
31:53
And even if it's only one of those, you still got to somehow distinguish the one from the rest. Because if you say, oh, look, it's the referee because we found that there are fewer yellow cards given against away players when there's no crowds in the stadium. Well, it could also be that the players behave differently, right? Players behave more aggressively, perhaps, and that's why they're being given more yellow cards. So even if we look just at the referee decisions, the referee decisions are a function of what.
32:22
players have been doing. So this is a long-winded way to say that what I was interested in looking at was, as much as possible, the impact of crowds on match outcomes. And so what we collected was numbers of away supporters in the stadium. So I think in terms of culture it differs from country to country, but in England there's a big culture of fans travelling to watch their team play in an away game.
32:53
So last night the game was a very local game, but there was two and a half thousand of my team's fans Aldem's fans at this game And only the whole team only had about three and a half thousand So there was a very kind of a quite even balance of the number of supporters in the stadium But longer distances, yes, I've been to games down here, which turned in 18 miles from my team and there's been 150 of my fans My team's fans I should say they're not fans of me
33:24
And if there's only a few fans, you imagine they can't make quite as much noise and they can't influence things. So basically we've collected all these numbers and tried to have a look at whether we can tease out any kind of impact from that. The reason why I guess the noise comes into it is that kind of optimistically, I thought that we might be able to try and learn a bit more about that mechanism, you know, with the analytics revolution.
33:53
of course began Moneyball, Saber Metrics and so on. It began in the US with, you know, an analysis of baseball and, you know, these games where there's much more regimented structure and plays and so on. But eventually, you know, analytics is taken over in football as well and soccer and so every game has thousands and thousands of lines of observations and detail about what that was. It was a short pass, this was the angle of the pass, this technique of the pass and the outcome of the pass and so on.
34:22
exactly where on the field that happened, all this kind of information. And so that enables us to start thinking, you know, maybe we can look at really in-depth, you know, decisions that players might make. Some players play, you know, on the edge of the pitch, so they're close to the fans. Maybe they play differently when there's more fans there, when there's fewer fans there. Where are the fans? Are they behind the goals? Are they down the sides? And fundamentally, of course, noise.
34:52
are they making a lot of noise or not? And the reason why I'm a little bit reluctant to think about it as a project on noise, because we can't measure noise. All we can do is infer what the noise probably was, the ratio of the noise from the home team or the away team. But fundamentally, the idea is just to get at, is there an impact? Is there an effect? Are players actually encouraged? I mean...
35:19
When I watch the game, when I watch any game, I find it hard to believe that if you're a footballer and you've got the ball and you're a wing, a player that plays in the wing, they're often the kind of player that does a bit of trickery, goes past someone and then they're through on goal. And that's exciting. You know, the crowd makes a noise. I don't know, I find it hard to imagine that doesn't have an effect. You know, sure, and you run as well, and you've probably run organized races. And when people are there to support, it makes a difference. You know, I'll...
35:47
before I ran my first half-mouth and I thought, I'm gonna hate all this noise, you know, all these bands by the side and all this kind of stuff, but I loved it. You know, it just keeps you going, it really encourages you. And especially when you've got a name badge and it's got a little number and you put your name on it and they call out your name as well. A random stranger calls your name and it's really encouraging. So I kind of, I imagine it has to have an effect. And so, you know, the project basically is to try and see if there is an effect.
36:17
And the problem is, even if there is an effect, it's still hard to get around the fact that, for example, if you find that, which we have, a team with more fans takes actions further at the field, so more advanced, more attacking actions. It's still very difficult to distinguish that from the fact that a better team will do that as well, and a better team will have more fans. So yeah, it's still very hard to get around this fundamental...
36:46
which way this causality actually go, is it from, you know, the fans encourage the team to be better or a better team attracts more fans? And so don't think we've quite solved that one yet, but we're using more and more interesting data to do so. But you also use econometrics methodology to tease that out and try to figure it out, which is an instrumental variable. Yeah, exactly. So the technique of instrumental variables is to try and
37:16
isolate essentially the causal component of any relationship. And so what we're looking for in any situation, so we've got the fans in the stadium and we've got the players doing something more and what we want essentially is something that's correlated with the number of fans in the stadium but not with the action on the field other than through.
