More than half a century ago Simon Rottenberg initiated the study of sport and economics when he considered both the industrial organization and labour market for professional baseball. What has followed since is the examination of almost every conceivable economic concept and sport on the planet.

Reference to Rottenberg's seminal work is made throughout this book, and the collection of chapters presented here constitute an effort to further the work he started. The individual chapters are by no means the final word on the topics addressed. In fact, they are quite the opposite. Traditionally, sports economics has been applied to the major team sports in the United States and Europe. Many of the contributions explore concepts and ideas in sports economics that are deserving of further attention. Where it has been possible, this book includes the application of the principles of economics to sports that have garnered less attention from researchers to date. We address less visible sports including Australian-rules football, cricket, Gaelic games, horse racing, rugby and tennis. Naturally, the more popular themes in sports economics, such as baseball, basketball and soccer, are also included.

Before exploring the economics of specific sports, we address three broad areas that are important in order to contextualize what follows. The first is an exploration into the history of sports economics as a field of study. This is something that receives very little attention, and what is presented here is a first attempt to remedy this. The second introduces some of the methods and theories most widely used in sports economics. The third demonstrates how the burgeoning field of sports analytics and the skills of the economist can be used at a practical level. The various sections that follow then consider specific sports. These groupings are by no means perfect but are an attempt to make underlying connections between these sports.

Many of the contributors to this collection of chapters are leading academics in the field of sports economics. It is thanks to their passion and research that this work has been possible to assemble. I would also like to acknowledge the contributions of various other people to the realization of this book. First, Alison Howson of Agenda Publishing, whose idea this collection was.

INTRODUCTION

This chapter describes the economics of cricket. Although it is played in relatively few countries, cricket is the second most popular sport in the world after football (soccer) (Swartz 2016). Cricket has undergone some dramatic changes, arguably the most important being the introduction of shorter match formats and the emergence of India as the dominant financial power in the game. Traditionally slow-moving, with matches lasting several days, the sport has introduced new shorter match formats aimed at attracting new audiences. An obvious question is whether the shorter game formats, originally regarded as a financial saviour, may actually herald the demise of the more traditional form of the sport. Historically, cricket as a full-time pro-fessional sport was confined to England, and the English County Championship attracted leading players from other countries, in much the same way that European soccer leagues today attract the world's leading footballers. However, over the past 20 years the Board of Control for Cricket in India (BCCI) has overtaken the England and Wales Cricket Board (ECB) as the richest national body in world cricket (Agur 2013). Although most English county teams operate at a loss, the Indian Premier League, launched in 2008, has been a great financial success and has dramatically altered the structure of the sport. The massive financial rewards available to players has left other countries with little choice but to allow their leading players to play in the IPL. Outside India, domestic cricket is essentially dependent on revenue from international matches.

The balance of this chapter is structured as follows. The following section provides a brief history of cricket. The key features of the IPL are then described. The following section considers the influence of broadcasting. The issue of competition between cricket leagues following the establishment of the IPL is then addressed. The sports economics literature in relation to cricket is then reviewed. This is followed by a section on corruption in the sport, and some conclusions are offered in the final section.

A BRIEF HISTORY OF THE GAME

Cricket emerged in England at the beginning of the eighteenth century. The first officially recognized international (“Test”) match was played between Australia and England at the Melbourne Cricket Ground from 15 to 19 March 1877.

INTRODUCTION

As in many developed countries, the leisure, health and fitness sector makes a significant contribution to the economic, social and health of the Irish population. According to Ireland Active (), the representative association for the sector, 490,000 people participate in personal exercise in gymnasia and leisure centres each week, making it the most popular form of leisure activity in Ireland. In addition, 33 per cent of all club members in Ireland are members of gyms or leisure centres, making it the most popular form of club membership in the country. The sector employs 9,500 people, with €450 million spent on health and fitness club memberships alone (Ireland Active 2017). Figures from the Irish Sports Monitor (ISM) support this assessment of the significance of the leisure, health and fitness sector. The ISM is administered by Sport Ireland and is an ongoing survey designed to measure physical and social participation in sport and other forms of exercise in Ireland. The most recent release, relating to data collected in 2017 (Sport Ireland 2017), finds personal exercise (primarily consisting of gym-type activities) and swimming to be the first and second most popular forms of physical activity engaged in by the Irish adult population every week. Swimming was also the only physical activity (out of the top five) to have seen an increase in participation between 2015 and 2017.

