Hub of Cricket Information

Nation Books, New York, 2009, 336 pp., $14.95 (paper).

Are you getting ready for the soccer World Cup in South Africa this summer? Did you know that a nation’s income, population, and soccer experience are the main determinants of a team’s survival of the first round of the World Cup? Don’t rush off and check where your favorite national team stands. These three factors explain only 25 percent of the variation in goal differences; the remaining 75 percent is unexplained random noise or sheer luck—all courtesy of the power of econometrics.

This and many other surprising facts about the world of soccer are discussed in Soccernomics, by Financial Times writer Simon Kuper and Stefan Szymanski, a leading sports economist. They weave academic analysis and anecdotes from individual players, managers, and teams across the world into a highly readable and entertaining book about the most popular sport in the world. It would have been more fun in undergraduate economics to learn game theory through penalty kicks or regression analysis through soccer examples.

What do large financial institutions such as Lehman Brothers and soccer clubs have in common, and how do they differ? Both are subject to moral hazard (risky behavior is not penalized), because they are usually bailed out. Alas this not always the case—as the example of Lehman Brothers recently showed—but, surprisingly, soccer clubs seldom disappear. Yes, some clubs might go bankrupt (for example, Fiorentina, Leeds United), but according to Kuper and Szymanski, soccer clubs are among the most stable businesses around. Even the few that are not bailed out often reappear with a new name, money, and the same fans and swiftly move up the ranks to the highest league again (Fiorentina, for example). Although banks make enormous profits in good times, soccer clubs are in general unprofitable. The authors find no correlation between league position and profit. Yet, interestingly, soccer players’ salaries explain almost all the variation in English Premier League positions. But the next time your favorite English team announces a multimillion-pound “transfer deal of the year,” don’t get too excited: spectacular transfers do not necessarily correlate with the team’s subsequent league position in the standing.

We also learn that hosting the World Cup or European Cup reduces suicides in European countries, Norway is apparently the most enthusiastic soccer country in Europe, Iraq is among the best overperformers in world soccer, and 50 percent of British ticket holders don’t take up their seats the next season. While bank customers usually stick with their bank unless there’s a bank run, soccer fans don’t seem to be very loyal. In addition, hosting large sports tournaments doesn’t yield any profits or many economic benefits, but it does increase people’s happiness—a finding drawn from the influential field of happiness economics. So even though South Africa is likely to lose money on the forthcoming World Cup, it might be a happier nation this fall—not to mention all the other participating African countries that could reap empowerment, pride, and happiness from the South Africa–hosted World Cup.

What are some of the limitations of the book? The empirical evidence is at times overly focused on England. Economists tend to be a skeptical species (except maybe when it came to rational expectations or efficient markets), so more evidence from other countries would certainly help generalize some of the findings. Also, in general, the explanation of why poor countries do worse at sports—poor nutrition, exposure to disease, lack of networking, and organizational issues—is compelling. But it does not explain why African countries do so well in the FIFA Under-17 and Under-20 soccer World Cups. Nigeria is the most successful U-17 team besides Brazil, with three titles, and the current U-20 world champion is Ghana.

One question for globalizers is when countries such as China and India will make their mark in the soccer world. Brazil, one of their cousins in the so-called BRIC countries—Brazil, Russia, India, and China—has the best national soccer team in the world; the other, Russia, made it to the European Cup semifinals two years ago.

Finally, a word of caution to any soccer manager with a large budget: don’t buy the stars from the World Cup in South Africa. They tend to be overvalued. Buy players in their early twenties and players whose personal problems you can solve (both tend to be undervalued).

Soccernomics is highly recommended not only for soccer fans but for anyone who is interested in how economics tools apply to the wonderful world of soccer.

Heiko Hesse

Economist, IMF; former professional soccer player for Borussia Dortmund; and featured in the German documentaries Die Champions and the forthcoming HalbZeit