David R. Henderson  

CBS Sixty Minutes: Insider Trading in Sports

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Last week, I blasted CBS's show 60 Minutes. This week I've come to praise it. 60 Minutes's long segment was with referee Tim Donaghy. I thought it would be a standard story about a guy betting on one side and then using his powers as a referee to fix the game. But about three or four minutes into it, I said to my wife, "This isn't about fixing games; it's about insider trading."

Here's why I found it at least "surface plausible" that he didn't fix the games: the video showing him kicking out the San Antonio Spurs coach, Gregg Popovich, only a few minutes into the game, when Donaghy had bet on the Spurs! He lost the bet.

So how did he win 70 to 80 percent of the time? By knowing which other refs had special relationships with, or grudges against, various players, coaches, or owners.

The next night (last night), I was watching our Golden State Warriors lose yet again. There was some call or other in which one of the announcers said, "He's a rookie: he'll never get that call." If you watch the NBA much, how many times do you hear that line? Try "every night." So what they're really saying is that refs do go beyond the rules a lot, depending on the situation of the players rather than on what the players are doing. So if there is a ref who is more pro-Kobe than the average and you--Donaghy--find out an hour before the game, you can bet appropriately.

I got a kick out of the interview with Mike Mathis in which Mathis admitted that referees sometimes let their personal feelings affect their refereeing and then said that Donaghy had washed his, Mathis's career, down the toilet. So for Mathis, apparently, the problem was not that referees did a bad job because of their personal biases but that one of them was able to win bets by predicting which ones would do a bad job.

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COMMENTS (4 to date)
Ryan writes:

ESPN recently interviewed BYU economist Joe Price about the Donaghy story. Price collected data on game outcomes and referees. Here: http://espn.go.com/blog/truehoop/post/_/id/11341/tim-donaghys-tale-of-dick-bavetta

Sam Kaplan writes:

I agree that the Donaghy interview was very damming. However, a couple of ESPN articles point to some statistical evidence disputing some of Donaghy's claims. See this, for example:

Here's another one from an economist's viewpoint: http://espn.go.com/blog/truehoop/post/_/id/11341/did-dick-bavetta-prop-up-weaker-teams

As a long time NBA fan who mostly gave up on the sport 2 years ago, Donaghy's claims match what I have seen over the years. But, it would be interesting to see some more analysis of the claims and certainly some more investigations. Donaghy, after all, essentially says the League was, if not fixing, influencing the outcome of games to the league's economic advantage. I believe Donaghy is right but want to see more evidence.

David R. Henderson writes:

Thanks, Ryan and Sam Kaplan. Those links are helpful.

Koz writes:

I wondered where Mathis was going to fit in all this. Maybe you don't know (and I didn't see the 60 mins. thing) but Mathis got caught in a much smaller scandal beforehand.

Apparently the refs collective bargaining agreement mandated first class airline travel when it was required. Mathis habitually cashed in the first class tix and went coach instead. He actually was entitled to do that except that he didn't report the income to the IRS and got busted for that. After much wailing and gnashing of teeth he was allowed to officiate again. But the Donaghy thing came and the league couldn't afford to be seen looking the other way.

My guess is the "rookie call" vs. "superstar call" thing didn't enter into it all.

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