Free Market Sports

Malcolm Gladwell came in for a lot of surprisingly intense criticism after his most recent story went to press. The premise — that underdogs should opt for more extreme strategies — was illustrated in part by a tale about a girls youth basketball team that beat more talented squads by ruthlessly deploying a full court press. Every basketball nut in the land, seemingly, had an issue with the piece. I don’t really get it; Gladwell’s just out there to make you think, and his broader point — that underdogs are generally far too risk averse — strikes me as absolutely true.

Anyway, the story gets mentioned some in this fun email exchange between Gladwell and ESPN’s Bill Simmons. But I particularly liked another part of the conversation, where Gladwell writes:

The consistent failure of underdogs in professional sports to even try something new suggests, to me, that there is something fundamentally wrong with the incentive structure of the leagues. I think, for example, that the idea of ranking draft picks in reverse order of finish — as much as it sounds “fair” — does untold damage to the game. You simply cannot have a system that rewards anyone, ever, for losing. Economists worry about this all the time, when they talk about “moral hazard.” Moral hazard is the idea that if you insure someone against risk, you will make risky behavior more likely. So if you always bail out the banks when they take absurd risks and do stupid things, they are going to keep on taking absurd risks and doing stupid things. Bailouts create moral hazard. Moral hazard is also why your health insurance has a co-pay. If your insurer paid for everything, the theory goes, it would encourage you to go to the doctor when you really don’t need to. No economist in his right mind would ever endorse the football and basketball drafts the way they are structured now. They are a moral hazard in spades. If you give me a lottery pick for being an atrocious GM, where’s my incentive not to be an atrocious GM?

I have to say that one of the most disappointing things about sports in America is that none of the major team sports leagues follows the kind of radical libertarian set-up seen in, say, continental soccer leagues. For some reason, Americans feel the need to regulate their professional leagues within an inch of their lives — strict rules on entry and relocation, no relegation or promotion, wholesale redistribution of resources, strict limits on pay and payroll. Where’s the fun in that?

Rather than spending their money on ads fighting transit investments, libertarian organizations should focus their efforts on making at least one professional league in this country like a European soccer league.


  1. dcuist says:

    National Pastime by Szymanski and Zimbalist has an interesting chapter or two on the beginnings of baseball leagues in the US and soccer leagues in England and how they developed their different structures.

    Baseball and hockey of course went without drafts for decades but the less successful teams eventually forced it on the more successful teams.

    I haven’t noticed smaller teams in European soccer leagues being any more likely to adopt unconventional strategies.

  2. kiril says:

    One of the legitimate criticisms of Gladwell’s piece is that he held Pitino up as the exemplar of the underdog-gaining-advantage-by-way-of-full-court-press. While I disagree with Gladwell’s characterization of the talent level on this year’s Louisville team (they had a number of former top recruits), even mentioning his mid-90’s Kentucky teams seems absurd.

    Those teams, particularly the 1995-96 team that won the National Championship. That team is one of the most talented college basketball’s recent history and had 8 or 9 players that went on to play in the NBA. He was able to employ the press because he had two full teams worth of players that were superior to most of the opposing team’s players. They were not an underdog in any sense of the word.

    I do agree with the overall point, though, that the incentive structure in professional sports needs some adjustment, but I’m not sure using Pitino’s college experience backs up his overall claim.

    At lower levels, like high school, it is often superior teams – particularly athletically superior teams – that use the press to their advantage, while athletically inferior teams often use a different radical strategy to their advantage, a heavy reliance on the 3-point field goal. This may not seem so radical because it is now so widespread at all levels (Jim O’Brien’s Celtics a few years ago used it in the NBA), but it is precisely the type of underdog strategy that Gladwell is talking about, and one that would have been seen as heretic only 20 years ago. Gladwell, however, chose the full court press, which requires far more athleticism to pull off successfully, and which would not raise the odds of winning at all for many true underdogs.

    I’m just rambling at this point. I know none of this contradicts his larger point or the point you’re trying to make in this post, but I think most of the reaction to his article focuses on the trees rather than the forest, as I’ve done here.

    I would love to see them revamp the draft lottery, either by evening the odds across all non-lottery teams, or just including all NBA teams in the lottery.

  3. Corey says:

    I agree – I’d love to see relegation/promotion in any sport with suitable minor-league depth (in the United States, that means hockey and baseball, as basketball and football develop their most of their players collegiately) But it strikes me that the goal of American sports leagues is not to reward the best teams, but to put the best possible (i.e. most entertaining) product on the field/court/ice.

    And I think, in terms of the unpredictability of any given season in a major American sports league, they’ve accomplished that goal – as opposed to every Euro soccer league, whose champion is one of five teams every year.

  4. Alex B. says:

    Yeah, as much as the abstract idea of a more unregulated ‘market’ for sports teams sounds appealing, the fact is that only 4 teams have ever won the English Premier League.

    For example, the NHL recently added a salary cap, and they’ve had an excellent product to watch for their playoffs so far, in part because of their parity.

  5. bottomofthe9th says:

    One other benefit that might interest you: promotion and relegation would severely limit owners’ ability to hold cities ransom for new stadiums, as they threaten to move to another city otherwise. A city without a team is always willing to pay for a stadium to lure a team, because there’s no other way to get a big-league franchise.

    As a result the distribution of franchises severely lags changes in population and/or interest.

    Although I do think there are other things libertarians should be concerned with.

  6. Doug says:

    Paul Westhead for Treasury Secretary?

    I think the economics depends on the product. Gladwell assumes that excellent teams are the good and the leagues assume excellent games are the good they sell. As Alex suggests, it’s hard to say that redistribution among the teams impedes excellence. Maybe sports is an exception for some articulable reason or maybe our idea of free markets are flawed.

  7. Cavan says:

    Oh hell no. I don’t want my MLS or any other American pro league becoming boring like the English league. Hmmm… Manchester United won again this year? Wow. Never saw that one coming. Why bother even caring when it’s the same team who wins every year. Might as well just play a game of Monopoly. It’s the same thing.

    On the other hand, who saw the Columbus Crew winning MLS Cup last year before about September? Isn’t it great that any team can win if they put together a good team that works together rather than taking on debt to buy a world-class team?

    Those leagues are all looking at our leagues’ financial setup and trying to emulate it. They’re all going into debt due to the rich clubs engaging in arms races with each other and the smaller clubs don’t get any of the pie so they’re going broke too.

    Not a good idea.

  8. winstongator says:

    MLB/NFL/NBA all have their structures to improve the competitive level. As Alex B says, only 4 teams have won Premier league titles, and it has been 5 years since a non big4 team has been in the top 4. In that time you’ve seen 11 NFL champions, 10 MLB champs, and ‘only’ 7 NBA champs. In the EPL, the top 4 gain much higher revenues from the European leagues they also compete in, that their system will only perpetuate itself.

    The relegation/promotion club systems are not as competitive as the franchise systems in the US.