What Can International Cricket Teach Us About the Role of Luck in Labor Markets?

I came across this paper by IMF economists Shekhar Aiyar and Rodney Ramcharan on the same topic. I have not read the paper but has become top priority. Nothing could be better than to read about cricket and take economics lessons.

I came to know of this paper from this summary of the paper. The paper says:

Is landing a good first job a matter of luck or ability? Is the playing field level between somebody who graduates in a boom and somebody who graduates in a recession? And how long-lasting is the impact of a good first job on a person’s career? These questions are central to societal notions of fairness. If, for example, software mogul Bill Gates’s wealth were solely a matter of luck, then there would be little harm in redistributing it to the less fortunate. But if successful careers reflect only hard work and ability, then high levels of taxation would be both unfair and inefficient.

Sports, and in particular, international test cricket—a contest between two national teams that stretches over five days—provides an ideal, if novel, context in which to study the relative importance of luck in career outcomes. Performance is observable and easily measured. The stakes are high, positions in national teams scarce, and success yields large payoffs.

Moreover, in the case of test cricket, performance depends not only on ability, but also on familiarity with local geographic and atmospheric conditions, which vary widely and systematically across the nations that play test matches.

We used data on all test cricketers who debuted between 1950 and 1985 to isolate intrinsic ability from luck for those playing their first test series. We did so by examining information on whether the debut series was played at home or abroad—which is unlikely to be influenced by the debutant and is largely a matter of luck.

Wow, what thinking. What are the results?

We find that playing at home has a large and significant beneficial impact on a cricketer’s performance in his debut test series and that his first-series performance has a major impact on his career productivity. For batsmen, playing at home raises the debut series batting average by an enormous 33 percent. For bowlers, the defensive players who throw the ball to the batsmen, a home debut lowers the bowling average by about 18 percent—that is, the bowler allows 18 percent fewer runs for each batsman he faces.

Pretty intuitive finding. As debut at home means familiar conditions, so a batsman or a bowler is expected to  perform better. But to see the impact last for the entire career is amazing.

A good debut performance depends on both intrinsic ability and luck. Since we are interested only in the career impact of luck, we employ a two-stage technique, called instrumental variables, to eliminate the influence of ability. In the first stage we study the relationship between players’ debut averages and the location of their debut. Because debut location is a matter of luck, the portion of the debut performance explained by location is then used in the second stage as an explanatory variable for career averages. This two-stage procedure isolates the impact of luck on career outcomes. If luck is not persistent, we should find that the debut average is unrelated to the career average. In fact we find that the relationship continues to be strongly significant, although, as expected, the magnitude of the relationship diminishes. The bottom line is that not only does luck—in the form of friendly conditions at home—influence debut performance, this impact does not disappear as a player’s international career progresses.

In nut shell, luck plays a big role. Why does luck persist?

Why is luck so persistent? The literature advances at least two possible explanations, both of which have exact analogues in our sample. First, those who perform well in their debut series—the analogue to a good initial job placement—may accumulate certain skills as a result, and these skills may bear fruit over the remainder of their career. For example, batsmen may acquire more confidence and better technique the more time they spend in their debut facing high-quality international bowlers without getting out. Those traits would continue to benefit them in future series. We call this the human capital hypothesis. Second, those responsible for selecting the national team may fail to make allowance for differences in debut location when deciding whom to retain and whom to drop from the test team, thereby penalizing those who debuted abroad. We call this signal bias. Note that the human capital hypothesis and signal bias can coexist.

We use data on which players were dropped and which retained to construct a simple model of the selection decision following a player’s debut series. We find evidence for the human capital hypothesis for both batsmen and bowlers: doing well on debut builds useful skills. Similarly, we find that selectors are prone to signal bias for both batsmen and bowlers. But signal bias is much stronger for bowlers than for batsmen. Selection committees penalize both batsmen and bowlers for debuting abroad, but they penalize bowlers disproportionately, perhaps because compared with poor batting performance, poor bowling performance is more likely to cause a team to lose, and is penalized more harshly.

Very very fascinating stuff.

Conclusion

It would be wrong to generalize from this study to all other labor markets, but it does seem that luck plays a major role in shaping a successful debut performance, even though ability and hard work may augment that initial good fortune. Our results are therefore likely to disappoint purists from both camps—those who view success as a function solely of luck or ability. But we should add that the market for test cricketers differs from other labor markets in ways that should reduce the role of luck, not increase it.

What a paper.

How about some other findings? Say, someone makes a successful debut abroad (Sunil Gavaskar comes to mind automatically for making a superb debut against West Indies). Is this list’s  career performance better than those who make successful debuts at home?

As the analysis is for test cricket between 1950-1985, do the findings still apply? The current crop of very successful test batsmen – Brian Lara, Sachin Tendulkar, Rahul Dravid etc all made test debuts on foreign soil (Ponting, Kallis etc made on home soil). Even great test bowlers like Kumble, Muralitharan made debuts on foreign soil (Mcgrath etc made on home soil).

I am thinking of so many possibilities now……

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3 Responses to “What Can International Cricket Teach Us About the Role of Luck in Labor Markets?”

  1. select your broker Says:

    Is landing a good first job a matter of luck or ability? Is the playing field level between somebody who graduates in a boom and somebody who graduates in a recession? And how long-lasting is the impact of a good first job on a person’s career? These questions are central to societal notions of fairness.

  2. unicon india Says:

    Sports, and in particular, international test cricket—a contest between two national teams that stretches over five days—provides an ideal, if novel, context in which to study the relative importance of luck in career outcomes. Performance is observable and easily measured. The stakes are high, positions in national teams scarce, and success yields large payoffs

  3. Pravin Amre Says:

    statistics are overrated! ;)

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