Utility Player: Paul Oyer Explains How Economics Can Make Sports More Fun
The thrill of victory. The agony of defeat. The joy of calculating the optimal strategy for soccer penalty kicks.
Great athletes show how people who’ve never cracked an econ textbook can develop an “economic intuition.” | iStock/Dmytro Aksonov
You might not know the difference between a no-hitter and a Nash equilibrium, but if you’ve ever geeked out over players’ stats, assembled a fantasy football roster, or placed a bet on a big game, you’re familiar with some principles of modern economics. And your favorite athletes are too, whether they realize it or not.
“I believe that all great athletes (well, most of them anyway) and fans are also sound economists,” Paul Oyer writes in his new book, An Economist Goes to the Game. “They have to understand how to make investments, how to choose strategies, and how to resolve trade-offs that separate champions from also-rans.”
Oyer, a professor of economics at Stanford Graduate School of Business (and an avid tennis player and lifelong sports fan), makes an entertaining case for how economics can help us better understand sports. And vice versa: Through topics like doping, scalping, and big-league salaries, Oyer provides accessible entry points to concepts like the prisoner’s dilemma and gains from trade as well as issues like income inequality. “I’m always looking for ways to help show the importance of economics to people who don’t necessarily see it,” he says.
But perhaps the best reason to mix economics and sports is that they make each other more fun. Or, as an economist would put it, they help maximize our utility.
We spoke with Oyer about a few surprising stats and calculations sprinkled throughout his book and what they can teach us about the wide world of sports.
Liechtenstein is the greatest sports powerhouse in the world — on a per capita basis.
“Liechtenstein has only ever won an Olympic medal in one type of event — downhill skiing — but they’ve won 10 medals over time,” Oyer says. That’s not a lot in absolute terms: 47 of the 2,633 medals ever won by U.S. Olympians have been in Alpine skiing. But when you factor in Liechtenstein’s population (about 38,000 at last count), the European principality has enjoyed a higher concentration of glory on the podium than any other country.
Oyer cites Liechtenstein as one of several examples of countries that dominate a particular sport due to a combination of environmental and socioeconomic factors. Liechtenstein, he explains, “is situated perfectly for what an economist will call ‘natural advantage.’ Liechtenstein is right in the Alps. The ski areas are very close by. Kids go ski after school. They grow up that way.”
To further help level the statistical playing field, Oyer created the Population-Adjusted Power Index (PAPI), a standardized measure of “national athletic dominance” in 16 sports. China has 5 of the world’s top 25 badminton players, but that’s what you’d expect from a country with a fifth of the global population, so its PAPI is around 1. Liechtenstein’s PAPI in women’s downhill? A whopping 7,718.
Soccer players choose the best kick in a shootout almost as well as they would if they used a computer to help them.
It seems obvious: If a player is better at kicking to the left, they should always aim their penalty shots at the left side of the net — right? Wrong. If they did that, the goalie would anticipate the shot and would consistently jump in front of it. So a strategic kicker must sometimes kick to their weak side to increase their chances of winning a shootout. Which combination of kicks to use is a classic game theory problem. (The problem also applies to the goalie, who must commit to a dive before the kicker’s foot even hits the ball.)
Oyer calculated the optimal strategy using Excel. Yet successful soccer players can come up with something very close to the best strategy without an app. The problem demonstrates how people who’ve never cracked an econ textbook can develop an “economic intuition” that enables them to act without hesitation.
“If you’re not playing the best strategies in situations like penalty kicks, you’re not going to survive,” Oyer says. “Game theory certainly isn’t enough to make you a great athlete, but an inability to use game theory strategically is enough to keep you from being a great athlete.”
Kevin Durant’s annual income in 2016 represented almost 1% of all the money earned by the more than 300,000 African American men born in 1988.
This striking stat pops out in Oyer’s chapter on whether parents should encourage their kids to pursue a career in pro sports. Spoiler: He concludes that most kids should just play sports for fun. “There are only really two reasons to play sports with any expectation of a longer-term return,” he says. One is getting into college. The other is if your kid is unusually gifted: “If your kid is incredibly tall and athletic by like age 12 or 13, the odds that that person can go on to have an NBA career are surprisingly high.”
Take NBA star Kevin Durant, who hit 6’8” before he finished high school and recently scored a four-year, $194-million contract with the Brooklyn Nets. But his story isn’t just one of talent and tallness. As a Black kid from a working-class background, Durant’s economic options were limited. Aiming for the NBA, Oyer says, “looks pretty good in a country with a history of systemic problems for African Americans in the labor market. And so he made that investment.”
Seen in that context, the stat about Durant’s income versus other Black men his age isn’t only a measure of his superstar status. It’s also a striking illustration of the lack of economic mobility that drives many kids from humble backgrounds to dream of going pro.
People who make their living gambling on sports rarely pick winners more than about 55% of the time.
In some ways, gambling is the perfect distillation of the economist’s approach to sports: Bettors crunch stats to predict a payoff while bookmakers tweak the odds to keep the action coming. Yet, unlike the showdown between kicker and goalie, this scenario is not a match between equals. Over time, even the most disciplined sports gamblers barely break even.
Despite the long odds, Oyer doesn’t discourage readers from betting on sports, so long as they’re realistic about it. “Bet if it’s fun, but don’t bet because you’re going to win,” he says. “You’re not going to win. It’s all about utility.”
After all, thinking like an economist isn’t just about winning. Sometimes the biggest win is simply maximizing your own enjoyment. “Economists are all for that,” Oyer says. “If that’s how you want to spend your money and have a good time, and there’s no negative externality on the rest of the world, then go for it.”
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