IPL and Sri Lankan economics

Originally appeared on the Morning

By Dhananath Fernando

For countries in the South Asian region, cricket is more of a religion than a sport. Sadly, in the same region, religion is more often a sport than an instrument for spiritual enlightenment. However, both scenarios can be understood using basic economic principles. The recent performance of Sri Lankan fast bowler Matheesha Pathirana, a member of the Chennai Super Kings, is a good example. 

Matheesha Pathirana, a 20-year-old youngster from Sri Lanka, has become one of the star players of the Chennai Super Kings, a finalist in this year’s Indian Premier League (IPL). Recently, however, Matheesha failed to secure a slot on Sri Lanka’s T20 cricket team. 

Meritocracy is nothing but being competitive and allowing a framework for competitive people to receive a good share of the incentives. The Indian Premier League and the story of Matheesha teaches us a good lesson on incentives, freedom of choice, and the role of a government. 

Freedom of choice 

The IPL’s model is such that each team builds its player base through an auction. Simply, players have an incentive to remain competitive and maintain their performance to earn a good income. On the other hand, the team or the franchise has an advantage too, as they can earn a good income through sponsors by forming a competitive team to win the tournament. 

As a result of the competitive process, freedom of choice is allowed and resources are distributed based on a price value. The auction of players is a good example of a level playing field – it is such that the best of the best players get the opportunity, ultimately benefiting the quality of the game.

No interventions by regulator

Secondly, the Board of Control for Cricket in India (BCCI) does not field a team, as simultaneously regulating and competing will not be effective and will lead to a higher chance of failing at both functions. However, in Sri Lanka and many parts of the world, the government is engaged in both business and regulation. 

In our country, the Government is involved in almost all key industries, so the system is not incentivised to be competitive. The credibility and competitiveness of the IPL tournament is driven by the rules-based system, which is organised strictly to promote this while ensuring that a reasonable attempt is made to maintain the code of conduct and ethics of the game. 

Even though intervention is presently limited, many years ago a regional government intervened when Sri Lankan champion off-spinner Muralidaran played in Chennai. Nuwan Kulasekara faced a similar incident. Both are good examples of what could happen to the spirit of the game when governments intervene and harmony and reconciliation between communities do not exist. 

Although a functional framework is in place, it does not mean that accusations of gambling and match-fixing are not present. We need to understand that markets are not always perfect and while there can be deviations, we need to always focus on the most reasonable solution. 

Knowledge transfer to maximise competitiveness 

Markets honour the skill set, regardless of age, ethnicity, or any other barrier. The Chennai Super Kings has an experienced player in the 41-year-old former Indian Captain Dhoni as well as in the 20-year-old Matheesha who are on the same team – a common feature in most of the teams in the tournament. The IPL also allows foreign players to compete side by side with local players. 

In economic terms, this transfers a significant expertise between teams and their players while top-notch coaching staff with years of experience ensure maximum productivity and efficiency of the teams. 

Internationally driven 

Today, the IPL is not merely a game – it has now expanded into an industry earning billions in income by attracting many investors and brands as sponsors. It is in itself a large ecosystem with spillover effects on the Indian tourism industry, massively contributing to building the national brand name of India. 

Whoever wins the 16th IPL finals held on Friday (26) – whether it is the players or the Board of Control for Cricket in India – the Indian economy is the real winner. When markets are allowed to work, miracles can happen. This is the lesson Sri Lanka needs to learn.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.