Chapter 10

1. The Economics of Sports FIFTH EDITION Chapter 10 Discrimination: Theory, Measurement, and Consequences Michael A. Leeds | Peter von Allmen

2. Introduction • Jackie Robinson became the first black player in MLB’s modern era (NL; hired by manager Branch Rickie) • 1946—Montreal Royals • 1947—Brooklyn Dodgers • Larry Doby became the first black in the AL (hired by Bill Veeck) • 1947—Cleveland Indians • It is remarkable that Robinson and Doby flourished despite the tense atmosphere in which they played

3. Learning Objectives • Understand the Becker model of discrimination • Describe how various forms of discrimination can occur in professional sports • Evaluate gender discrimination in college sports

4. Empirical Studies and Definitions • A major study finds that all players face the same opportunities in MLB, NFL and NBA • Some economic studies find that there are differences in pay in the NBA as well as European soccer • They also find evidence of discrimination in the NFL draft • We need to distinguish between • Prejudice -- a feeling or emotion • Discrimination -- an action • Economists separate two issues • Equal access to work (draft order) • Equal pay for equal work (equal salaries to equally talented players in same positions)

5. 10.1 Becker’s Theory of Discrimination • Gary Becker (1957) uses neoclassical theory to analyze and evaluate discrimination like any other “good” • Neoclassical theory assumes that people maximize utility subject to constraint • Economists focus much more on the outcome of discrimination than on its origin • Becker considers prejudice a taste • Discrimination is indulging that taste • This indulgence comes at a cost • We can reduce discrimination by raising its cost

6. 10.2 Different Forms of Discrimination • This section introduces • Employer Discrimination • Employee Discrimination • Consumer Discrimination • Although each model uses money to measure the intensity of the discrimination, they are all based on utility maximization • As people with a taste for discrimination maximize their utility, their willingness to pay to indulge their tastes has a variety of effects

7. Employer Discrimination • In Becker ’s model, employers have preferences regarding employees with whom they do and do not want to associate • There have been many studies of discrimination against French-speaking hockey players (Francophones) • Their findings depend in many cases on the players’ positions • To simplify matters, assume that there are only two groups of players • English-speaking (E) and French-speaking (F) • We assume for now that, although the players’ styles may differ, they are equally productive • They have the same MPL

8. Employer Discrimination • If a hockey team owner dislikes Francophones, employing them brings a psychic cost • He feels that he pays them more than others • The perceived wage is • wF = (1+dF)wE • dF = discrimination coefficient (%) • If the employer pays both F and E the same, he feels as if he is paying F more • As a result, the demand for F falls

9. Employer Discrimination • Assume for simplicity that the supply of both players is the same • Panel b in Figure 10.1 indicates that the wages of both kinds of players will be the same • Panel a in Figure 10.1 indicates that with discrimination, the demand for Francophones falls • At any given wage, the employers’ distaste for them reduces their willingness to hire them • As a result, F’s wage falls relative to E’s • WE > WF

10. Figure 10.1

11. Who Wins and Who Loses: Summary • Francophone players lose • Pay is lower and fewer are employed (Figure10.1) • Anglophone players win • Pay is higher and more are employed • Less qualified workers are hired • Unequal pay for equal work results • Prejudiced employers lose • Francophones’ lower pay offsets psychic cost • Employers pay more for worse players

12. Statistical Discrimination • What if productivity differs across the two groups? • Group statistics may indicate nothing about individual performance • The use of group averages to judge individual productivity is called statistical discrimination • Employers may use it if obtaining individual information is costly • Small differences in group statistics can have a strong impact on a team’s hiring practices and may result in decisions that look like taste discrimination • Statistical discrimination may generate a self-fulfilling prophesy

13. Does Anyone Win with Employer Discrimination? • Consider the case of racial discrimination in MLB • Blacks were effectively barred from organized baseball from 1888 to 1947 by a “gentlemen’s agreement” • One group that benefited from discrimination was white players of that era • More white players played in the major leagues than would have been possible otherwise • Figure 10.2 reflects the result of assuming that there is a large supply of white players (deep pool of talent) willing to play at market wages—no blacks are hired

14. Figure 10.2

15. Segregation Results • The Negro League owed its existence in part to such discrimination • The league effectively folded once the major league integrated • Figures 10.3 shows the market for Negro League • Demand (DS) was much higher before integration (DI) • Figure 10.4 shows the MLB market • Demand (DI) rose after integration (DS) • Tastes of consumers changed, both blacks and whites

16. Figure 10.3

17. Figure 10.4

18. Competition Can Eliminate Discrimination • Unprejudiced employers have an advantage over prejudiced employers • They hire more productive players (and get higher revenue if consumers and employees are not prejudiced) • They do not have to pay as much as teams with Anglophones • They have higher profits • As more unprejudiced employers enter, or as more people worry about profit than taste • Pay of Francophones is driven up • Pay eventually equals those of Anglophones • Perfect competition eliminates discrimination

