Jyoti Rahman*

Canberra, June 20 (2014), Alochonaa:Macroeconomists have an abysmal record when it comes to forecasting. As Tim Harford documents, as late as September 2008 —when the Lehman Brothers collapsed —consensus among the economists at the Wall Street and City of London was that no major economy would fall into recession in 2009. Not deterred by such abysmal failure, market economists have ventured into predicting the World Cup. The overwhelming favourite is Brazil.

And economists of Goldman Sachs —which dominates the Wall Street the way Brazil dominates football —have actually published the analysis behind their prediction. According to their analysis, Brazil has a nearly 50% chance of winning. Of course, Brazil is also the favourite in the betting markets. But as of kick off (that is, before the Croatian counter attack stunned the world), betting agencies such as Ladbrokes were implying only around 25% chance of a Brazil win.

Why are the Goldman Sachs boffins so much more bullish on Brazil? The bankers try to predict the score of every match based on a regression analysis that uses the results of every official match played since 1960 (about 14,000 observations). Their model also accounts for factors such as home ground and home continent advantages. Now, even the best regression analysis is only right on average. And the chances of getting it right, on average, increases with longer form league formats that involve a large number of matches. In that format, the so-called ‘fundamental’ factors —as reflected in past performance— dominates. That’s why, if Brazil were to play, say, Australia a dozen times, we could be very confident that Australia would be thrashed, on average.

But the World Cup isn’t like a long season of league matches. Particularly in the knock out stage of the Cup, a team may win or lose on some random events such as a referee mistake or penalty shoot outs. And that kind of randomness can’t, by definition, be modelled.

Modelling football is particularly difficult because of the very nature of the game. It is that nature that, quite often, may yield results that seemingly appear contrary to the run of the play — a side playing much ‘better’ seem to lose by a single goal from the other side. Does this sort of thing appear to be more common in football than in other sports?

Tyler Cowen, an American economist, has a theory about football:

• the rules of the game are simple, but a lot of complex interactions result from this simple set of rules; • it is hard to quantify what is a ‘good’ play (that is, the data cannot tell you which complex interaction is better), and a lot depends on intuition that are typically developed at an early age.

I am intellecutally attracted to empiricism — using ugly data to slay beautiful hypotheses, this is the scientific process. The beautiful game may just be the stuff of metaphysics. One can argue that with an average that is three standard deviations above the mean of all batsmen, Bradman is the greatest. One simply cannot argue for Pele or Maradona that objectively.

The general unpredictably, together with the fact that so many more countries play it than rugby, cricket or hockey, would suggest that many more teams will be successful at the World Cup football than in other sports. For example, there are less than a dozen countries (at most, being charitable to some weaker teams) that make the pool of potential winners in cricket. This is also the case in rugby and hockey.

And yet, the pool of finalists, no matter what the sport is, is actually quite small. Seven countries have made the final of football final in my life time. This compares with six in cricket, five in rugby, and six in hockey.

But what about club football?

Manchester United, Manchester City, Chelsea and Arsenal between them have won all but one English premiere league since its inception in 1992-93. AC Milan, Juventus and Internazionale between them have won the Italian Serie A all but twice in these years. Barcelona, Real Madrid, Atletico Madrid and Valencia between them won the Spanish league all but once in that period. If you know nothing about football but predict that one of these teams will win the next league, you will have a pretty good chance of being right.Compare this with American sports.

Over a dozen teams have won the Superbowl in the past couple of decades. You may not know anything about baseball, but you still probably have heard of the New York Yankees. The Yankees have won the World Series only five times since 1992. Eleven teams have won the World Series in that time. The most iconic sport team of the 1990s must be the Chicago Bulls under Michael Jordan. But even the Bulls won only five NBA titles since 1992, and eight teams have won the championship in that time.

Predicting the winner in an American league is pretty hard if you knew nothing about the sport. And learning something require effort. I’m no psychologist, but I’d hazard a guess that it is difficult to pick up a new sport after your 15th birthday. If you don’t know anything about basketball, rooting for the Bulls on the basis of Jordan’s name is no use as they haven’t made a final since 1998.

Perhaps this is why World Cup is so popular in Bangladesh — all you need to do is to root for Brazil or Argentina to have a good time.

So, why is football, despite the randomness, dominated by a few big names?

The answer, in one single word, is, socialism!

