Sports and economic systems

There has been increased attention paid to the issues of economic justice and college sports this Fall, spurred in part by the publication of an essay in the Atlantic by Taylor Branch, excerpted from his book The Cartel. I am a big sports fan and have written a bit about the role and tradeoffs of big time college sports in Universities, and made a proposal for how some college athletes could be paid that emanated from discussions with Harold Pollack.

One big picture question has always fascinated me, and I am wondering if there is scholarship or reader thoughts about this question:

  • Why does the USA have more economic control in our professional sports of football, basketball and baseball (free agency, salary caps, hard constraints to entry) than Europe has in its top sport of Soccer?

This seems ironic if you go with the assumption that the USA has a more market based economy than does Europe. While this insight is fairly obvious and therefore maybe not novel, it fascinates me that in a nation that values markets, we have so much economic control in our professional sports. And in Europe which has more governmental economic intervention, they have an essentially unfettered market in their top sport of Soccer. If I had a Billion dollars to spend, I could buy a lower flight or struggling top flight English Soccer club and could buy my way to star players and presumably improved results in a quite straightforward manner (the limiting factor would be how much money I had, and it would take some time). In the U.S., it would be very hard to buy a team, and even if I managed to do so, I would face many barriers to spending my way to the top.

Why is this the case? Has there been serious scholarship (economic, sociological, historical) that explains the seeming disconnect between the overall economy and the economics of sports in the USA and Europe? Is the existence of big time college sports in the USA somehow part of the answer?

DT

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

14 Responses to Sports and economic systems

  1. Ed says:

    I am not familiar with any scholarship on the subject, but I always assumed that the high degree of economic control by the professional leagues in the United States was a consequence of the explicit antitrust exemption enjoyed by MLB and the de facto antitrust exemptions enjoyed by other leagues.

    • Don Taylor says:

      @Ed
      Yes, but why would that (exemption) be granted in the U.S.? Why wouldn’t sports competition be the place you would have the most market?

  2. Brant says:

    I have been a long time follower of soccer and find this same subject fascinating as well. Here are some reasons for why the world soccer is more of a free-market system than the US sports.

    1. The US sports leagues work in a closed market. Nobody outside the US plays American football and very few other countries play baseball or basketball. The ones that do have basketball/baseball leagues don’t come close to the revenue or talent (not yet) of the MLB or NBA. Therefore there is no competition for the American owners. This is not the case in soccer. If, for example, the English FA (Football Assn) implemented salary caps for the English teams, many of the best players would play in other countries (Spain, Italy, Germany, France, etc) which don’t have salary caps. Also, the professional teams in each country’s top league compete against teams from other leagues in Europe-wide tournaments. These tournaments (Champions League and Europa League) are cash cows for both the teams and the soccer associations. If English teams started losing it’s best talent to say Spanish and Italian teams then the whole English league suffers.

    2. For American sports, the talent pool is relatively small which enables its acquisition to be tightly controlled via a draft system. This would be impossible in soccer. There are thousands of players to acquire from hundreds of leagues all over the world. Professional soccer clubs have reserve and youth teams to develop young talent which they find at early ages. There are also minimal labor laws preventing soccer clubs from acquiring talent of a very young age. For example, the best player in the world at the moment, Lionel Messi, was scouted in Argentina and signed to a contract at Barcelona at the age of 11. This would be frowned upon by most Americans I would think. Americans like to think their youth athletes are getting a well-rounded upbringing with a good education. Maybe that’s why American youth sports teams are linked with educational institutions? Hmmmm.

    I’ve got a few more but I am tired….

    • Don Taylor says:

      @Brant
      interesting points that make sense. A true difference in Soccer (esp talent pool) versus American professional sports. Interestingly, baseball is the most similar to soccer in terms of broad talent pool (Latin America, Japan) and has the most different college/pro sport connection. You can be drafted out of high school and not sign and go to college. If you do this you must stay 3 years in college and then are redrafted. This system seems more fair (to the players) than the way basketball and football are done with respect to college v. pros.

      • Brant says:

        Agreed. Maybe this is part of the reason why baseball players have more power in regards to creating a more free-market system (ie. no caps, etc) compared to NBA and NFL. Also, average career length plays a large part in that too. The NBA and NFL player carrier lasts 2-4 years on average. The baseball career average is much longer I would think and I recently read a pro soccer career lasts 10 yrs on average. If the NBA/NFL players unions lose a season’s wages due to negotiation failure then the majority of players will lose possibly 25-50% of their potential career income. The owners use this to play hard ball. The opportunity lost for baseball and soccer players, if they hold out, would be far less because their pro careers are much longer. And referring back to point 1… soccer players have many other leagues to play in.

      • Don Taylor says:

        @Brant
        had not thought of the differential free agent system with baseball starting that in the U.S. I will tell my son to work on switching hitting….

    • Ann says:

      It is interesting to note that MLS has followed the American model rather than the world football model. Competition (ie “rivalry”) from European leagues makes no dent in upping salary caps and spending on talent within the American cartel. The national team should be thankful for the competition since the international experience seems to benefit the US.

      With respect to the lip service paid to markets and competition, economists should refer to Adam Smith’s insights. With respect to the competitiveness of the world leagues, you won’t see someone buying Darlington or Exeter (or Siena or other lower league teams) and then investing their way into the top league. The top teams (even the Championship in England) are still largely rich men’s toys – think Man City, Chelsea, AC Milan, The rich men (exclude Delia Smith) are sugar daddies.

      • Don Taylor says:

        @Ann
        Fair enough on Darlington because of locale I assume. QPR, Crystal City, it would be doable, right? Also, have heard it said the reason the US national team is not better in Soccer is that our best players go to college and play instead of going to Europe as professionals at age 18 (which is of course late for the best of the best).

      • Ann says:

        Darlington is further down the order, but not really that much more out of the way than Sunderland. QPR and Crystal City are excellent examples of how European “business interests” are not looking to be competitive by picking up a cheap firm that can be built into a profitable concern, but turn instead to Liverpool, usw.

        Norwich might be the case that proves the rule, however.

  3. Don Taylor says:

    @Ann
    Also, the best model for an owner of any professional sport is person with more money than sense and who doesn’t care so much about financial bottom line, but wants to win. Jack Kent Cooke and Redskins exhibit A.

    Your case about not buying QPR, etc. is fairly convincing. I think the difference is desire to make money vs. desire to win, but maybe I overstate

  4. Ann says:

    So here is a sports economics question for you to mull over:

    Why can moving a franchise in the US work financially (e.g., Dodgers, Colts), but is less likely (maybe not at all) in Europe (I don’t know about Latin America) as evidenced by Wimbledon’s move to Milton Keynes and subsequent disappearance?

    I don’t have a set answer, just speculations.

  5. Brant says:

    @Don

    David Stern exhibit B… 🙂

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