Racing's Elephant in the Room - In One Chart

Supply and demand curves are about as dependable as a rusty hammer. Whether it be consumer behavior, factors of production, or the shift in capital, the curves work just fine for just about every free business.

Except, perhaps, when it comes to the horse racing business.

In the 2016 Australia Fact Book released today, we see one chart that tells an interesting, if not sordid, tale. (sorry for going all Vox.com on you with the blog title, but it fit)

Ignoring the 2015/16 foal crop bar (this was pointed out to me to be wrong, it's about equal to 2014/15's number), we see no correlations, where there should be correlations.

Prize money has gone up almost precipitously. The demand for horseflesh, at the same time through foal crops, continues to fall. The number of races during this time period has remained relatively flat.

There's more gross money to race for - it's about doubled, or up 32% inflation adjusted since 2001 - and there's more average purses to race for.  During the same period, the supply of horses (foal crops) is down by about a third.

This is occurring in an environment where stock markets around the world have increased by 1500% or more since 1985, while consumer prices have barely doubled. It's happening in a world where the wealth class has done very well, and collectibles, luxury items etc, have seen big growth.

Although there are a number of reasons and much conjecture why this is happening, the salient point is that it is happening, and it's against everything we're taught to believe.

The next time your track or alphabet tells you that "if we raise purses all will be well" like we hear ad nauseum in racing, it's pure folly.  The problems run much deeper than Adam Smith ever imagined.