37:45
effect of the fans on the stadium. I think we use the distance between the two clubs on the basis that that would affect the number of fans that turn up, but in principle it shouldn't affect football players, they're professionals, it doesn't matter if they've traveled 50 miles versus 100 miles to play a football match, maybe. Yeah so this kind of leads me to the next question. So I know that you watch football, soccer.
38:15
Um, what are other sports that you watch? And do you actually, when you go to a game, do you analyze it and an economics perspective? Are you kind of thinking, for example, the noise, did that come up from, did that come up from actually being, I mean, the running part that you were talking about does make sense, you know, that actually, it actually, in a race too, right? We do faster. We, we are, we're faster in a race. And you wonder, is it because.
38:44
Is it the people that you're like, you're around the pace or is it also or, or, and, or is it the people around that are making noise and the people that are running with you? Same idea, but do you ever analyze, um, in a different way or like when you started maybe? Yeah, I think what I'm more like to do that when I'm watching a team, that's not my team. When I'm watching my team, it's all about, you know, I'm totally engrossed in the action and just, you know,
39:14
desperate that my team actually does well. And it has a weird effect on you. I'm sure you're probably familiar with this when you're watching your own team play, you're just somehow immersed in the game in a very different way. I think if I'm watching another game, if I'm watching a Premier League game versus my team, so my team is in the fifth division, so it's quite some way below the Premier League. And so when I watch the Premier League, the thing that strikes me is it's, first of all, it's a very different quality.
39:42
the level of quality is considerably higher. The level of athleticism and so on is just dramatically different. And I think therefore what I'm doing, that I am thinking more about the economics of it. I am thinking about what led these people to be at this point in their careers, because they are on their career. I think a lot of sports fans probably don't think about the players from their team as...
40:12
people trying to earn a living, you know, just trying to make ends meet. So I think I probably do think more about things from the perspective of an economist and possibly the average fan, but I certainly only do it when it's not my team. My next question is gonna be, how did you see sports economics evolve over time? Because this wasn't, it's not always been.
40:40
you know, a lot of sports economists working in the field and that's also in effect. You have a conversation, we have a group chat. So I read it too, I know what's going on in Europe and you guys are analyzing some, you know, like what just happened in a match, but how has it evolved over the years and what major trends are maybe shaping the field today?
41:09
You know, as I kind of, I guess I kind of said at the start, you know, the, the, well, I didn't really say it out, actually. You know, I guess if I was explaining sports economics, as you asked me at the start to someone that wasn't an economist, I would say something like what I did. If I was talking about sports economics with someone who's, you know, much more of a, I guess an academic or an economist, I'd say, well, there's two aspects. And one is that we use lots of data in sport because sport produces so much data and we use that data that tells more about economics.
41:38
about how we make strategic decisions and this, that and the other. And then the other side of it, of course, is we apply economics to sport. You know, we think about scheduling sporting events, then we think about the labour markets in sport, and we use our economics to essentially make proposals and try and improve things in the area of sport. And so I think those have always been the two areas of sports economics.
42:08
And I think, you know, what's I guess what what's interesting, of course, is, as you say, how how things develop and the seminar series that you organize kind of in part, I did that. Well, I did it because the pandemic began and I wanted some way to keep in touch with people because I knew we weren't going to be seeing much of each other for a while. And usually the way academics operate is when you meet for conferences every, every, every, usually every summer.
42:37
European, more than hemisphere, so I started off there and I've carried it on mainly because it's helped me to have a real sense of what's going on in the field. It's really important when you're trying to do research of course to know what other people are doing so you don't replicate what they're doing and so that you might develop what they're doing as well but also so that you might spot niches and do new things that other people aren't doing. So you know I guess I probably
43:06
able to give a sense of where sports economics is than I might have, you know, five, ten years ago. I think it remains very much the case that you still have people trying to make really interesting observations about the world using sports data. So things like discrimination in labour markets is a really common theme. You know, I've got a paper from many years ago now where we looked at the again yellow cards in football.
43:36
And we found that they were being given more to particular black players who originated from Africa rather than black players in England that had been born in England and therefore raised in the culture of England. You know, so you can, because you've again, because you've got so many observations on things, you've got loads of data on which to establish discrimination. Is it statistical?
44:04
Is it some other kind of discrimination? So there's still a lot of that goes on and ever more creative, I think. There's a really wonderful paper at the moment looking at the impact of community centers in areas and the closure of community centers on crime and different things like that. So there's still quite a lot of that. An increasing amount of course makes use of the in-depth analytics.
