Economics of Sports: A Note to this Special Issue

Abstract

The expansion of economics to other spheres of life, including politics, war, crime, religion, or in particular sports can be seen in line with Hirshleifer (2002) as a breath of fresh air in economics. Although one can always criticize the generalizability of results developed with sports data, sporting events can still be seen as economic (miniature) environments. There is no reason not to acknowledge that athletes, for example, behave according to two key elements in economics, namely incentives and constraints. Focal economic concepts such as prices, opportunity costs or property rights can be nicely investigated in sports markets and are supposed to drive the behaviour of their key actors. An essential strength of sports events is the fact that they take place in a controlled environment generating therefore outcomes that come very close to holding other things equal, providing therefore a real-world laboratory for testing economic theories. Researchers have the chance of working with highly reliable data (low variable errors) and reduced omitted variables biases. The advantages can be visualized using the Tour de France as an example. The ranking of a cyclist at the Tour de France, his performance in the mountains or the time trials are clearly observable and are free of discrepancies compared to well known and often used traditional economic variables such as GDP or CPI. Statistics can be adjusted based on the outside conditions (stadium, weather conditions etc.). A Tour de France takes place in a controlled environment. All riders perform in the same terrain at the same time with the same outside restrictions such as the weather. Further external influences are controlled by the rules (law) of the event, as they are the same for all riders. Thus, many factors can be held constant and therefore the situation is much like a controlled environment. Even though a cycling event allows social and economic interactions and is thus less controlled than a laboratory experiment one of the main advantages is that the participation evokes actual and real processes (e.g., strong monetary incentives) in an environment outside a laboratory setting (Goff and Tollison 1990).doping; economics of sport; illegal activities