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Fun and Games: The economics of cycling

August 3rd, 2008 · No Comments

he Tour de France has just finished, we believe it’s the fourth largest sports event in the world (depending how you measure it, after Wordcup football, Olympic Games, and European Championship football). Modern technology has already demystified it to a large degree, and the cyclists themselves, well, they keep shooting themselves in the foot, huh, tube. There is a simple, logical explanation for that.

The Tour de France is probably the most taxing sports event in the world (this is what happens when you try to do it yourself), although the stages are not as long as they used to be (in the early days, 300 and even 400 kilometres stages were no exception, riders arriving or departing at 4am, funny things like that).

There are a couple of economic concepts that can shed some light on things that have been happening, like one awkward constant, doping. Not that we belief it’s more rife than at other endurance sports, but still.

Winner-take-all. Competitive situations can have been characterized as ‘winner-take-all’ markets by economist Frank and Cook (in a book called the “Winner-take-all society” which appeared in 1995) of they have the following characteristics:

  • It is not absolute performance that counts, but relative
  • The spoils go disproportionally to the winner
  • The differences between the winner and the rest are disproportionally smaller than the division of the spoils.

The Tour de France displays all three characteristics:

  • It’s what economist call a ‘rank-order tournament’, relative performance that counts. You want to beat the rest, and finishing second is better than finishing third
  • The winner awaits eternal glory, few number two’s are often remembered. Do you know who came third in the Tour of 1979? 1989? Or even 1999 or 2004? Even many aficionados wouldn’t know the answer to most of these questions. We won’t even ask for nrs. 14..
  • In 1989, American Greg Lemond, making a breathtaking recovery from being almost killed by a hunting accident (no, it was not the Vice President, but his brother in law, perhaps you shouldn’t trust these either), won the Tour on the last stage by a difference of just eight second (after some 80 hours on the bike during three weeks). It did make a truly outstanding sports event, but poor Laurent Fignon, who finished second. You could viably argue that statistically, it was a tie. Both riders were equally good. But that’s not how it works. It doesn’t really matter whether the difference was 8 seconds or 8 hours, all that matters was that Lemond came first and Fignon second, and first is much better, in terms of fame, money, prestige, etc.. Much better than that marginal 8 seconds difference.

In fact, Fignon was never really the same afterwards, and seen as a little bit of a loser, even in his native France where they’re not exactly thrilled with an American winner, especially if he beats a native.

Ok, granted, it didn’t help that he was not quite the most accessible guy (he spat at a reporter in that Tour of 1989), and had, in cycling circles, a slightly suspect intellectual ‘look’, but nevertheless, that 8 seconds difference, such a dramatic impact seems hardly justified.

Markets that display these ‘winner-take-all’ characteristics often see a disproportional (and hence inefficient) amount of effort expended by people wanting to become the number one. This is a rather wide ranging phenomenon:

  • Tens of thousands (if not more) of young people go to great lengths to become successful football players, concerto pianists, cyclists, top lawyers, top anything, alfa males, basically. Only a fraction make it, the rest fall by the wayside, having spend (or rather, wasted) great amounts of effort which could often have been directed at more profitable pursuits, in economic terms, it is a misallocation of resources
  • It’s a phenomenon that’s also well known in the animal kingdom. It’s good to be top dog, you get a lot more fun that way in many species, often a sort of monopoly right to the most desirable females. Down the ranks, life is not so good, it’s shorter and considerably more stressful, as scientific work has shown (higher level of stress hormones have been measured in lower ranking apes, things like that). Perhaps we’re not that different after all.

The last two decades or so have brought new insights from evolutionary psychology and related stuff, bringing us happy new insights like

  • Societies in which males are more promiscuous are more violent. Winner-take-all (or at least most) in overdrive, creates greater pressure for men to compete for each other for mates
  • Monogamy would actually benefit men as it more or less guarantees every male to find a wife
  • One could even go further, the whole basics of capitalism is based on the incentives of money, but this looks to be more like a proxy (or measure) for competitive rank order. This is supported by other phenomena: rich people generally keep working and increasing wealth way beyond their consumptive needs (something which traditional economics find hard to explain), and the fact that what matters most in income inequality is it’s relative terms, not absolute (try telling an unemployed poor person in the west that most people in poor countries are worse off if you don’t believe this)
  • Animals also waste resources in the competitive struggle, even in evolutionary terms, developing useless devices like peacock tails to attract mates. The fact that these devices are useless, or even harm the chances of survival is actually a sign of fitness and hence helps in the sexual selection game

This was supposed to be about cycling, so after taking a wrong turn (we remember Tour stages were this happened to cyclists in winning positions), we return to the topic.

Prisoners dilemma. Cycling is marred by doping incidents (suggesting it’s more structural, actually). Although there are no a-priori reasons to believe doping is worse in cycling compared to other endurance sports (testing is much more severe in cycling), another piece of economics (well, game theory, actually) explains why it’s so hard to eradicate.

The prisoner’s dilemma game (see here for an introduction) is a situation with the following characteristics:

  • Two prisoners are suspects in a crime, they are interrogated separately, and each faces the following deal
  • If they confess, but the other denies the crime, the prisoner who confesses gets a light sentence (5 year), the silent one a heavy one (30 years)
  • If both deny, they get 10 years
  • If they both confess, they get 20 years each.

Now, this situation contains a very interesting dynamic:

  • It’s best if they both deny, each would get 10 years
  • However, no matter what the other does, a player can always improve his result by confessing. (If player B confesses, what should A do? Confessing gives him 20 years, denying gives him 30, so it’s better to confess. If B denies, what should A do? Confessing gives him 5 years, denying 10, so once again it’s better to confess.)

The prisoners dilemma shows how in certain situations individual rationality can lead to socially unwelcome situations (no invisible hand from Adam Smith helping here). It applies to drugs in cycling. Socially welcome would be a drug free sports, even the cyclists (or probably especially them, as they run the risks of doping) would agree to that.

However, just like the prisoner’s dilemma game predicts, that is true for all cyclists, but individual cyclists could still be better off by cheating no matter what the other cyclist do. If they don’t cheat, the cheating cyclist would get a competitive advantage, and if they do cheat, he would get a competitive disadvantage by not cheating.

So, this prisoner dilemma situation, reinforced by winner-take-all characteristics, make it very difficult to produce a drug free Tour de France. What can be done?

Well, another piece of economics argues that the disincentive to take drugs (or do something bad in general)  is a function of the penalty attached to it time the probability one gets caught, and research from criminology has shown that the latter is way more important than the first, one more indication that humans are not as rational as economist would like).

So, we’ll have to test a lot more, which is exactly what happens, and the reason why you read about a couple of cheats in the papers..

Tags: Fun and Games