Sports Economics
I listen to a lot of sports talk on the radio - Mike and Mike, Jim Rome, local guys - you name it. As I listen, I find myself getting very frustrated with the ignorance of the general sports-watching public.
One of the things that many sports fans like to do is complain, and I wholeheartedly support this. One thing that people tend to complain about is the fact that there exists no salary cap in baseball, and I support those complaints. The fact that the New York Yankees can spend over $200 million on their payroll for one season a complete sham. It’s horrible for competitive balance, and the separation between the rich, large-market clubs and the mid- and small-market organizations is going to keep increasing unless something is done about it. Can something be done about it? Yes, but it’s not going to be fixed overnight. The NBA, NHL and NFL all have salary caps of one kind or another, and generally have tremendous competitive balance. Teams from mid- and small-markets like San Antonio, Sacramento, Indianapolis, Denver and Charlotte regularly make the playoffs and fare well in those leagues. Major League Baseball, however, is dominated by teams from high-population regions that can afford to have enormous payrolls, like New York, Boston, Chicago, Los Angeles and Miami. In fact, no World Series participant, other than last year’s champion St. Louis Cardinals (who had a miraculous post-season run after a mediocre 83-78 regular season) has come from a city with a metropolitan population of fewer than 4 million since the 1997 Cleveland Indians. Since 1988 only five of 36 total World Series participant clubs have come from middle or small markets.
This is a problem and it needs to be fixed. What is the solution? Firstly, major league baseball needs to institute a stiff luxury tax for any team that spends more than a certain amount on payroll, that amount to be determined before every season, and the tax should escalate exponentially as the payroll increases over the luxury threshold. The tax should start relatively soft and become harder as players play out their existing contracts and teams that have astronomical payrolls are able to shrink their budget. Eventually, a salary cap should be put into place with a similar system to the NFL. This would eliminate issues with competitive balance, and also problems with certain players making exorbitant amounts of money (ahem Alex Rodriguez ahem).
However, complaints about sports should be based in sound, logical reasoning. There should be no cap on individual players salaries, as many, many sports talk show callers like to complain about. Within the system, the market will fix itself. Many people find it offensive that professional athletes, and baseball players in particular, make so much money for playing a game. But the truth is that they wouldn’t make so much if the market didn’t indicate that they should. Anyone who suggests that athletes make way too much money either doesn’t understand capitalism, or is an outright communist, economically speaking. They make good money because they can perform feats that few others can, and that people will pay handsomely to see. I find it funny that many of the people who complain about players’ salaries are in fact season ticket holders to professional sports franchises. If you are unhappy with professional athletes, then stop supporting professional sports. It’s as simple as that.