DRI-275 for week of 9-28-14: Touchdown-Celebration Prayer: Time for Separation of Church and Red Zone?

An Access Advertising EconBrief:

Touchdown-Celebration Prayer: Time for Separation of Church and Red Zone?

Fans of the National Football League (NFL) have become inured to the spectacle of celebrations conducted by players who score a touchdown. These actions have assumed a variety of forms, ranging from ordinary excesses of joy and enthusiasm like jumping up and down to esoteric rituals like spiking or dunking the football over the goalpost. Perhaps the most common form is some sort of gyration or celebratory dance. The practice originated among certain players whose fame depended at least as much on their self-promotional zeal as upon their athletic prowess – Deion Sanders, formerly of the Dallas Cowboys, comes particularly to mind.

Older readers will appreciate the striking contrast between this modern attitude and that exhibited by legendary stars of yesteryear like Jim Brown of the Cleveland Browns and Johnny Unitas of the Baltimore Colts. Brown, who may have been the greatest running back of all time, was slow to assume his stance prior to the center snap of the football and even slower to rise after being tackled when running the ball. His demeanor was impassive. He conserved his energy and saved his exertions for the time between the snap and the referee’s whistle signaling the end of a play. Did this account for the fact that his average-yards-gained per carry was the highest of any Hall of Fame runner?

Unitas was similarly deadpan on the field. As quarterback for the Colts, he terrified opponents and awed teammates with the knack for leading his team from behind in the closing seconds of a game. But fans could never have guessed by looking at him whether he had just been sacked for a loss or thrown the winning touchdown pass as time expired. If any of his teammates had ever done anything as gauche as celebrating a long run or spectacular catch, they would have been frozen solid by the icy stare known throughout the NFL as the “Unitas look.”

In the so-called “greatest football game ever played” – the 1958 NFL championship game between the Baltimore Colts and the New York Giants – Unitas provided the prelude to victory by completing a daring sideline pass to tight end Jim Mutcheller in the Giants’ one-yard line in sudden-death overtime. At the post-game press conference, a reporter ventured to question Unitas’s play-calling decision: “That was a pretty dangerous pass, wasn’t it? What if it had been intercepted?” The reporter was the first televised victim of “the look.” “When you know what you’re doing,” Unitas replied without needing to raise his voice, “they’re not intercepted.”

Nowadays many players feel obligated to supplement the audio and visual record of play supplied by television by advertising what has just happened. The newest wrinkle on this style of irrepressible self-expression is praying in the end zone after scoring a touchdown.

The Abdullah Case and Ensuing Fallout

In the fourth quarter of a game between the Kansas City Chief and New England Patriots at Arrowhead Stadium on September 29, 2014, New England quarterback Tom Brady completed a pass to Kansas City safety Husein Abdullah. Abdullah traversed the 39 yards to the New England end zone, where he dropped to his knees in prayer.

End-zone touchdown celebrations are now so commonplace that rules have been drafted to cover them. One of those rules forbids celebrating while “on the ground.” The referees invoked this rule, penalizing the Chiefs 15 yards on the ensuing kickoff for “unsportsmanlike conduct.”

That did not end the matter, though. Two days later, the NFL’s league office announced that the official decision had been in error. Why? It seems that “there are exceptions made for religious expressions,” according to NFL vice-president for football communications Michael Signora. But the referees may have been confused by Abdullah’s body language; he slid on his knees rather than simply kneeling down. Probably sensing an opportune moment, the well-known organization CAIR (Council on American-Islamic Relations) lodged an objection to the original ruling. According to an article in the Kansas City Star (“NFL Admitting Error on Abdullah Flag,” October 1, 2014, by Tod Palmer), “Abdullah is a devout Muslim.” The CAIR spokesman urged the league office to “clarify the policy” so as to “avoid the appearance of a double standard” for Muslims and non-Muslims.

The sensitivities of Americans have been abraded by over a half-century of controversy over the separation of church and state. Now the debate over public religious observance has invaded the football field or, more specifically, the end zone. Will theologians have to be on call for replay decisions by officials? Should the NFL nail a thesis on the separation of church and red zone to the main gate of its stadiums? Is all this really necessary?

The Economics of Player Celebration 

Does associating end-zone prayer with celebration seem odd? Abdullah himself referred to his action as “prostrat[ing] myself to God.” Still, the religious faithful at their devotions are often called “celebrants.” In any case, the attributes of prayer and those of celebration are virtually identical in this particular context, which allows us to apply economic principles to both types of action. Both interrupt the normal flow of play and divert attention away from the game and to the celebrant. A case exists that each kind of action might either please or annoy a football fan.

One interesting thing about this example is the diametric tacks taken by the economist and the non-economist. The non-economist feels compelled to ascertain whether prayer itself is “good” or “bad.” A particularly discriminating non-economist might put that to one side and focus on whether or not prayer is a good thing in this particular context; e.g., on a football field with hundreds of millions of spectators. The economist may or may not feel qualified to supply answers to those questions, but does not care about the answers because they needn’t be answered by any particular individual. Markets exist to answer questions that individuals cannot or should not answer. 