In July 2018 the Irish government released its National Sports Policy 2018– 27 (Department of Transport, Tourism and Sport 2017). The policy set out a vision for Irish sport to 2027, along with 57 actions to transform the sporting landscape over the next decade. One of the key targets of the policy is to increase overall adult (16 and over) participation in sport from its current level of 43 per cent of the adult population to 50 per cent by 2027. Action 5 identifies certain sports that are to be prioritized to increase sports participation levels. One of these is swimming, as it is seen as having the greatest potential for generating higher levels of active participation across the life course. In another stated action, a commitment is made to work “closely with relevant Government Departments, Local Authorities, sporting bodies and other stakeholders to agree a coherent national strategy for swimming.

INTRODUCTION AND CONTEXT

Gaelic games are traditional Irish amateur sports. There are four games in total: Gaelic football, hurling, handball and rounders. Gaelic football and hurling are the two most popular, and it is the men's versions of these two games that are the focus of this chapter, in particular those individuals who play at senior inter-county level, which is the highest level at which the games are played.

Although all Gaelic games are played as amateur sports, developments that have taken place in the games over the past 15 years have resulted in players being required to give increased commitment and investment of their time to the sports. The advances that have taken place have largely been driven by developments in sports science, new technologies (GPS), education and the use of data, all of which aim to improve the per-formance levels of players.

There have also been spillovers from other professional sports into Gaelic games, such as strength and conditioning from rugby union and Australian rules football. As a result of this, training is no longer confined to field-based sessions. Gym-based sports conditioning is now a central component of Gaelic players’ training schedules, with the majority of teams having specialized sports conditioning coaches. This type of training has added a minimum of two additional sessions per week to a player's training load, on top of two to three field-based sessions. In addition, many players engage in their own, individually instigated training sessions, either to hone ball skills for their respective game or to undertake additional strength work. As well as the extra sports conditioning and training sessions, Gaelic players now engage in prehabilitation and recovery sessions, along with full training weekends and, sometimes, training weeks. The latter often take place away from players’ county team training bases, and can be based in other countries.

Aside from changes that have taken place in training, many other aspects of elite-level sport practices have been introduced into the games. For example, players’ diets are monitored. Supplements are now an integral part of most players’ daily consumption routine.

INTRODUCTION

The history of player drafts in professional sport extends far longer than the typical Australian Football League fan would believe; American football's National Football League was the first to experiment with an “amateur” player draft in 1934. Although the modern narrative portrays drafts as a device to ensure competitive balance (defined as the degree of parity between teams), the NFL draft was originally motivated by a desire from the teams to circumvent bidding wars for prospective star players. Therefore, it was actually driven far more by the imperative to keep players’ wages low, which was historically a central tenet of employer behaviour in the sports industry in North America, where teams are invariably owned privately (the Green Bay Packers is one notable exception), and there is a clear profit motive for the owners. See Fort (2011: 247– 9) for a quick economic primer on these effects of drafts (the rest chapter 8 of of his Sports Economics covers this general theme more widely).

In these leagues – and also for the National Hockey League, National Basketball Assocation and Major League Baseball in their respective sports – the evidence on the proposition that the draft (and other restrictive policies, such as salary caps and revenue sharing) improves competitive balance is quite mixed. Vrooman (1995) is a good example (among many) demonstrating that the invariance principle holds in that such restrictive policies do not alter the level of competitive balance from that observed under free agency. However, some studies find otherwise, such as Depken (1999), who finds evidence of deteriorating competitive balance following the MLB move towards free agency in 1976 (away from the reserve clause – another, even more, restrictive policy on movement of players’ labour).

The AFL is not comparable in this respect, since its constituent teams are not managed inherently as if motivated by profit. Any surplus generated by a club in a given financial year is either retained or reinvested in future years, rather than being paid out as a dividend to their members (for instance, in the form of a reduced membership fee for the following season) or any other single entity. Rather, the clubs are economically assumed to be motivated by winning, subject to the constraint that they must at least break even over the long run.

The field of sports economics is one that can be traced back to very definite origins. Just as the discipline of economics can be attributed to Adam Smith's An Inquiry into the Causes of the Wealth and Poverty of Nations, the first application of economic methods to sport dates back almost seven decades, to 1956. The same year that the New York Yankees’ Don Larsen pitched a perfect game in the World Series against the Brooklyn Dodgers, which remains the only perfect game in World Series history, University of Chicago economist Simon Rottenberg published “The baseball players’ labor market” in the Journal of Political Economy. Economics and sport were then introduced, and subsequently they have spawned a plethora of research.

Of course, one can legitimately ask: why sport? In 2015 three well-known sports economists, Alex Bryson, Bernd Frick and Rob Simmons, tried to answer this question in “Sports economics: it may be fun but what's the point?”. The authors argue that there are four reasons why sport and economics are a great fit. First, sport is big business and it is growing rapidly. Second, it is an industry that contributes significant employment in most developed economies today. The third reason is that sport actually matters to people. Although the connection with sports teams and events can be irrational, this bond is real and affects peoples’ lives. It can help both physical and mental well-being and is actively promoted by most governments as having a positive impact on life satisfaction. Finally, sport can shed light on fundamental economic questions. The data that professional sports generate, which are largely unparalleled in any other industry, provide a wealth of information, to which economists can bring their analytic toolkit to understand various aspects of different sports and sporting events. This extends to issues such as competition, productivity, decision-making, labour markets and discrimination.

