Tuesday, 24 July 2012

Tournament Economics

I decided to start blogging.  Being a writer of books, I find I end up with lots of scraps that won't make it in the books, but that would be good candidates for the blog format. 

I'm not overly interested in sport - so it's perhaps unexpected that my first 'Philosophical Muser' blog should be about sport.

The lionisation of sports stars and sports teams, and generalised sport fanhood, is a mental commitment that usually stifles the development of real excellence of mind.  In much of Europe the national obsession is football - which is probably an unhealthy obsession in excess, just like almost all sport obsession is.  I suppose the corollary issue is that sport is something of taste, so how do we measure quantity to find what is excessive and what isn't?  There is one way - by assigning value using an economic template.  The sorts of sums of money involved in football constitutes crazy money.  I know this because when one talks in terms of tens of millions, it's obvious to me that the money could be spent better elsewhere. 

Ah, but wait, you may say - if sport gives people great pleasure, and people wilfully follow it at some personal cost, who is anyone to say the money could be better spent elsewhere?  That is the wrong question.  The right question would be - if the vast sums of money associated with sport were diminished and put into more worthwhile uses, would the diminution that greatly compromises the quality of sport be worth it against the gains obtained from the increased resources in other uses?  Let's say the benefactors and businessmen behind sport and its media outlets got together and agreed to charitably take 75% of the crazy money out of sport and invest it in projects that helped the needy.  Yes the quality of sport would decrease, but not by very much, and the enjoyment levels would soon equilibriate again.  More so, the quality of life for those in need would increase greatly.  Sport involves huge sums of money that generates rewards that would not be greatly diminished with much of the crazy money taken out.  In the global sense, where one is measuring quality of life and well-being, sport (and many other things, of course) sucks up a lot of money and provides relatively little in return.

Once again, that is not a wild speculation - it is based on the economic principle that market economies quite naturally shape rewards, contribution and demands commensurably.  With a small degree of flexibility, the price of a bunch of bananas, or a mobile phone, or a lawnmower, or a scarf, or the fees of bricklayers, plumbers, removal men, etc reflects the demand and willingness to pay a particular sum for the goods or services.  That is why (save for anomalies) the market generally isn't over-saturated or in great scarcity of the products consumers buy and the services people need.  Sport doesn't have this 'invisible hand' (to use Adam Smith's term) to regulate its dispensations - it can extend globally and amount to a huge over investment which robs us of a great many resources and denies the more valuable and worthwhile alternative uses.  Because of this, irregularity in the market economy doesn't provide the optimum number of sports stars as it does goods supplies, bricklayers, plumbers and removal men. 

Does all this mean people should give up their love of sport?  Not necessarily - it gives them pleasure, and the crazy sums of money involved aren't going to change for the better anyway.  And remember, this wasn't a post about how to live your life, it was the expression of a truism based on economic facts.  Compounding this is the fact that money isn't the same as wealth - money buys you the things you want and need, but it is the assets that money buys that gives quality of life.  You don't create wealth just by giving someone millions of pounds.  You create wealth when you start a company that fulfils the demands of the consumer with the supply of a particular product that adds quality or well-being to people's lives.  You create wealth when you streamline a company of its extraneous staff.  You create wealth every time you close down an entity that sucks up more resources than it provides.  You create wealth when you invent new things, or synthesise two concepts in innovation, or construct new theories that generate prosperity when actioned. That is why the crazy money in sport is doing much less good than that crazy money could do elsewhere.

Next time I will tell you why your mental excellence might be enhanced by giving up some of the things you most enjoy.

2 comments:

  1. Hello PM, I'm very impressed with the new blog. I particularly like your analysis of how money turns professional sports into an effective 'arms race'. If you're interested in how economics affects social behaviour, there is a really good book called 'The Economic Naturalist' by Robert Frank which analyses how these situations occur daily, in such simple ways as women attempting to compete with one another by wearing the tallest shoes or the most makeup.

    Really looking forward to your next post!

    - Kris

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  2. Thanks very much for the feedback Kris. I've heard of a Robert Frank of the New York Times (or at least, he used to write for them). I'll check out the book you mentioned. I'm currently reading the sequel to Freakonomics, called SuperFreakonomics, which contains lots of fascinating data that involved tremendous research from the authors. It's more 'facts' than 'logic' but very good indeed. I probably will give mention to some of the most fascinating facts in future blogs.

    Regards

    James

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