The NFL's Parity Perplex 

How the dismal science applies to your life.
June 23 2000 9:30 PM

The NFL's Parity Perplex 

The salary cap is one of the mysteries of the universe

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The example of the Giants points up another important truth: Contrary to popular belief, the threat to parity comes not from the richest teams but from the teams with lots of fans who are willing to pay high premiums to see good players. If quarterback Joe Btfsplk adds $5 million to the revenue of the Chicago Bears, then the Bears will offer him up to $5 million (and no more) regardless of whether the owner is rich or poor. This analysis assumes that NFL owners are rational profit-maximizers, and, of course, there is room to question that assumption.

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How will the salary cap evolve in the future? Like the universe itself, it might continue to expand forever or suddenly vanish in a final "big crunch." Either prophecy can be self-fulfilling. Take the big-crunch theory: If teams believe the cap will be abandoned in a few years, they'll sign a lot of long-term contracts with large signing bonuses (figuring that most of the bonus will be scheduled to "count" in years when there will be no cap to count against). Once they've signed those contracts, they'll bring pressure on the league to abandon the cap. That's where the prophecy becomes self-fulfilling.

On the other hand, if teams believe the cap is here to stay—even with continuous adjustments and new exceptions and exceptions to the exceptions—those signing bonuses become less attractive, there will be fewer of them, fewer teams will be desperate to escape the constraints of the cap, and the cap has a better chance of surviving.

When two conflicting prophecies can each be self-fulfilling, we economists say we're in a situation with "multiple equilibria" and usually throw up our hands when it comes to making predictions. So the cap might or might not survive, but in any event it's a pretty good bet that the league has a long-run commitment to the conservation of parity. Closer contests mean more revenue, and professional sports organizations don't walk away from revenue. That's a law of nature you can take to the bank. 

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