Book Review

International Journal of Sport Finance

Volume 1, Issue 3

The Wages of Wins: Taking Measure of the Many Myths in Modern Sport

by David J. Berri, Martin B. Schmidt, and Stacey L. Brook

Stanford: Stanford Business Books

Reviewed by John Charles Bradbury

Department of Health, Physical Education, and Sport Science

Kennesaw State University

Sports economics is fun. That is the main lesson of The Wages of Wins, which focuses on the research of three economists who have made numerous contributions to the sports economics literature in recent years. However, the material is most certainly not frivolous, as the authors make a substantial contribution to the field of sports economics. Berri, Schmidt, and Brook demonstrate that sports economics is enjoyable not only because of its entertaining subject matter, but because sports games yield so many unanswered questions about human behavior that social scientists have failed to investigate thoroughly.

Until recently, sports economists tended to focus on issues that were excessively practical: public financing of stadiums, labor squabbles resulting from bilateral monopolies, racial discrimination, etc. These issues are important and should be studied by sports economists. Other issues that economists ought to study have been largely neglected, and this is where the authors focus their attention. Economists occasionally do employ the economic method to study many seemingly trivial aspects of human life, but rarely have economists made substantial careers doing so. When the American Economic Association awarded Steven Levitt the John Bates Clark Medal in 2003, it acknowledged the important role of the discipline in studying every aspect of human behavior. Levitt is particularly known for finding unique testing grounds for interesting economic theories, including a television game show, sumo wrestling, and sporting contests. It is in this vein that the authors promote the scientific study of sports, without apology. Furthermore, the author’s approach mirrors Levitt’s Freakonomics (coauthored with Stephen Dubner) and William Easterly’s The Elusive Quest for Growth, in writing a book that targets a general audience using studies published in the academic literature. At the same time, the authors also challenge economists working within theses spheres of research.

There is nothing subtle about the approach. The authors challenge many aspects of the conventional wisdom directly: labor disputes drive away fans, rich teams can buy championships, sports leagues are losing competitive balance, and competitive balance is crucial to the success of sports leagues. Furthermore, the authors tackle the difficult job of disentangling individual contributions from jointly-produced outcomes in team games. Their findings are often counter-intuitive, yet convincing. The book will provoke everyone from seasoned sports economists to the average fan. The prose is clear and written to entertain as well as inform the reader. The subject matter and tone remind me of the casual conversations economists have at professional meetings. It includes many of the same thought provoking ideas that the participants vow to investigate further, but feel the need to concentrate on other more traditional topics instead.

The authors begin with a general introduction to the basic principles of economics and explain why even math-phobic fans ought to care about numbers in the sports they follow.

“If we can’t refer to numbers in our assessment, we could never know who won any game. In fact, all those numbers on the shinny score board probably just seem like a distraction in our efforts to enjoy watching very tall people run around a basketball court.”

And furthermore, “these numbers tell stories that differ from popular perception.” In the chapters that follow, the authors explain how numbers are integral to understanding the operation of the game on and off of the playing field.

The first topic of investigation is the claim that fans often make when threatened with a strike: “I’ll never watch again.” Using their own research for support, the authors show that, in all major sports leagues, work stoppages have not resulted in attendance declines. Despite the fact that owners, players, and fans all talk of impending financial doom on the eve of a strike/lockout, the actual consequences are not so dire. Though the evidence backing up the claim is based on rigorous statistical analysis published in the prestigious American Economic Review, the written explanation is clear. The chapter includes simple graphs of attendance over time, making it clear that the attendance returns to normal after play resumes. Unfortunately, if maybe players unions and owners believed some of their own cheap talk, and are now wise to this research, they might decide to endure work-stoppages more frequently knowing that fans will return.

Next, the authors tackle the relationship between payroll and performance in Major League Baseball. Historically, there is no denying that the league was once ruled by the high-dollar Yankees, but is it still the case that on-field outcomes are a predetermined function team wealth? Contrary to the findings nearly everyone else—MLB Commissioner Bud Selig’s Blue Ribbon Panel, television sports personality Bob Costas, and noted sports economist Andrew Zimbalist—Berri, Schmidt, and Brook say “no.” After an excellent public choice analysis of Bud Selig’s incentives to encourage wealth redistribution through revenue sharing—Selig’s family owned the small-market Milwaukee Brewers—the authors demonstrate why these previous findings are not robust. The main reason is that the analyses of the Blue Ribbon Panel and Costas focus on playoff outcomes rather than regular season outcomes. It is true that over the period studied small-budget teams did not fare so well in the post-season, but this is a sample size issue. In a short series, the better team has a lower chance of winning than over the course of a 162-game season. When looking at the more meaningful—in a statistical sense—regular season, differences in payrolls across teams explain, at most, 33 percent of the differences in wins. And when looking at other time periods, the effect of payroll on winning is much smaller than the previous estimates indicate. This point is further buttressed later in the book by showing that performances by individual players vary quite a bit from year to year, preventing owners from guaranteeing success on the field. Team spending is certainly a component in winning, but no team can buy a championship.