Professional football is an intangible product supplied by the National Football League and its member franchises (teams) to consumers (fans). That product consists primarily, but not solely, of competitive athletic performance. A rhetorical question posed previously in this space asked: If O. J. Simpson were still in full flower of his athletic skills, would he be working as a running back in the NFL, all other things equal? The obvious answer is no, because football fans do not want to watch murderers play professional football, no matter how talented they may be.

The advent of touchdown celebration allows us to add another qualifying example to our definition of the pro-football product. To the degree that some fans enjoy and even encourage end-zone celebrations, it is clear that they derive satisfaction (or utility, in economic jargon) from this practice. That means that the pro-football product is defined as “competitive athletic performance plus entertainment.”

This is not merely an ad hoc formulation cobbled together by an economist for a column. In the same edition of the same Sports section of the Kansas City Star as the story of the NFL’s recantation of the penalty on Abdullah, the adjacent story is a profile of Chiefs’ cornerback Sean Smith. Study Smith’s comments about his flamboyant style of play and the attitude of Chiefs’ coaches to the on-field exhibition of his personality.

“‘I think (the Miami game) gave the coaches a chance to see that when I’m able to go out there and just be myself and let my personality hang out there, not only do I play well, but people feed off my energy,’ Smith said.” [Quoting reporter Terez A. Paylor] “‘Smith, like his other more animated teammates, appreciates Coach Andy Reid’s philosophy. He encourages his players to play with passion and let their personalities shine through on the field, and Smith has embraced that approach this season.'”[Back to Smith again] “‘Coach emphasizes to let your personality show, go out there and cut loose, and be yourself and have fun…That’s something I definitely took personal. I’ve been a very enthusiastic guy. I like going out there and having fun and putting a smile on people’s faces.'”

This constitutes an implicit endorsement by a player and head coach, as cited by a beat reporter, of the economic model developed above.

Does this mean that end-zone celebrations are a good thing? Does it mean that players have a right to indulge them? Does it justify the NFL’s policy? Or condemn it? The answers to these questions are various forms of “no.” End-zone celebrations are one more input into the productive process, no better or worse a priori than any other. They may or may not be appropriate. Players have no “right” to indulge in them because players do not control the production process – the team does. The NFL is the franchisor; it has the right to control end-zone celebrations only if they affect its ability to provide the right competitive environment for the teams and not when only team profitability is at stake.

A last key question may be the one most frequently asked when this issue arises in public controversy. What about the player’s “right” of free religious observance?

Why Freedom of Religion Does Not Guarantee the Right to Celebrate in the End Zone 

Freedom is defined as the absence of external constraint. It does not guarantee the power to achieve one’s aims over opposition; in particular, it does not confer rights. A right can be enjoyed only when it does not abrogate the exercise of somebody else’s right. A contract is a voluntary agreement that imposes legal duties on both (all) parties to it.

These definitions lay the groundwork for our understanding of prayer in the end zone.

Husein Abdullah is an employee of the Kansas City Chiefs football team. He helps produce professional football entertainment but he does not control the mix of inputs into that product. The team decides who the other players will be, what style of football the team will play, what offensive plays the team will run, what defensive sets the team will employ, who the coaches, assistant coaches and trainers will be. If the team chooses all these inputs into the production of professional football entertainment, why should it not also control the nature of end-zone celebrations? Of course, the team may opt for spontaneity by giving free rein to players’ imaginations, just as conventional entertainers in show business may opt for improvisation over a scripted performance. Still, the team will almost certainly forbid players from celebrating by making obscene gestures to opposing players, revealing intimate body parts to fans and performing other acts virtually guaranteed to offend fans rather than entertaining them.

So we should hardly be astonished if the team should choose to regulate an action as potentially sensitive or embarrassing as an act of religious observance – should we? And, speaking as students of economic logic, we can make no objection to that – can we?

How about Husein Abdullah? Or, for that matter, any religious celebrant of any religious denomination? Is he being treated unfairly? Are his rights being violated?

No. As an employee of the team, Abdullah works at the direction of the team and for its benefit. The fact that Abdullah is engaging in a religious observance in this particular case is irrelevant. Abdullah certainly has freedom of religion. He has freedom of speech, too, but that doesn’t give him the right to say anything and everything under the sun in his capacity as an employee with no fear of repercussion.

Suppose Abdullah were an employee working in an office building. Does he have the “right” to pray at the top of his lungs while wandering around and between the desks of his fellow employees? No, he has no right to disrupt the workplace in this fashion even with the excuse that freedom of religion allows him the right of religious observance. Similarly, his “right” to pray in the end zone is circumscribed by team policy.

Does this mean that the Abdullahs of the world are inevitably booked for disappointment in their longing to prostrate themselves before God in the end zone? There is no reason to think so. We know, for instance, that celebrations were once frowned upon and suppressed yet are now practically de rigeur. There seems no way to predict what twists and turns this penchant for celebration will take because there is no way to predict how the tastes of the public will change.

