{"id":817,"date":"2020-11-27T23:30:35","date_gmt":"2020-11-28T04:30:35","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=817"},"modified":"2023-05-06T16:49:29","modified_gmt":"2023-05-06T20:49:29","slug":"economics-of-salary-caps","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=817","title":{"rendered":"Economics of Salary Caps"},"content":{"rendered":"

It started innocently enough.\u00a0 A chance comment heard on the sports radio WFAN from Baltimore opened to my eyes to something I hadn\u2019t never realized.<\/p>\n

\"\"<\/a><\/p>\n

Under its collective bargaining agreement, each NBA team must spend up to at least 90% percent of the salary cap on player salaries.\u00a0 To quote the Wikipedia article on the NBA salary cap<\/a>:<\/p>\n

To ensure the players get their share of the BRI [basketball-related income], teams are required to spend 90 percent of the salary cap each year,<\/div>\n

which amounts to a minimum salary level per team of $98.226 million (see NBA Salary Cap set at $109.14 million for 2019-20<\/a> for additional details).<\/p>\n

\"\"<\/a><\/p>\n

The WFAN Big Bad Morning Show continued on this topic for a couple of minutes but the bad taste it left in my mouth remained at lot longer.\u00a0 One of the announcers (Jerry Coleman) was indignant in the discussion, pointing out that the majority of the players are mediocre at best and were grossly overpaid as a result.\u00a0 The other two announcers (Ed Norris and Rob Long) leapt to the defense of the players, pointing out that the league makes money off of them and that it was only fair that they got a substantial piece of the pie because they were the ones putting in all the effort.<\/p>\n

Now I don\u2019t expect a lot of rigorous economics analysis from sports radio and I realize that hotly debated opinions make for good radio.\u00a0 That said, the faulty economics on display can\u2019t go unchallenged for precisely the reason we would criticize any group claiming the earth was flat.\u00a0 Eventually this bad thinking leads to bad decisions.\u00a0 Sadly, both Jerry\u2019s and Ed\u2019s & Rob\u2019s points-of-view are wrong and make good examples of the kind of \u2018flat earth\u2019 thinking so prevalent in the way the public at large think about economics issues.\u00a0 First let\u2019s deal with Gerry\u2019s misconceptions and then we\u2019ll discuss the more subtle errors of Rob and Ed.<\/p>\n

Gerry\u2019s primary error is in thinking the common misconception that there is a single unique standard for judging what a person\u2019s effort is worth.\u00a0 I might agree with him that the majority of professional basketball players fall short of really having a mastery of the game.\u00a0 Examples are abundant where a player confuses athleticism with understanding the core aspects of the game.\u00a0 As a result there are moments of exhilaration but they are often few and far between and, it often is the case, that the team, as a whole, suffers from the grandstanding of one of these players.\u00a0 I might even go so far as to say that I think the NBA as a whole is not worth it.\u00a0 But in these cases Gerry and I are merely stating opinions and not well-supported ones.\u00a0 The public judges a basketball player on the enjoyment they derive from watching him play not from some objective analysis of how he plays.\u00a0 Since it is a matter of taste in entertainment, there is no absolute scale against which he can be measured, no well-defined set of criteria by which we can say that he deserves such and such and no more.\u00a0 He gets what the market can bear even if someone schooled in the art of basketball would find issues with the skills (or lack thereof) on display.\u00a0 If the public enjoys a particular player\u2019s flamboyance and are will to look past his shortcomings then they are getting exactly what they pay for and their freedom to choose should be as sacrosanct as those who think that the player is \u2018shockingly overpaid\u2019.<\/p>\n

Rob\u2019s and Ed\u2019s error centers more along the economic fallacies pointed out by Frederick Bastiat, when the latter complained about people ignoring the unseen cost.\u00a0 It is tempting to look at the players and couches putting in the effort at playing while the owners simply prowl the sidelines or sit comfortably in the luxury owner\u2019s box and say only one side is working.\u00a0 But, of course, this looks past the time and effort put in by the owners in acquiring the capital to buy a team.\u00a0 Such thinking ignores the league management that markets the games and makes deals with the networks to air each contest.\u00a0 For one thing is certain, no matter how talented an individual player is his talent amounts to nothing if there isn\u2019t an audience willing to buy the product he is selling.\u00a0 Without access to a market to showcase his skills he is consigned to suffer in obscurity.\u00a0 This is the point so brilliantly made by Crash Davis (played by Kevin Costner) in the pool hall scene of Bull Durham.<\/p>\n

\nhttps:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2020\/11\/One-More-Quail-a-Week.webm<\/a><\/video><\/div><\/center><\/p>\n

The benefits the players derive from the structure of the league and the center stage it provide them extend far beyond the salary they are paid.\u00a0 Many players earn substantial incomes by lending their endorsements or likenesses to advertising this product or that.\u00a0 Do the owners get a piece of this pie in exchange?\u00a0 Shouldn\u2019t the flow of earnings go both way since the players endorsement revenue results only from the fame they derive from playing in the NBA?<\/p>\n

To close, I don\u2019t think one simple morning show will bring down the fabric of capitalism nor do I think that Gerry, Ed, and Rob are responsible for these misconceptions being part and parcel of ordinary thinking.\u00a0 But they could contribute to better thinking about economics issues.\u00a0 As far as the NBA is concerned, it is hard not to be critical of squabbling millionaires bickering with squabbling billionaires.\u00a0 Both sides have a lot to be thankful for but I somehow think that even during this time of thanksgiving, neither side is likely to recognize much less admit it.<\/p>\n","protected":false},"excerpt":{"rendered":"

It started innocently enough.\u00a0 A chance comment heard on the sports radio WFAN from Baltimore opened to my eyes to something I hadn\u2019t never realized. Under its collective bargaining agreement,... Read more ><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-817","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=817"}],"version-history":[{"count":4,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/817\/revisions"}],"predecessor-version":[{"id":1175,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/817\/revisions\/1175"}],"wp:attachment":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}