There are piles of them in each of my offices, next to my beds and futon, wobbling precariously on unstable shelving – unread books, articles, academic papers, journals and essays. Holidays, consequently, become bibliographical experiences where I catch up on all the items that I really should have read in the previous year. One such book is Freakonomics by Levitt and Dubner.
We should celebrate anything that popularises the corruption in the marketplace or in any other societal structure and Freakonomics utilises big picture overviews to assess a range of structures. By addressing the perverse incentives of individual operators within contorted infrastructures, the book focuses on the preferable nature of a moral approach and contrasts with the actual reality of a manipulated economic environment. By incorporating the power of information together with the relative weightings of economic, moral and social incentives in a spectrum of instances, the authors create landscapes that titillate but, unfortunately, trivialise the whole analytical process.
The authors choices of sectors and situations to analyse are illuminating in that, although entertainingly portrayed, they are peripheral to our realities. Selecting sumo wrestling as a corrupt sport when Levitt trades professionally on massively corrupt horseracing markets; the focus on the ku klux klan’s attitude to information and power rather than the masonic WASP hierarchies of modern day America; targeting estate agent’s (with their lack of a professional trade association) manipulation of property buyers and sellers rather than lawyers with their abusive approach to class action suits or accountants and their consultative corruption; the choice of Black crack rather than white cocaine etc etc. Furthermore, the holistic views presented in the book are often incomplete – any analytical approach that purports to address the selection of a name for your children must incorporate the impact of the selection of names from within your family. A quick straw poll around the office reveals that only one member of our Trading Team is not named after a relative or ancestor, for example. Additionally, by claiming that the internet is shrinking the informational asymmetric advantage enjoyed by the elite, they completely ignore that this very elite also is utilising the internet to enhance their own knowledge and databases. One of the prime reasons political blogs are allowed is that the manipulators wish for an open source world wide web so that they may improve their ability to monitor potential customers and their habits.
Why is there no focus on corruption in the capital markets? Why is the NFL off-limits? What about the warped incentives of the major global accountancy firms and investment banks and their alleged Chinese walls that we are supposed to believe ensure no internal informational advantage? Why ignore the corruptions at society’s core power loci? And don’t even get me started on the perverse incentives of politicians with respect to big business and Wall Street/City of London.
Despite these criticisms, the book should be read by any individual who takes an interest in the corruption endemic in our globalised shareholder capitalist system. The analytical approaches undertaken by Levitt are similar, although significantly less developed, to those utilised at our trading desks. For instance, Levitt repeatedly falls back on regression analysis to show causal links and an expanded version of such analysis is incorporated into our approach regarding the incentives of football referees and horseracing jockeys (to name but two examples). They are also correct that the more recently developed corrupt infrastructures have been established with minimal regard to their in built weaknesses which expose such corruptions to the prying eyes of investigative market analysts. Another big plus is that the book indicates, however fleetingly, that absolute structures are more rewarding (and, hence, more prone) to corrupt than complex systems incorporating information from a range of power bases - think of the corrupt referee whose input can almost always produce a required outcome on a match compared with the manipulation of a financial market where systemic risk may override a corrupting process.
Freakonomics, in many ways, approaches the area of corruption with the same analytical template used by marketing people and spin doctors. By getting the public to gaze at the manipulations on the periphery or the aspects of a product or a political situation that they wish for you to focus on, they avert your eyes from the fundamental systemic corruption that blights all of our existences.
Corrupters view the risk of exposure as a summation of hazard and the ensuing outrage. Football Is Fixed repeatedly presents manipulations at the very core of our systems both in sport and in financial markets by exposing these hazards with the subsequent realisation of public cynicism in the spectacular society constructs that we are all presented with to keep us entertained. Out of all the many emails that we have received since starting this blog, only one has made any attempt to confront our view of these realities and the arguments that were presented were so intellectually flawed as to be not even worthy of consideration. Undoubtedly, some of the corrupt edifices will reconstruct their operations as their manipulations fall under public gaze but, unless the corruption takes on an extremely limited form, investigative analysts will ALWAYS be able to detect the manipulations.
As my hairdresser jokingly (?) exclaimed, while holding a particularly sharp pair of scissors to my neck, “you have ruined football for me”.
We prefer to see the educative process as liberation rather than ruination…
© Football Is Fixed/Dietrological
