THE BOOK--Playing The Percentages In Baseball

The only American capitalists who want free markets are start-ups trying to get a foot in the door. Established capitalists want monopolies or cartels with guaranteed profits. Sports leagues are only the most public examples.

This reminds me of the (ironic) fact that, in terms of competitive balance, the Europeans are far more capitalistic in the organization of their soccer leagues, while the US is far more socialistic in all of its sports.

I can dig up the article if people are interested—it may have even been linked to from here.

#1 - your conflating issues. for one thing, monopolies can and do exist in free markets. people are free to use whatever search engine they want, and its a free and open market for anyone who wants to compete in that space. yet google maintains a near monopoly of search requests, to little or no detriment to the consumer.

also its not a uniquely american trait for capitalist to want to corner the market and dissuade competition. the concept of “national champion” was invented by the french. the chaebol and keiretsu are native so south korea and japan respectively, etc etc.

but i love the article. promotion and relegation is a great meritocratic concept for sports leagues that gets basically no attention in north america. it has its drawbacks as well, as witnessed by the calcification of many european soccer tables. plus the north america system is not immune to market forces (team failures/relocation, pressures from start up/rival leagues, etc). but in any event, its a topic i think should be discussed a whole lot more when it comes to league parity issues.

I agree that the promotion/relegation system produces much better results.

EVERY established business prefers central planning to a free-market system, because it eliminates competition and guarantees profits.  It’s the “non-established” businesses (like startups and individuals) that benefit from the free market.  (Most of the benefit, of course, goes to consumers.)

That’s why you see the biggest corporations asking to be regulated.  The regulations are expensive to comply with, keeping the small fry out of the market. 

(Like the settlement with the tobacco companies ... from what I’ve read, Big Tobacco agreed to huge cigarette taxes to compensate smokers for the lies told in the 1960s.  But NEW tobacco companies have to charge those taxes too.  That means the bad guys don’t go out of business, even though they might deserve to.)

The idea that big corporations love the free market is dubious at best. 

Anyway, a better analogy might be Wal-Mart (the American model) vs. Subway (the European model).

Wal-Mart owns all its stores.  They decide where they go, and how big they’ll be.  Every so often, they review how the stores did and make changes as necessary.

Subway has franchisees.  The franchisee has lots of input into where the store goes.  If he makes money, it stays.  If he doesn’t, he goes bankrupt and the store closes.

Both models work.  Neither is more or less free-market than the other.

I’d like to see a REAL free-market.  That would mean competing leagues, like NHL/WHA.  If the NHL doesn’t want to put a second team in Toronto, then, hey, the WHA will be happy to fill the gap.

Of course, that wouldn’t necessarily work, and hasn’t in the past.  But, if you want to be heavy-handed, you could become President and then do what Bill James suggested: force the league to split in two, allowing them to co-operating only to organize a championship between them.

If you look at the various European soccer leagues you’ll see that promotion/relegation system isn’t quite as good as you think. Money still talks and the richest teams dominate the top 4 or 5 slots year after year (in some leagues is the same 2). The fight for first place involves the same few teams year after year--because they have the following and the ownership dollars.Every so often a new team joins the fight for top dog because a new owner is willing to spend millions to get there. For example, the past two year Manchester City in the English Premier League got a new owner who is willing to spend what it takes to move from being a middle team with no chance of relegation or championship to challenge for the title.
In a 30 team league you’ll see the same few teams fighting for first, the bulk of the teams fighting to move into spot 4 or 5 (because they get to play a competition between various leagues that earns them more money) and about 4 to 6 teams fighting relegation.
The Pirates probably have a better chance of winning the World Series than the last place team in the Premier league has of finishing in first place.
No matter what system you have in place, the top spots go to the richest teams--barring poor management--and the richest teams stay the richest teams year after year.
Les

One gripe I have with the sports socialism vs market argument is that it assumes the “team” is strictly the unit of economic activity, and that’s a false assumption. Those that call a sports league “central planning” or “socialist” are confusing athletic competition on the field with business competition off the field.

Teams are not independent businesses the way Apple, IBM, Google or Microsoft are. Teams are franchises, akin to McDonalds.

Franchise arrangements are a hybrid of a single economic unit and independent economic units. McDonalds franchises are not intended to be in competition with one another. They are, as a whole, in competition with the Burger King and Taco Bell brands, as wholes themselves. The NFL is in competition with the NBA and other entertainment options, not with itself.

As Phil mentions, it would never make sense for McDonalds to allow franchises to open next to one another and directly compete. This is not the same as “central planning” on a national economic scale.

As Berri notes, the nice thing about the relegation/promotion system is that if a particular “minor-league” city can truly support a better team, it just spends money on better players to get promoted.  It’s a nice way that a league can ensure, semi-automatically, that teams follow the money.

I guess it’s like an internal market ... just to make something up, it’s like the individual Subway franchisees bid on having Jared Fogle fly in and make an personal appearance.  That makes sure Jared goes to the Subway where he’s most valued—that is, the highest bidder—without needing a central corporate planner to try to figure it out.

P.S.  My #5 repeated Dana King’s #1.  Should have read #1 more carefully, sorry.

As many have pointed out, including Krugman and Mark Thoma, in this link-

http://krugman.blogs.nytimes.com/2011/12/05/things-that-never-happened-in-the-history-of-macroeconomics/

- Hayek’s ideas shouldn’t really be taken serious when it comes to economics. His influence is political. Interesting ideas presented by Berri though. I’m a big fan of Wages of Wins.

Berri is making reference to arguments that Hayek made in The Use of Knowledge in Society (linked in my name) and numerous other works, which are dead-on relevant to his point. His influence as a macroeconomist isn’t relevant, and while Krugman’s claim that Hayek is not an important figure in macroeconomics is ridiculous, I don’t want to pull this thread off topic. The commenters in the article Krugman links do good work.