19. Competition and Discrimination • In the 1950s, integrated teams were better • Dodgers, Giants, Indians, Braves, and White Sox were dominant teams • Dodgers and Giants won pennants • Only the Yankees were good and remained white • Owners had recognized black talent but could not act on it • MLB kept Bill Veeck from buying the Phillies in 1943 • Veeck had wanted to hire Negro League players • He was the first to integrate AL with 1947 Cleveland Indians

20. When Markets Are Not Competitive • In competitive markets, discriminated players work at a discount • We will now assume that the market for labor is not competitive—it is a monopsony • The standard model is presented in Figure 10.5 • Without discrimination, the employer pays the same low wage (found on the supply curve) to all players • In this figure, the wage is $800 while the value of the player is $1000

21. Figure 10.5

22. Figure 10.6

23. Monopsony Model with Discrimination • Figure 10.6 shows the wages paid to F players • It assumes that • F players are more productive than E players, so F players are worth $1500 rather than $1000 that E players receive (for example) • Employers discriminate against F players, which shifts the demand curve from D to D’ • F players are paid more than E players ($960>$800) • F players are paid less than they are worth because of monopsony power and because of discrimination

24. Employee Discrimination • Employees with a taste for discrimination regard the market wage, w, as w(1 - dj) • dj represents the coefficient of discrimination for employees • They feel like they are being paid less • In 1880s, a few blacks played in the American Association • The first was Moses Fleetwood Walker for Toledo in 1884 • Cap Anson, a dominant player for Chicago White Stockings, played in an exhibition game against Toledo team with Moses Fleetwood Walker • Next year he had a contract not to include black players • White players drove blacks out of MLB by 1888

25. Employee Discrimination History • Attempts to reintegrate MLB started after WWII even as employee discrimination was rampant • The Dodgers traded 5 players for Al Gionfriddo & $100,000, a marginal player, who was willing to take the locker next to Robinson (& “carry the money”) • In 1947, Dodger players circulated a petition refusing to play with Robinson • Dodgers manager, Leo Durocher, called a late-night meeting and (in an exquisite speech of which there are different versions) said • See the next slide

26. Quote • …I hear that some of you don’t want to play with Robinson. Some of you have drawn a petition. Well, you know what you can do with that petition • I hear Dixie Walker is going to write Mr. Rickey a letter asking to be traded. Just hand him the letter, Dixie, and you’re gone! I don’t care if a fellow is yellow or black or if he has stripes like a fuckin’ zebra • I am the manager, and I say he plays. …I’ll play an elephant if he can do the job, and to make room for him I’ll send my own brother home • He’s going to win pennants for us. He’s going to put money in your pockets and money in mine

27. Discrimination in Perfect Competition • Assume the labor market is perfectly competitive • The supply curve is horizontal • Prejudiced players require a compensation above the market wage: w/(1-dj) • Such a wage does not exist • Prejudiced players are replaced by those willing to take the market wage • Alternatively, the employer could ban black players • Players no longer require a premium wage • Segregation thus results in this case from employee discrimination

28. Discrimination v. Segregation • The two are not the same – though they usually are related • There could be separate markets for prejudiced and unprejudiced players • Dixie Walker refused to play alongside Robinson • Walker was not refusing to play • He just did not want to play with Robinson • Dodgers traded Walker to the Pirates in 1948 • Teams separate into integrated and non-integrated teams • Pay and treatment on those teams is not affected by race

29. A Digression into Boxing • Jack Johnson and “unforgivable blackness” • In some ways, he resembled Muhammad Ali • Times did not tolerate a brash black man who taunted his opponents • Race riots accompanied his title win and defenses (1915) • He spurred the search for a great white hope • No black man fought for the title between 1915 and 1936 • Joe Louis was a supremely talented fighter • He was groomed with Jack Johnson in mind • His achievement went beyond boxing 2 bouts v. Max Schmeling • He became symbol of American ideals v. Nazism • Schmeling beat Louis in 193 • The rematch in 1938 brought interracial celebration rather than riots

30. Consumer Discrimination • Consumers have a taste for discrimination if they prefer not to purchase goods or services from members of a specific group • Customers feel a psychic cost • Some fans feel they pay a higher price p(1+dk) when watching black players • p is the price of watching white players • Consumer discrimination can be difficult to isolate • A team feels pressure to discriminate • It fears that fans will go elsewhere • Unprejudiced employers are led to discriminate

