What economics tells us about the next Premier League champion

 
Paul Ormerod
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THE PREMIER League season is drawing to an exciting close, and it is by no means clear who will be champions or who will gain the coveted top five European qualifying spots. There could even be a surprise. If Liverpool wins, for the first time since 1995 a team from outside Manchester or London will be crowned. Even then it was Blackburn. In any case, in the last 21 seasons of the Premier League, all the winners have come from either the North West or London. A Scouse victory would not alter this.

These two regions are important, with around 20 per cent of the UK’s population and 30 per cent of its income. But their lock on the Premier League seems absolute. Yorkshire and the West Midlands have big populations, but have not enjoyed football success, especially teams from the White Rose county. It is not just a matter of being champion. Only one team from outside the Lancashire/London strongholds has been in the top five since 2004, and none have been in the Champions’ League top four qualifying spots since Newcastle the season before that. Aggregating all the results over the last 10 years, from outside Lancashire/London, only Aston Villa and Newcastle are in the top ten, at eighth and tenth respectively.

Yet in its first few seasons, the Premier League had more democratic outcomes. In 1992-93, not only did Aston Villa come second, but Norwich was third and QPR fifth. The next season, Newcastle was second, and Leeds and Wimbledon fifth and sixth respectively.

Looking back, it seems easy to rationalise the growing concentration of success among a handful of teams in a couple of areas. The creation of the Premier League has injected increasing amounts of money into the game. The value of TV rights has soared. The bigger names have cashed in on income streams like sponsorship and shirt sales. In the jargon, positive feedback has been in operation. Unto him that hath, more shall be given. And as Simon Kuper and Stefan Szymanski show in their book Soccernomics, the size of the wage bills explains no less than 92 per cent of the variation in the clubs’ league positions over a ten year period.

Despite all this, change is possible. Even giant clubs can falter and fail. Much of the regional monopoly of the champions is due to Manchester United winning 13 titles. Yet this season, despite all the club’s money, it seems destined to finish outside the top five. The decade before the Premier League, football was dominated by Liverpool, yet until very recently it has hardly threatened to win the League again. The same principle operates at all levels. Leeds and Wimbledon, top boys 20 years ago, now languish in obscurity.

For all their peculiarities, football clubs are companies. They share the fundamental dynamics which explain the success and failure of all businesses over time. Yes, success tends to reinforce success. But a myriad of factors, hard to identify in advance, can upset this process and send the feedback into reverse.

Paul Ormerod is an economist at Volterra Partners, a visiting professor at the UCL Centre for Decision Making Uncertainty, and author of Why Most Things Fail: Economics, Evolution and Extinction.