Measuring the influence of golf caddies

Over at the Dismal Science, a correspondent, Ross, commented on my post about the wage contracts for golf caddies, syndicated from here on Offsetting.

Ross suggests a neat natural experiment that could potentially identify an exogenous effect of caddy on a golfer's performance. The imposed exogeneity comes from the fact that for years all players in the Masters were required to use an Augusta National Club caddy, whereas in the other three major tournaments, golfers could use their own caddy. So one way of looking at the effect of caddying is to see how much predictive power player rankings at the other tournaments have for performance at the Matser's relative to how much predictive power they have for each other. If there had been no change of rule, such an exercise might be suggestive but hardly conclusive, as  there might be something about the Master's that encourages a different kind of player. (My little bit of golf knowledge suggests that this might not be a huge deal--the major tournament that is the most different from the other three is the British Open.) 

But the rule did change in 1982, after which golfers could use their own caddy at the Master's. So here is my suggested test. Take the 5 years prior to the rule change and the 5 years after. For each major tournament in those 5 years, find the subset of players who played in that tournament and each of the previous three (i.e. all 4 majors over a 12-month period), and note the ranking out of that subset of players in each tournament. Then for every pair of players the player with the highest average ranking in the three previous tournaments also had a higher ranking in the 4th. If caddying is important, we would expect to see that the fraction of pairs where the pairwise ranking stayed the same was lower for the pre-1982 Master's than for the other three tournaments (due to the effect of randomly  assigned caddies), but that that difference disappeared after 1982. 

I don't have time to do this, so I put it out there if someone wants to jump in as a co-author and do the legwork. My guess is that golf is such a high-variance game that there simply won't be enough data to tease out any statistically significant result, but it might be interesting. Or maybe it could be an Honours project. 

Labour economics: golf caddying edition

Radio Sport yesterday was consumed with a debate about whether Steve Williams, the caddy for Masters winner, Adam Scott, is worth the money he is paid.

For those who don't follow golf, here is the background. Steve Williams is a New Zealander who was the professional caddy for Tiger Williams in his heyday (1999-2011). They had an acrimonious break-up two years ago, and since then Williams has been caddying for the Australian, Adam Scott. Williams' contract sees him earning 10% of Scott's prize earnings, which I gather is a typical contract for a professional caddy. Obviously, if you can caddy for one of the greats, that is a very lucrative contract indeed. (The prize for winning the Masters this year was $1.44m USD.)

Now the debate on Radio Sport concerned whether any caddy is worth that amount of money. And for an economist, "worth" would typically mean what a caddy can contribute relative to the next best alternative. Is it really the case that a top caddy can improve a golfer's winnings by more than 10%, relative to what he would earn with one of the throng of enthusiastic golf fans who would be prepared to do the job for a normal kind of salary? While there has been much commentary on the advice that Williams gave Scott on his winning shot at the Masters this week, it seems unlikely that the best caddy is really that much better than the alternative.

There is a second labour-economics question that I did not hear addressed on Radio Sport: Why are caddies paid on a commission basis (percentage of income) rather than a flat rate? The standard answers to these questions from the contract literature would be that either the golfer is more risk averse than the caddy, or that this is a hidden-information problem and that the caddy needs a financial incentive to exert the effort needed to do a good job. The former hardly seems likely given the relative incomes of the golfer and his caddy. The second is even less likely to pass the sniff test: Does it really take additional costly effort to give good advice on which club to use and how a putt is likely to break?

Instead, maybe we should be looking to the efficiency wage literature which contains a number of different theories for why above-market-clearing wages can persist in the face of unemployment. My favourite model to explain caddy wages would be Shapiro and Stiglitz's classic model of shirking. In their model, the high ("efficiency") wage persists as a preference for employment over unemployment is needed to induce a fear of being fired and hence an incentive not to shirk in the face of costly monitoring of effort. The model I have in mind for caddies is similar. The top golfers are big superstars whose flaws and foibles would be fodder for the tabloids. A caddy who works closely with a golfer is likely to have considerable information that tabloids would love to get hold of. So why might one pay above the market-clearing wage for a caddy? So that the cost to the caddy of losing his job would not be dwarfed by payments he might be offered by a tabloid. And why pay caddies on a commission basis? Because the greater is a golfer's earnings, the greater is his stardom, the more a tabloid would be prepared to pay for information, and hence the greater would be the needed efficiency wage.

What other explanations explain the twin puzzle of high remuneration and a percentage-of-earnings contract. If I were teaching labour economics, I would set this as an essay question.