31. Consumer Discrimination • Consumer discrimination can affect attendance • Consumers could show their taste for discrimination by supporting teams that have fewer players from the group that they dislike • Consumers could follow teams that are integrated but do so with less intensity—going to fewer games, buying fewer jerseys, watching the team less on television

32. Detecting Consumer Discrimination • Studying consumer behavior can be difficult • It is not obvious how to separate taste for the team from the taste for individual players • Several studies focus on memorabilia rather than game attendance • Do fans prefer the cards of white players, all else equal? • Evidence suggests they do

33. Measuring Discrimination • In 1988 Kahn & Scherer asked: • Is there racial discrimination in the NBA? • How can there be when the NBA is 80% Black? • Black players earn more than white ones on average • The theory of discrimination says that • Average pay is suggestive but not conclusive • Discrimination means paying equals unequally • Compare black players with otherwiseidentical whites • Kahn and Scherer found that black players received about 20% less than white players

34. Discrimination by National Origin; UEFA • Civil rights legislation outlaws discrimination on the basis of “race, color, religion, sex, or national origin” • Union of European Football Associations (UEFA) is the governing body for European Football/Soccer • Collectively, UEFA feared loss of national identity on club teams if clubs use too many foreigners • Individual teams tried to hire many foreign players to improve • Until 1991 UEFA allowed each team to have only 2 foreign players • This limitation was struck down by European Union

35. UFEA • Because the EU (Treaty of Rome…) allows free movement of labor, teams had to adjust • 3 + 2 Rule limited each team to three starting players from other countries in 1991 • It, too, was struck down—by the “Bosman Ruling” • Jean-Marc Bosman tried to move from Liege (a team in the Belgian League) to Dunkerque (France); he was blocked and appealed to the European Court of Justice • UEFA’s current regulation requires “eight players from every 25-man squad to have been developed in the fielding club’s national association”

36. Positional Discrimination • Positional (or role) discrimination occurs if players have unequal access to specific positions in team sports • Players are stacked in specific positions • Consider positions in the NFL in 2010 • 83 percent of quarterbacks are white • 84 percent of wide receivers are black • In general, white players are more likely to be on offense than on defense • Table 10.1 reports similar inequalities in MLB

37. Table 10.1

38. Hockey and Football • Hockey has changed since the fall of the Wall • Role discrimination is a possible form of statistical discrimination • A member of a group is being judged based on the average performance of that group instead of individual talent • Troubling because if could be “justified” and self-fulfilling • This could be happening in the NFL • Because there are few black quarterback and their low incidence could be discouraging others from trying

39. Discrimination in Coaching • Minority coaches and managers have become increasingly common • The NFL lags behind MLB and the NBA • See Table 10.2 • Women are represented in all major sports, though they generally have little say in personnel decisions • Division I college coaching resembles professional ranks • Minorities are underrepresented at Division II and III schools • Fewer women are coaching – even in women’s sports • Do minority coaches have to be better? • Manning finds that minority NFL coaches have better records • Kahn finds that minority NBA coaches are no more likely to be fired

40. Gender Equity—A Special Case? • Gender equity is harder to measure • Men & women are seldom in the same venue • Babe Didrikson Zaharias, Annika Sorenstam, and Michelle Wie entered the PGA—they are exceptions • Even the same sport may vary: tennis & figure skating • Mixed competition is rare • Mixed tennis doubles is a contrived event • Horse & auto racing are the only real examples • We do not know if there are few women because demand or supply is low

41. Fan Demand for Women’s Sports • Demand for women’s professional team sports, such as soccer or basketball, is much lower than for men’s sports • Women fare much better in individual sports • Tennis is a primary example • Wimbledon TV ratings of women’s tennis is high • Women are paid more in gymnastics and figure skating • Women have recently encountered problems in golf • Number of women’s tournaments has fallen

42. 10.3 Title IX & Discrimination in College Sports • Title IX has been credited with the success of US women in soccer and the Olympics • Titles deals with more than sports • It is part of 1972 Education Amendments to the 1964 Civil Rights Act • It mandates equal access & opportunities for women in federally funded education programs • Secondary schools and college

43. Title IX Compliance • Compliance has a long history • It is overseen by the Office of Civil Rights in the Department of Education • There are three ways to comply • Funding and participation must be proportional to enrollment • 5% gap is allowed • School must show history of expansion of programs • School must accommodate interests of students • Very few programs are truly in compliance • No school has been penalized/sanctioned

44. Title IX Impact • Some results are desirable. Title IX • Spurred rapid growth in women’s sports • Most of the growth was in the 1970s and 1980s • Gave women grounds to seek remediation • Some results are undesirable • Many colleges have cut men’s programs rather than expand women’s programs • As rewards to coaching have risen, women coaches have disappeared • Fell from ~80% of coaches in women’s sports to ~44%