Are we afraid that “discrimination” against unpopular minority groups (Muslims, for example) will proliferate? No, we are not, because in this context the term discrimination loses its familiar colloquial meaning. There is no arbitrary exercise of power against a group because no business has a duty to employ all inputs to an equal degree. Instead, businesses have a duty to their owners and consumers to employ inputs based on productivity precisely by discriminating in favor of the more productive and against the less productive. Whether the inputs are engaging in religious observance, speech or any other activity does not matter. If a player can produce a productive form of celebration, this will make money for his team and provide the player with a celebratory meal ticket. If not, the player will lose the privilege of celebrating in the end zone. Business is not about what the boss wants or what employees want – it is about what consumers want. Economists characterize this principle as consumer sovereignty.

If a player demands a right to pray in the end zone, what he is really demanding is not freedom, nor is an exercise of a valid right. Rather, it is the power to abrogate his duty to his employer at whim. As often emphasized in this space, this confusion of freedom and power suffered by the general public has been repeatedly exploited to political advantage by the left wing.

The Absurd Position in Which the NFL Finds Itself

The framework for analysis outlined above is simple and logical. It is an outgrowth of the system by which we divide labor to produce and exchange goods and services. The pellucid clarity of this system stands out in brilliant contrast to the existing framework under which the NFL currently operates.

The NFL currently has rules governing player celebrations. These rules are part of the code that governs play on the field. Violations are punished with penalties such as the one Abdullah earned for the Chiefs. Consequently, the rules must be mastered, interpreted and applied by the referees. Inevitably, as with all sports decisions made by referees or umpires, subjective perceptions and interpretations cause mistakes and controversy. (The distinction between kneeling and sliding to his knees probably reminded Abdullah of the judging on Dancing With the Stars.) Meanwhile, the entities whose interests are most directly affected – team ownership and management – must sit back and await the chance to appeal any wrongful decision later.

And the fans – the people for whose benefit the system operates – don’t get any direct say in this administrative process. Whereas in a competitive market, input from fans directly determines the nature and extent of player celebrations, the regulated market gives immediate control to the administrative mechanism of the NFL. This allows the entertainment part of the product to contaminate the competitive part when penalties are levied for unsportsmanlike conduct, whereas under a competitive system the team handles problems of unsuitable celebration outside of the context of the competitive contest.

That’s not all to object to about top-down regulation of end zone celebration by the NFL. In fact, it may not even be the worst. The Abdullah case illustrates the political hazards of the top-down approach. The NFL began by wanting to suppress inappropriate celebration, which is surely not objectionable in and of itself. By doing the regulating itself instead of leaving it to the market, the NFL left itself open to the pressures of every special interest with an ax to grind. Because the NFL has no special interest in the profits of any one team, it has no incentive to favor popular celebration. Because the NFL is a bureaucratic organization, it is open to influence by every special interest with an ax to grind, CAIR being the most recent to step up to the grinder.

Suddenly, the NFL finds it can’t simply ban a form of celebration it doesn’t approve of (by “any player on the ground”) because that would run afoul of “religious observance.” Imagine – religious observance interfering with the conduct of a football game, when previously the only thing the two had in common was Sunday. And the minute the NFL starts making an exception for “religious observance,” it then has to confront the issue of different – and conflicting – religions. Wonderful – the two things attendees at a dinner party are never supposed to mention are politics and religion, and both are now elbowing their way into the end zone. What next? Will Stars of David start popping up on player helmets as an expression of their “right of free speech?” If only the fans had the power to throw a flag against the NFL for interference!

The General Principle at Work Here 

Americans have forgotten the value of allowing markets to decide basic questions. A recent Wall Street Journal op-ed commented offhandedly that we have lost confidence in free markets as a result of the Great Recession. If so, this is a monumental irony, since that event was caused by the interference with and subordination of the market process. It is not clear how much of the current attitude originates with a loss of faith and how much with simple ignorance. Regardless of the source, we must reverse this attitude to have any hope of survival, let alone prosperity. We know markets work because the world in general and the U.S. in particular would never have reached their present state of prosperity unless markets were as effective as free-market economists claim they are. The pretense that regulated, administrative markets are a vehicle for perfect “social justice” is not merely a sham – it is a recipe for tyranny. Administrators possess neither the comprehensive information nor the omniscient sense of fairness necessary to decide whose celebrations to allow, which ones to ban and what standard to apply to all.

The best thing about the example of touchdown celebrations is that they provide a side-by-side illustration of free markets and regulated administrative markets. The free market is player celebrations as they evolved in recent years, encouraged by fan response and governed by individual teams. The Kansas City Star excerpts show in so many words that this market exists and the evidence of our senses shows that this market works just as economic logic predicts that it will. And our ever-more-dismal experience with top-down, bureaucratic NFL regulation shows that rule by fiat and by ventriloquists in the chattering classes is an escalating failure.

What about the older fans who are appalled by player celebrations and long for the good old days of strong, silent, heroic players like Brown and Unitas? Why, we’ll just have to find a team that suits our tastes – or found one.

