Soccer Economics

Georges van Hoegaerden

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To understand the need for robust economics, one does not need to be an economist. A rudimentary understanding of sports will do. The game of soccer, or most sports for that matter, deploys better economics than the self-proclaimed “economic experts” have prescribed for us.

To ensure a renewable evolution, we must stimulate and protect freedom. A freedom that cannot solely be left in the hands of marketplace participants.

Why not, you say?

We, in the private sector, failed too

Forget the problems with the government for a minute; our independent plans have not worked out that well. We must admit that the lack of rational self-governance by the private sector is the reason we failed. And that we consistently fail to respect the exploration of universal freedom.

Venture Capital, as the arbitrage of innovation, is the youngest and prime (yet indeed not only) example of a financial instrument that was left predominantly unregulated. And we made a complete mess out of it, with its subprime maelstrom digging a deepening hole of mediocrity. We cannot blame the government for that fiasco, and the devastating effect of uniform deployment of risk has on the sub-priming of innovation, which in turn results in the loss of socioeconomic integrity and value.

The real reason we fail comes from our lies. And when we want to be honest and succeed, we must acknowledge that the (often misplaced) regulation deployed by the government is not the cause of our down-slide, but the lack of rational self-governance by the private sector to prevent the government from having to step in. We must admit we don’t understand and deploy economics any better than our government.

Hence, it is high time to take a fresh look at what economics are supposed to do.

Back to basics

Now luckily, to understand the need for clear and robust economics to drive freedom, one does not need to be an economist. A rudimentary understanding of sports will do.

Economics, as its translation from ancient Greek implies, is a set of rules comparable to those in sports that control what game is being played. Let’s take soccer, as the world’s most played sport, as an example. First, nobody is forced to play soccer. Participation is optional, and any other sport employs a similar equilibrium, albeit with different rules. Few would question soccer’s lack of freedom, even though the rules of the game are quite restrictive.

In the game of soccer, two teams meet up and collaborate to kick the ball with their feet in the goal of the opposing team. Lines in the grass demarcate the range of motion by players, only the goalkeepers can touch the ball with their hands, and attempts to capture the ball must be aimed at the ball not at the player. Many more rules in soccer restrict the freedom of players. And both teams and players are expected to understand the rules of the game before kick-off. All the rules apply to all players of both sides equally, with the audience cheering on the players.

Three referees enforce the rules of the game of soccer, as players compete to score the most goals. Violations lead to free kicks and hand the ball to the opposing side. Yellow and red cards are handed out to the players who purposely violate the rules of the game, with a red card leading to immediate expulsion. Freedom in soccer comes from the ability to score more goals than opponents, and the winner of all games in a tournament is crowned that year’s champion.

Understood? Now back to economics.

Rules of nature

Economics in the broadest sense define the rules of life. They dictate how people in a civilized society interoperate and compete to achieve a result per their merit. Just like in the game of soccer, where players compete to let their ball-handling define their merit.

The first significant problem with our current economics (a derivative of “classical economics”) is they are based on numbers rather than rules. As if the sum of goals in soccer is any indication of the quality of the game or the capacity of its players. Foolishness does not quite describe the acceptance of such metrics.

The second glaring omission is that we have never explained to all players what the rules of the game of economics are. What does it mean to participate in a “free-market”? What – if any – rules apply, and why? Hence, each participant ends up playing to his interpretation of the game of economics, one that is likely to be highly egocentric and bound to dismiss and damage the pursuit of merit by others.

New rules unearth merit

For more than two hundred years we have played a game of economics led by mindless formulas, wild predictions of behavior, and without essential regulations. Except for the whistle by an occasional referee, who finally happens to notice the game is getting out of hand, and feverishly starts handing out yellow cards, without ever expelling anyone or questioning the intent of the game.

Of course, the term economics has gotten a bad reputation, for we have never deployed any of its preeminent rules. The game of soccer would get out of hand without any rules too. As a result, we have severely tarnished the economic freedom of its participants and suppressed the exposure of their authentic merit.

A brave new world

As an innovative society, yearning to control our destiny and success, we can and must do much better than the mess we created. We must stop pointing fingers at the government, and start to prove that we are better at controlling ourselves. And thereby lead the government to the promised land we share.

New rules establish and renew merit. The merit that is already here buried deep under the weight of an old economic religion. And while the implementation of our doctrine of economics is highly questionable, I would caution the doubters: the quality of our unexplored merit is not.

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