Skip Sauer, of The Sports Economist, and Clemson University, is interviewed in the Spring issue of the Richmond Fed's Region Focus : "Interview. Raymond Sauer."
This is one in a series of Region Focus interviews by Aaron Steelman. These are very good. Steelman does his research and poses interesting questions; the subjects get the chance for thoughtful answers, and take advantage of it. Tyler Cowen of Marginal Revolution, was interviewed in the Winter 2006 issue, Thomas Schelling was interviewed in the Spring 2005 issue. The series appears to go back to 2003 at least.
Sauer's professional speciality is sports economics.
The interview is wide ranging. Here he discusses Michael Lewis' book on the Oakland Athletics baseball team, Moneyball: The Art of Winning an Unfair Game . This is a great story of the dynamics of entrepreneurship and competition:
RF: What do you think of the hypothesis that Michael Lewis put forward in Moneyball?
Sauer:Moneyball was a fascinating book. It had great writing, a great story, and was compelling reading. But at the core of it was an economic idea: that wages in the market for professional baseball players were not well-priced, and that one could exploit these discrepancies to win a lot of games at relatively low cost. In particular, the ability to take a pitch and to get on base in any way you could were undervalued. The Oakland Athletics — and, in particular, their general manager Billy Beane — figured that out, and were able to get to the playoffs for several consecutive years on a very tight budget.
At its core, I find the Moneyball hypothesis offensive. I tend to think that, as a general matter, labor markets work quite well, and returns to skill are valued appropriately. But the Oakland example was in opposition to my belief in labor market efficiency. So my colleague Jahn Hakes and I decided to investigate it more in a paper that will be coming out in the Journal of Economic Perspectives. We found that Lewis’ offensive idea was correct. On-base percentage was undervalued, and buying on-base percentage went a long way toward explaining Oakland’s success.
How do we explain this? I think what Lewis found was a very clear-cut example of institutional inertia. A lot of old baseball scouts had a certain idea of which skills made for a good baseball player — and those weren’t necessarily right. Yet once those ideas took hold, they tended to stick. Someone eventually questioned and tested them, and decided there was another way to evaluate talent. Beane was a real innovator, and he was able to exploit the opportunities that he saw. But it’s very hard to do this over an extended period of time. This information will
be exploited by others — indeed, we have seen it recently with several other teams. Just about every front office in Major League Baseball has guys poring through data looking for statistical patterns that can give them an advantage. As a result, there will be new innovations in assessing talent that might prove even more effective.
As the questions continued, Sauer pointed out that economics actually has implications for practical people:
RF: Has the exposure that Moneyball received affected the field of sports economics?
Sauer: Not much, I think. The paper that Hakes and I did has been well-received and has been downloaded a lot. But I think there are some examples that go beyond Moneyball that are interesting to note here. There are a number of papers where people have modeled different games, and it’s interesting for us as economists and applied econometricians to do those exercises. We don’t have an impact on things very often, but occasionally we do. One example of this is the work that David Romer did on fourth-down decisions made by football coaches. If you model a football game properly, you can look at the costs and benefits of doing various things. The thing that Romer focused on was the decision to give up the ball on fourth down by punting. It turns out that coaches were extremely conservative on this point. They hardly ever went for it on fourth down, even in short-yardage situations in their opponent’s territory. But if you look at the data, there are no real benefits from punting in those situations and the net costs
can be very large.
Over time, I think Romer’s message has gotten through. You see a lot more people going for it on fourth down than in the past. Bill Belichick, the head coach of the New England Patriots, makes decisions that are very data-driven — he was an economics major at Wesleyan — and he goes for it on fourth down a lot of the time. Similarly, you see more coaches going for the touchdown now instead of settling for a field-goal attempt. So coaches are increasingly taking risks when they are appropriate, and I think the work economists did pointing out the costs associated with excessive caution helped move them in this direction.
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