WHAT SOMEONE TOLD ME ABOUT FOOTBALL & WHAT THE BEAUTIFUL GAME CAN TEACH US ABOUT ECONOMICS


ImageThe World Cup was looming ever nearer and in conversation (over a drink,) with an Economist friend, he taught me (and not for the first time,) never take anything at face value.

“So what’s not to take at face value about ‘The (FIFA) World Cup?” I asked.  The World’s finest players, playing for their national teams, will display their footballing talents for the world to see.  The best of the best.  And in the end, the best side (not necessarily Brazil,) will win the Tournament (and hold the World Cup aloft,) and England will do what it has done for the past forty years and underperform (if we make the finals at all) – Foresight thing even if it has nothing to do with ESP or any other divine or scientific skill is a wonderful thing.

My friend then reminds me of a quote from the Philosopher Albert Camus who famously said:-

“…all that I know most surely about morality and obligations, I owe to Football.”

He (my friend,) then went on about how major football/soccer tournaments and our National Sport in general has plenty to say about a subject I hate and one my friend makes a living from, as well as having a very nice lifestyle into the bargain.  He put it all in one nice neat (long,) sentence:-

“Footballers deserve the cash (honest,) but it isn’t shared equally (but) put the cheque book away Football and The World Cup (is good for growth”.

Okay, let break this sentence down (I thought later,) and try to make sense of it all with my (positive,) Economists hat on.

 

Footballers Deserve the Cash (Honest)

ImageIf a certain Manchester United Star kicks a crucial penalty over bar in a World Cup, England fans will be pondering (and not for the first time,) whether he is worth the £250,000GBP a week he gets paid.  Some while drowning their sorrows, will even rail against the pay of these millionaire players, while nurses are paid a pittance.  What we are in denial about is the laws of ‘Supply and Demand’ are at play here.  Only a minority of us can do what they (the players,) do.  So they have huge value in the market place.  They have a vast amount of natural ability (yes, really,) and can fill huge stadiums. They also generate revenue.  If I was to speak brutally, nurses are a cost and with dominance of the NHS (National Health Service,) they are subject to a single buyer of services in a labour market, which lends to depress wages.  Brutal but true.  The best footballers however, generate huge competition for their signatures.  A similar correlation exists for the world’s best actors I might add.

 

…But It Isn’t Shared Equally

Chart_-7-MayAs with much in Life, Business The Arts etc., so too in Football, the rewards of ‘The Beautiful Game’ are shared unequally.  The best of the best, take home far more than the average player, simply because they are more than average in their abilities.  Some number crunching on Italy’s Serie A two years ago, found that while the average pay was €900,000Euros, the median pay (the mid-point between the highest and lowest,) was much lower at €500,000Euros.  As a comparison, Wayne Rooney’s £250K dwarfs a Premier League average of £30K a week.

Again ‘Supply and Demand’ is in action as the ball boy gets much less than the Star Man.  It is enough to make anyone who has ever kicked a ball on a weekday evening in a business league or a works team on a Saturday afternoon or a Sunday morning, look back in anger at the unfairness of it all.

 

(But) Put the Cheque Book Away

Why-England-Lose-186x300If you are a gambling man, you will know the worst time to buy a player (or a Manager/Coach,) is after a World Cup or another international competition.  A few good showings are not always a good indicator of a good long-term investment.  The prices are too high, and you won’t always get value for money.  If you go down this road, you have fallen prey to what behavioural economists call ‘Availability Bias’ – The basing of decisions on the most recent or dramatically memorable information.  This Concept can be explained by Liverpool fans in the name of one man: Gerard Houlier.  France won the 1998 FIFA World Cup, as well as being Host Nation.  Arsene Wenger aside, the notion was everything/anything/anyone French was World Class.  On this basis, Houlier was hired and History speaks for itself, in terms of his buys, results and after-match excuses he made for dismal performances were unbelievable.  Liverpool FC’s cheque book suffered during Houlier’s Regime and beyond but some lessons in Football take years to be learned and absorbed.  If in doubt, don’t.

 

(And) The World Cup is Good for Growth

Jolley 1Those who prepare for the future ultimately own the future.  I have no need to splash out on an HD-TV I have had one for years.  So I am ready.  But is The World Cup good for growth?  Since 1955 the UK has seen average growth of 0.6% in Q2 and Q3 in non-cup years.  Compared with a growth of 0.8% in the same quarters in World Cup Summers.  It all seems convincing but on a bizarre note, growth was below in 1966 when we (England,) actually won the Tournament as Host Nation.  Possibly all the growth was offset by the impact on the Economy of workers taking time off to watch the matches.

Irrespective of how well or how badly England does in this summer’s Tournament, try to think of the next few weeks as an educational experience in Economics via filter of ‘The Beautiful Game’.

 

Ps. The above article was written some weeks prior to commencement of the 2014 FIFA World Cup in Brazil.

 

 

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