What can economics learn from sport?
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Thank you for downloading the moral less podcast. We are weekly guide the numbers all around us in the news and in life. And i'm tim harford now.

I like sport both as a spectator and as a participant. That maybe I should also like sport as an economist, that is the view of our guest today. He is gas sio places hera, and he is a professor of economics at the london school of economics. He's also the author of a research paper titled the beautiful data set.

We typically economist stand to yours and economic approach to a the human behavior, meaning finance or economic growth, business or labor markets. But here is just the opposite, is not what economics can do for sports, is what the sports can do for economics.

So i'd love to talk about some examples, and maybe we can start with one from psychology, I guess, or or maybe behavior economics, loss aversion and reference dependence. This is an idea from nobel ya danika ammon and his long time research partner aims to versy. And uh, you talk about an example when this was investigated by studying and gulf. So what what went on there?

Well, this is fantastic in everybody. Everybody knows he is ped. A very successful model of reference abundance with the a value function that says, you know that we treat differently losses from games. It's very difficult and to know exactly what is the reference and what losses and what games.

So the idea is just to be just be specific, IT would be forward to maybe give you ten euros and then say, let's toss coin and if I win, i'll take the ten year ros back off you verses if I say, hey, let's have a bet autos coin and if you win, you get ten euros. Actually those situations should be equivalent, right? If you win, you your ten euros richer.

If you lose, you gain nothing. But because you have the ten euros and i'm threatening to take you away again, there's a different reference point and people make different decisions. So that's the theory. But there more is golf teachers about this.

Golf is really because of office are rewarded for the number of strokes. And each interview on hole has a sAiling in the reference points, which is the pot of the hole. Yes, but this is actually, do you, the number of strokes?

yeah. So you have a bird or a bogie. IT doesn't actually make a difference whether call L E A bird or a bogie to who wins the tournament. That's whoever goes around in the smallest number of strokes. And yet yet the par is on everyone's mind basically.

Now the question is in my in the situation where the same one thing is in the second, the same position and is below part, so is is the main of games in his mind, the same situation where he is above part, so is in the domain of loss. Now this should be the same, is the same stroke, the same distance, everything IT turns out that as a beautiful test of client model, uh, professional sort, this are significantly less accurate when they are in the main of games. There are below bush.

See if you're putting to putting to make a birdy, you're more careless that if your you're putting to to .

save power or to avoid a boggy using some sense focus more when put in, uh for part to avoid card in the logs than when put in the over, which is incredible .

because you know, a shot is a shot IT make exact the same .

difference and of the tnm sy sly and this reference point really matters to them. And the beauty against the reference point is relevant to the number talks.

Let's look at another example, the economics of discrimination you started at the university of chicago. This is A A field may made famous by university of chicago great gary becker. And one of the questions that beco was expLoring was whether in a competitive market, competitive forces would would eat away at discrimination.

The idea being are you have some racists to discriminate on racial grounds? Well, they're going to lose out because they're not employing the best people because of their racial prejudices and employers who are not racist or even maybe who are racist. But they they like money more than they care about their racism.

They will employ the racial minorities and and get a Better deal and they will succeed in a competitive environment, I always thought was a really interesting idea. But the question is, how do you really test IT? How do you get data absolute is?

So again, this is another very important aspect of economics. Discrimination, again, has been very, very difficult. I think the best evenness can be found in sports. I remember a couple of papers, and then the seventies, that they looked at lifting them, the restriction of hiding black players in, basically. So that was a beautiful because, and you can see how discrimination is like a text.

so we should give people the historical context. So this is just off to the second world war. I think in the nineteen thought is that the major baseball leagues do not let managers employee african american players.

Is just you just not allowed to do IT so and then they lift that restriction? And then the question is, well, as some great players out there who have been shut out because of their race, some managers may want to employ them and some managers may say, no, I don't want a black player on my team. So when that restrict n is lifted, what what did we see?

We see that is exactly the most success x teams they was that they were quickest. And gardening, this nonWhite talent, which is, is like the election of garden big model a little.

Let's look at another example. I want to talk about game theory. Game theory was my my love when I was studying economics. And the basic idea of game theory is that you're trying to make decisions where how your decision works out depends on what a small number of other people do, maybe just one other person, and they are trying to make their decisions in the light of what you're doing. And you're trying to decide what to do in the light of what they're likely to do. Game theory has all kinds of interesting predictions, but you suggest, I know this is research you've done yourself, rather than research done by other people. You suggest, if you wanna want to stand game theory, you should look at the goalkeeper er's response and the striker's response .

during A A football penalty that has placation almost impossible to find to testing real life. But in the penalty, a kind of a state for where the first implication is that because, uh, people have the fair size, uh but I know they keep notes that I am grateful that I am a stronger kicker to the right and I know that he knows and he knows that I know that he knows that I know and so on okay, so is not fifty.

Fifty, although actually more like sixty forty sound like if we only think about left and right. Uh, and secondly, they have to be unpredictable. Imagine that this, uh, six six certificate to simplify others cannot be that I do right, right, left, right, right, left, right, right, left.

Okay, that would be the perfect proportions, two third to one third, two third to my strong side, one side to the other side. But that would be partially predictable. So I have to choose the right portions in a random way.

yeah. So IT raises a huge question, is our football players capable of doing this? Can they actually figure that out? Can they randomize? Can they get the right proportions? So, so when you look at this, what did you find?

I found that most do most of the time, not everybody, not all the time, but most especially frequently, are somehow able to a kick in the right proportions and not be predictable. No, I was so, so happy when I found this evidence.

Thanks to profess natural police who switch of the london, the school of economics. That is all we have time for this week. But please keep your questions and comments coming in tomorrow.

Less that BBC dot. C, O, not U. K. We will be back next week, and until then, goodbye.