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The Economics of Doping

Good short article from Wages of Wins on the economics of doping in sports. On the A-Rod situation:

You may find yourself arguing:  isn’t it costly for a player to sit out the games?  If A-Rod is denied the 2014 season, he will give up some income, right? True–he might. But, the decision to break the rules and take the banned substances is really made based on the player’s expected benefits weighed against the expectedcosts. Nobel Prize winning economist Gary Becker introduced this principle in his paper Crime and Punishment: An Economic Approach (1965).  The expected costs are equal to the penalty (i.e., the game suspension or ban) multiplied by the probability of getting caught and the probability of being punished (having the penalty applied). So, even if the 2014 ban holds, A-Rod will still have three years on his contract at $61 million (plus incentives for various homerun milestones)!  From his public comments one gathers A-Rod is not expecting the penalty to be applied in full. So, no matter how you slice it up, A-Rod’s behavior–though illegal–was rational economically speaking.  And, that is why tomorrow’s PED headline will be old news.

August 13, 2013

Comments

  • prince says:

    The fact that players cheat isn’t going away. The penalties of getting caught have to be higher.

    But what is fascinating to me, is the psychology behind A-Rod’s choices.

    In baseball, unlike the NFL, contracts are guaranteed. He was always going to get his money.Once the contract is signed, if you play pro baseball, you don’t need to get better.

    A-Rod’s behavior when it comes to PEDs isn’t one of a player wanting to be better. It is the behavior of someone addicted, either physically (or even more interestingly) psychologically to drugs.

    When the A-Rod story is finally written, the tragedy isn’t going to be the wasted talent, it’s going to be what was happening in his head.

  • Brad Noble says:

    I don’t think A-Rod should get credit for thinking through the economics, as this article seems to suggest. (Though, I do think the economics here are interesting.) It is my belief that in this case, as in the case of Armstrong, a supremely gifted athlete chose a path to elevate his ~supernatural gifts b/c of vanity. Sure, he probably thought he’d make more money. But I don’t think he calculated anything more economically complicated that this:

    me X no drugs = $
    me X drugs = $$$

    or…

    me X no drugs = <3
    me X drugs = <3 <3 <3

    Believing you can cheat and get away with it is not so different than believing you can text and drive without causing an accident. The consequences are too heinous to consider; even when they're real, they're too heinous to accept.

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