44:32
type data that's available for many different sports now. Again, to make these kinds of observations. I think probably the main thing really is that sports economics becomes ever more applied. It's always been an aspect of applied economics, as you said at the start, it's just another application of economics. You could apply it to wine, people do wine economics, people do
45:01
other kinds of quirky applications to different sectors, tourism, economics, for example. So it's always going to be a little bit like that. But I think to a large extent, it kind of feels like a lot of the theoretical contributions have kind of been made by now. Ideas of the uncertainty of outcome hypothesis and ideas of the impact of a salary cap on competitive balance and all these kinds of other ideas in theory.
45:27
A lot of them seem to have already been made. And a lot of what sports economics really is, is, you know, finding new, more imaginative, more interesting data sets to, you know, to basically look at, well, what's the impact of this kind of change? What's the impact of this difference in circumstances on the way make people make decisions? I feel like sports economics, you know, when you look, when you also look at just economics and how it's evolved. You know, we look at, we used to.
45:57
used to be a very theoretical, um, and model focused. And I feel like in sports now it aligns really well with the fact that it's empirical and all this data that's, that's a, that's available. You did make a point about salary caps and revenue sharing. You talked about revenue sharing before, but when we're doing this research, we're not just, you know, we're trying to inform policy makers, but how does
46:27
stadium financing, salary caps, revenue sharing or other aspects? You like to think of course, you're a sports economist, and so you like to think that the things that we do have a real difference, make a real difference. I've become a little bit more pessimistic over recent years. So we observe here in the UK, we had Brexit 10 years ago now nearly. And the debate around that really emphasised to me that
46:57
There was a famous quote by one of the leading politicians at the time who said, Britain has had enough of experts. And the idea essentially, this was run with everywhere, is, well, OK, you're an economist, you can talk about GDP. But what does that GDP really mean? How does it affect me? What does it mean? And so I've kind of become a little bit more, I guess, not necessarily cynical, but a little bit more kind of
47:26
downbeat about necessarily the impact that we sports economists can have necessarily. Especially when as we often do we kind of come out with counter-intuitive suggestions. You know so I think for a lot of people I think for the average person you know the local government subsidizing you know the location of a sports franchise in their city to the average person I think that's a good thing and so I think then they're a little bit
47:56
taken aback when a sports economist comes along and says, no, it's terrible. Why are you spending all this money on this thing that benefits a small number of people and benefits the owner of the sports franchise more than anyone in the city itself? Um, and so when we always come, when we often come up with these counter intuitive suggestions, it means that we often get, we don't get listened to, um, quite so much, you know, and I see, uh, you know, the, the new president Trump putting, no, threatening to put large tariffs on.
48:24
on the US is closest trading partners and that flies in the face of all economics. You know, the first thing that we teach in economics says this is really not a good idea and it doesn't seem to have much traction. So, I mean, I guess I go back, you know, can we have an impact on things like sports, stadium, finance? Can we have an impact on, you know, bigger picture issues? Um, I guess I would still like to think so. I'd like to still be optimistic, but I am a little bit.
48:54
I'm a little bit, I don't know.
48:59
concerned, let's say that maybe we won't ever really have that much of an impact. And I mean, to some extent, when it comes to stadium finance and Olympic Games and so on, there is something that's that we can't necessarily measure with economists. You know, so again, with Olympic Games, like the sports stadium finance, we generally say as economists, well, it's probably not worth it, you know, the amount of money that's spent and so on. It's probably not worth it. But I was here in the UK when we had the Olympic Games. You'll have the Olympic Games in a few years time there.
49:29
And it's amazing. It's absolutely amazing. You know, you just it's just the reason which you can't describe it, the buzz, you know, everything about it is just wonderful and you have, you know, two, three, four weeks where it's just everything's fantastic on that level of feel good factor. You can try and measure it. You can come and put numbers on it and so on. But I don't know, you know, and I kind of come back to always you think about the fact that
49:57
rational economic agents who are well aware of vested interests arguing for certain things that still decide that these things are good to do, suggest there must be reasons that perhaps we're not yet necessarily capturing as economists when we're analyzing these things. Yeah, and there's also so many aspects to the model, right, for Los Angeles. So there's, I know there's going to be a really big bias here because we're in Los Angeles. In 1984, they were the first city that
50:27
And, you know, it explains it. We have all the infrastructure, but if all there's actually before that. Many cities didn't want to host it. And if they actually go off that model and choose maybe cities that are similar to Los Angeles, or just kind of, you know, have this sort of, you know, just like a framework.
