Intertemporal Substitution

Week 6 of the 2012 NFl season is in the book and while we might have entered a new era of parity and competitive balance in Football, we also saw an (aging) icon of the game go down: Baltimore Ravens Linebacker Ray Lewis.

Lewis is probably the best Inside Linebacker in the long tradition of great players at this position in the NFL. He was the first draft pick of the relocated Baltimore Ravens and has lead the mostly great Defense ever since. He is an icon, not only for Ravens fans. He was elected to thirteen Pro Bowls and has one the Super Bowl once as a member of one of the best defensive units ever in the 2000 season. Once he is retired (a time that could come sooner than later) he will enter the Hall of Fame right off the bat.

But Lewis is also 37, playing his 17th season in the NFL. This is quite an accomplishment, as he clearly played longer than the average career at his position. And he played on a higher level. Only recently critics came to the front. They called him out for missing tackles and looking slow and (well actually he is in terms of football age) old. On Sunday Lewis injured his triceps while playing the Dallas Cowboys and on Monday he was ruled out for the season. Immediately speculations started if that might be the end of his career - only to be countered by the newest question: Would he be ready to play in a (possible) Super Bowl?

I am not convinced that the Ravens will eventually get to the title game, as they are beat up in terms of injuries and have played badly on Defense even when healthy. If they do it would have to be the (currently) high-powered Offense to carry the team. Sounds odd to say that about the Ravens, doesn't it?

If there is the slightest possibility that Lewis could return for the Super Bowl in February, the Ravens have to make a tough decision: Do they put him on injured reserve (IR) and sign somebody to replace him, or do they keep him on the roster and hope he will return for a game that is all but certain. There was a similar situation for the New York Jets, who also lost their best player on Defense, Darelle Revis, to injury and discussed his return for the Super Bowl. He was soon put on IR and all hopes for a return in the current season were put to rest. While I wish all the best to Lewis, my guess is that he will share Revis' fate.

In terms of economics the Ravens face a simple question: Is it good to save for the future? Are future returns larger than immediate returns? Is the team better off waiting for Lewis, or does it have to fill glaring holes on the roster? In this case we do not have a clear setup where we compare the utility of today's consumption to utility of consumption in t+1 because the Ravens do not know if they will still be there in t+1 if they do not consume today. So many interesting questions to think about!