As Major League Baseball camps reawaken for spring training over the next few weeks, the same scene will repeat across the country: A pitcher will take the mound. A batter will stare back. And behind him, an umpire will tense in anticipation, ready to call a ball or a strike depending on where the pitcher throws the ball.
How much would you expect the race of the umpire and the pitcher to determine the outcome of the call? That's the question Christopher A. Parsons, Harvard Business School visiting associate professor in the Finance unit, poses in Strike Three: Discrimination, Incentives, and Evaluation, a paper published in 2011.
“We know racism and sexism exist. The question is what can we do about it?”
Parsons has made a habit of asking surprising questions about economic issues, looking at situations where small factors have an unexpected effect on the outcome. In addition to asking about baseball and race, he's explored questions such as how much money motivates ministers, and how much financial journalists affect the stock market.
"I am interested in what motivates people," he says, "and what causes them to make the decisions they do economically and otherwise."
In the cases of umpires and ministers, Parsons's work falls under the broader category of incentive research. "They are about what causes people to behave in predictable ways, and how that changes over time," he explains. Those causes and effects can have broader implications for business and economics as a whole.
Eyes On The Ball
In order to determine the effect of racial discrimination on baseball games, Parsons and colleagues Johan Sulaeman of Southern Methodist University, Michael C. Yates of Auburn University, and Daniel S. Hamermesh of the University of Texas at Austin waded through pitching data for every Major League Baseball game from 2004 to 2008. When the data was analyzed, they found that indeed, race matters.
When umpires and pitchers are a different race or ethnicity, the umpire is slightly more apt to call a pitch a ball, which favors the batter. Although the effect is small—averaging about one pitch a game—it is consistent and statistically significant, ruling out simple human error.
What was more surprising, however, is how pitchers reacted to this trend. For a select number of games in 2007 and 2008 the researchers also analyzed where the pitchers threw the ball over the plate. They found that when the umpire and pitcher were of a different race or ethnicity, the pitchers were less likely to throw the ball to the edges of the strike zone—"painting the corners" in baseball parlance—and more likely to throw it straight over the plate where it is easier to hit.
In other words, the pitchers seemed to compensate for discrimination by throwing the ball in areas where the outcome was less subjective, even if it meant potentially hurting their own performance.
"That little bit of conscious or unconscious discrimination spills over into the entire game," concludes Parsons. "It might only directly affect a pitch or two a game, but indirectly it affects every pitch through tiny little changes. Ultimately, when a black pitcher is pitching to a black umpire, he is more likely to win the whole game."
Parsons speculates that the discrimination may not be conscious. Since the effects increase as the game goes on, he suggests the animosity that can grow between a pitcher and an umpire over time is magnified by race. A pitcher expressing disgust to an umpire can eventually tick the ump off. "Umpires have a shorter fuse for guys they don't like. If you are a black guy and I don't like black guys, and you shake me off or throw your glove down, now I'm going to get you."
The researchers didn't observe the same effect when umpires were a different race or ethnicity than batters, perhaps because batters are in front of an umpire for only a few pitches a game--pitchers square off face-to-face with umpires for many innings in a row.
The most significant finding in the paper to Parsons is when umpires don't discriminate. During the time the researchers investigated, MLB had installed cameras pointed at the strike zone in a third of ballparks as a way of monitoring umpires' accuracy. They found that when cameras were present, umpires made calls the same no matter the race of the pitcher. "They didn't install these cameras to look for racism, but it turns out those incentives really matter to umpires," Parsons concludes. When an umpire's job was on the line depending on how accurately he called strikes, then he was more likely to work hard to make his calls fair.
Findings from the study have broader implications beyond baseball, says Parsons. A person concerned about being discriminated against may be less likely to take chances, sticking instead to more objectively measurable tasks, in the same way that a pitcher stops taking chances by painting the corners and throwing straight over the plate. That could go for a police officer who chooses to spend time writing traffic tickets rather than conducting investigations; or a worker who chooses to push paper rather than pursue more entrepreneurial activities.
At the same time, it points to the need to monitor supervisors in the workplace for evidence of discrimination. "We know racism and sexism exist. The question is what can we do about it? Does evaluating the evaluators change discrimination? Does the fact that I know I'm being watched change my behavior?"
The answer, at least from this study is yes. "That is interesting," says Parsons, "because it implies that policy can change things."
