Monday, May 27, 2013

Sports Leagues as Command Economies, Not Market Economies

I wish I had seen this brilliant post from the Freakonomics guys prior to my post about the NBA's Seattle shenanigans.  While I explained how the NBA was essentially asserting its monopolistic powers over the free market, Dave Berri puts it in better - albiet nerdier - terms:
Unfortunately, Seattle learned this past week that the NBA doesn’t quite follow the rules of a market economy. For Seattle to get the Kings, the other 29 owners had to approve the deal. And when the dust settled, a majority of those owners thought an inferior bid from another group that wanted to keep the team in Sacramento was preferred. Consequently, Seattle has been frustrated again.
Here is how Ira Boudway of Bloomberg BusinessWeek described the owners’ motivation.
More than anything else, the Sacramento saga is about public funding for arenas. The NBA, like the NFL and MLB, wants to reward cities that help pay and punish those that don’t. Seattle lost its team in 2008 because it refused. When Sacramento Mayor Kevin Johnson came up with a promise to secure $258 million in public funds for a new arena, the league felt bound to keep up its end of the deal. “You’ve got to match the offer, have a building, and get a good ownership group that can make it happen, and it happened,” Commissioner David Stern said at the press conference yesterday. The Kings, of course, already have a building. Stern meant a new building, replete with lots of luxury boxes subsidized by taxpayers.
So the NBA, according to Boudway, chose the Sacramento offer because it wishes to continue the flow of public funds to the NBA. As Robert Baade and Victor Matheson note, in the past 20 years we have seen more than $3 billion of public money spent on NBA arenas.
Berri goes on to explain how the highly-regulated league is really a command economy.  And that, according to the WiseGEEK website, defies the balance of supply/demand as well as the will of the producers (athletes) and consumers (sports fans).

1 comment:

  1. None of this should be a surprise.
    NBA gets another in a long line of local suckers in Sac. to pony
    up for the privilege of serving the basketball lords and keeps their carrot (Seattle) dangling until they use their stick again on the next in line.
    No different than what the NFL is doing.
    Quite a raket, eh?
    The blue sky financing scheme in Sac. should be a cautionary
    tale for those in Hillsboro who want to break the bank for
    the Rays.