Back in 1956, Rottenberg was drawn to baseball as a subject for investigation because of “a number of market problems which are interesting because of some unusual characteristics of the baseball labor market and the organization of the baseball industry” (Rottenberg 1956: 242). He identified a number of key issues in the labour market for baseball players that were economic in nature.

INTRODUCTION

This chapter explores economic issues in Irish horse racing, including funding of the sport through the betting duty and the Irish government budget, television broadcasting arrangements and the future of both the sport and wider industry in the context of the United Kingdom leaving the European Union. Both the industry and sport are multifaceted and rely on a complex supply chain that is interwoven between Ireland, Great Britain and France. This includes the breeding, selling, training and racing of horses. Unlike many other jurisdictions where the sport takes place, horse racing in Ireland is heavily subsidized by the exchequer in the form of an annual grant issued each year by the Department of Agriculture, Food and the Marine. This funding has resulted in both the sport and industry flourishing at home and on the international scene. Irish horses – horses that are trained on the island – compete internationally at venues in Great Britain, France, the Middle East, Australia, Japan and the United States, with considerable success. The industry has also been greatly assisted by exchequer support and has resulted in Ireland becoming a global centre of excellence for the breeding and training of thoroughbred racehorses.

The general success of horse racing over the past 20 years has occurred within a very unstable macroeconomic environment from which public funding is sourced. The Irish economy experienced a period of unprecedented growth from the mid-1990s until 2007 (the “Celtic tiger”), followed by an economic collapse in 2009 that resulted in the government requiring international funding support from the European Union, the International Monetary Fund and the European Central Bank. An economic recovery, driven by the buoyant export-oriented sectors, started apace around 2014 and was gathering pace by the time Covid-19 arrived in Ireland in 2020. Despite the global pandemic, Ireland's export-orientated economy proved to be remarkably resilient, with double-digit annual economic growth recorded in 2021. During these various periods of boom and bust, government support for horse racing has remained steadfast. Horse Sport Ireland3 (2012

: 33) notes that Irish horse racing “has benefited from substantial financial support from the Government”.

INTRODUCTION

Cricket is a massive sport. It dominates the attention of sports fans on the Indian subcontinent. It is a national obsession in India, Pakistan, Bangladesh, Sri Lanka, Afghanistan and Nepal, as well as among these ethnic communities found in large numbers around the world, such as in the Arabian Peninsula. It is also popular in other regions of the former British Empire, such as southern Africa, Australia, New Zealand and the Caribbean. Cricket remains the dominant sport of the English summer, despite the encroaching influence of football. To put the scale of the demand and interest in cricket into perspective, a 2019 match between India and Pakistan in the World Cup drew an estimated live broadcast audience of 1 billion. In comparison, the biggest live event in the US annual sporting calendar, the National Football League Super Bowl, attracts around 100 million domestic viewers and fewer than that number again in the rest of the world. Even the 2018 FIFA Football World Cup Final had an estimated average viewership of just over 500 million. In this context, there is a surprising lack of economic literature concerning cricket, at least when compared with the team sports most focused on by economists, such as baseball, basketball, association football and American football (Gregory-Smith, Paton & Sacheti 2019). Like these other sports, cricket is a setting that allows effective economic analysis, with implications not just for this sport, and others, but for our wider understanding of economic behaviour.

In this chapter, we focus on the oldest cricket league, the County Championship (henceforth the CC) in England and Wales. The CC is the premier domestic first-class cricket competition in England, with matches played over several days. The competition can be traced back to the eighteenth century in some form, but it officially began in 1890. From the first match to the most recent, we have complete data not only on final outcomes but also the specifics of what happened within those matches. Despite the increasing popularity of short-form cricket, the CC still makes up most of the professional cricket played in England each season. One reason why the CC is interesting for economists is that its rule makers have continuously tinkered with its design over the past 130 years.

HORSE RACING: A GLOBAL SPORT

Despite its much-referenced decline in the United State, horse racing remains a prominent sport in many regions of the world. It takes various forms, with thoroughbred racing and trotting (harness racing) being the most widely practised. This chapter deals mostly with thoroughbred racing, which features the highest-value horses, prize money and prestige. In 2018 countries staging the largest number of thoroughbred races included Australia (19,409), Japan (16,498), Great Britain (10,406), France (7,039) and Argentina (5,320) as well as the United States, which still offered 36,586 races despite the closure of many venues. Smaller jurisdictions with a high level of supply relative to their population sizes included Chile, Ireland, Hong Kong, Mauritius, New Zealand and the United Arab Emirates. In most of these countries, thoroughbred racing is entirely or overwhelmingly on the flat, although jumps races (over obstacles) account for roughly one-third of the programme in Great Britain and France and more than one-half in Ireland.