DRI-271 for week of 9-21-14: The NFL and Domestic Violence: Too Much Action or Not Enough?

An Access Advertising EconBrief:

The NFL and Domestic Violence: Too Much Action or Not Enough?

Two recent highly publicized cases of domestic violence involving current National Football League players have attracted reams – nowadays, “mega-pixels” might be more apropos – of publicity. In addition to the cases themselves, controversy has swirled around the issue of action taken, or not taken, by the NFL itself in response to the incidents. What is the responsibility of the league in these cases?

As always, economics has much to offer in answer to these questions.

The Bare Facts of the Ray Rice and Adrian Peterson Cases

Both of the cases involve star running backs, All-Americans in college and All-Pro caliber performers during their NFL careers.

Ray Rice was a star rusher who accumulated the second-highest total rushing yardage of any Baltimore Ravens running back during his career. On March 27, 2014, he was indicted for third-degree aggravated assault for punching his fiancée in an elevator and knocking her unconscious. His subsequent conviction and lenient sentencing on this charge actually attracted less publicity than did a videotape of the incident that showed him delivering the punch and dragging the apparently unconscious woman from the elevator. This videotape was delivered to NFL security by a law-enforcement officer and then released by the website TMZ. The resulting adverse publicity had two effects: the NFL changed its “player conduct policy” and Rice’s contract with the Ravens was terminated on September 8, 2014. Meanwhile, Rice’s fiancée had become his wife.

Since leaving college in 2007 and joining the Minnesota Vikings, Adrian Peterson has established himself as one of the NFL’s leading running backs. In 2012, he missed breaking Eric Dickerson’s all-time single-season NFL rushing record by a mere nine yards.

His personal life has been as turbulent as his professional life has been productive. His father was a convicted drug dealer. In 2013, he discovered the existence of his two-year-old son, then living with the boy’s mother and her current boyfriend – only to lose him weeks later after the boy was allegedly assaulted by the boyfriend.

On September 11, 2014, Peterson was indicted by a grand jury for allegedly beating his four-year-old son with a tree branch on May 18 of this year, injuring the boy’s legs, back, ankles, buttocks and genitals. The charge was “negligent injury to a child.” Initially, Peterson was suspended for one game by the Vikings. On September 17, 2014, Peterson was placed on the NFL Commissioner’s Exempt/Permission List, requiring him to “remain away from all team activities.” The Vikings have given indications that he does not fit into their future plans.

The Public Controversy

Some scandals explode out of nowhere like building with a gas leak. Others blow up as the predictable culmination of accumulating circumstances, like a cache of dynamite reaching the end of its lit fuse. Then there are those that accumulate like an avalanche that begins with a boulder and snowballs. The last category fits the domestic violence scenario, in which public condemnation gradually rose to a crescendo. Spokesmen and spokeswomen for various organizations opposing domestic violence serially rose to denounce the actions of Rice and demand that something be done about them and him. Print and broadcast media mouthpieces formed a chorus echoing those sentiments. Politicians put their ears to the wind and sensed a sound-bite opportunity. “If the NFL doesn’t police themselves,” Sen. Kirsten Gillibrand (D-NY) courageously declared, “we will be looking more into it.” “We,” of course, referred to the Senate, sixteen of whose members then forwarded a demand that NFL Commissioner Roger Goodell establish a “zero tolerance” policy toward domestic violence.

Commissioner Goodell proved to be the lightning rod for most of the public criticism, thus reinforcing the suspicion that the doctrine of free will and individual responsibility is a dead letter in contemporary American society. The vocally indignant were apparently alluding to the NFL’s “conduct policy,” instituted on April 10, 2007. It applied to off-field behavior of players, coaches and front-office personnel but excluded illicitdrug and performance enhancement matters, which are covered by a separate policy. Between 2007 and 2011, seven players were disciplined under the policy in eight separate actions. (One player was reprimanded twice.) Five of the actions were taken in response to criminal convictions or allegations, one for general misbehavior and two for unspecified conduct. The stated purpose of the policy was to “improve the league’s image.”

Mr. Goodell addressed Rice’s behavior in a press conference last week. But, as Wall Street Journal columnist Holman Jenkins put it (“Way Beyond the NFL’s Competence,” WSJ, September 24, 2014), Goodell apparently “said the wrong thing, or failed to say the right thing, or said the right thing the wrong way – or something.” According to CBSSports.com: Goodell was guilty of “not nailing the moment.” The Los Angeles Times convicted the Commissioner of not “get[ting] it.” The National Organization of Women escalated the charging contest by demanding Goodell’s resignation. This must represent a new high – or low – in the evolving doctrine of corporate responsibility. The league commissioner is supposed to resign because a player’s spat with his girlfriend cum wife gets out of hand.

Commentators Weigh In

Sober voices eventually began to be heard. Joseph Epstein, arguably America’s leading essayist, rightly accused the finger-shakers and fist-pounders of “moral preening” (“Blitzing the NFL With Moral Preening,” The Wall Street Journal, September 22, 2014). “Politicians…university psychologists…media colleagues…the people [the scandal] will make feel good are those who get to pronounce upon it… expressing shock, moral outrage, dudgeon to the highest power.” It provides them “a splendid opportunity… to exhibit their own high and irreproachable virtue.”

