The Freakonomics of Soccer – Part 2

From the Financial Times:
World Cup ‘facts’ that miss by a mile
By Simon Kuper
Published: May 26 2006 20:31 | Last updated: May 26 2006 20:31
No event generates as much nonsense as the World Cup. Here are just a few of the silly things you will hear over the next few weeks: “Hooligans could ruin the World Cup.”
The danger of hooliganism is exaggerated. If louts hit a few people and break shop windows before a game in Germany, that is more or less the same thing that happens on an average Saturday night in many British towns. The difference is that the louts at the World Cup act under the lenses of possibly the largest battery of cameramen ever assembled.
The danger this summer is not hooliganism but terrorism. Terrorism is a form of public relations. This World Cup will be the biggest media event in history. A suicide bomb in Baghdad barely gets on television any more but one in Frankfurt’s train station on match day would be the story of the year.
“The World Cup is a male party. It turns women into soccer widows.”
This is decreasingly true. In countries that have only recently embraced football – Japan, the US, even France – women are often as keen as men.
“Players who come from the slums have fire in their bellies. For them, football is an escape from poverty. Kids in the rich world aren’t hungry enough.”
If poverty were the key, African teams would win World Cups. Instead, the trophy usually goes to a rich nation: Germany, Italy, France, England, Uruguay when it still was rich.
Goldman Sachs, in its report on the tournament, notes that “the wealthier nations are generally the better footballing nations”. It turns out that you need good nutrition and a well-organised football set-up to win the World Cup (unless you are Brazil). It’s true that within rich countries, the working classes and particularly poor immigrants tend to produce the best players. But even these groups are many times richer than the global average.
“Penalty shoot-outs are a lottery, a terrible way of deciding football matches.”
You might as well say that putts in golf are a lottery. Penalty shoot-outs test the ability to beat a goalkeeper from 12 yards while exhausted and with tens of millions of people watching. Clearly there is an element of luck, as in almost everything.
However, measured over time, some players and countries will outperform others. There are reasons why the English do badly. First, they rarely wait for the keeper to dive before choosing their corner. Second, they take their kicks knowing that their countrymen historically lose on penalties. When a team plays at a World Cup, the ghosts of their past players sit on their shoulders whispering in their ears.
“There is a new slave trade in football: young African players are being shipped to Europe to be exploited.”
Millions of Africans died in the “old” slave trade. This doesn’t quite compare with the fate of an African teenager flown to Belgium on the false promise of a professional contract who ends up living illegally in poverty. He may in fact be better off than if he had remained in his home village. Agents who exploit African players – by taking three-quarters of their salary, for instance – should be punished. But comparisons with slavery should be forbidden.
“The African players are natural athletes.”
So are the English, Serbian and Japanese players.
“The World Cup will be an economic bonanza.”
In fact, much of the money spent is either wasted or displaces other spending. The family that buys a plasma television screen to watch the tournament would otherwise probably have bought it the year after. Fans who buy beer and pizza to fuel their viewing aren’t going to the cinema or buying lottery tickets. And building a big stadium and access road in a provincial town to stage four World Cup matches generally yields little long-term return.
The World Cup can also damage economies. Brazil operates on a semi-official go-slow throughout the tournament. In England, people show up at work hungover.
The finance academics Alex Edmans, Diego Garcia and Oyvind Norli are about to publish an authoritative paper called Sports Sentiment and Stock Returns. It shows that the domestic stock market suffers when a national soccer team loses an important game because investors feel depressed. The authors analysed 1,162 matches played by 39 countries from 1973 to 2004. They found that a loss in the knockout rounds of the World Cup, for instance, “leads to a next-day abnormal stock return of –49 basis points”. The effect is strongest for small stocks, which tend to be traded chiefly by domestic investors. By contrast, a team’s victory had no statistically significant effect on stocks.
“In the World Cup winning isn’t everything. It’s the only thing.”
Football fans remember the beautiful football of the Hungarians who lost the final in 1954, the Dutch who lost in 1974, the Brazilians of 1982. Their tragic ends are part of their legends. Johan Cruyff, the Dutch captain in 1974, even argues that Holland “really” won that World Cup because the world remembers their team better than it does the German winners. That might be going too far.
See this column by the Freakonomics nerds as well>>

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3 comments on “The Freakonomics of Soccer – Part 2
  1. I disagree strongly on your remarks to the economic point of view.
    First of all, many more small businesses and services are sprouting out of the ground in Germany. That means quite a few more employees and many more taxes payed.
    The World Cup gets people to the country, that would otherwise not have come. They spend quite a lot, too.
    People spend more money during such games, than they would spend on that evening or often even in that whole week.
    People watch football (soccer), that would usually not watch at all. They generate extra revenue.
    Besides, it is all about how much money circulates, and there will be a lot more circulating than without the World Cup.

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