Global Views: Understanding Racing's Economics

In Global Views, Godolphin Flying Start trainees provide insight into practices experienced and observations taken on their worldwide travels. Second-year trainee Rachel Wade discusses how racing must gain a clearer understanding of its economics.

Often vaguely described, economics is a study in human choice and behavior and their effect on society. The term has historically carried a monetary connotation but really delves into how different choices are made, why humans make those choices and what the implications of those choices are to industry and the wider economy. As such, it is important for any industry to understand economic forces in order to achieve whatever their goals may be.

Horse racing falls short in its research and understanding of the more subtle economic intricacies such as incentives and decision making. Reports on economic impact show the quantitative measurements of the industry, which are indisputably important, but fail to address anything qualitative pertaining to racing. How can we expect to improve our industry and keep it relevant without understanding what everyday decisions and incentives drive it forward or hold it back?

I have been incredibly privileged to experience racing in four major racing jurisdictions during the past 15 months on the Godolphin Flying Start scholarship. Through my travels I have yet to see a racing industry that doesn't suffer from a skilled staff shortage. This issue is both fashionable and widely accepted within the industry, yet there is no research into why it exists. Many are quick to point the finger extrinsically, blaming issues such as an increasingly urbanized population and its resulting disconnect between humans and animals or the younger generations' aversion to manual labor. Perhaps it is time to look intrinsically and improve our understanding of things such as the appeal and value of racing, what its barriers to entry are and what incentivizes people to work in it. Without an understanding of something such as incentivization, our industry will never be able to attract and retain a viable workforce.

The book Freakonomics describes incentives as “why human beings do things,” and separates incentives into three categories: economic (material), social and moral. Humans base decisions on all three factors which is evident in society as well as more specifically in the Thoroughbred industry. For example, Australian studs in the Hunter Valley constantly compete with the neighboring mining industry for workers. Mining staff work fewer hours for substantially higher wages, yet stud farms still manage to recruit and retain staff (albeit often international/seasonal workers), demonstrating that people find value outside of material incentive to work in our industry. If humans were truly rational and motivated only by material incentive, it is unlikely racing would have any workers in any jurisdiction.

There can be no doubt that higher wages would make our industry more attractive, but it is unlikely that racing will ever be able to pay enough to compete with an industry as large and subsidized as mining. It is therefore paramount that we identify and promote the key social and moral incentives that racing offers in order to maximize our workforce. Furthermore, racing should pinpoint nonmaterial incentives that could be changed in order to align with society's values. For instance, assume that society places high value on time spent with friends and family. If horse racing altered its working hours to appeal to this value and allow staff a more sociable lifestyle, the personal utility gained may make our jobs more attractive than the higher paying industry next door.

Oftentimes to its detriment, the racing industry has acted as a 'reactive' rather than 'proactive' business. Issues such as animal welfare and aftercare have emerged and been debated with increasing ferocity in the past decade as society's values and opinions on animals used for sport has changed. In my opinion, racing has responded urgently and effectively to this issue, but much of the damage to public perception may prove irreversible. If the industry is to survive over the coming years, it will be necessary to identify strengths and weaknesses within the sport and attempt to make change proactively rather than reactively. The world's population is expected to reach nine billion by 2050, with approximately 70% of the population living in urbanized areas. This can be viewed as both an opportunity and a threat to the racing industry. If racing can shift to a proactive mindset, perhaps this growth can be used to thrust horse racing into a top tier sport. For example, racing may appeal to those who value ecological sustainability as it is a sport with a relatively small ecological footprint and has many positive externalities. Stud farms have a vested interest in the land they occupy, protecting and cultivating it so that it may be used to raise healthy racehorses. This is more sustainable than single- use industries such as mining. As more people become disconnected from animals through an urbanized lifestyle, horse racing may satiate a desire to connect with large animals. Though these are only speculations, horse racing must prepare for society's change over the coming years and identify how it can fit into shifting values and norms.

Although often hidden and misunderstood, economics plays a vital role in our beautiful industry. A greater understanding of its impact could unravel the numerous challenges the Thoroughbred industry faces as it struggles to maintain relevancy in a constantly changing and modern world. Maybe it is time we begin to look at racing through the eyes of an economist and ask ourselves why we love this industry and what hidden incentives can be used to attract new people to racing as both professionals and patrons.