Tag: ipl

The IPL and the Benefits of Competition

I was gloriously and completely wrong about the IPL. And I couldn’t be happier about being wrong!

So happy, in fact, that I can’t stop talking about how wrong I was (see here, here and here). The IPL has been beneficial for Indian cricket, and I would argue this holds true for world cricket at large.

It’s one thing to say this in 2022 with the benefit of hindsight, and it is quite another to have said it in March 2008! Here’s Amit Varma from what seems like ages ago:

The problem with cricket in most cricket-playing countries, certainly in India, is that the cricket market is what economists call a monopsony. A monopsony is a market in which there is only one buyer for a particular class of goods and services. Until now, a young Indian cricketer who wanted to play at the highest level could only sell his services to the BCCI. If it treated him badly and did not give him his due rewards, he had no other options open to him.

https://www.espncricinfo.com/story/opportunity-choice-and-the-ipl-342143

I’ve quoted from this piece before, and I would urge you to go read it again. I always urge all of you to read the entire piece, of course. But the reason I’m doing so in this particular case is because it is always a pleasure to read a piece that uses economic theory to make predictions that turn out to be spot on.

Here’s Ian Chappell in a more recent piece:

Apart from the massive financial boost and enormous increase in fan interest, India’s biggest gain from a highly productive IPL competition has been the huge improvement in playing depth.
About 20 years ago, India’s overseas reputation was an improving one, especially under the captaincy reign of a competitive Sourav Ganguly but the pace of that ascent gradually increased when the IPL began 15 seasons back, in 2008. The quietly thoughtful MS Dhoni – who is still exerting an influence – built on Ganguly’s reputation, which was then improved upon by the highly competitive leadership of Virat Kohli.
The firmly established IPL is now seen as the most important part of India’s enviable depth in international cricket.

https://www.espncricinfo.com/story/ian-chappell-india-have-the-ipl-to-thank-for-their-formidable-international-depth-1313912

But what are the economic factors that have been at play in making the IPL Such A Good Thing for cricket in general, and Indian cricket in particular?

Amit listed out the following factors:

  1. The BCCI stopped being a monopsony. Ten (as of this year) franchises bidding for a player, with a reasonably well established feeder system is a very different proposition from depending upon the whims and fancies of a deeply flawed selection system. The results are there for all to see.
  2. The IPL is a competition that is about the money, is about the bottom-line, and this is a good thing. Something that I should have known, but was too besotted with my love of test cricket to see. It forces players to be selected on merit, and also dropped on merit, and merit alone.
  3. The ecosystem for spotting, nurturing and promoting talent is only likely to get better over time was his prediction. See this article about Kumar Kartikeya Singh, and this article about Tilak Varma, published this year on ESPNCricinfo. And if you’re hungry for more, see this on T N Natarajan, and this on Washington Sundar. Sports fans will see the struggle in these stories, but if you think about it from the point of view of an economist, you should credit the IPL for creating the ecosystem that enables the emergence of these players. And indeed, many more to come!

Ian Chappell is making the same points in his write-up as Amit Varma, but for Amit to have done this in 2008, and by using simple economic theory is remarkable. We would do well to absorb the lesson that I think can be learnt from this: don’t be blinded by distractions, and trust in economic theory to work well more often than not.

This is how Amit concluded his piece back then:

Having said that, the IPL could fail, for not every good idea is rewarded with smart execution. Maybe the franchises got carried away and bid too high (game theorists call it “the winner’s curse”). Maybe the games will not get high enough TRPs, as a cricket-loving public deluged with an overdose of cricket finds other ways to entertain itself. If it does flounder, it will be a pity, for its failure will be remembered and used to prevent other such experiments.
On the other hand, if the IPL succeeds, cricket historians may one day write about 2008 as the year that cricket discovered its future.

https://www.espncricinfo.com/story/opportunity-choice-and-the-ipl-342143

It is safe to say that it is the second paragraph that is applicable today, not the first.

And it wouldn’t be the worst idea to learn some of the principles of economics by studying the IPL!

Links for 28th March, 2019

  1. “While nightlife and entertainment are certainly drivers of the night-time economy, they need not be the only ones. According to a report released by the London mayor’s office, 1.6 million people in London—constituting more than a third of the workforce—worked at night in 2017. Of these, 191,000 worked in health and 178,000 in professional services, with nightlife coming in third at 168,000. These were closely followed by transport, automotive, IT and education.In other words, the city’s nighttime economy is not merely bars and restaurants, but an extension of its day-time economic activities as well. It is estimated that the night component comprises 6-8% of the city’s economy and contributes £18-23 billion in gross value added to the British economy. The figures are approximations but significant enough for Mayor Sadiq Khan to champion the night-time economy and appoint a “Night Czar” to manage it.”
    In which Nitin Pai makes the argument for having more shops, establishments and services operate at night as well, in India. A useful read for students of urbanization, microeconomics and life in India.
  2. “I think that our economic system reflects our understanding of humankind, and that understanding has been developing, with especial rapidity lately. You have to understand people first before you can understand how to devise an economic system for them. And I think our understanding of people has been accelerating over the last century, or even half-century.”
    Robert Shiller chooses five books to help us understand capitalism better. I haven’t read all of them, and read one a very long time ago (Theory of Moral Sentiments) – but this has tempted me to go and read at least A.O. Hirschman’s book, if not all of them!
  3. “The problem with cricket in most cricket-playing countries, certainly in India, is that the cricket market is what economists call a monopsony. A monopsony is a market in which there is only one buyer for a particular class of goods and services. Until now, a young Indian cricketer who wanted to play at the highest level could only sell his services to the BCCI. If it treated him badly and did not give him his due rewards, he had no other options open to him.”
    I am happy to admit that I got the IPL gloriously wrong – I approached the IPL while wearing my cricketing purist hat, but I really should have approached it wearing my economist’s hat. Which is exactly what Amit Varma did, ten years ago. Monopsony, the power of markets, incentive mechanisms, it’s all here.
  4. “The 737 assembly line in Renton, Wash. is a marvel of lean manufacturing. The line inches forward little-by-little as assembly proceeds. Born from Toyota’s production methods, the process is one of continual improvement. It’s what made the 737 the lifeblood of Boeing in the first place and why this crisis, taken to its most extreme, could threaten the company’s very existence. But the assembly line also comes with a tool called an Andon cord. The cord empowers all employees to pull it and stop the line if something is amiss or requires investigation and needs fixing. The rest of the world has already pulled it.”
    A mostly understandable explanation of the possible reasons behind the crash – but when I say possible reasons, I do not mean the technical ones. Why compromises had to be made, and the impact of those compromises.
  5. “I’m happy for the descriptive part of economics to stay as it is. The prescriptive part, when we tell people what to do – that one should be much more broad. In fact, we should stop using just economics and take all kinds of ideas from psychology, sociology, anthropology, philosophy and economics, and test which ones work, which ones don’t work and under what conditions. There is no question that behaviour is the ultimate goal – to try to understand behaviour, and how to change or modify it. I hope we can create a discipline that is much more empirically based and data driven. Maybe we can call it “applied social sciences”. It will draw from all the social sciences equivalently as we approach problems in the real world, and try to find solutions for them.”
    Dan Ariely on five books that he’d recommend when it comes to understanding behavioral economics better. If you are interested in this topic, as I am, the interview is great reading – and the books too! I have not read Mindless Eating, and will begin it soon.