Unfortunately, Mr. Epstein’s analysis of the problem itself exhibits the same shortcomings he displayed with his retrograde, liberal take on the violence in Ferguson, MO. “Should anyone be shocked at the irrefutable evidence of domestic violence in the NFL?” No, he concludes, because the players are “men who make their living through violence, and for whom violence well-executed has made millionaires of nearly all of them… The weekly paycheck of Adrian Peterson… is near $700,000.”

Mr. Epstein’s leftish envy of free-market outcomes was now breaking loose. He gave it free rein. “To be a star athlete in America is to grow up… with no one… ever saying no to you. Fame, money, women come rolling in for these athletes, the favorites, or so it sometimes seems, at least while they are still young, of the gods.” Now Mr. Epstein was positively green with envy. At least he was venting his spleen in the right direction – but with his gall bladder rather than his brain cells.

“When someone does say no… is it all that shocking that the athletes respond with violence? I do not say it is right… only [that] it’s not shocking. What is shocking is that there isn’t a lot more of it.” Now it’s out of his system. It’s the old liberal line – the system is the “root cause” of individual misbehavior, while the miscreants are helpless victims, acted upon rather than independent actors.

Mr. Epstein’s failure to distinguish between uncontrolled domestic violence and limited violence within acceptable and desirable constraints is simply inexcusable. It was once commonplace to equate veterans with out-of-control wackos. 1930s musicals would moan “they gave him a gun” and imply that “society” had only itself to blame for any antecedent fiasco, from bank robbery to murder. Knute Rockne’s view, that college football was invaluable competitive training for a future in a competitive society, seems a lot closer to the mark than Epstein’s nonsense.

Like Mr. Epstein’s “civil rights” analysis of the Ferguson episode and his call for a black leader to soothe the savage breasts of the unruly natives of Ferguson, his domestic-violence explanation is a throwback to the liberal pieties of the 1960s. The “root cause” thinking of that bygone era is as dead as the big-government, welfare-state approach to social policy. Not only is top-down management of human behavior demonstrably ineffective, it is also a recipe for moral nihilism. The failure of an acute social critic like Mr. Epstein measures the depth of our morass.

As is so often the case, Holman Jenkins provided a fresh breeze of thinking on the issue. “It’s been decades since police and courts gave a pass to wife-beaters. Mr. Rice was hauled before a grand jury; given the video evidence he might well have gotten the full five-year sentence…[but the state of New Jersey] seems to have seriously applied the criteria for its first timers’ leniency program, in which the victim, Mr. Rice’s now-wife [emphasis added], was allowed an important say… Obviously, an alleged refusal to face up to domestic violence is not the problem here… Domestic violence is a common form of violence for a reason: People fight with those they know. This creates dilemmas for the justice system absent when stranger assaults stranger – dilemmas even a $40 million-a-year league president might struggle to resolve to the satisfaction of any but the shallowest of media shouters.”

Jenkins notes ironically that virtually every full-length discussion of domestic violence in the NFL “segu[es] to those problems that football faces that actually pertain to football [such as] concussion.” He might have added drug use and performance enhancement as well.

The Economics of the Domestic Violence Scandal

In 1956, Milton Friedman authored a classic article entitled “The Social Responsibility of Business Is to Increase Its Profits.” His thesis seemed to be perfectly encapsulated in the title. As usual, though, it was widely misinterpreted. The political Left accused Friedman of saying that only profit matters and all other human values are and should be irrelevant. But Friedman was arguing the economic case for specialization. Business firms exist for the specific purpose of creating goods and services. Although he did not cite it, Friedman could have referred to the previous classic 1937 article by Ronald Coase, “The Nature of the Firm.” Coase deduced that business firms spring up when something is too costly for a household to produce internally. Extending the principle, a business firm produces those things whose internal cost of production is lower than its external cost of purchase. Virtually everything listed under the heading of the “social responsibility of business” is something too costly for business to produce internally because it does not specialize in doing it. Curing the problem of domestic violence surely fits under this heading.

The frustration shown by the Left toward this laissez-faire stance implies that we are giving up on our problems. But that is far from the truth; indeed, it is the opposite of the truth. By assigning the solution of a problem to the agency best equipped to solve it, we are making the best use of the scarce resources available to solve problems – thereby maximizing problem solution. And the NFL’s domestic-violence conundrum is a case in point.

The NFL is a business. It produces a kind of entertainment product called “professional football competition.” The business form it uses is called franchising, a popular method utilized by many American icons like McDonald’s. The NFL’s franchises are called teams; these include the Baltimore Ravens and Minnesota Vikings for whom Rice and Peterson played and play, respectively.