50:52
it could be possible that it's not always a loss. So I think, I believe London also did pretty well in 2012 too. So there's sometimes a positive impact. So let's just wait till 2028. Yeah, so this is one of my favorite questions because this is how I got into sports economics was behavioral economics. You actually did talk about loss aversion but there's a lot of behavioral economics
51:22
It's almost at every single game. We might not even expect it. Like that even us as consumers. We're, we're experiencing behavioral economics when it go there, just like you were talking about loss aversion and uncertainty of that, can you, can you explain a little bit more about that? Like maybe one concept or. I mean, I think my kind of very simplistic understanding of behavioral economics is essentially, you know, understanding a few of those biases that mean that we don't necessarily act as rational economic agents.
51:51
And again, the data in sport mean that it's just, it's waiting there to be analysed from that perspective, because you've got such an amount of data, you know, to look at these things. One of the, one of the papers that I liked a lot that I saw a year or two ago was looking at decisions based upon essentially, again, for me, it always comes back to soccer, so my apologies to those in the audience who don't care for soccer, but.
52:21
There's a paper which looked at shots on goal in football, so they hit the post. Because once they hit the post, well, some of them go in and some of them don't go in. And of course, the ones that go in, their goals and the goal scorer gets the adulation, gets picked for future games and so on. The ones that go out, maybe the player doesn't get selected for the next game. And careers are different as a result of pure luck, basically. And I thought that was a really nice, a really nice setting because
52:51
You are literally making decisions based on something that is really... A lot of these metrics that you think are useful, does that strike a score of goals? Yes, probably long term you can get them, but you often don't get those long samples in sport because each game comes and each game is very salient and decisions are made based on that game or the last game he wasn't very good, he didn't score, therefore we won't play him in the team this time around.
53:19
These decisions can have fundamental effects on player careers, whether they can go on to become a Premier League player or whether they slum it in the fifth division, playing for my team for example, can to some extent be a function of these very lucky decisions one way or another. And there's another nice paper more recently looking at the recruitment that goes beneath. Obviously if I play a player or don't play a player, I have to have recruited them in the first place.
53:49
And, and, you know, I've got to make decisions about recruiting based on what I think this player's going to do in my team. So, you know, I see a player, he's currently playing for some other team. And I think he'd be good in my team, but there's so many different variables there. Right. You've got, he's got another 10 players alongside him. Um, you know, he's playing a different system for that team. It's a different part of the country with different number of fans watching, you know, different contract length, all sorts of different variables.
54:15
And so what all that means is that you don't necessarily know how productive that player is until they're playing for you in their team, by which point you've contracted them for some length of time, wages committed, big costs involved, and maybe it just turns out he's really not suited to your team. And that's a lot of money down, down the drain. And so you've got, again, you know, kind of the, the implication is that therefore you imagine that sports teams, when it comes to players and coaches as well.
54:44
probably be quite risk averse in their hiring patterns, because they don't really want to take a risk on a new attractive, you know, upcoming new talent, better to go with proven trusted, you know, older, you know, person that's been around the block, you know, much more established. One of the papers that actually I was fascinated by in behavioral economics was the hot hand fallacy. It's that it, and you know, basketball bringing us up because, you know, we just had a trade.
55:13
was very, you know, it was around the news a lot. So, but the hot hand fallacy, that's been work that for several years and you know, they've looked at it in basketball, but I mean, if you look at a different sports, there could be, you know, different findings as well too, just because of the way the game is. Basketball is really fast. The way they're shooting is different compared to let's say like soccer.
55:43
or even football or I play field hockey. So that's how I know it. But yeah, I found that I think that hot hand fallacy and behavioral economics is really interesting. Yeah. And then have you noticed a difference in sports economics between major leagues and then smaller leagues or emerging sports markets? The sport I watch, I watch my team play at a, what I guess you'd probably think it was a minor league.
56:09
kind of level, you know, it's four divisions below, it's under teams below the Dependent League essentially. And, you know, there are quite dramatic differences. And then once you get further down, of course, the differences become more marked. Because, you know, these players, the further down you go, are only playing on a part-time basis. They're semi-professional, you know, they'll have a day job. Nine to five where they're, maybe they're even economist work at a university, then one night a week they'll train.
