Super Golfonomics

Stephen Shmanske

• Publisher: WSPC
• Year: 2014
• eBook ISBN: 9789814612562
• Topic: Mathematics
• Subtopic: Economic Theory
• Index: Mathematics

Super Golfonomics continues along the path of Professor Shmanske's pathbreaking Golfonomics. It uses economic and statistical analysis of the sport of golf for three main purposes, (1) For the enjoyment of golfers and fans of professional golf, (2) to teach a little economics and show how it can be used to analyze the game of golf, and (3) to use golf statistics and golf course statistics to comment on social, political, and economic issues like gender discrimination, inefficient pricing and public finance. Professor Shmanske pioneered the field of golf economics with his early writings in Golfonomics. Now, Super Golfonomics presents his more recent scholarship in the field in a form accessible to an intelligent, general readership.

Contents:

• Introduction
• The Economics of Slow Play
• Golf Course Waiting: The Good, the Bad …
• Golf Course Waiting: … and the Ugly
• Consistency or Heroics
• Skills, Performance, and Earnings in the Tournament Compensation Model: Evidence from PGA TOUR Microdata
• Gender Discrimination Revisited
• Gender and Driving Distance
• To Play or not to Play: The Skills Match
• To Enter or not to Enter: Another Look
• To Bet or not to Bet: Sports Gambling, Golf, and Efficient Markets
• Still Looking for Economic Impact: The Case of the Golf Majors
• The Best of the Rest

Readership: Researchers and students who are interested in applying economics principles to the game of Golf. Key Features:

• There are no competing titles (except Golfonomics )
• Contains new, up-to-date, cutting edge scholarship
• Interesting to golfers, fans of golf, students of economics, and students of sports economics

Chapter 1

Introduction

I remember when I first started research on the economics of golf. It was 1987 and I was sick with the flu. My wife, Tina, bought me a golf magazine to read and it had a spreadsheet of statistics for the top 60 money winners on the PGA TOUR for the 1986 season. Primitive now, but fantastic for the time, software allowed me to run regressions on my ten-megabyte hard drive desktop behemoth to derive the earliest production function for professional golf. It didn’t even seem like work. I cannot remember as vividly the genesis of each particular line of research that I have pursued since that first paper. But it seems to me now that, like a putt from the top shelf of a two-tiered green, my research started rolling slowly and picked up speed as I moved from one golf topic to another, enjoying it every bit of the way.

By the early 2000's, I had collected enough material to bring forth Golfonomics which was published in 2004. But my research was just starting to heat up. Since the material in Golfonomics was finalized, I have published ten more pieces in a variety of places. Additionally, other researchers have started to expand upon my work and open up new lines of inquiry. It is time for some more Golfonomics. In fact, More Golfonomics was the working title of this book until I decided to do some coattail riding and entitle this volume, Super Golfonomics.

The avid reader and follower of popular economic culture may remember the best selling book by Steven Levitt and Stephen J. Dubner, Freakonomics, that was published in 2005, the year after Golfonomics. Freakonomics applied economics and econometrics to problems that seem unconnected to economics, showing how economic explanations could shed light on phenomenon as varied as abortion and crime, working conditions for crack cocaine dealers, and cheating by Sumo wrestlers. Although there is much to criticize in the book, it became a popular best seller. Its success can be attributed to the cleverness of its subject matter, its marketing and promotion by the publisher, and the combination of Levitt’s insights as an Economics professor at the University of Chicago and Dubner’s writing skills as a journalist with the New York Times. The book was so successful that they published a sequel, Super Freakonomics, in 2009.