What should the NFL – the franchisor – “do” about the “problem” of domestic violence among its players? (Or, for that matter, among its coaches or front-office personnel?) Nothing. Domestic violence is not a problem for the NFL, the franchisor. The NFL’s job is to enable its franchises to provide the best possible product to fans, who are the consumers of its product. What about the NFL’s “image?” The NFL’s image depends on how well it does its job of supporting its franchises and how good their product is. In that regard, it is just as important for the NFL to refrain from doing bad things as it is for it to do good things. The NFL should not waste its time and money trying to solve problems that it cannot solve and which are better solved by others.

But the fact that domestic violence committed by players is not a problem for the NFL does not mean that it might not be a problem for the particular team that employs the erring player. The word “might” is the operative one; it reinforces the rationale for excluding action by the league. The NFL does not, and cannot, know whether the particular episode is a problem for the team or not. That is a decision for the team to make, not the league office. The NFL does not run its franchises; it does not make the day-to-day, profit-and-loss, operational decisions for team management. Only the team is legally entitled and circumstantially qualified to make those decisions. This decision is one more operational decision for the team to make. In the case of Ray Rice, the Baltimore Ravens made it by deciding to terminate Rice’s contract.

We can easily envision a player’s union advocate representing Rice objecting to that decision in language like this: “Rice’s actions may have been unfortunate, but he faced legal sanction and paid for his crime. This has nothing to do with his ability to perform on the football field and therefore does not justify the termination of his contract.” That hypothetical case, seductive though it may seem at first hearing, is quite wrong. Ray Rice, and every other professional football player, is not merely an athletic performer. The product he produces is entertainment, and it includes more than mere athletic performance. It also includes a standard of behavior and image acceptable to the public in an athletic performer. The fact that this standard is subjective does not detract a whit from its reality.

O.J. Simpson immediately stopped appearing in movies when he was charged with murdering Nicole Simpson. Had he still been playing football, had he still retained his youthful athletic skill, his football career would nonetheless have reached an immediate close. People do not want to watch a murderer act in movies. In the 1940s and early 50s, a substantial minority of actors and actresses lost the ability to act in motion pictures produced by major U.S. studios, although they still could act on Broadway and abroad. Americans did not want to watch Communists act in movies.

The subjective line with respect to domestic violence is much less clear, but it obviously exists. We are willing to tolerate some measure of violence in domestic relations among athletes, but there are limits to it. Who decides what the limits are? The free market, which means the people directly affected by it. Those people are the consumers of the product athletes produce – the fans – and the producers of that product – the teams. Fans express their views at the ticket office and by direct contact with the team. The team acts in accordance with their view of short- and long-term profit, based on the reactions of fans and the athletic prowess of the player. This is the system calculated to produce the best possible football product for consumers. That will achieve the best outcome not only for the NFL but for consumers and producers as well. The rest of us have no stake in the matter.

Wait a minute – what about Mrs. Rice? She has an obvious stake. But Mrs. Rice’s interests were served by the agency best equipped to serve them – the criminal justice system. She had her day in court and even had her views prevail when Rice was given a lenient sentence. The busybodies of the media are actually arguing to overrule her and impose extra penalties on Rice over and above those dictated by law and the team. In essence, they are applying the “helpless victim” codicil of Joseph Epstein’s “root cause” hypothesis. Here, it is Mrs. Rice who is the helpless victim in need of the all-wise counsel and direction gratuitously provided by the blabbermouth class, who specialize in telling the rest of the world how to run their lives.

Is the Adrian Peterson case special because it involves a child? Well, it is certainly special in the legal sense, since the child’s presumed inability to act as his own advocate in a way analogous to that of Mrs. Rice argues for government involvement. But those special considerations don’t introduce any factors conducing to involvement by the NFL. The need for careful consideration by the team is still present, even enhanced, by the possibility of child abuse.

What about the NFL’s drug and performance-enhancement policy? Does this violate the doctrine of specialization a la Friedman and Coase? No. Here the NFL is arbitrating the issue of competitive balance between teams, an appropriate action for a franchisor. For example, franchisors such as McDonald’s routinely award franchises by providing geographic separation between franchisees to limit competition between them. They want franchisees to compete with other franchisors – Hardees, Burger King and Wendy’s – but not with each other. Similarly, the NFL does not want some teams to gain a competitive edge by employing players who use steroids or human-growth hormone while others feel compelled to respect the wishes of fans by banning use of those substances by their players. Of course, it is still up to the NFL to adopt a wise and effective policy – but the policy is not objectionable a priori.

Domestic Violence Reconsidered

The most recent entry in the domestic violence op-ed derby is revealing. In “A Better Way to Reduce Domestic Violence in the NFL,” author Richard J. Gelles estimates the statistical expectation for acts of substantive domestic violence among 2,016 males between 21 and 39 years of age – the demographic base of NFL players. Assume that 90% of these players are in relationships with women. About 4% of these relationships would produce an act of domestic violence annually. That would be about 80 cases. This would lead to about 20 arrests. But not all of these acts, or arrests, would be perpetrated by the male – maybe 10-20 would be female-caused.

This puts a different face on the current hysteria about domestic violence in the NFL, even if we include the aggravated assault accusation against Jonathan Dwyer of the Arizona Cardinals and the accusation against the Chicago Bears’ Brandon Marshall, which goes all the way back to 2006. Suddenly, we are not confronted with an epidemic demanding emergency action but an age-old problem meriting careful consideration.