Horse racing, like motor racing, may be considered nearly everywhere as primarily a spectator sport, given that there is typically no underpinning recreational structure. And in many places it is an important spectator sport. In Mauritius, which has a population of barely more than 1 million, the Champ de Mars racecourse regularly draws crowds of more than 20,000. In Hong Kong, the 88 race days offered during the 2018/19 season attracted a total of 2.2 million spectators. In Great Britain, aggregate attendance at horse racing was 5.6 million in 2019, which was second only to football (and comfortably ahead of rugby and cricket). Irish racing reported 1.3 million admissions in the same year (from a population base of some 6.6 million).

Given the prominence and popularity of horse racing in many jurisdictions, it is surprising that the sport has attracted relatively little attention from academic economists, aside from the large number of papers on the efficiency of its associated betting markets. For example, Buraimo, Coster and Forrest (2021

) is, to my knowledge, the only horse racing attendance demand paper this century. And, except for studies related to betting, the Journal of Sports Economics, at least to the time of writing, has only ever published three papers on the sport, all related to the market for purchasing thoroughbreds.

INTRODUCTION

The last 25 years have witnessed a rapid growth in interest in both sports economics and sports analytics. Sports economics has developed in two general directions: discipline-specific and industry-specific. By “discipline-specific”, I mean the use of sports, particularly professional team sports, as an empirical context to test economic theory. Sport is data-rich, and almost unique as an industry in its transparency and data availability. Economists have increasingly recognized the possibilities of using sports data to empirically investigate issues in the theory of the firm, consumer demand, labour markets and business strategy (Kahn 2000). Sports economics has also seen several industry-specific developments, particularly in connection with competitive balance and the uncertainty of outcome hypothesis.

Paralleling the rapid growth of interest in sports economics has been the explosive growth in sports analytics. Initially sports analytics focused on applying data analysis to inform player recruitment. This has now developed into a more general use of data analytics to support a variety of coaching decisions. Economists, with their combination of analytical, statistical and econometric skills, are increasingly involved as analysts not only in the business operations of elite sports teams but also in the sporting operations. This trend in the economists’ labour market is merely replicating a well-established pattern in other industries, despite the continued criticism of mainstream economics as unrealistic, especially in its assumption of rational economic agents.

It seems rather paradoxical that students of the most abstract theoretical social science should be in such high demand in one of the most competitive and anti-intellectual industries. Data analytics is best understood as data analysis for practical purpose that seeks to produce actionable insights, and economists can be effective as analysts only if they are able to appreciate the unique context of any decision. Data analysts must aim to create a meaningful synthesis of the empirical results of their data analysis and the context-specific insights provided by the expertise and experience of the decision-makers.

INTRODUCTION

This chapter briefly summarizes the most common theories and empirical methods discussed within sports economics. The theories surveyed relate to professional team sports and comprise profit-maximizing models, win-maximizing models and behavioural economics as a newer approach. The empirical methods considered relate to individual and team sports and sports participation. These are divided into the contingent valuation method (CVM) for policy interventions, regression analysis applied to sports participation and natural experiments using difference-in-difference methodology. Various academic articles are used to selectively exhibit these themes.

THEORIES

In line with other businesses, sports teams might be assumed to maximize profits, defined as revenue minus costs. Revenues of sports teams typically comprise gate receipts, income from sales of broadcast rights and commercial revenues such as sales of replica shirts. A convenient assumption is that revenues from broadcast income and commercial income sources are a constant multiplier of gate receipts, although this assumption breaks down if crowds are absent from stadia, as in the period of the Covid-19 pandemic. Leaving aside Covid-19 restrictions, this assumption means analysis can proceed by focusing on gate attendance and gate revenues.

Profit-maximizing models of team sports

The profit-maximizing approach to a model of a professional sports league starts with the attendance demand function for team i:

where Ai is attendance, pi is a uniform ticket price, wi represents team wins and mi denotes market size.

This function then maps into a revenue function:

Wins are determined by amounts of player talent, ti, an inherently abstract and unmeasurable concept but important for analysis. Wins and talents are related through a contest success function:

where tj denotes the talent of all other teams.

Then team i's revenue function can be expressed in terms of talents:

Any team faces a competitively determined unit cost of talent, c, and its total costs are cti.

Profits are then equal to

Each team solves for profit maximization by equating the marginal revenue of talent to the marginal cost of talent, where talent is the team's primary decision variable.