Numbers game

May 19, 2006
Sporting inequalities

Gross inequalities of income pervade professional sport. A clear example is provided by the sponsorship of team shirts in football. At present, the most lucrative deal in Europe is the annual £15m paid by Libyan energy giant Tamoil to Juventus. In Britain, Chelsea's £10m a year from Samsung is the largest. But this has recently been surpassed by Manchester United.

After Vodafone pulled out of its £9m-a-year deal with United to sponsor the Champions League instead, the Reds came close to securing an arrangement worth twice as much with the online casino Mansion. The proposal fell through, but the club recently signed a deal worth more than £14m a year with the US insurance firm AIG.

Hardly ten miles away from Manchester United's stadium is Spotland, the shared home of Rochdale's football and rugby league teams. Rochdale Hornets, proud founder members of the Rugby League in 1895, have not won a trophy since 1922. Their shirts can be sponsored for £3,000, but if you haven't got that kind of cash, an individual shirt costs just £175. For that, the sponsor gets his or her name in every home game programme, and their very own Hornets away game shirt at the end of the season—plus the knowledge that their money makes a contribution to the players' food for away matches.

The persistence of variety

On the topic of inequality, the media appear to be obsessed with the so-called postcode lottery, the enormous variation across areas in the performance of individual schools and hospitals. The government seems to believe they can all be raised to an identical standard of "excellence."

But the idea that individual units of production—whether schools, hospitals or social service departments—can achieve the same quality at any point in time flies in the face of evidence. A large amount of detailed research has been carried out on how profitability, efficiency and productivity vary across individual firms. Much of the work is on American data, but distinguished scholars such as Giovanni Dosi have replicated the results for Europe.

One striking finding is that there is enormous variation in the efficiency of firms within the same industry. And this variation exists within many different industries. The best performer is typically four or five times more productive, in terms of output per hour, than the worst. But even leaving out the 10 per cent worst performers and the 25 per cent best, we still see a typical ratio of 2 to 1 between best and worst.

Just as important, these differences persist over many years. True, inefficient firms are more likely to disappear than efficient ones, but there is no guarantee this will happen.

There are big differences between the private and public sectors, of course: for one thing, firms in the marketplace have every incentive to make themselves efficient. Their survival may depend on it. But the research suggests that differences in efficiency and performance may be a fundamental feature of the world. The central planners in the treasury need to face this reality.

Non-believing believers

The 2001 census showed that 77 per cent of people in Britain said they belonged to a religion. A more recent ICM survey found that 54 per cent did not believe in God. Assuming all believers practice a religion, it follows that about 40 per cent of those with a religion are nevertheless atheists.