…because I’m an economist and a mom–that’s why!

My Son’s Media Debut

May 2nd, 2012 . by economistmom

My son Johnny and I were guests on “The Sports Docket” (an online radio show focused on NY sports) last night, talking about Jeremy Lin and the whole “Linsanity” thing and how inspiring he is to kids like Johnny who want to do well academically and otherwise.  Johnny was the first kid to ever be a guest on the show.  I had hardly anything to say since it was, well, a sports talk show.  (I was invited because of the Christian Science Monitor column I had written about Linsanity and Asian American stereotypes.)  But I enjoyed learning about some of the economics of professional sports, such as the influence of salary caps on ticket prices, from the other guest, Allen St. John.  I am hoping that Jeremy Lin himself finds out about Johnny’s interview and invites him to a Knicks game or just over to his house sometime soon!  ;)

3 Responses to “My Son’s Media Debut”

  1. comment number 1 by: AMTbuff

    Professional sports are effectively monopolies, except insofar as each sport competes with other sports for fans. Over the years the monopoly profits have moved from the players to the owners, even as those profits increased tremendously with ticket prices and TV revenue.

    This situation is analogous to other industries with high barriers to entry. We saw it with GM, Ford, and Chrysler as the unions increased their compensation to the breaking point and beyond. We have seen it with airlines, as unions captured all the profits and more, leaving shareholders with losses and bankruptcy, sometimes more than once.

    Salary caps are an attempt by team owners to avoid bankruptcy, but the transfer of profits to players is permanent. Owners now get their income in prestige, paid for by financial losses. As with designer fashion accessories, the point of owning a team seems to be to make a show of your ability to overpay for an exclusive item.

  2. comment number 2 by: Vivian Darkbloom

    “Over the years the monopoly profits have moved from the players to the owners…”

    I think you meant the other way round?

    “We have seen it with airlines, as unions captured all the profits and more”

    I’m old enough to remember PanAm, but was it ever very profitable? I doubt any airline since then has been a very profitable investment, so you must be going way back. The airline business does strike me as a vanity investment as much as professional sports team, though.

    I doubt there is much accurate data on the profitability (or not) of most pro sports teams, since they are, almost without exception, privately owned. Whether or not the owners make current income, the prices for the franchises do seem to do better than airlines:

    There is a common denominator in the three industries you mention (auto, airline, sports) other than unionization—-government subsidization. Perhaps the two go hand in hand.

  3. comment number 3 by: AMTbuff

    I think you meant the other way round?

    Yes. Good catch, even though the umpire would have called the infield fly rule on my error.

    Another industry of this nature is higher education, where financial aid to parents is captured by college administrators and tenured professors through higher prices. For colleges, the barrier to entry is the long time needed to build prestige. Imagine having to compete in the NFL with a team built only from free agents, without being given permission to draft a single player from the existing teams. That’s how hard it would be to create a top-tier college today.