Alas, Gelles – a sociologist – offers two “solutions,” neither one within shouting distance of cogency. The first, recourse to a “Case Review Committee” to arbitrate domestic disputes, is best applied by the principals with interposition by agencies like the NFL. The second is even sillier. Gelles wants “professional sports [to] apply sanctions judiciously.” We might call this the “Spike Lee” solution: “Do the right thing.” He helpfully explains that suspending Ray Rice for a third of a season “would be appropriate” without providing the general rule that makes it appropriate. This is worse than useless.

The beginning of wisdom on this issue was broached by Jenkins when he observed that “people fight with those they know.” Consider an example that provides a reasonable parallel to the NFL case.

In the late 1920s and 1930s, contract bridge was a craze in the United States. As inconceivable as it might seem today, bridge was front-page news. The great popularizer of bridge, Ely Culbertson, organized a challenge team match with his principal competitor for public favor, Sidney Lenz. For days, the running tally of the 1931-32 Culbertson-Lenz match was reported in the press, on radio and on neon billboards in Times Square. Over the years, bridge retained its popularity as the nation’s favorite card game, surpassing poker. Culbertson’s successor, Charles Goren, appeared on the cover of Time Magazine in the 1950s.

Throughout this reign of popularity, there was a link between bridge and domestic discord between husbands and wives. This was popularly recognized and wryly treated by humorists and the movies. This good-natured acceptance flew in the face of occasional violent outbursts such as the famous Bennett case in Kansas City, MO, in 1929. Mrs. Bennett was so outraged and frustrated by her husband’s incapable display as her bridge partner that his culminating depredation, failure to land a four-spade contract at their regular bridge game, drove her ballistic – she pulled a pistol and shot him through the door of the bathroom to which he had frantically retreated. It is not clear to what extent Ely Culbertson’s straight-faced analysis of Mr. Bennett’s mistakes as a declarer caused the jury to acquit Mrs. Bennett. This seems to be the precursor of our modern tendency to balance distaste at domestic violence with a demand for competitive excellence.

Women bridge players have vastly outnumbered men. Yet only one husband and wife partnership has represented a country in the Bermuda Bowl, the international world team championship that has been played since 1950. (They were not notably successful.) Traditionally and notoriously, husbands and wives have found it very difficult to sustain a long-running successful partnership in top-level competitive bridge. Carrying the principle that familiarity breeds contempt even further, long-running partnerships in general are historically rare in bridge, despite the demonstrated competitive advantage accruing to established partnerships over short-duration combinations.

In the bridge world, a few experts have legendary reputations for their gentlemanly demeanor and politeness to opponents. (The opposite is more nearly the rule in top-level bridge.) Yet these players have usually found it difficult or impossible to play harmoniously with their wives. One of these world-famous gentlemen was the perpetrator of an explosion at the bridge table in which he astonished hundreds of onlookers by yelling at his wife: “And to think that this woman is the mother of my children!” Their successful and long-running partnerships have been with men. Even these are hard to sustain. Again, it needs to be stressed that this is the rule rather than the exception over some 90 years of stressful high-level competition involving many thousands of competitors around the world.

What are we to make of this?

Holman Jenkins referred pejoratively to a past practice that he called “[giving] a pass to wife beaters.” This might more precisely be called erring on the side of legal inaction when the assault involves married couples. In the old days, there was implicit recognition that the intimate familiarity between married couples created an inherent potential for frustration, discord and violence that, as again noted by Jenkins, simply did not exist between strangers. That does not mean that those were the good old days, because today we wince at casual references to wife beating that crop up in old movies, books and plays. Still, today’s pendulum has swung so far in the opposite direction that husbands and wives are legally treated as exact equivalents to strangers. Mrs. Rice’s decision to marry her husband after he knocked her cold and her plea in his behalf in court illustrates the absurdity of this state of affairs.

The “Solution” to Domestic Violence

Some problems are inherent in the human condition. Domestic violence is one of them. There is no “solution” to it. Its mitigation is not a top-down process administered by bureaucratic organizations like the NFL or through compulsory arbitration by the National Labor Relations Board. What little help can be provided by third parties must be offered on a voluntary basis by the private sector. The people best equipped to solve the problem must be in charge. That means the principals – the husband and wife.

The NFL should stay out of it.

DRI-319 for week of 6-22-14: Redskins Bite the Dust – and So Do Free Markets

An Access Advertising EconBrief:

Redskins Bite the Dust – and So Do Free Markets

The Trials and Appeals Board (TTAB) of the United States Patent and Trademark Office (USPTO) recently suspended validity of the trademarks previously held by the Washington Redskins professional football team of the National Football League (NFL). The legal meaning of this action is actually much more complex than public opinion would have us believe. The importance of this action transcends its technical legal meaning, however. If we can believe polls taken to test public reaction to the case, 83% of the American public disapproves of the decision. They, too, sense that there is more at stake her than merely the letter of the law.