At first I was happy telling everyone that Golfonomics was like Freakonomics except that all the examples were about golf, and . . . , that Golfonomics was first. I would also tell them that despite what sounds like a narrow focus, the examples in Golfonomics were more interesting and more compelling than those in Freakonomics. To list just three comparisons, which do you think is more interesting to members of the general public? (1) Tiger Woods’ earnings and celebrity or the link between abortion and crime, (2) the potential for women to compete against men or Sumo wrestling, and (3) high corporate executive salaries as incentives or working conditions for crack cocaine dealers. In each of these comparisons the former topic is in Golfonomics and the latter is in Freakonomics. Unfortunately, my personal sales efforts did not have the intended result of making Golfonomics a million seller. I wracked my brain to find out why this was so. I originally suspected that my publisher’s high-price/low-advertising-budget style was not as good as the low price strategy coupled with a massive promotional campaign chosen by the publishers of Freakonomics. Ya think? While I still suspect that this is the case, it is also possible that the professional writing capabilities of a major newspaper journalist might have something to do with it. Whatever the reason, Levitt and Dubner had the best seller and I didn’t. It might have been nice to claim that Levitt and Dubner stole the idea for their title from me, but I doubt that it was the case. Anyway, you can’t judge a book by its cover. I end up jokingly proclaiming that since they rode on my coattails with Freakonomics, it is now my turn to free ride, hence the title of this volume, Super Golfonomics.

Incidently, several sports economics colleagues of mine who will remain nameless here have suggested that the title, Golfonomics, did get them to be interested in the book in the first place. I find this gratifying. I hope they liked it enough to also be interested in Super Golfonomics. I also like the fact that since it is a made up word, computer search engines bring my work, or references to it, up to the top of the page very quickly. Finally, they say that imitation is sincere flattery. And I am very flattered that one of the preeminent sports economists and my old world style namesake, Stefan Szymanski, has used a spinoff of the idea in his own book. While we are not too far removed from the topic of coattail riding, I am happy to say that more than once I have been asked if I was spelling my name differently, the questioner thinking that some of Stefan’s work was actually mine. There is definitely a positive externality that rubs off on me; I hope that not too many negative spillover effects go the other way. To me, Stefan is a workaholic, possibly attributable to the fact that he is a self-proclaimed “worst athlete in the world.” Stefan, therefore, does not waste his time on the golf course like I do and is a most prolific scholar. Football, or in his concession to the American market, soccer, is his favorite and I wish him great success with his book, Soccernomics.¹

Enough about the title, what’s actually on the inside? There really is something for everyone, both in terms of the topics covered and in terms of areas of economics employed in the analysis. Topics include gender discrimination, policy, and performance; posted odds gambling; golf’s Major tournaments; competition, entry, and contestable markets; advertising; how to win tournaments; which tournaments to enter; and slow play on the golf course. All of these topics have some relationship to golf or golf statistics, but many have aspects that are relevant to society as a whole. With this in mind, two organizing themes that appeared in Golfonomics, and in other work I have done in sports economics² are also evident in this book. First, some of the book is better described as the use of economics to examine and understand various aspects of the golf industry, for example, the use of inventory modeling to understand slow play on golf courses. Second, some of the book is better described as the ability to exploit statistics developed in sports settings to address larger social problems, such as gender discrimination or the unintended consequences of market intervention. Within golf itself, some chapters will interest fans, others will interest professional golfers and coaches, others will interest golf course builders and investors, and most will interest the typical enthusiastic amateur golfer. Any golfer who likes to read, and who wants a golf book with some intellectual heft, will enjoy Super Golfonomics.

With respect to economics and economists there is also much variety. Areas of economics and related fields that are called upon include labor economics, finance and efficient markets, public finance, the economics of discrimination, econometrics, statistics, production theory, contestability and entry, inventory management, and growth. The basics of whatever theories are used are presented and explained in everyday language, however, so the non-economist should not fret. Indeed, I hope that one result of reading the book might be a slightly increased understanding of economics and economists by those unfamiliar with the economic way of thinking.

In the chapters that follow, sometimes past results are confirmed and strengthened with new statistical analysis, as in the cases of gender-based earnings decompositions, the efficient setting of betting odds, and the lackluster effects of staging a mega event. In other cases new applications of existing theory are pursued, as in the application of inventory control to golf course pace of play, the statistical ability to examine the variance (and skewness) along with the mean of skill distributions, or in ferreting out the chicken/egg problem of prodigiously long drives stimulating fan interest leading to high purses versus high purses supplying incentives for intense practice leading to longer and longer drives. I hope that economics students, economists in a variety of fields, and especially sports economists will find the book interesting, in some cases provocatively so, and will engender new ideas for future research.