The authors devote two chapters to the related topic of competitive balance—a popular subject in sports economics. In an ideal world, all teams would be of equal strength, and the league would have perfect competitive balance. In baseball, the conventional wisdom is that the disparity between winners and losers is as wide as ever and growing, largely due to unalterable demographic characteristics of the league. It turns out that the difference between the best and worst teams has grown smaller, not larger, over time. Using some evolutionary biology from Stephen Jay Gould and Chicago School economics from Simon Rottenberg and Ronald Coase, they explain why competitive balance is mostly a function of the population of available talent, not league policy. And the competitive balance in MLB is quite similar to other professional sports leagues around the world. But what if we could substantially alter the competitive balance of a sports league, would we want to? The authors also challenge the traditional notion, which is certainly controversial to the sports economics field, that perfect competitive balance is something fans want.

The authors address football, developing a model of quarterback productivity and demonstrating that quarterbacks bear too much public responsibility for the performances of their teams. They find that quarterback performances are very unstable from year to year—even less stable than baseball players, whose performances are not as stable basketball players. Though this work is informative, it is not as impressive as their analysis of basketball.

The real fun of the book—not that the other sections are dull—starts when the authors delve deep into what is obviously their favorite sport: basketball. They begin with a typical sports bar question: who is the better basketball player, Shaquille O’Neal or Kobe Bryant? O’Neal and Bryant are two very differently-skilled players with unique strengths and weaknesses. Despite their success together they prefer to be far apart, which forced the L.A. Lakers general manager, Mitch Kupchak, to make a difficult choice between the two during the 2004 off-season. This exercise of constrained maximization requires the weighting the different qualities of players that help teams win games. The problem is intractable, because of the team-play aspect of the sport; therefore, after discussing the weaknesses of existing methods the authors make the important contribution of devising a new approach to value players. The Win Score method estimates the worth of players by weighing each person’s contribution to winning. The discussion ultimately spans several chapters, and leads to the evaluation of all players and teams through the authors’ exhaustive Win-Score-based models. The method is intricate, but simple to understand; and, with each step they explain why they do so. Win Score is to basketball what Linear Weights is to baseball, evaluating players on the things they do according to the weight in which they impact winning.

Their method would make Frederic Bastiat proud, as it seeks to value achievements that are not often reported in mainstream discussions of basketball, including intra-team spillovers onto teammates. The authors find that both the media and NBA executives make decisions that seem ill-advised according to the Win Score model. In particular, team executives rely too heavily on scoring in judging player quality. Without reading the book, many economists might be tempted to scold the authors for arrogantly chastising decision-makers who have the incentive to know how to measure productivity. However, the authors take the necessary care to examine meticulously the game and their own analytical methods, which ultimately leaves little doubt that there is some truth to their argument. In fact it is the authors that end the book with a lecture for economists.

“Like many of our stories, the importance of scoring is yet one more myth in sport. Telling this story, though, reveals another myth. And this one is all about economics. People in the NBA do not appear to process information as efficiently as some economists might suspect. Consequently, a treasured belief held by some is inconsistent with the data.”

This is just one example of what economists can learn from applying their methods to new areas. The lesson applies to economics as a whole, not just sports economists. This ought to encourage economists to study interesting questions that seem too trivial to examine at first glance.

As a whole, the book works. Writing a book for a general audience that involves mathematics, statistics, and a discussion of academic literature is a difficult task. Additionally, making an academic contribution further complicates the writing, but Berri, Schmidt, and Brook succeed. Statistics are explained at a low level, and the authors use rhetorical tools well—such as employing real world examples from extremes to make a point and reducing ideas to absurdity in a humorous manner. The frequent use of graphs and charts aids the understanding of the material. The sources are well-documented in the endnotes and bibliography, and the empirical methods are clear. It would make an excellent supplementary text for sports economics or sport management courses. While these courses can often be dry, The Wages of Wins has a way of reminding the reader that the subject of analysis is sports, which is always interesting.

I do have a few minor criticisms. Some of the acknowledgements to previous work is excessive, and could have been delegated to the endnotes. Also, some of the personal anecdotes meant to humanize the authors by discussing friends and team allegiances do not work well in a co-authored book.

Ultimately, the authors should be commended for bringing their research to a wider audience, something which academics have done too little of in the past. However, with the recent success of Freakonomics-type books by college professors, this trend seems to be changing. Yes, academics do need to have some discussions with each other, but professors should feel the need to share their knowledge with the rest of the world.