The Sports Economist

The Squeeze Play Is On

Baseball's owners take everything and leave you with a promise. They tell you professional athletics will not only make your city whole again but it will surely serve as an engine of economic growth. Then, 20 years down the line, when they have siphoned your treasury, you are left praying that the promise is fulfilled. Or else.

There was a moment, in the third and deciding set of the 1993 Wimbledon final, when Jana Novotna seemed invincible. She was leading 4-1 and serving at 40-30, meaning that she was one point from winning the game, and just five points from the most coveted championship in tennis. She had just hit a backhand to her opponent, Steffi Graf, that skimmed the net and landed so abruptly on the far side of the court that Graf could only watch, in flat- footed frustration. The stands at Center Court were packed. The Duke and Duchess of Kent were in their customary place in the royal box. Novotna was in white, poised and confident, her blond hair held back with a headband--and then something happened. She served the ball straight into the net. She stopped and steadied herself for the second serve--the toss, the arch of the back--but this time it was worse. Her swing seemed halfhearted, all arm and no legs and torso. Double fault. On the next point, she was slow to react to a high shot by Graf, and badly missed on a forehand volley. At game point, she hit an overhead straight into the net. Instead of 5-1, it was now 4-2. Graf to serve: an easy victory, 4-3. Novotna to serve. She wasn't tossing the ball high enough. Her head was down. Her movements had slowed markedly. She double-faulted once, twice, three times. Pulled wide by a Graf forehand, Novotna inexplicably hit a low, flat shot directly at Graf, instead of a high crosscourt forehand that would have given her time to get back into position: 4-4. Did she suddenly realize how terrifyingly close she was to victory? Did she remember that she had never won a major tournament before? Did she look across the net and see Steffi Graf--Steffi Graf!--the greatest player of her generation?

A: Is a sequence of eight heads conditioned on three tails a random walk?

B: Almost certainly not. Why?

A: The Red Sox.

B: Yeah, wow. That was some performance.

A: Did they have a hot hand?

B: I think so. And apparently the Cardinals did too. They hardly showed up last night.

"the ballpark will be 100% financed by the team owners, those who use the ballpark, and by DC's largest businesses ... our residents will not be asked to pay one dime of tax dollars toward this ballpark."

With this type of revenue sharing, the value of talent at the margin decreases for every team by the same proportion. It is argued that profit maximizing teams will not alter the amount of talent that they will try to acquire - but that talent will bring less in pay for the players. In other words, relative talent is unchanged leaving no change in competitive balance.

MLB has recognized that there may be a need for an incentive to entice receiving teams to spend some of their shared revenues. The most recent collective bargaining agreement signed by baseball players and owners states that "each club shall use its revenue-sharing receipts... in an effort to improve its performance on the field." "... the Commissioner", Bud Selig, " may impose penalties on any club that violates this obligation."

Official reports have attributed 40 percent of the vehicle delays in urban areas to traffic signal inefficiencies. If that figure is correct, the annual nationwide loss comes to 5.7 billion vehicle-hours, or $95 billion, plus $28 billion for wasted fuel and other vehicle operating costs.

Experiments in the Netherlands have shown that running traffic in urban areas at 30 kilometres per hour, encouraging eye contact, eliminating traffic rules, signals, and other controls all together - and leaving road users to their own devices, their own judgment, and their common law duty of reasonable care - has cut accidents, delay, and congestion, and saved public funds. ... So successful were those trials that other European towns are copying them.

Exorcising the Curse of the Bambino is the Red Sox mission, but a subplot is the performance of Epstein, whose innovative approach to baseball will be on display as this Series evolves.

Oakland's Billy Beane is the high priest of this approach. In addition to Epstein, disciples include Toronto's J.P. Ricciardi and Paul DePodesta of the Los Angeles Dodgers.

What Epstein has done should certainly silence critics. Especially after the Red Sox took a two games to none lead in the Series on Sunday, thrashing St. Louis 6-2 for their sixth consecutive postseason victory.

Epstein, at 30 the youngest GM ever in the bigs, is a Yale grad. He and DePodesta, 31, from Harvard, have brought an Ivy League presence to a fraternity of grass-roots baseball lifers who didn't know a spreadsheet from a bedsheet.

Louisiana-Monroe (another Sun Belt conference team) this season played at home game in Little Rock vs. Arkansas. This was a favor to ULM in order to meet the attendence requirement.

Arlington Mayor Robert Cluck, who said he's familiar with Rosentraub's work, said he remains comfortable with the ERA study.

"I certainly hope that Mark is right and that money that is currently spent on the Cowboys in Irving is redistributed right here in Arlington," he said. "Arlington is not getting anything from the Cowboys right now, and that's basically what we're doing -- redistributing wealth to Arlington."

