St. Norbert College Magazine - Fourth downs and 401(k)s St. Norbert College
 


Fourth downs and 401(k)s
By Paul Bursik, Associate Professor of Business Administration

Paul Bursik
Paul Bursik teaches finance at St. Norbert. His research concentrates on behavioral issues in finance and sports. He will be contributing a chapter on behavioral economics in the NFL to the upcoming "Economics of the National Football League: The State of the Art."

On a beautiful fall afternoon, you sit in Lambeau Field. It is the first quarter of a scoreless tie. The Packers have the ball on their own 45-yard line. It is fourth down with 2 yards to go. What should the team do?

The nearly universal decision in such situations is to punt. But is this the correct play?

In business and economics we generally assume that decision makers “get it right,” especially when the stakes are high. In recent times, however, researchers have uncovered many situations in which this is not the case.

Many examples of suboptimal behavior come from the world of finance. Investors tend to save too little, diversify too little and ride losing investments while liquidating winning ones. We invest too much in familiar companies (including an alarming tendency to go “all in” on our own employer in our 401(k) accounts). We have overly favorable memories of our past investment results, and we are inclined to see patterns in essentially random movements in prices.

Such tendencies have affected the way we teach students about investments. Traditional finance theory provides us with a guide to how decisions should be made by rational investors; the emerging field of behavioral economics suggests that, by studying behavior and looking at research in the areas of decision science, neuroscience and cognitive psychology, we gain insights about how decisions are actually made by sometimes less than fully rational human beings.

That brings us back to the Packers’ fourth-down situation. In “Do Firms Maximize? Evidence from Professional Football” (Journal of Political Economy, 2006), University of California-Berkeley economist David Romer concluded through examination of data from hundreds of NFL games that teams tend to be too conservative by opting to kick field goals or punt rather than going for it on fourth down. Out of the 1,604 fourth-down cases in which the optimal decision was to kick, the teams went for it only nine times, but out of the 1,068 fourth-down cases where the teams should have gone for it, they kicked instead a whopping 959 times!

How does Romer explain this irrationality? He argues that coaches are more concerned about job preservation than about marginally improving the probability that their teams will win. Kicking on fourth down is conventional wisdom, and going against it means risking the ire of fans, media and team owners.

No one knows that better than Bill Belichick. Last season the venerable coach of the New England Patriots (who is known to have read the Romer article) went for it on fourth-and-2 from the Patriots’ own 28-yard line late in a game in which his team led the Colts by six points. The Patriots did not convert, but the Colts did, with Peyton Manning throwing a winning touchdown pass in the closing seconds. By the numbers, it was probably the correct move, but Belichick was widely criticized for bucking a “no brainer” decision to punt the ball away.

Conventional wisdom is “sticky,” but it does change over time. Prior to the 1980s, it was conventional wisdom in baseball that weight training was a bad idea. If you watch games from that era on “ESPN Classic,” you will notice that the players look very different from today’s major leaguers. Baseball’s steroid issue indicates that players have gone to extremes to change their physique.

In addition, Michael Lewis’ bestseller “Moneyball” chronicles how Oakland A’s general manager Billy Beane shunned conventional wisdom to put winning teams on the field despite a modest payroll. “Moneyball” changed things. Players who take walks get paid more now; teams are more careful in using the stolen-base strategy than before; and teams are less likely to draft high-school pitchers over college pitchers.

So what will bring on a change in the NFL approach to fourth downs? It will probably take several job-secure coaches following a more aggressive strategy and meeting with success.

This fall, when the Packers face a fourth-and-2 from their own 45 early in a game, Romer’s analysis suggests going for it. I am guessing you will witness a punt. But that could well change in the next couple years. In the past four seasons, the Packers have been among the top five teams to go for it on fourth down. Perhaps Mike McCarthy read the Romer article?

Fall 2010 Magazine

Web extraLook here for web-only content that expands on topics presented in the current St. Norbert College Magazine.

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Music professors Michael Rosewall and Linda Cook help us “Raise our voices to the Green and Gold” with renewed spirit.

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Text Extra“Sundays in Manila”
A chapter of Philippines encounters from the new travel memoir by Robert Boyer (English, Emeritus).

Text ExtraAlumni Award Winners 2010
Read more on the life and works of this year’s honorees.



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