American sports have a draft system whereby incoming young talent do not get to choose who they play for but must go to the team that drafts them. And by and large, the draft order is determined in inverse order of the previous season’s standings — that is, the worst teams get to pick first. Plus, in most American leagues, there is a salary cap that limits the total team spending as well as how much a team can pay an individual. Neither condition holds in European football leagues, allowing, in effect, the bigger teams to outbid everyone else.

America as the bastion of socialism? Yes, indeed. And there is more to this.

Think about Marx’s predictions about capitalism. Marx said that capitalism would collapse because competition will give way to monopoly. Of course, this prediction has not come to pass. There are two reasons why competition has not led to monopoly in most markets. First, most markets have firm entry as well as firm exit in the long run. That is, people enter a market when they see existing firms earning lots of profit. Secondly, there is technological progress, which opens up all sorts of new products and markets. Both factors work to prevent monopoly in the longer run.

However, in the context of a sports league, clearly neither of these can happen. There can only be so many clubs, and rules of the game change slowly, if at all.

So Marx’s prediction of competition giving way to monopoly may well come true in an unregulated league. To prevent this from happening, you need outside intervention, you need redistribution, you need, for the lack of a better word, socialism!

Therefore, football-lovers of the world, unite!

Let the international unite the human race.

Okay, okay, I get carried away.

American sport may be socialist, but socialism has had little success in America. Indeed, the Anglophone countries, in general, have always been far more liberal —in the English sense of the word —than continental Europe. And football does not mean the same thing around the English speaking world. Even in the England, ‘football codes’ other than soccer still fill stadiums. In fact, England already won a ‘football’ World Cup in 2003.

Why is it that no single football code has dominated the entire Anglophone world the way football (that is, soccer) has come to dominate Europe and its former colonies? Could it be that the multitude of football codes in Anglophone countries is linked to the deeply ingrained liberalism/libertarianism of these societies? Countries where a single football code came to dominate, typically by the second quarter of the last century, were also countries that flirted with establishing a strong totalitarian state based on a dominant ethnic group or ideology or religion. The point is made most starkly when we look at two antipodean lands. Blessed with bounty of the land, Argentina and Australia were both among the richest countries a century ago. Both countries were hit hard in the aftermath of the Great War and the Great Depression. One turned to a semi-fascist populism and bouts of military regimes, the other remained a liberal democracy throughout. One suffered economic crises every decade or so, the other is still among the richest of all countries. One is football-crazy, the other is sports-mad, but has no national code as such.

Australia has virtually no chance of winning the World Cup. Neither does America or England. In fact, no liberal democracy has ever won the World Cup —England in 1966 was more of a social democracy than a liberal one. So, what kind of political system is best at winning the World Cup?

That’s what Franklin Foer explored, finding: fascist countries beat communist teams; military juntas beat fascists; social democracies beat military juntas; European Union members are likely to do well; former communist countries do better now than they did under red flags; colonizers tend to do better than the colonized; oil rich countries don’t do well; and neo-liberal economic reform doesn’t help — Argentina hasn’t won in nearly three decades.

Foer also had a caveat: The political reality most likely to produce a Jules Rimet trophy (sic) at any given moment in history: whatever form of government has taken up residence in Brasilia that week. A left-of-centre populist government has taken up residence in that city. But as I write this, half-time score of the opening match does make the Brazilian win a bit less inevitable. So, if not Brazil, who?

Never mind the fancy models of Goldman Sachs. Every schoolboy in Bangladesh knows that Europeans never win in on the other side of the Atlantic. If not the host, surely it will be one of their neighbours. The populist dictatorship of the south then?

Not necessarily. Argentina isn’t Brazil’s only neighbour. Between these two large countries is a smaller land that has been dubbed the ‘country of the year’ in 2013 for its socially liberal policies by the arch-(neo)-liberal Economist. Uruguay won the Cup last time it was held in Brazil. After the shocking start, it’s hard to see them even progressing to the second round. Goldman Sachs says the chance of Uruguay winning the Cup is about 1%.

But then again, what do the economists know?

*Jyoti Rahman is a Bangladeshi Economist who occasionally writes for alochonaa. This is cross-posted via Jyoti’s personal blog Mukti under a mutual agreement.

** Alochonaa.com is not responsible for any factual mistakes (if any) of this analysis. This analysis further is not necessarily representative of Alochonaa.com’s view. We’re happy to facilitate further evidence-based submissions on this topic. Please send us your submission at alochonaa@gmail.com