All major American professional sports have a time of year when they capture the eyes of the nation. America’s pastime, baseball, has the ‘Fall Classic’, the NFL dominates Thanksgiving, and the country has an entire weekend dedicated to the Super Bowl. Christmas Day is the NBA’s time to shine with action from noon to midnight (though the NFL tries to get in on the action). When Americans tune in to watch Lebron James and Kevin Durant battle it out on the court, they usually aren’t thinking about the referees, but it’s impossible to play without them.
The creation and enforcement of rules within sports is often overlooked despite their significance in determining the outcome of games and championships, at least until the referees make the wrong calls.
In a 2010 World Cup knockout round match, English midfielder Frank Lampard shot a missile that rocketed against the crossbar and beat German goalkeeper Manuel Neuer. Nearly everyone in the stadium was sure that the match had been equalized 2-2. Everyone except the referees. Images in real time showed that Lampard’s shot had indeed crossed the goal line, but nevertheless, the goal was not counted. Germany went on to win 4-1, sparking a conversation among fans around the world about refereeing in the beautiful game, and resulting in the implementation of goal-line technology soon after.
Nearly a decade later, the English Premier League instituted Video Assistant Refereeing, or VAR, out of a similar ambition to reduce the human error of refereeing and increase fairness in the game. However, in the six seasons since its introduction, VAR has produced more controversy than it has solved. How could that be? Don’t fans want more correct decisions?
Maybe not, says Daisy Christodoulou, author of the book I Can’t Stop Thinking about VAR, and guest of the February 2025 EconTalk episode, Coase, the Rules of the Game, and the Costs of Perfection. Christodoulou and host Russ Roberts apply economic theory to understand why the desire for perfection often leads to unsatisfactory results, why continuums are often more helpful than categories, and how comparative judgment can improve consistent rulemaking that accommodates individual preferences
As the title suggests, the Coase theorem is a core theme of this episode. The Coase theorem states that in certain instances, individuals can resolve disputes involving externalities more efficiently than a governing body. This is partially because the attempt at making perfect rules that supposedly “solve” externalities leaves little room for the complexity of individual situations. However, Russ Roberts argues that rulemaking techniques like VAR can muddy the waters of refereeing, needlessly overcomplicating disputes that can be resolved through common sense. In his words, “We all know what a goal is. We all know what a handball is…and, yet once we get down to these details of making sure…somehow it gets harder.” Christodoulou agrees, adding that although VAR was brought in to make refereeing decisions clearer, it has thus far primarily served as a force of confusion and frustration. She finds that through the implementation of VAR, English football has smashed a top-down rulemaking structure on top of a once bottom-up process, and this has led to the conflict of accuracy with other preferences of fans.
There is bound to be a trade-off between the accuracy of refereeing and the excitement of a game. Agonizingly long video review sessions may produce the correct result, but oftentimes they reduce the electricity of scoring a goal.
Christodoulou believes this is representative of the trade-off between consistency and common sense. Using the justice system as an example, Christodoulou argues that people often value a certain level of discretion in enforcing and interpreting the law. However, discretion inevitably leads to inconsistencies, accusations of bias, and potential injustices. In other words, beating tradeoffs is impossible, and trying to do so often results in the worst of both worlds.
This has been the result with VAR: Overcomplicated rules, applied inconsistently.
Christodoulou states that the handball rule increased from 11 words to 121 words since the institution of VAR, and yet what’s deemed a handball differs widely even from minute to minute within the same match. Christodoulou believes the handball rule misidentifies a continuous variable as a categorical one. Categorical variables describe concepts that are mutually exclusive, while continuous variables exist on a spectrum. Many decisions that referees make during matches are categorical: an incident is either a foul or it is not. The problem is when the line between two is blurry. For example, it’s exceedingly difficult to describe what is and what is not a handball in plain language. Indeed, many aspects of everyday life are almost indescribable through language itself. But this does not mean that it is impossible to determine what is or isn’t a handball. Christodoulou argues this can be done through comparative judgment and tacit knowledge.
Christodoulou uses the example of grading papers to illustrate. make this point. It is far easier to decide which piece of two is better than the other, as opposed to deciding how good a piece of writing is on its own. Determinations of quality within a vacuum vary wildly both between individuals and, crucially, within the same individual. Comparisons, on the other hand, can be combined to create a quality distribution. According to Christodoulou, grading through comparative judgment leads to more agreement and consistency than grading based on a rubric.
“So, you have this weird paradox, in that what feels like an incredibly subjective method of assessment, the data shows it is actually really quite objective. And the flip side is true: That when you have this very objective measure–seemingly very objective measure of assessment—which has all these tick lists, and you can say, ‘Does it feature this? Does this piece of writing feature that? Does it feature this?’ But when you crunch the numbers, people do not agree at all….it’s actually very subjective.”
To apply this insight to refereeing, first, technology can create a collection of potential handballs, for instance. Then crowdsourcing can be used to prompt fans, players, and referees to decide which of two clips in this dataset is more of a handball. This, done repeatedly, creates a distribution for judging handballs. Here, Christodoulou suggests that AI can be trained to recognize patterns from examples that were considered handballs that can be relayed to referees during handball disputes. Referees would then determine whether the instance in question lies above or below the set line of handball.
As always, there are no solutions, only trade-offs. Perfect rules don’t exist. Attempts to impose them, top-down, result in unclear rules applied inconsistently—and unhappy fans (and players). Counterintuitive as it might seem, the key to encouraging goodwill towards referees is less likely to come from more oversight or attempts to override referee judgment than through recognizing the power of common sense and tacit knowledge.
Kevin Lavery is a graduate student in the M.S. in Economics program at Georgetown University. He holds dual Bachelor of Science degrees in Economic Analysis and Political Science from Western Carolina University.
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