Money makes the world go round. And here is a prediction for the 2014 soccer world cup …

The 2014 soccer world cup opens in Brazil this coming Thursday with the bookies’ favorite (the home team) playing Croatia. Argentina is currently tipped to be the other finalist, with Germany and Spain (the defending champion) trailing these two by considerable margins.

In a paper just published in a German sociology journal, and (save the abstract) unfortunately in German, Gerhards, Mutz, & Wagner explore how marketization and globalization have changed professional soccer and the composition of teams. The authors conjecture that success of soccer teams in their national leagues is essentially determined by their market values. (Market value of teams was computed as average of the market values of all players on the roster at the beginning of a season.)

The authors control for inequality within the team, the cultural diversity of the team, and the degree of turnover among team members which have been proposed as important determinants in other studies (and for other sports). Curiously, the authors do not control for the market value of the coach(ing staff). Klopp will not be amused.

Drawing on the top twelve European soccer leagues (according to the UEFA- ranking 2012: England, Spain, Germany, Italy, Portugal, France, Russia, Netherlands, Ukraine, Greece, Turkey, and Belgium) and using data for the 2012/2013 season, the authors find that the key predictor of a team’s success is indeed the market value: In eight of the twelve leagues the team with the highest market value finished as national champion. In three leagues it was the team with the second-highest value and the remaining team started the season with the third highest market value.

This simple heuristic (which, however, required considerable data sleuthing by research assistants) also worked well for the European qualifiers to the 2014 world cup in Brazil. With the exception of Russia (whose market value was second to Portugal) all winning teams in the qualifiers (Belgium, Italy, Germany, Netherlands, Switzerland, Bosnia-Herzegovina, England, and Spain) were also the ones with the highest market value.

Inequality within the team, the cultural diversity of the team, and the degree of turnover among team members essentially don’t matter.

In short, money shoots the goals.

The findings entail a testable hypothesis for the upcoming soccer world championships. Given my background, I like the prediction for the configuration of the final (Spain vs. Germany) but not the prediction for the outcome.

Fortunately, I can think of many cases where the team with the higher market value has lost to the team with the lower market value ? So, there …

 

33 thoughts on “Money makes the world go round. And here is a prediction for the 2014 soccer world cup …”

    1. No guts, no glory ? I should add that in 2006 und 2010 the strategy worked like a charm. Likewise for the European soccer cup 2008 und 2012. So I am moderately confident about the finals configuration …

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      1. You’re ignoring the magical powers of discontinuity. So I get that if $X> $Y, then Y wins, but what happens at the singularity $X=$Y.

        I guess I predict the derby final with an Argentina win, because they are the best team in South America.

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      3. On this I tend to listen to my unhappiness index (though not stable over the decades, it has worked for me for reasons I don’t fully understand). These results will make me unhappy this year:

        1. Netherlands beats Australia (index +5 unhappiness)
        2. England beats or draws with anyone (index +5 unhappiness)
        3. USA beats Ghana (index +5 unhappiness)
        4. Italy beats or draws with anyone except England (index +5 unhappiness)
        6. Germany beats Netherlands (index +15 unhappiness (childhood trauma))
        7. Germany beaten by anyone aside from Brazil or the Dutch. (index +5 unhappiness)
        8. Spain plays anyone (index +1 unhappiness)

        Here is a testable hypothesis, my unhappiness index will be less than 30.

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    1. What I was trying to comment with was that this reminds me very much of a couple of recent articles I’ve read regarding this issue in the EPL, namely:

      http://www.economist.com/news/britain/21601873-good-managers-matter-not-much-money-does-everything-play and;

      Interesting that monetary investment (specifically in player wages) really does seem to be a huge determinant of league performance.

      P.S. Came here from your course announcement, good work on that sneaky plug!

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  3. Very interesting read. I completely agree with your reasoning and your theory, as an avid soccer fan, I’ve seen too often how “money can buy titles.” Just look at Manchester City in the EPL, they were bought by a rich Arab Sheikh and were able to spend big and completely change their team roster within three years, buying the most talented (and most expensive) players in thge market. Market value is normally is a good indicator of a a player’s skill and talent, and its due to this that the best teams, are usually the most expensive teams if all the market value of al individual players are added up.

    I agree that Spain and Germany both have amazing squads, however even though their teams might be more expensive than other favourites, I still tip an all South American Brazil-Argentina Final. You just can’t go past the hughe advantage of playing in home conditions :P.

    P.S. I also came here from your course announcement!

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      1. Bookies just channel the wisdom of crowds. I think home advantage is hugely overrated. In fact, it might work against you. Lots of added pressure …

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      3. Yeah, that Dohmen paper has an interesting hypothesis. But in world cup games many more people watch. Not just in the stadium … As you say, no telling what the Bundesliga findings imply for the world cup. Anyways, yes, we’ll see … (and the nice thing we have clearly competing hypothesis and the test will starkly discriminate between them ?

