Point Shaving in the NBA

There are two big stories today. The first is the proposed Kevin Garnett deal, which appears to make the Celtics into a title contender in 2008 (but perhaps in trouble in a few years) and the Timberwolves into a lottery team (which they already were). Although this is a great story, it’s not the subject of today’s post because

a. the trade hasn’t happened yet, and

b. I want to talk about the other big story.

The other big story is about point shaving in the NBA. No, I don’t want to comment on the NBA’s referee scandal, which has already been reviewed in this forum.

Some Needed Perspective on the NBA Referee Scandal

Avoiding Work on Tuesday

Today I want to talk about a study by an undergraduate at Stanford University. On Thursday I received an e-mail from Henry Abbott of ESPN’s TrueHoop. Henry wanted to know if I could review a study by Jonathan Gibbs, a 22 year-old graduate of Stanford University.

My first reaction to this study was

a. this paper is written by an undergraduate. Stanford is a great school, but undergraduates typically don’t do research that can be published in peer reviewed journals.

b. even if this paper is good enough to be published, right now it isn’t.

c. even if this paper has been published, can we really believe this study? After all, does anyone believe that gamblers can convince today’s rich athletes to cheat?

Having read the paper over – and having talked to Henry – my reaction changed a bit. First of all, this is a well-done study. Gibbs has managed to replicate a wonderful study by Justin Wolfers examining point shaving in the NCAA. And replicate is the key word. The Wolfers study provided Gibbs with a road map to follow in his analysis of the NBA. As anyone who has taken a trip knows, it’s always helpful to have a map.

With the Wolfers methodology in hand, Gibbs proceeded to analyze the NBA. Much to his surprise (as revealed in an interview with Henry Abbott published today), Gibbs found market inefficiencies with respect to games where the point spread was large. When the point spread is “small”, Gibbs found that the gambling market is quite efficient. But when the point spread is larger, one could win money by betting against the favorite.

What Does this Study Mean?

Here is what I told Henry (as quoted in his story at TrueHoop).

“I am willing to say, having read the paper over, that there is something going on here. I am somewhat surprised an undergraduate could pull this off. My sense is that [one of the Gibbs’ advisers at Stanford] Roger Noll, who is a very good economist (with an expertise in sports), helped a bit.”

In sum, I think Gibbs found something. Unfortunately his work does not name names. And I am not even sure if he could go through the data and implicate anyone. He has found something in the data that suggests that point-shaving is a possibility.

In talking with Henry I noted that NBA players tend to be quite rich. Henry, though, said that there are players who manage to spend more money than they make. This happens because many players are supporting a large contingent of friends and families. So although one suspects that players do not have a financial incentive to shave points, Henry says it’s possible that the large salaries in the NBA do not fully capture the players’ financial incentives.

What will the NBA do?

Having thought about this for a few days, I am really not sure what policy this study suggests the NBA should follow. Again, there is no naming of names. Without knowing who is doing this, what can the NBA do to stop it?

My sense is that the NBA – if they choose to react – will simply dismiss this study. As I noted in discussing the referee scandal, the NBA is not in the “truth” business. The NBA is in the entertainment business. The easiest path for the NBA to follow is to dismiss this study as so-much academic mumbo-jumbo, and continue to go about its business.

Of course if we ever do find that a player or players has been implicated, then the NBA will change its tune. And we can all say “see, we told you something was going on.” Not sure being able to say “I told you so” is much to look forward to. But it’s something.

Let me close by recommending the two stories Henry Abbott posted on this today.

Research: NBA Scores Consistent with Occasional Point Shaving

Talking NBA Point Shaving with Jonathan Gibbs

– DJ

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