Pay Players Less So Owners Get Richer?

Moneybox
A blog about business and economics.
April 15 2013 1:42 PM

What's the Alternative To Sky-High Salaries for Baseball Players?

165949868
Detroit Tigers pitcher Justin Verlander

Photo by Gregory Shamus/Getty Images

With due respect to Edward McClelland's concerns about high compensation for baseball players and growing wage inequality in the United States, it's not clear to me what the alternative system that would be better from an egalitarian viewpoint is supposed to be. What if Congress passed a law saying no player can earn more than $5 million a year?

The quality of baseball play would stay similar. The number of people who want to attend games live would stay similar. The pool of tickets for sale would stay similar. The market-clearing price of tickets would stay high, as would the profit-maximizing price of in-game concessions. The number of people wanting to watch games on TV would stay similar, so the auction process by which TV rights are sold would stay similar. In other words, no benefits would trickle down to baseball fans. The benefit of lower salaries would trickle up to baseball team owners. And whatever you think of Justin Verlander, it's not at all clear to me how putting more money in the pocket of Tigers owner (and Little Caeser's Pizza founder) Mike Ilitch improves anything.

Advertisement

A relevant issue here is that in a lot of lines of business, higher profit margins will spur new investments. If the wages for Chicago-area homebuilders fall, then profits will soar, leading to more home construction and thus a consumer benefit—more homes. But if the wages for Chicago-area baseball players fall, then it's still the Cubs and the White Sox and a 162-game season. Why exactly Congress has decided to allow major American sports leagues to constitute themselves as closed cartels rather than European-style leagues with promotion, relegation, and entry I couldn't quite say. But given the existence of the closed-cartel system, all the returns to falling costs will accrue to the owners. So what's the point?

Correction, April 16, 2013: This post originally misspelled Edward McClelland's name and misidentified Mike Ilitch as Mitch Ilitich.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

The Slatest

Ben Bradlee Dead at 93

The legendary Washington Post editor presided over the paper’s Watergate coverage.

This Scene From All The President’s Men Captures Ben Bradlee’s Genius

Renée Zellweger’s New Face Is Too Real

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?

Whole Foods Is Desperate for Customers to Feel Warm and Fuzzy Again

The XX Factor

I’m 25. I Have $250.03.

My doctors want me to freeze my eggs.

The XX Factor
Oct. 20 2014 6:17 PM I’m 25. I Have $250.03. My doctors want me to freeze my eggs.
Technocracy

Forget Oculus Rift

This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.

George Tiller’s Murderer Threatens Another Abortion Provider, Claims Free Speech

The Congressional Republican Digging Through Scientists’ Grant Proposals

  News & Politics
The World
Oct. 21 2014 3:13 PM Why Countries Make Human Rights Pledges They Have No Intention of Honoring
  Business
Moneybox
Oct. 21 2014 5:57 PM Soda and Fries Have Lost Their Charm for Both Consumers and Investors
  Life
The Vault
Oct. 21 2014 2:23 PM A Data-Packed Map of American Immigration in 1903
  Double X
The XX Factor
Oct. 21 2014 3:03 PM Renée Zellweger’s New Face Is Too Real
  Slate Plus
Behind the Scenes
Oct. 21 2014 1:02 PM Where Are Slate Plus Members From? This Weird Cartogram Explains. A weird-looking cartogram of Slate Plus memberships by state.
  Arts
Brow Beat
Oct. 21 2014 9:42 PM The All The President’s Men Scene That Perfectly Captured Ben Bradlee’s Genius
  Technology
Technology
Oct. 21 2014 5:38 PM Justified Paranoia Citizenfour offers a look into the mind of Edward Snowden.
  Health & Science
Climate Desk
Oct. 21 2014 11:53 AM Taking Research for Granted Texas Republican Lamar Smith continues his crusade against independence in science.
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.