Saturday, June 26, 2010

Markets Vs. Sport Championships

Another point that could be made regarding the World Cup in football is how it, and other sport championships, differ from market processes.

Markets are positive sum games. Transactions are made because both the buyer and the seller expect to benefit from them. Sometimes these expectations are mistaken, but usually they aren't, and as the significant economic growth of the last few centuries illustrate, markets have produced large gains for just about everyone in the advanced economies (at least compared to how people lived a few centuries ago). The economic growth resulting from these market activities means that people can gain without inflicting losses on other people.

By contrast, sport championships are zero sum games. In any match, one team can only win if another team loses. When for example England plays against Germany tomorrow, England can only win if Germany loses and Germany can only win if England loses. English supporters can only be happy if German supporters become disappointed, and German supporters can only be happy if English supporters become disappointed. And the same goes for all other matches, except that the identity of the teams and the supporters are different.

Because people may enjoy the game in itself and not just the win of their favorite team (or individual player in sports like tennis), it could be argued that sport championships in one sense are positive sum games. But in the sense of the win or loss of certain teams, it is a zero sum game, unlike market outcomes where the successful performance of transactions and the tasks associated with them usually results in overall gains. There is no necessity in other people losing whenever some people gain, unlike in sport championships.