Money In The Pews
The same holds true for Parsons's study into how money motivates ministers, Is a Higher Calling Enough? Incentive Compensation in the Church, published in the July 2010 issue of the Journal of Labor Economics. Perhaps more than any other profession, we hold religious leaders above such base incentives as money. At the same time, it's the rare individual for whom money isn't at least part of a factor in the work they do.
"Just because a person has intrinsic motivation, that doesn't crowd out other incentives," says Parsons. "I think it's a safe call to say that not many ministers get into the ministry to make a buck, but that doesn't mean a monetary incentive for doing a good job doesn't matter."
Parsons and fellow researchers Jay C. Hartzell of the University of Texas at Austin and David L. Yermack (HBS MBA1989/JD1991, PhDBE 1994) of New York University wondered to what degree money was a factor in minister performance, and what it could tell us about pay for performance in general.
To answer those questions, they relied on data from the Methodist Church in the Oklahoma conference, which meticulously collected numbers on all aspects of the ministry, including pay, size of churches, and number of baptisms and conversions over a 43-year period.
They found a direct correlation between the number of parishioners added to a congregation and the amount the minister was paid. In fact, for every member added, a minister was paid an average of $14.71 in inflation-adjusted dollars. And not all new parishioners were valued equally. A conversion from another faith was worth $17.78—but a defection from another Methodist church in the area was worth nearly double that, $32.51.
Objectively, that discrepancy makes little sense. "Those are the easiest people to recruit, since they are already Methodists," says Parsons. From the perspective of members of the congregation's council that is setting minister pay, however, it stands to reason they would be worried about losing members to neighboring churches and weigh those recruits more highly.
For the national Methodist church, on the other hand, it doesn't matter which local congregation a Methodist belongs to. "It's like one division of Google stealing from another," says Parsons. "If one is paid only on the profits of his division, then he has incentive to poach people from another division. You don't want that."
Within the Methodist church, at least, there is a check on this sort of behavior: promotions. The national church rotates ministers between churches every three to five years. When that occurs, Parsons and his colleagues found, ministers who "poached" were less likely to be assigned to the highest-paying congregations.
In a broader context the method of the Methodists spells out the necessity for any organization to structure performance pay in a way that properly aligns incentives.
"Even for groups that you expect would not be influenced by incentives, they are extremely influenced by incentives," says Parsons, "and different parties within an organization can have vastly different incentives."
Bears And Bulls In The News
While not in the realm of incentives, per se, another of Parsons's papers also shows how extremely open to influence people can be.
It stands to reason that news can influence events as much as it reports on them—but what about the way news is reported? In an analysis of the Wall Street Journal's "Abreast of the Market" column, Parsons found that even savvy investors are susceptible to influence, in a way that can have real effects on the stock market.
"Even the most sophisticated players in the world are not completely immune from framing and interpretation," Parsons says. The column is like a weather report for financial news, reporting on the events in the market on the previous day. It's not always the same weatherman doing the reporting, however; rather, the paper employs a rotating cast of columnists who break down the day's financial highlights.
In Journalists and the Stock Market, published in the 2012 the Review of Financial Studies, Parsons analyzed the effects of these different perspectives along with colleagues Casey Dougal of Drexel University, Diego García of the University of North Carolina at Chapel Hill, and Joseph Engelberg of the University of California, San Diego.
The researchers used computer software to analyze the tone of each columnist's writing, determining whether they wrote with a generally bearish or generally bullish perspective. "Some authors are always Debbie Downers, and some authors always pump up the market," says Parsons.
Then they recorded how the stock market performed on the days following each article's appearance. As it turned out, the market consistently dropped by several points after a bearish columnist wrote, and consistently rose by several points following a bullish columnist. "I describe the weather and you describe the weather and people dress differently for it," says Parsons by way of analogy.
What was most interesting was that the rise and fall seemed to have nothing to do with the content, but everything to do with the tone with which it was presented.
"This is not like something where a journalist would have any information on the overall movement of the market—professionals can't predict the market, let alone some random journalist," says Parsons. "What I found most surprising is that the framing of the day's events mattered as much as the events themselves."
Most of the market results were short-lived, disappearing after a couple of days, so the journalists didn't have any lasting effect on market value. Even so, the study provides a cautionary tale: Investors, as well as the public at large, should be as conscious of how reporters relay the news as they are about the news they relay.
Throughout his research, Parsons forces us to look beyond the generally perceived wisdom—that umpires are impartial, ministers are nonmaterialistic, and journalists are objective—to discover the hidden incentives and influences that change behavior. Such "curve balls" can teach us to look more deeply into these hidden biases and how to change them.