The reason the NY sports teams perform so much worse than their inflated salaries would predict is that they suffer from the diffuse and variegated nature of culture in NY, so that other things besides sports can take center stage, the way sports do in smaller cities. All the best soccer teams tend to come from midsized industrial cities where the only activities that holds everyone together is the sports team. And players come there knowing they will be lionized. On another front, the big cities demand high visible stars as an offset to all the other things they can idolize. And the owners have to give the fans what they want by hiring stars in their 30s, in the declining years of their ability, to give the fans a rise, and that decimates their bottom line and ability to field good teams. It's related to a line of studies now being bruited in the academic literature that shows that the size of the chairman's signature in the annual report is inversely related to performance.

Anatoly Veltman writes: 

I wonder if the gold market reflected that phenomenon last week. First came the news of record Bank of Russia purchases in September that catapulted them into the world fifth size of ownership among the sovereign Central Banks. The gold market promptly plunged to a new four year low on the news. Then on Friday, their Chair said they might sell some gold to defend the rouble–and the gold market erupted higher to score its best rally of the year.





Speak your mind

2 Comments so far

  1. manav on November 11, 2014 12:53 am

    I am not sure if this thesis applies to football (soccer) — in England, London clubs like Chelsea & Arsenal and of course the Manchester clubs are the powerhouses - of course one can argue that the clubs are hardly English with over 90% of the players being foreign. Similarly in Germany, its Bayern Munich, in Holland its Ajax of Amsterdam, in Italy the Milan clubs and in Spain its Madrid and Barcelona.

  2. Tom Higgins on November 11, 2014 6:23 pm

    I thought it was because the correlation between winning percentage and salary is very low in American sports right now, as opposed to, say, soccer in Europe, where it’s much higher.


Resources & Links