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June 24, 2006

Sportonomics Beguiles 3 Economists


SPORTS are entertainment. Sports do not often change our world; rather they serve as a distraction from our world."

So begins a new book, entitled "The Wages of Wins: Taking Measure of the Many Myths of Modern Sports." Written by three young, relatively obscure economists — David J. Berri of California State University, Bakersfield; Martin B. Schmidt of the College of William and Mary; and Stacey L. Brook of the University of Sioux Falls — it tries to do for sports, particularly basketball, what Steven D. Levitt and his co-author, Stephen J. Dubner, did for a range of social questions in their runaway best-seller, "Freakonomics."

Mr. Levitt, of course, is the University of Chicago economist who has become well known for applying the tools of economics — statistical analysis, economic modeling and so on — to try to answer such real-world questions as: do real estate agents always act in their customers' best interest (no), are swimming pools more dangerous than guns (yes), and do some teachers cheat to make their student's test scores look better (you bet they do).

But while Mr. Levitt is by far the most famous economist to take this approach, he is hardly alone. His kind of work has become the hottest little corner of economics, with lots of young economists seeking ways to do similar work. "Like most people, economists respond to incentives," said David C. Colander, an economic historian at Middlebury College. And the incentives in trying to follow in the footsteps of Mr. Levitt are powerful. As Richard H. Thaler, yet another important University of Chicago economist, put it, "Freakonomics is on everybody's mind."

All of which brings me back to "The Wages of Wins." The three authors are quite frank about their desire to have their book be seen as the "Freakonomics" of sports; in their first chapter, they even quote approvingly Mr. Levitt's line that "economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions."

So here are some of the questions the authors found interesting enough to merit the "Freakonomics" approach: In baseball and basketball, are the size of the payroll and the success of the team highly correlated? Is Shaquille O'Neal better than Kobe Bryant? Is Allen Iverson overrated? Is Kevin Garnett the best player in the National Basketball Association? Do good players play better in the playoffs? And are high scorers given too much credit — and paid more than their true value to a team?

WHEN I read the book recently, I was impressed by the amount of effort that went into compiling the reams of data that underlie the work; Mr. Berri later told me that "The Wages of Wins" was the culmination of 10 years of economic research the authors had been conducting since they'd all been in grad school together.

Equally impressive is the sheer complexity of the formulas they have labored over, particularly one called "Win Score," which tries to use virtually every offensive and defensive statistic in basketball to arrive at a number that measures how many wins each player in the N.B.A. is responsible for. Their Win Score, the authors claim, is the true measure of a player's productivity, and hence his value. (In case you're wondering, Kevin Garnett's Win Score — it's ranged from the mid-20's to the low 30's over the last few years — makes him the single most productive player in basketball. And Shaq's Win Score of 14 in 2004 means that the year the Lakers let him go and kept Kobe, he was the better player. Bryant's Win Score that year was 10.7.)

So far, all that effort appears to be paying off; the book has been generating attention, including a glowing review from Malcolm Gladwell in The New Yorker. But I couldn't suppress the lurking thought that the Freakonomics effect might be getting a little out of hand. I mean, does it really matter whether Shaq is better than Kobe? And is that worth studying?

If you ask economists why they think it's worth veering into sports, you'll get a few different answers. The first is that there is an incredible amount of available data — and a large amount of data is critical to anyone trying to do Mr. Levitt's kind of economics. "Sports is the only industry where you have the complete worker productivity of every worker in the industry," Mr. Berri said. "It is an incredible data set."

A second reason is that lots of people are interested in sports, so it is an easy way for an economist to engage an audience. "I use sports a lot in my decision-making class," Mr. Thaler said. "I like to tell students that I'm going to be happy if they spend time in a bar arguing about the stuff they've learned in my class. They're not going to be arguing about financial accounting in a bar."

The most highbrow reason, though, is that sports can give an economist a window into human behavior. David Romer, an economist at the University of California, Berkeley, and a man who generally writes about such weighty topics as monetary policy, did a study not long ago examining whether football teams make the correct decision — statistically speaking — on fourth down in choosing whether to kick the ball or attempt a first down. His conclusion is that, most of the time, teams are far too conservative. From there he extrapolated that companies and individuals may be arriving at equally poorly thought-out choices in making decisions that require evaluating risks versus rewards. In effect, he used football as a way to explore the issue of risk aversion.

Which, to me, is precisely what "The Wages of Wins" doesn't do. The fundamental case the authors make for their research is that the statistical analysis shows that more often than not, the conventional wisdom about sports is dead wrong — that the data, as they put it, "offers many surprises." Implicitly, at least, their larger point is that owners and general managers, most of whom are predisposed to accept the conventional wisdom — since, after all, it's their conventional wisdom — misallocate resources because they are operating from their gut rather than from a more statistically sound approach.

Well, maybe. On the other hand, there are always going to be smart basketball owners and not-so-smart ones, and the smart ones are going to make better decisions. Nor is there any particular proof that statistics-based decision-making is a guarantee of success. In baseball, the Boston Red Sox have embraced the kind of deep statistical analysis of baseball players that "The Wages of Wins" uses in basketball, and have had considerable success. But the Atlanta Braves disdain it — and that franchise has also had a great deal of success.

The more I read "The Wages of Wins," the more I wound up thinking that what they had mainly done was use the tools of economics to stir up the kind of debate that goes on forever in sports and will never be conclusively answered: who's the better player? On Malcolm Gladwell's blog right now, there is a roaring debate about whether Garnett really is the best player in the N.B.A., with Mr. Gladwell weighing in on the side of the economists, but others pointing out that perhaps Garnett's own flaws are part of the reason his team, the Minnesota Timberwolves, doesn't usually do much past the regular season.

Yes, that proves Mr. Thaler's point: this stuff really does engage people. But it strikes me as an awfully trivial way to spend a lot of economic firepower. Statistics or no, the question of whether Garnett is the best player in the N.B.A. is simply unprovable. It also caused me to think about another economist, Erik Lie of the University of Iowa, who has also compiled huge amounts of data in recent years to try to answer an interesting question. The question he was trying to answer was: Are companies backdating options? Now that seems worth the effort.

To his credit, Mr. Berri was pretty self-effacing when I asked him about the value of "The Wages of Wins." "This is sports," he said, echoing the beginning of his book. "It is not life and death. This is not 'The Wealth of Nations.' And no one should be confused that we think it is." He told me that he would be writing more about sports in the next few years, but "at some point, I hope to be writing better things." I hope so, too.

•Thanks to everyone who responded to my call for nominations for good business fiction over the last two decades. I know I said I would post the results on the Web, but once I realized how few of the nominated books I'd actually read, I decided to hold off until I'd had a chance to read some of them. That's going to be my summer reading. I plan to return to the subject in the fall.