This is not an edition of discussing the economics of the Indian Premier League in the sense of dissecting the commercial numbers, whether it be the billions of dollars that were bid for the media rights, or the billions that were paid out to buy franchises. But this season's IPL has two new interesting twists in the form of rule changes that probably deserve an economics lens.
Unlike previous seasons, the playing XI can be announced by the teams after the toss. This means that captains and coaches can make that call with more information at hand, specifically whether their team will be bowling first or batting first. Economists have studied decision making under uncertainty often, and the one thing that emerges out of most discussions is that dealing with uncertainty is cognitively very difficult. In fact in his book, Thinking Fast and Slow, econ nobel prize winning economist Daniel Kahneman said that a "law of least effort” applies to situations when we have to apply cognitive thinking and effort, for example, if I am batting first on a wicket where dew is expected to be heavy in the evening, what side should I choose? Without the advantage of knowing the outcome of the toss, there was much more uncertainty to this call, and teams may have looked to minimise their losses, i.e. they will choose safer options. It is what Kahneman calls "loss aversion" - "individuals seem to be more averse to losses, relative to a reference level, than partial to gains of the same size", he writes.
With that bit of uncertainty out of the way, may be teams will take bolder decisions in terms of team composition, because as Kahneman says, "In the economy of action, effort is a cost, and the acquisition of
skill is driven by the balance of benefits and costs. Laziness is built deep into our nature." Maybe we can check in with Rohit on this?
There is one other radical and crucial change this season - that of the "impact sub". This rule change, in effect, allows teams to use 12 players instead of the 11, because they can bring the substitute on basically at any point of time, and there are no restrictions on the type of player - batter or bowler - the sub can be. It presents a situation of not just providing teams with more resources, but also, to put an economics spin, allow them to squeeze Total Factor Productivity out of those resources. MS Dhoni called it a "luxury" at the toss of the first game against the Gujarat Titans, and promptly went ahead and announced a team of 11 batters after being put into bat first. Teams will be presented this conundrum and challenge, because instead of the usual economics challenge of making the most of scarce resources, now with this "luxury", they will be expected to make the most of their increased potential. Raghuram Rajan (remember him?) had famously referenced Robert Solow (another econ Nobel winner) in his IIT Delhi speech in 2015 evoking how Solow had said that "the bulk of economic growth did not come from putting more factors of production such as labour and capital to work. Instead, it came from putting those factors of production together more cleverly..."
May the team that puts it all together most cleverly win!
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