What the passion of soccer fans reveals about economic decision making

Ever been to, or watched, soccer games in England, Italy, Brazil or other capitals of the world’s most popular sport? If you have, you know that fans of the “beautiful game” are passionate about their teams.

The fierce fandom that permeates soccer, which is better known as football outside the U.S., holds investing and economic decision making lessons that extend beyond stadium walls. Marketplace senior economics contributor Chris Farrell takes us to the soccer pitch and discusses research findings with “Marketplace Morning Report” host Sabri Ben-Achour. The following is an edited transcript of their conversation.

Sabri Ben-Achour: So teams inspire their fans. Their fans are very, very passionate. What does that have to do with investing or economic decision making?

Chris Farrell: So we’ve seen the last few decades the rise in behavioral finance studies, and the field explores how emotions, biases and cognitive limitations influence economic decision making, including investing. And the results diverge from the classic economic model of the rational actor coolly evaluating risks and rewards to maximize returns. Instead, look, our judgments are often clouded by emotion and bias in systematic and predictable ways.

Ben-Achour: Soccer fans are definitely emotional.

Farrell: Well, from the studies I’ve looked at — and OK, it’s a far from comprehensive review — I get the sense that scholars who draw economic lessons from the beautiful game, they’re also fans. And that’s certainly the case with an intriguing study by several economists into English Premier League matches and fans. They ran a series of experiments on fans who placed nearly 40,000 bets on league matches during the 2020-21 season.

Ben-Achour: The Premier League is the highest level of the professional English football league. What did they find with these experiments?

Farrell: OK, so the participants — 800 from Kenya and 1,600 from the United Kingdom — were given a budget and asked to make wagers on upcoming games, and the economists were exploring how much team identity or fandom impacted investing decisions. And most participants were followers of a particular team, and their bets skewed heavily toward that team — even when the odds were against them winning. So they identified with the team they followed and favored.

Ben-Achour: So it sounds like the fans’ passion, their identity, is influencing decisions about money.

Farrell: That’s right, and this study is in addition to a lot of other, similar studies that report on the role identity and social belief play in managing money and making financial decisions. And the scholars call the money impact of emotional attachment and preferences an “identity tax” — kind of an intriguing term — and they argue you can’t understand economic decision making without recognizing the role of identity.

Ben-Achour: So do these results have broader lessons for how to understand behavior around money and finances outside the soccer field?

Farrell: They argue this identity tax idea, the importance of identity, it helps explains why people prefer investing in domestic stocks even when foreign stocks offer better value, or, you know, they invest heavily in their employer stock when diversification is the prudent course of action. So I would say studies like this are trying to understand better how people actually approach finance and money.