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  5. Still fancy Spain in the final, Andreas? I am not going to say the Dutch will be in the final, but boy does it feel good to have finally beaten the Spanish! Also nice to see so many goals so far.

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  6. They are down but not out ? Time will tell ! I personally don’t mind if we beat you guys in the final ?

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      1. Nope, looks interesting. Thanks for sharing. Same semifinals prediction. But the entire historical track record.strikes me as less relevant than the current team value.

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  8. Confused, does highest valued team mean you lose every game? For reason’s I don’t fully understand, I’m happy today!

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    1. ? That’s o.k., Rabee. One does not have to understand, or theorize, everything. Just enjoy those pangs of (anticipated) happiness.

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      1. Andreas, my unhappiness index model is now predicting a Uruguay-Brazil final, and eight years later a plane crash in Munich. You see an England win against Argentina would have increased my unhappiness greatly. Now that England is out, I don’t think Argentina will go to the final as that plays no role in my unhappiness either way. And now that we will not see a bunch of red shirted over-valued scarecrows planted in the green the football will be interesting and las unhappy.

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      2. England is not out yet. If Italy beat Uruguay and Costa Rica and England beat Costa Rica in their last game by 2 or more goals, England will progress alongside Italy.

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  9. Updating my unhappiness index. I am not unhappy to say, it remains low. But unfortunately, the dream final 1950 rematch Uruguay-Brazil will not happen, they’ll meet in the semi.

    Now I think that we as economists should be concluding that there is a European price bubble in player valuation. Italy is out, Spain is out, England is out. What gives?

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    1. I’m happy to hear that your unhappiness index remains low. As to the European price bubble, that’s an intriguing hypothesis. Unfortunately, with referees and vampires we have some serious confounds here.

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      1. Surely rainfall data can mitigate these confounds. It looks like a bubble that burst, this is all turning out to be as big as the GFC for European football. But the Greeks are fine this time round. Sure Germany and Holland aren’t too affected, yet, but will the collapse of Italy, Spain, and England have a contagion effect? Will all this force a rethink of European football? Probably not.

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      2. Who did the Germans manage to bribe to get such a good draw into the semi-finals? There’s not a single decent team blocking their way to the semis. Boring. And looking at things, it’s looking like a Holland final, again. Fifa should ban Germany and Holland to make the game more interesting, hope the referees do their job this time, send off a few key German players for passing the ball in straight congruent lines, and give us a half-decent world-cup.

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      3. “Single decent team?” Have you even been watching the World Cup? With the amount of huge upsets this tournament has produced so far, you can’t say any team into the round of 16 is incapable of beating any other. This Ghana 2-2 Germany, would you class that as boring? You must also be having a laugh if you don’t think the Dutch and the way they play is anything but breathtaking. The Germans play fantastic attacking football. Also just quietly, this World Cup has produced a plethora of goals, and has been one of the most exciting so far. You obviously must not be a football fan as the points you have made seem to be made out of ignorance and naivety.

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  10. Calm down, Harsh. Rabee was trying to be facetious. (I think. It’s always difficult to figure out what hard-core theorists are trying to say ;-).)Tonight should be an exciting game. Germany has not won that game yet. The game is at least 90 minutes. And the ball is round, and the next game is always the most difficult one ? . And at last in our departmental betting market Germany is still trailing Brazil.

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    1. I’m happy to report that my unhappiness index is 28, which is below
      30. As predicted.

      1. Netherlands beats Australia (index +5 unhappiness) +5
      2. England beats or draws with anyone (index +5 unhappiness) +5
      3. USA beats Ghana (index +5 unhappiness) +5
      4. Italy beats or draws with anyone except England (index +5 unhappiness) +10
      6. Germany beats Netherlands (index +15 unhappiness (childhood trauma)) 0
      7. Germany beaten by anyone aside from Brazil or the Dutch. (index +5 unhappiness) 0
      8. Spain plays anyone (index +1 unhappiness) +3

      Here is a testable hypothesis, my unhappiness index will be less than 30.

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      1. Yeap, looks like it, Given that the only way you can pass the magic mark is Argentina beating Germany … . Always happy to hear there are happy troopers out there. Enjoy …

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      2. Happiness and unhappiness are two separate dimensions and not the inverse of each other in a group operation. You can be very happy and unhappy at the same time.

        Here I’m talking about my unhappiness index which is fine. But my happiness index took a 1-7 beating.

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      3. Oh, I am sorry 2 hear. Strangely enough that game really enhanced my happiness; the following game, too ? Goes to show: De gustibus non disputandum est …

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