Although each chapter is a self-contained whole, there are connections among groups of chapters. Chapters 2-4 deal with slow play and other effects of waiting on the golf course or waiting for a tee time. As a subset of the economics of golf, these chapters could be called golf course economics. Chapters 5-10 deal with a variety of aspects of the economics of professional golf. Among them are the relationships between skills, scoring, and earnings, an examination of gender differences between the PGA TOUR and the LPGA, and the decisions of professional golfers about which tournaments to enter. Through Chapter 10, the economic topics that have been touched upon include, demand and supply, rationing by waiting, inventory modeling, production functions, earnings functions, the economics of discrimination, and labor economics. The remaining three chapters add to this mix the economics of gambling, efficient markets theory, local public finance, the economics of advertising, and behavioral economics. Some readers may choose to read from cover to cover while others will want to jump to topics of most direct interest to them. The following chapter by chapter overview introduces the topics for readers of either type.

Chapter 2, “The Economics of Slow Play,” is the only complete overlap with material from the original Golfonomics. The chapter has a few additions but is largely the same as before. My choice here is to give the community of golfers and golf course operators an additional chance to understand and fix one of the most important causes of slow play, or more accurately, long rounds of golf. Many of us have had the experience of playing behind (or several groups behind) a group of golfers that is not keeping up with an appropriate pace of play. This can happen at any course at any time. However, when the same pattern of slow play occurs time after time on a particular course (yours) at a particular time (essentially, the later the worse) or on particularly crowded days (like weekends), the cause has more to do with golf course design and golf course operations than it does with individual slow groups. The explanation and fix for this problem was detailed in Chapter 8 of Golfonomics, and even supplied as a free download from the publisher’s website at www.wspc.com, but, as evidenced by the continuing problem of slow play, has not been broadly understood. One of the main problems with overcoming the problem of slow play due to golf course design is that it can manifest itself in a very counterintuitive fashion. The chapter explains how there are two related notions of rate of play, namely, the time it takes to play (hours per round) and the flow rate of play (golfers per hour). And perhaps unexpectedly, by slowing the time rate for some (more hours per round) it is possible to increase the time rate on average (that is, decrease the hours per round on average) and thus, increase the flow rate allowing for more rounds of golf in total. Chapter 2 explains this in detail while providing simple numerical examples of the phenomenon and suggesting possible lines of follow up research.

In Chapter 3, “Golf Course Waiting: The Good, and the Bad . . .,” another aspect of waiting is examined, namely, the rationing by waiting model as applied to obtaining tee times on a crowded golf course. As introductory economics shows, when the price is set beneath the market clearing level, a situation of excess demand or shortage exists because the quantity demanded is greater than the quantity supplied. The shortage brings about a chain of events as the pressures to bring about an equilibrium get played out in dimensions other than a simple increase in price. Unfortunately for the market participants, most of these events are costly to consumers and potential consumers and wasteful to society as a whole. Time spent waiting in line, or dialing into an automated tee time reservation system, are only the tip of the iceberg. This chapter explains how pure queuing would work. In the real world, however, pure queuing is distorted by the many types of attempts to jump the queue or otherwise manipulate the system to one’s advantage. The chapter explains how any type of “non-price rationing” is inefficient, favors some groups over others, and in this light, therefore, is not “fairer” than simply raising the price to the market clearing level. As just one example shows, middlemen who manipulate the reservation system for the Bethpage State Park golf courses in New York may be able to capture rents approaching four figures per round that would otherwise go to the taxpayers of the state. Other numerical examples also show how quickly the losses to taxpayers from inefficient pricing can add up.

