If football really is a business, one-sixth of Liverpool FC has been sold. In October last year, New England Sports Ventures (NESV) bought the club in a deal that valued it at £300m. On the last day of the January transfer window, Liverpool sold Fernando Torres to Chelsea for £50m. The potential for comment here is almost endless. What of Liverpool’s aspirations to compete with and ultimately surpass Chelsea? What of Kenny Dalglish, Liverpool’s greatest striker, whose first significant move in his second coming as manager was to sell the man once touted as a possible rival to his crown? What of the idea that the Liverpool of 2011 is not the same Liverpool that rejected Chelsea’s huge-money offer for their other world class player of this decade, Steven Gerrard, in 2005? Perhaps claims to footballing pedigree and past glories can no longer ward off the cheque books of the world's wealthiest.

_{Football's subprime}

These issues, the business of football, are overshadowed by the

business that football has become. The question that has been asked for as long as the sport has been professional - most vehemently since the advent of Sky and the Premier League – is, can football thrive, or even survive, as a business? It has many of the hallmarks of an economy: trade, competition, finance. It has a bottom line.

But football’s problem is that a fundamental plank of economics may be missing: the profit motive. Whilst it has a bottom line, it is not the be-all-and-end-all. Trophies, purists will tell you, are priceless. The ‘revenue’ they yield in prize money is irrelevant, it is the accumulation of achievement, of prestige, an eventual rise to some previously unreached level that confers value upon them. This is not just true of trophies. What price a win in a local derby? What price a non-league cup run? The purist may be dismayed to hear talk of how much Crawley Town will earn for their journey to Old Trafford in the FA Cup fifth round, but this is symptomatic of the game today. Is it true enough, though, to say that the billionaire owners proliferating in English football are here for the prize money?

It is possible to accept that the basic aim of football cannot be measured in financial terms without ruling out its potential to function as an economy. This would be fine if the two sides remained detached, in such a way that the business side was conducted with an eye only for the bottom line, and the football side concerned itself only with silverware. This would make owners’ interest in success a function of prize money. The football side’s money would be one part of a wider budget, properly managed by businessmen that have not left their business sense behind in their previous lives.

Complications arise when the lust for success distorts the economic incentives facing those in the boardroom. Chelsea – a scapegoat, but equally a blatant offender – makes no pretence of attempting to achieve fiscal balance. Torres has shown us this much: the sums simply do not add up. Premier League winners receive £16m in prize money. Each place receives £800000 less than the place above, so a fourth place finish is worth £13.6m. The 25% of TV revenue assigned on merit adds a similar amount per place. If Chelsea win the league for the next five years, and we assume that Chelsea would not have finished lower than fourth in his absence, the Spaniard will have added at most £24m to Chelsea’s coffers. And that is in an almost incredible scenario (no one has won more than three Premier League titles in a row; Torres himself has not won a single league title in his 10 years as a professional). In the same five-year period, he will cost Chelsea a reported £35m in wages. His present value – the expected return on his performance for all time – is simply nowhere near £50m. It is closer to minus £50m. And that is before risk is considered: Torres is injury prone and appears to be suffering a recent loss of form. If football was an undistorted economy then, this transfer simply would not have happened.

_{The sums (Source:The Economist)}

Investment is a crucial part of all economies, but elsewhere it remains tied to the profit motive. Projects that cost more than their present value are not invested in. Transfers that flaunt this economic rule happen for two related reasons: because there is no division between the finance and the football, and because the investment is not put in to be regained. Oligarchs have made their profits; now they want trophies. The two exist in different contexts: one pays for the other, with football accruing the losses.

Football is not operating like any other economy for a very simple reason: its costs are not linked to its revenues. Torres was paid for by Russian oil, not by the Stamford Bridge faithful, or even by Rupert Murdoch, the man behind the Sky revolution. Non-football money is not a panacea, as was shown by the financial results released on the very same day as the Torres signing. Chelsea made a loss of £70.9m in the year to June 2010. Having a billionaire in your corner does not keep you in the black; it means that you can afford to go in to the red.

The problem, in the eyes of the economist - as Liverpool themselves discovered in the years of wrangling that preceded the NESV takeover, and mortgage lenders the world over discovered in 2008 - is that unbacked debt is not easy to sell, and eventually becomes too expensive to service, leading to default and closure. When Mr Abramovich has had enough, what then? For Lehmann, read Chelsea. The problem, in the eyes of the purist, is that the basis of success becomes exogenous to the game. Money made elsewhere is introduced into the game and acts to distort its competitive outcomes. UEFA has accepted that there is a problem and has ruled that clubs must break even over a rolling three year period from 2012. Sadly it has taken the economic perspective to bring about the change that the purists have been calling for for years.

Business will remain a part of football for as long as it generates billions of pounds every year. This is not necessarily a bad thing. It is widely agreed that the financially motivated Premier League is the best league in the world. Eradicating the exogenous business elements and thereby re-equating costs and revenues, however, means that there is the prospect of success becoming endogenous once again. That at least should make the purist smile.