Comments on economics, mystery fiction, drama, and art.

Sunday, February 28, 2010

The economics of NASCAR

I've started working on a project that looks at changes over time in competitive balance and earnings differentials in NASCAR, and, so far, the single most interesting piece of data I've dug up is this:

Between 1975 (the earliest year for which data are readily available) and 2009, the number of drivers who appeared in at least on NASCAR race in a year fell from 133 in 1975 to 67 in 2009.

This is, it seems to me, extraordinary.

While I still have to look into this, I think there are two primary potential explanations.

First, NASCAR may have changed the rules governing car design and operations in ways that have significantly increased the costs of owning and maintaining a racing operation. (Safety provisions leap to mind.) This will have the effect of pushing out those car owners and drivers who only occasionally saw a reason to enter a race (e.g., the race was close to home.) Why might NASCAR have wanted to do this? I suspect two reasons.

A. Having a large number of very part-time drivers diluted the quality of the field, even when they managed to qualify. Because these owners/drivers did not compete regularly, they had less competitive cars and less well-honed driving skills. This reduced the quality of the experience for everyone involved. Pushed to choose between an open racing format and higher-quality events, NASCAR (rationally) chose quality.

B. Having less-skilled drivers may have had a secondary effect as well. Car racing is dangerous, and that danger is a part of the spectator appeal. But with inexperienced and less-skilled divers, the risks may be more random, and may be more likely to lead to crashes involving the drivers people do want to see. This could reduce, rather than increase, fan interest.

Second, it could be that many of the part-time participants were older and that the reduction in their numbers was a part of natural attrition. Over time, the drivers and owners attracted to NASCAR may have come to see it as more of a full-time commitment, independent of NASCAR's rules.

I suspect both were involved. But I also suspect my first explanation will prove to be the stronger one.

Friday, February 26, 2010

Two emails

I recently received two emails, back-to-back, with the following subject lines:

Nutrition Action Healthletter to be distributed to each department

Biology Club Krispy Kreme Sale

The jokes write themselves.

Saturday, February 06, 2010


"Speculators may do no harm as bubbles on a steady stream of enterprise.But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."

J. M. Keynes, in The General Theory of
Employment, Interest, and Money

"It's like on Wall Street, when your heart is in your throat. You make the wrong move and you could lose your clients' money...Wall Street is just a form of legalized
Dave "Spider" Perry, a 41-year-old f
ormer bond trader, living in Las Vegas,
in The Wall Street Journal,
February 6, 2010, p. A-10

Headline in The Wall Street Journal, February 6, 2010, p. A-1:

"Firm Engineers Vegas Wedding Between Wall Street and Sports Betting"

The lede:

"LAS VEGAS---Investors are sometimes accused of treating the stock market like a casino. Now, one Wall Street firm wants to treat casinos like the stock market.

"Bond-trading specialist Cantor Fitzgerals in March took over the management of sports betting at the M Resort..."

Their approach includes in-game betting (e.g., on such things as whether a pass will be completed or a field goal made), in addition to the formerly standard win/lose, with-the-spread/against-the-spread betting.

Be afraid. Be very afraid.

Friday, February 05, 2010

There's some good news

The good news: The national unemployment rate fell to 9.7% in January 2010 (from 10% in December 2009.

Even better news: The decline in the unemployment rate did not occur because of a shrinking labor force--the labor force grew (slightly) between December and January.

Which (still better) means that employment as measured in the household survey rose--as did the the employment-population ratio.

Somewhat good news: Establishment employment was essentially unchanged (down 20,000, out of about 130 million). Construction employment was down 75,000, more than accounting for the decline.

And some really good news: Manufacturing employment actually rose (not enough to cheer about, but, hey, up, in this case, is better than down).

So maybe, just maybe, the corner really has been turned. More details than you could possible want are here.

Wednesday, February 03, 2010

Is having a pro football franchise related to higher metropolitan area incomes?

The conventional answer to this question is probably "No." But in a paper appearing Economic Inquiry (V. 48, N. 1, January 2010, pp. 39-50), Davis and End ("A Winning Proposition: The Economic Impact of a Succesful National Football League Franchise") find that "the winning percentage of the local professional football team had a significant positive effect on real per capita income." If this holds up, this is a truly significant result in the analysis of the impact of sports on local economies.

But even based on their results, I have my doubts. First, the coefficient of having a team at all is negative and large. Just having a team is associated with a real per capita income that is about $150 lower than in comparable cities without teams. Second, before the net effect is positive, a team has to win at least 8 games. Third, the marginal effect turns negative at 11 wins, and by 14 wins the net effect is again negative. So having a team is bad. Having a medicore-to-good team is good. But having a great team is bad. I think the negative marginal effect of going from a 10-6 record to a 11-5 record is really an important result of their model, but it goes undiscussed.

Beyond that we have to deal with the causation issue. A plausible case can be made that teams in more prosperous cities have more resources available (e.g., through larger local revenue streams that are exempt from revenue sharing) and are thus able to acquire more talent.

So color me skepitcal for now.

Tuesday, February 02, 2010

Twenty years of schooling...

I've been teaching full-time since 1973, and I do have the requisite 20 years of schooling. And, after all, Bob Dylan wrote (in Subterranean Homesick Blues)

"Twenty years of schoolin'
And they put you on the day shift..."

Well, this semester, I teach until 7 PM two nights a week and until 10 PM one.

I'm still waiting for the day shift.

(This is a whine. You may return to your regularly scheduled activities now.)