Cluck also noted that Rosentraub has consistently argued against building stadiums in lightly populated suburbs, without masterplans for ancillary development.

"We're proposing to put this stadium in the middle of our entertainment corridor, which includes Six Flags, Hurricane Harbor and AmeriQuest Field," Cluck said. "He said you have to have a master development plan, and we signed an agreement a few weeks ago to hire a masterplanner.

any official of any government "who pays, suggests his government should pay, or promises a sports franchise, or ... money towards building a stadium or refurbishing an existing one, that official will be sentenced to a life of hard labor in a federal penitentiary."

[T]he Red Sox stealing the pennant from the Yankees not once but four times within 72 heart-stopping hours was something more than just the greatest last-gasp comeback in history.

More than that, it was a partial squaring of accounts, a down payment on simple fairness. With due respect to Brian Cashman, Torre and their classy players, the Yankees cannot escape the fact that their franchise has used its wealth to tilt the supposedly level playing field of sport by a larger margin and over a far longer period of time than any other team in our national history. If somebody should have the biggest flop on record in our national pastime, it should be the Yankees; and it should be while George Steinbrenner III owns them at a moment when he has, yet again, broken his own gluttonous payroll record with a $182 million team.

If any club deserved the right to administer these dishonors to the Yankees, it was the Red Sox, crownless for 86 years. The true distinction of this fabulous week was that this ALCS was the most fun -- the most unadulterated, disbelieving, decades-overdue fun -- that baseball has experienced in our time. And maybe, if you like a pinch of malice with your meat, ever.

Between the NFC championship and the Super Bowl, the team saw a 3,448 percent increase in merchandise sales over the same two-week period in 2003.

...The spillover into the 2004 season hasn’t been nearly as dramatic, of course, but business has been good. Game-day merchandise sales at the stadium are up 47 percent.


...An 18 percent increase in ticket prices, bringing the average Panthers ticket to $50.23. [Note: Virtually all Panther games are sellouts].

...The annual sale of personal seat licenses, which require a one-time payment for lifetime season-ticket rights and essentially paid for the construction of the Panthers’ privately financed stadium, have more than doubled to 1,400 in 2004.

...Sponsorship sales ... are up 20 percent from last year.

The Panthers’ success likely won’t have any impact on the city’s economy, though, largely because the team owns the stadium, radio broadcast rights, Internet site, you name it.

They call this over-40 soccer league of Central and South American players the Golden Age League. It has several teams made up of players who mostly live in New York City. Now that the league is in its playoffs, many former soccer stars who are legends in their countries and among soccer fans come out of the woodwork to play. Romerito, who lives mostly in Paraguay, spends October here, staying with friends in Astoria, Queens. Mr. Cabañas, who lives in White Plains and is busy raising a family and running a soccer school, takes more evenings off than he can really afford, for Sol de América.

Both Mr. Cabañas and Romerito are retired and have lost a step or two in the open field, but their legs are still taut and their skills remain sharp. Though slightly past their prime, the men are hardly weekend warriors. The play is rugged. There are daring diving headers and savage sliding tackles. Passes are crisp, and the men execute plays with the strategic cunning of a chess grandmaster.

...Miguel González, a Paraguayan immigrant who plays for Sol de América, stood watching in street clothes and shook his head in disbelief.

"I grew up like everyone in my country, watching these guys playing on television as national heroes," he said. "It's exciting but it's strange. You have some of the best soccer players in history playing in this park, and no one knows it."

...Mr. Cabañas said that even after his distinguished 21-year professional playing career, he is not set for life.

"I can't retire," he said. "American athletes make a lot of money, but soccer players have to keep working."

"I have played with Pelé and Maradona," Mr. Cabañas said. "I scored 380 goals in my career, but when someone recognizes me playing in the park and thanks me for what I've done for soccer, it's as thrilling as playing in Giants Stadium in front of 75,000 fans."

Competition, in medieval times and our own, almost always has a locational component. Urban centers with cathedrals vied fiercely for relics and works of art to adorn their churches. Somewhat in the manner of modern sports stadiums, medieval cities engaged in a kind of spatial competition for ever grander cathedrals that inflated the costs of providing religious services of all kinds...

In this as in all matters economic, the true cost of the cathedral was the opportunity cost of resources used in its construction and maintenance: the opportunity cost of stone masons, artists and saver-investors whose human and physical capital resources were directed to the provision of religious services.

