The field of sports economics has grown dramatically over the past few years. Unfortunately, much of this research (being published in academic journals and/or presented at academic conferences) is often not accessible to non-academics. To help remedy this issue, the Wages of Wins Journal has elicited the help of Jill Harris. Jill earned her Ph.D. in economics from Oklahoma State University. She has taught Principles of Microeconomic theory, Economics of Sport and Economics of Crime for more than 20 years in public and private institutions and is currently teaching at Pitzer College and Pomona College. Her research interests include cheating in the NCAA, detecting the Hot-Hand in sports (especially water polo), and non-compliance behavior in organizations and industry.
Her first (of what we hope is many) discussions will focus on what sports economics has to say about performance enhancing drugs (PED).
To Dope or Not to Dope?
If that is the question, the answer is “yes” according to economic theory. The highly publicized suspensions announced yesterday invite public comment across a broad spectrum of opinions. Everything from “just another reason to hate A-Rod” to “what’s the big deal? Everyone does it” came across the twitter feed. The opinions on display in social media with this latest PED development seem to be rooted in divergent cultural perspectives on sports and drug use. For some, PED use by MLB players or blood doping by Tour de France cyclists is of little concern. Professional athletes can/should be able to decide what they do to their bodies in order to improve their performance. This group may even view the zealous pursuit of users as a waste of resources and might think anti-doping rules are antiquated. For others, the 50+ game suspensions of players like Cruz and Braun might be considered a slap on the wrist; the harm from prolonged used of PEDs is well documented and the integrity of the sport is what is at stake.
So, with this broad spectrum of opinions, how do economists view the news? The headlines yesterday were very predictable given the large potential gains from doping (to the athletes) and the relatively smaller costs if they are caught. Michael Leeds and Peter von Allmen include a great discussion of this principle in their book “The Economics of Sport” (see pp 262-265 in the 4th edition). Economists like to model the athlete’s decision as a prisoner’s dilemma; players would be universally better off if they all did not use PEDs. However, so long as one player can use PEDs to gain a performance advantage, the other players have an incentive to do so (or they will receive smaller relative pay-offs for their performance). The Journal of Sports Economics has a number of papers exploring these types of decisions. The interested reader can look here, or here, or here for examples.
You may find yourself arguing: isn’t it costly for a player to sit out the games? If A-Rod is denied the 2014 season, he will give up some income, right? True–he might. But, the decision to break the rules and take the banned substances is really made based on the player’s expected benefits weighed against the expected costs. Nobel Prize winning economist Gary Becker introduced this principle in his paper Crime and Punishment: An Economic Approach (1965). The expected costs are equal to the penalty (i.e., the game suspension or ban) multiplied by the probability of getting caught and the probability of being punished (having the penalty applied). So, even if the 2014 ban holds, A-Rod will still have three years on his contract at $61 million (plus incentives for various homerun milestones)! From his public comments one gathers A-Rod is not expecting the penalty to be applied in full. So, no matter how you slice it up, A-Rod’s behavior–though illegal–was rational economically speaking. And, that is why tomorrow’s PED headline will be old news.