Don’t like the Yankees success? Blame the principles of capitalism

I came across the linked article today, which I found to be an excellent read. The author suggests reformers of MLB should focus on incremental changes to revenue sharing, and other league rules, and a salary cap later, maybe much later.

about 2 years ago ShawnK 21 comments 0 recs |

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I’ve always thought of professional leagues as monolithic entities, not “markets” of individual teams. To use a fast food example, McDonald’s would survive if Burger King went out of business, but the Yankees would be severely hurt if 5 or 6 baseball franchises folded, since their success depends on there being teams to play against. Because the overall health of MLB has been pretty good even as the disparity in payrolls has increased, there’s no incentive for MLB to do anything substantial to change the current system. You would hope that someone would realize that having the sport dominated by the big-market teams will have long-term deleterious effects on the overall health of the game, but I’m not holding my breath.

by Ryan on May 20, 2010 12:12 PM EDT reply actions 2 recs

It’s a closed market. Not everyone can open up a Major League Baseball franchise in their town.

To use a pizza shop analogy — if I open a pizza shop in my town, I just have to compete basically with the pizza shops nearby. I compete with a giant corporation like Domino’s, but not all of the Domino’s locations, just the ones that serve my direct market. Therefore, I am not directly affected by the total amount Domino’s can spend in order to make their pizza shops function, just the localized amount.

However, if I am the owner of a major league franchise, I have to compete (on some level) with all of the 29 other teams within the closed system. So I’m competing against a team that is able to utilize upwards of three times (or more) of my budget to improve their on-the-field product. That makes it extremely difficult for me to operate at any type of profit and still put forth a viable product.

Normally, I’m a free markets kind of guy. But in the closed monopoly that is MLB, I would be open to socializing the revenue streams. As Ryan says, it’s a completely different animal.

Blake: Thanks to you, I am damaged beyond repair!!

by emd2k3 on May 20, 2010 5:38 PM EDT up reply actions

It’s a closed market. Not everyone can open up a Major League Baseball franchise in their town.

exactly. one of the more basic assumptions in economics is free exit and entry into a market. even if it isn’t free, it is also assumed (at least with the basic theories of economics) that the market, even if it doesn’t have free entry and exit, is open. you cannot compare MLB, or any sport really to an open market because it isn’t one. I completely agree with you.

your last paragraph describes my views perfectly too.

I teach good life choices. That’s why I almost didn’t graduate High School.

by bross09 on May 20, 2010 9:14 PM EDT up reply actions

In an open market, there would be a rush to fill a void and the NYC area would have 4-5 teams instead of 2…

by stuart dean on May 21, 2010 1:18 PM EDT up reply actions

Yeah, some recommendations on how cut down the Yankee revenue machine involve moving a team to the NYC area (New Jersey? Connecticut?).

by Ryan on May 21, 2010 2:06 PM EDT up reply actions

I don’t think it’s a closed markert. It just has HUGE barriers of entry. Yankees fans have extraced a lot of value from their team in the form of 27 World Series championships – why would they switch their allegiance? Who would fund a new stadium? Yankee Stadium’s capacity is roughly 51,000. If there is so much pent up demand, why didn’t they build more seats?

by ShawnK on May 24, 2010 12:43 PM EDT up reply actions

I would argue near-impossible barriers of entry make it a de facto closed market.

Blake: Thanks to you, I am damaged beyond repair!!

by emd2k3 on May 24, 2010 1:17 PM EDT up reply actions

If you put a Brooklyn Superbas franchise in Coney Island you’d see a core of fans within two seasons.

by odradek on May 24, 2010 4:45 PM EDT up reply actions

Of course it’s a closed market. The other owners have to vote to let you in. They vote “no,” you’re not in. Period. That’s a closed market.

by Jay on May 24, 2010 7:02 PM EDT up reply actions

It’s a monopoly, but I’m nitpicking.

by ShawnK on May 24, 2010 7:37 PM EDT up reply actions

The author raises some good points, but his solutions lack nuance. I understand it’s just a broad sketch, however many people have already stated that an international draft has many drawbacks. I’d also like to know what tweaks he insists be made to free agency, rule 5 draft and waiver system.

It’s not all that hard for educated baseball fans (or even just the casual fans) to point out what’s causing this huge disparity between the rich and the poor. However, I’ve yet to come across someone with a realistic fix. I realize it’s complicated, but some of these articles or complaints have become a bit lazy imo, and just seem to cater to the payroll outrage that’s been more vocal the last year or so.

by JP_Frost on May 20, 2010 12:14 PM EDT reply actions

Seems to me this article is a major step forward from the usual crap we see.

Whatever drawbacks an international draft may have, and whatever problems the Rule 4 draft already has, there can be little doubt that it would be a big improvement on the open-bidding for international players that goes on now.

by Jay on May 20, 2010 12:22 PM EDT up reply actions

Revenue and expenses are made for the collective. As long as each team make certain attendence standards, they all share equally. Either that or nationalize TV contracts. I still think its asinine that team revenue disparities are so large. They need to take advantage of their anti-trust exemption and work more socialized. A league is only as strong as its weakest member. If teams still can’t draw on a stabilized playing field, then they do not deserve a fighting chance. Would this ever happen? not a freakin chance!!!

Baseball fans are junkies, and their heroin is the statistic. - Robert S. Wieder

by jerseywahoo on May 20, 2010 1:34 PM EDT reply actions

Baseball has many features in common with markets, but it is still a sport. This writer understands that well.

by jhon on May 20, 2010 3:36 PM EDT reply actions

I would much rather blame something more tangible. Like Jorge Posada.

-Erik

by drerikbrady on May 20, 2010 4:24 PM EDT reply actions 3 recs

I think the writer (and headline writer) are extremely clumsy to frame the situation in economic terms like “capitalism” and “socialism,” which also are political hot-buttons at the moment. What the Yankees enjoy is not capitalism; it’s a closed system in which they get unearned advantages, nothing more.

Every fantasy league is “socialist” per the terms of this article, but does calling it socialist explain what a fantasy league really is? No, of course not. What a fantasy league is, and what the NFL is and what MLB should be, is simple: A level playing field.

by Jay on May 20, 2010 6:06 PM EDT reply actions

In defense of the writer, I think that the title of his article is accurate. He lays out the root problem of major league baseball, which is individual control and production of revenues by owners. This is a principle of capitalism and in contrast to a principle of socialism, which is collective control and production of revenues.

Does capitalism or socialism define baseball? No. But principles of capitalism are evident in the current economics of the league.

by ShawnK on May 24, 2010 11:19 AM EDT up reply actions

And so are principles of socialism, and for that matter, principles of physics. It’s still a ham-fisted characterization that is far more politically loaded than it is enlightening.

by Jay on May 24, 2010 7:04 PM EDT up reply actions

The socialism/capitalism thing in baseball is truly irrelevant. Unless there’s a competing league, then as a monopoly, baseball can rely on any economic system that works best.

Blake: Thanks to you, I am damaged beyond repair!!

by emd2k3 on May 25, 2010 10:03 AM EDT up reply actions

Not so sure about the earlier trading deadline proposed. Maybe eliminate trading deadlines altogether, so rich teams would be forced to trade until the end of September.

Also, why not change Rule 5 to favor poor teams, and grant poor teams 42 man rosters?

by odradek on May 20, 2010 7:38 PM EDT reply actions