...The precise amount of resource use generated by cathedral building cannot be directly calculated, but a good deal of anecdotal evidence suggests that the opportunity costs were massive. According to Scott, more stone was cut between 1050 and 1350 in France than in the entire history of Egypt. Scott and Morris also note that almost 9,500 ecclesiastical buildings, such as abbeys, cathedrals, parish churches, were constructed in England and Wales over the medieval period. While capital markets were rudimentary, the actual building of cathedrals on these scales meant that resources were in fact responsive to a kind of "spiritual" investment demand and therefore allocated away from additional infrastructure, such as roads and bridges, or from greater investments in education and technology.

...Scott estimates that each Gothic cathedral or other type of great church would cost hundreds of millions of pounds in contemporary currency. Such estimates, while anecdotal, provide indirect evidence of an enormous opportunity cost of building cathedrals and other church structures. Indeed, if Weber is correct, economic growth set in after the spate of cathedral building stopped, which is a corollary of our argument.

...It is clear that medieval Catholicism emphasized large-scale, extravagant structures over small-scale, simple ones. Economic resources have alternative uses. Therefore, by rejecting the extravagance of church buildings - however they were financed - Protestantism made it possible for such resources to be directed toward more secular, market-oriented activities.

Twentieth Century Fox Film Corporation has filed trademark applications 78444142 and 78485747 with the United States Patent and Trademark Office to register the names "FOX Soccer Channel" and "The Soccer Channel".

Multiple sources indicate that FOX is planning to convert FOX Sports World (US) into an all-soccer channel sometime in the first quarter of 2005.

Despite all these no-hurry factors, Jones insisted that this issue be put on the Nov. 2 ballot. There are many issues at play: polling numbers that favor a general election with high turnout, national trends that show local governments aren’t as enthusiastic about stadiums as they once were, and some important court cases on the docket that may affect future stadium developments.

According to several sources involved in the negotiations between the Cowboys and several local governments about potential locations for a new stadium, Jones has made a fall election a non-negotiable demand.

....Those who study voter turnouts know that national elections draw many more of these less-savvy voters than local elections. Polls paid for by the Cowboys, sources said, made it clear that if a stadium issue went before voters in a special election — where turnout is low and anti-tax older people still get out and vote — the issue could lose big time. In short, Jones’ advisors have told him that if the issue doesn’t get on some ballot during this presidential election, it might be years before it could pass.

There is nothing wrong with good luck, particularly when it's yours. But we approach the market not as if it were Churchill Downs, where the outcome of the wager is clear in a couple of minutes, but as if it were the auction block at Keeneland, where you expect the purchase of a horse to prove itself out over years. Because this is for the long run, we don't want Old Paint. We want a great horse at a great price. And because, unlike at Keeneland, an investment comes with a rider who will be in the saddle for many years, we put as much emphasis on the jockey as we do the horse.

Lawrence Summers, the president of Harvard and the former U.S. Treasury secretary, once wrote that the work of Messrs. Prescott and Kydland on business cycles had "nothing to do with the business-cycle phenomena observed in the United States or other capitalist economies." In an e-mail yesterday, Mr. Summers said the two professors "richly deserve" the prize because of the economic methods they introduced, even though "I like many others find their particular theories [about business cycles] implausible."

Clemens will start Sunday on three days' rest, for the first time in 2 1/2 years. He has won just once on short rest in the last 14 years. And his record in the six starts he has made in that span (regular season and postseason) is only 1-4, with a 7.55 ERA. He hasn't won a postseason start on three days' rest since Game 7 of the 1986 ALCS.

If he doesn't win, the Astros will then bring Oswalt back on three days' rest Monday. They won't want to know that, counting Johan Santana's no-decision Saturday in the Twins-Yankees series, 39 pitchers since 1999 have started a postseason game on short rest. They've gone a combined 7-20. And their teams are 11-28.

The pharmaceuticals giant responded 'almost in a paragon way,' said Gerald C. Meyers, a University of Michigan business professor of organization and management. 'They're being very open about what they know. They're bringing in top people to lend veracity,' he said. Faced with a major crisis, 'most companies fail because they're not prepared.'

But the Merck crisis could linger for a long time, as its management struggles to quell anxiety among patients, employees and investors. The manufacturer withdrew its popular painkiller after a trial showed increased risk for heart attacks or strokes. The move sent its stock falling nearly 27%.

Merck also may face more criticism for having strenuously denied for several years suggestions by outside researchers that use of Vioxx led to heart problems. The company even published its own studies suggesting the drug wasn't causing harm.

To maintain faith in its crisis management, specialists say, Merck will need to make prompt disclosures of any additional information about Vioxx, good or bad, through national advertising campaigns, direct patient contact and meetings with their physicians. Merck officials should assure the public that 'we will make sure you know day by day what we know' about the drug's problems, said Harry M. Jansen Kraemer Jr., former chairman and CEO of Baxter International Inc. 'This is a matter of life and death.'