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Maybe the Fans Are Right

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Decision-making is not often as rational as traditional economics argues. And that story has an impact on our understanding of both sports and economics.

"I must say, with all due respect, I find it very hard to see the logic behind some of the moves you have made with this fine organization. In the past 20 years, you have caused myself, and the city of New York, a good deal of distress, as we have watched you take our beloved Yankees and reduce them to a laughing stock."

George Costanza upon meeting George Steinbrenner (owner of the New York Yankees): Seinfeld, "The Opposite" (season 5, 1994)

"What the hell did you trade Jay Buhner for?! He had 30 home runs and over 100 RBIs last year. He's got a rocket for an arm. You don't know what the hell you're doin'!"

Frank Costanza (George's father) upon meeting George Steinbrenner: Seinfeld, "The Caddy" (season 7, 1996)1

Few sports fans ever meet the people who operate their beloved sports teams. Such a meeting, though, would probably inspire many fans to get in touch with their inner "Costanza." Given the opportunity, fans would love to ask:

  • Why do you keep signing such lousy free agents?
  • Why can't we ever draft players who actually help us win?
  • Why can't we ever find a better goalie?
  • Why does the coach keep making that decision on fourth down?
  • Why does the coach keep playing that point guard?

Obviously, this is just a sample of the questions asked. And, just as obviously, we have cleaned up the language. What may not be obvious is the economic implication of these questions.

Fans often suggest that decision-makers in sports are less than perfect. Managers and coaches are not only accused of making bad choices, fans often accuse these people of making the same bad choices over and over again. Many economists, though, find such stories unbelievable. After all, traditional economics clearly teaches that decision-makers are supposed to be "rational."

What does it mean to be a "rational" decision-maker? Thorstein Veblen sarcastically argued in 1898 that economists tend to see people as "hedonistic lightning calculators."2 In more recent years, Richard Thaler and Cass Sunstein have just as sarcastically suggested that the rational decision-makers described by economists "can think like Albert Einstein, store as much memory as IBM's Big Blue, and exercise the willpower of Mahatama Gandhi."3

Both these remarks comment on the simple idea that rational decision-makers "choose efficiently the means that advance their goals."4 Let's imagine the behavior of a manager and coach that "chooses efficiently." Such a person would tend to make the correct decision given the circumstances they observe. Perhaps more importantly, as the game changes, these same coaches and managers would change their point of view and make different decisions. Therefore—and contrary to what sports fans often contend—it's not possible for coaches and managers to make the same mistake over and over again.

So who is right: fans or economists? The emerging field of behavioral economics—via a collection of laboratory experiments—seems to side with the fans. Experiments have shown that people are not quite as rational as traditional economics contends.5 Some economists have argued, though, that how people behave in a laboratory experiment is different from how they behave in the "real world."6 In the real world, people face real consequences for making mistakes, and real consequences force people to be rational.

Sporting Rationality

To settle this debate, it might help to move out of the laboratory and look at decisions in the "real world." Sports are often described as being removed from reality. Yet for the people in this particular reality, what happens in sports matters. Consequently, we can learn about the rationality—or irrationality—of human decision-making by examining the "real world" of sports. This examination, consistent with the experimental evidence, will show again and again and again (actually we will present at least 20 "agains") that decisions in sports are not completely rational.

Before we get to this examination, let's emphasize that the word "irrational" is not synonymous with the word "stupid." When we eventually argue that decision-makers in sports are "irrational," we will not be saying that people in sports are not as smart as people are in other industries or other occupations. In fact, people in sports are often better prepared for their jobs than people employed elsewhere.7 Furthermore, it seems likely that whatever "irrationalities" are observed in sports are likely to be found elsewhere.

We make this claim because at first glance decision-makers in sports perhaps more than anyone else should be "rational." There are two characteristics of the sports industry that bolster this expectation. First, despite being a relatively small industry in the American economy,8 sports receive an inordinate amount of attention from the media. After all, no other industry has an entire section of each local paper devoted to its happenings. Such coverage raises the cost of failure to the participants in sporting contests. Losing in sports, as noted earlier, is not a private affair. Sports fans both near and far witness your failure and are often not shy in expressing their disappointment. Although people do pay some attention to failures in non-sports industries, it's rare to see interested observers in other industries pay money to yell obscenities at those who fail to achieve success.

Sports are not only different in terms of attention received. In sports, success and failure would seem to be—relative to other industries—somewhat easy to understand. To illustrate, ask yourself this question: At your place of employment, who is the most productive worker? Yes, we know. It must be you. But is this something you could prove? We suspect, for many people, this would be difficult. For workers in many non-sports industries, measuring worker productivity is difficult.

Take our profession, college professors. We both think of ourselves as above average professors. But such a self-assessment may be dubious. In fact, a survey at the University of Nebraska revealed that 94% of college professors thought they were better teachers than the average at that same institution.9 We don't think this obvious delusion is unique to Nebraska. Neither of us can recall meeting a fellow professor who thought he or she was below average.

It also turns out that professors are not the only people who overestimate their abilities. Thaler and Sunstein find evidence of this phenomenon in surveys of MBA students, drivers, and new business owners,10 and this is just a partial list. They go on to note that "unrealistic optimism is a pervasive feature of human life; it characterizes most people in most social categories."11

In sports, though, there's a brake on this natural tendency. If we asked Jeff Francoeur of the Atlanta Braves how his hitting in 2008 compared to the league average, Francoeur would be hard pressed to argue he was above average. With respect to most of the standard measures of hitting performance, Francoeur was below average. Likewise, Francoeur's teammate Chipper Jones can be pretty confident that he really was an above-average hitter in 2008. Again, that's what the stats indicate.12

Because sports come with numbers, evaluating worker performance in sports would seem to be easier. Consequently, the path to success would seem—relative to what's seen in other industries—easier to navigate. Unfortunately, there are a few stumbling blocks on the path to victory.

The stumbling blocks can be separated into two broad categories. First, numbers have to be understood. Coaches and general managers can see the numbers associated with each player's performance. But how these numbers connect to wins is not always appreciated. Even if the numbers were understood, though, another stumbling block gets in the way. Understanding the past doesn't have much value if the past can't predict the future. Some numbers in sports are simply inconsistent across time. When that's the case, following the unpredictable numbers makes the path to victory hard to find.

What the numbers mean for the present and future is the foundation of our story. But before we get to that story, we need to address a fundamental objection to any sports analysis offered by academics. Specifically, is it likely that academics would be able to say anything that the "experts" employed in the sports industry don't already know?

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