I’m sure it is obvious that I am not a fan of subsidized, below market-clearing pricing, even for a good which I enthusiastically consume on a regular basis. It is not only the fact that I have to wait in line, or the fact that I feel bad about taking from some non-golfer taxpayer who is poorer than me. The problems outlined in Chapter 3 are bad enough, but the problem is potentially much worse as explained in Chapter 4, “Golf Course Waiting: . . . and the Ugly.” The problem is, indeed, truly ugly in that the existence of subsidized municipal golf courses actually leads to an equilibrium with fewer rounds of golf played on fewer golf courses of overall lower quality. Yikes! How can this possibly be? The answer lies in the unintended consequences of intervening in markets by those with good intentions. In this case the good intention is to make golf more available and more affordable by subsidizing the price at a publicly-owned golf course. The unintended consequence is that builders of for-profit daily fee golf courses are placed at a disadvantage in competing against an entity that does not have to cover its costs. The daily fee golf course does not get built (or its construction gets delayed) and the municipal course with a more or less captive market can skimp on its maintenance budget to save money for the city or for the management company, and still be at capacity. In a simple model, instead of two courses splitting a larger number of rounds, the equilibrium has one course at capacity with lower quality selling a lower number of rounds in total. The self-serving gut reaction of those who gain from municipal golf course operations (that is, both golfers and middlemen who can manipulate the queue to their advantage) is to discount the possibility and avoid the cognitive dissonance by not thinking about it. However, strong statistical evidence is provided for the entry deterrence effect by looking at the establishment of 104 golf courses in the San Francisco Bay area over a more than 100-year period.

In Chapter 5, “Consistency or Heroics,” the focus changes from golf course economics to the economics of professional golf. This chapter also has ramifications for employee compensation and bonus plans in the non-sporting economy. Owing to the highly nonlinear prize fund structure in golf tournaments, professional golfers can earn a lot of money by receiving occasional large paydays for superior performance even though their average performance over the course of the season may be only mediocre. Playing superbly only occasionally might even be better than a consistently good, but never great, performance profile. This brings up the question of which type of performance is preferred, not only in golf, but in any company’s attempts to bring forth effort from its employees. Would the PGA TOUR rather have a different winner each week, depending upon who has the largest negative deviation from their average score, or a set of familiar names as leaders due to steady play that is consistently better than their peers? Would a firm rather have occasional flashes of brilliance from its employees or consistent steady performance? The analysis in Chapter 5 sheds light on these issues. By looking at the variance (and skewness) of individual performances over the course of a season, the chapter measures and compares the effects of increasing variance and skewness versus decreasing one’s average score as the path to higher earnings. Although variance and skewness do play a significant roll in the earnings of professional golfers, the numbers show that consistent better than average performance by the top five golfers in 2002 (Tiger Woods, Phil Mickelson, Vijay Singh, Ernie Els, and Retief Goosen) is more important than the ability to occasionally go low by having a large variance or a large negative skewness in one’s week to week performances.

Having shown that variance and skewness in one’s distribution of scores is important, the question now arises of where do skewness and variance come from? This topic is addressed in Chapter 6, with its long-winded title, “Skills, Performance, and Earnings in the Tournament Compensation Model: Evidence from PGA TOUR Microdata.” The microdata refers to the painstaking collection of week-by-week performance statistics to capture not only the average driving distance, for example, but also to capture the variance and skewness of this and the other skills. Thus, the extent to which having a good or bad week in scoring comes from a good or bad week in driving distance, or putting, or approach shots, etc. is explored. The chapter first adjusts the individual week-by-week data to account for the ease or difficulty of the tournament course. These adjustments improve the previous literature, by eliminating a bias caused by, for example, not adjusting driving distance for altitude. Further, a second type of improvement is possible. By looking at the week-to-week adjusted data, a distribution of adjusted skill measures for each golfer is developed, thus allowing the calculation of mean, variance, and skewness. The ch...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication Page
• Table of Contents
• Preface
• 1. Introduction
• 2. The Economics of Slow Play
• 3. Golf Course Waiting: The Good, the Bad
• 4. Golf Course Waiting: … and the Ugly
• 5. Consistency or Heroics
• 6. Skills, Performance, and Earnings in the Tournament Compensation Model: Evidence from PGA Tour Microdata
• 7. Gender Discrimination Revisited
• 8. Gender and Driving Distance
• 9. To Play or not to Play: The Skills Match
• 10. To Enter or not to Enter: Another Look
• 11. To Bet or not to Bet: Sports Gambling, Golf, and Efficient Markets
• 12. Still Looking for Economic Impact: The Case of the Golf Majors
• 13. The Best of the Rest
• References
• Index