56:39
and then on the weekend they'll play a game. And so you've got this whole range of, I mean, I think the thing about it is, of course, back to this European sport model where there's more of a kind of a full spectrum, if you like, it kind of goes from the elite all the way down to you and I putting together a team in the local park. In principle, you can do that and you can get promoted and keep getting promoted and end up in the top division of the country.
57:08
So that means that you kind of observe these differences as you go along. And there are of course websites that give you data on, you know, the dog and duck put playing, the shipbuilders team, whatever it is. And so you can analyze this. And one of the things that I find quite interesting is that the major difference, if you go from the tournament league down to, you know, the
57:36
10th, 11th, 12th, 13th, 14th, 15th division, is that there are fewer draws. So you remember, that's another thing that's different about European sports and American sport. We have tight outcomes, where neither team wins the game and they go home without having won the game. But those kinds of outcomes, they just happen less and less the further down you get. The more amateur, the more part-time, the more less skilled players are.
58:04
I think it's quite interesting and I don't really have an explanation for that but you know that's certainly one difference that I've noticed you know the home team still wins about 40 percent of the time the difference is when you're getting really far down the away team wins about 36 37 percent of the time because there are no draws whereas if you go premier league the home team wins about 45 percent of the time there's about 25 percent of draws you know and the rest of away
58:34
I've asked you several questions about sports economics, but where do you see the future of sports economics? Where do you think it's going to go? It's a very, it's a very big question. Um, I like the idea that we'll just keep on chipping away at different ideas, you know, because I think what seems likely to happen is that, you know, we'll keep on playing sport. Sport will keep changing in incremental ways as it has done over the past.
59:04
120 and 30 years and we'll just keep chipping away ideas and hopefully more data keeps on becoming available and new novel insights that you know that help us understand a little bit more about you know fan preferences. I mean you know right at the start I said you know one of the things that we economists like about sport is there's lots of data but we still always want more you know so you know the demand for attendance.
59:32
the numbers of people attending the stadium, we've got those numbers, but we don't know what they all paid to attend. You know, we also don't, and even if we know, you know, even if we know what the average price was, you don't know what, you know, each individual paid, you don't know how far they travelled. We don't know all sorts of different aspects of what they're doing when they're attending a game. So there's always a demand for more data. Novel sources will probably come up. I like the idea that, you know,
01:00:03
will work more with sports teams. So you know you and I have talked a bit about you know how you've tried to work with the LA Rams and so on and I think that's to me is a really promising area I think because we need sports economics and we need as academics to be relevant in the real world. You know I think you know I observe what's happening with governments around the world becoming ever more it feels ever more populist.
01:00:29
and doubting the value of universities and higher education and so on and questioning things that we do. So we do have to remain relevant and we've got a lot to contribute in the area of sport. So I think collaborations with teams are probably things that will be on the up and that presents huge opportunities because if you're working with teams, you know there's a bunch of economists in Germany, Tim Pablowski and others, they work with teams like Stuttgart and other teams and...
01:00:57
They've got really fascinating data, so Tim, the flask, he's got a paper where they look at beer consumption. When you came to England, she unfortunately you couldn't have a beer and watch the game in the stands, sadly, because we have laws against that because English fans can't behave themselves. But in Germany, you can buy a beer and sit there and watch the game, drinking your beer face civilized. But because of that, because of that availability, Stuttgart wanted to know, you know, how do beer sales fluctuate with.
01:01:26
what's going on in the game. And as you can probably imagine, the more tense is the game, the less likely people are to go and buy a beer because you're watching the game when you're too engrossed in the game to go and think about going and getting yourself a beer. Obviously, if it's a full-on conclusion, everything's going well, and if it's a positive surprise for the home team, beer sales are going up. So yeah, I think we'll become ever more quantitative, as we've always talked about, and hopefully we'll be doing ever more relevant bits of work rather than esoteric.
01:01:57
bits of economic theory that we think might be interesting to publish in some weird journal somewhere or something. Thank you for answering all the questions, Dr. Reid. And, you know, we've learned a lot about sports economics, but specifically what kind of research that you do and what's your niche. So it was nice getting to know you. Well, thank you very much for having me. It's been a great pleasure.