The Letter of the Law – and Other Letters

The federal Lanham Trademark Act of 1946 forbids the registration of “any marks that may disparage persons or bring them into contempt or disrepute.” That wording forms the basis for the current suit filed by a group of young Native American plaintiffs in 2006. The hearing was held before TTAB in March, 2013. This week the judges issued a 99-page opinion cancelling each of the 6 different trademark registrations of the name “REDSKINS” and the Redskins’ logo, an Indian brave’s head in silhouette with topknot highlighted on the left. The decision called the trademarks “disparaging to Native Americans at the respective times they were registered.” The wording was necessary to the verdict; indeed, the dissenting judge in the panel’s 2-1 ruling claimed that the majority failed to prove that the registrations were contemporaneously disparaging.

This was not the first attempt to invalidate the Redskins trademarks – far from it. The previous try came in 1999 when the TTAB also ruled against the team. That ruling was overturned on appeal. The grounds for rejection were both technical and substantive. The judges noted that the plaintiffs were well over the minimum filing age of 18 and that the registrations went as far back as the 1930s. Thus, the plaintiffs had undermined their claim to standing by failing to exercise their rights to sue earlier – if the trademarks were known to have been such an egregious slur, why hadn’t plaintiffs acted sooner? The plaintiffs also cited a resolution by the National Congress of American Indians in 1993 that denounced the name as offensive. The Congress claimed to represent 30% of all Native Americans, which the judges found insufficiently “substantial” to constitute a validation of plaintiffs’ claim.

Meanwhile, an AnnenbergPublicPolicyCenter poll found in 2004 that “90% of Native Americans [polled] said the name didn’t bother them,” as reported in the Washington Post. Team owner Daniel Snyder’s consistent position is that he will “never” change the team name since it was chosen to “honor Native Americans,” the same stand taken by NFL President Roger Goodell. Various Native American interest groups and celebrities, such as 5000-meter Olympic track gold-medalist Billy Mills, have sided with the plaintiffs. Senate Majority Leader Harry Reid jumped at the chance to play a race card, calling the team name a “racial slur” that “disparages the American people” (!?). He vows to boycott Redskins’ games until the name is changed. Roughly half his Senate colleagues sent a letter to the team demanding a name change.

The Practical Effects of the Ruling

Numerous popular sources have opined that anybody is now “free” to use the name “Redskins” for commercial purposes without repercussions. Several lawyers have pointed out that this is not true. For one thing, this latest decision is subject to judicial review just as were previous ones. Secondly, it affects only the federal registration status of the trademarks, not the right to the name. The enforceability of the trademark itself still holds under common law, state law and even federal law as outlined in the Lanham Act. The law of trademark itself takes into account such concepts as “pervasiveness of use,” which reflects actual commercial practice. In this case, the name has been in widespread use by the team for over 80 years, which gives it a strong de facto claim. (If that sounds confusing, join the club.) Finally, the appeals process itself takes at least two years to play out, so even the registration status will not change officially for awhile.

Thus, the primary impact of the ruling will be on public relations in the short run. The same commentators who cast doubt on the final result still urge Daniel Snyder to take some sort of token action – set up a foundation to benefit Native Americans, for instance – to establish his bona fides as a non-racist and lover of Native Americans.

Why the Law is an Ass

There are times when you’re right and you know why you’re right. There are other times when you’re right and you know you’re right, but you can’t quite explain why you’re right. The general public is not made up of lawyers. If judges say the trademark registrations are illegal, the public is prepared to grant it. But, like Charles Dickens’ character Mr. Bumble, they insist that the law is an ass. They just can’t demonstrate why.

The provision in the Lanham Act against disparaging trademarks is the kind of legal measure that governments love to pass. It sounds both universally desirable and utterly innocuous. Disparaging people and holding them up to ridicule and contempt is a bad thing, isn’t it? We’re against that, aren’t we? So why not pass a law against it – in effect – by forbidding disparaging trademarks. In 1946, when the Lanham Act passed, governments were big on passing laws that were little more than joint resolutions. The Employment Act of 1946, for example, committed the federal government to achieving “maximum employment, purchasing power and income.” There is no objective way to define these things and lawmakers didn’t try – they just passed the law as a way to show the whole world that they were really, really serious about doing good, not just kidding around the way legislatures usually are. Oh, and by the way, any time they needed an excuse for spending a huge wad of the taxpayers’ money, they now had one. (Besides, before the war a famous economist had said that it was all right to spend more money than you had.)

The law against disparaging trademarks was passed in the same ebullient mood as was the Employment Act of 1946. Government doesn’t actually have the power to guarantee maximum employment or income or purchasing power and it also doesn’t have the power to objectively identify disparagement. Unlike beauty, a slur is not in the eye of the beholder. It is in the brain of the author; it is subjective because it depends on intent. Men often call each other “bastard” or “son of a bitch”; each can be either deadly serious invective or completely frivolous, depending on the context. The infamous “n-word,” so taboo that it dare not speak its name, is in fact used by blacks toward each other routinely. It can be either a casual form of address or a form of disparagement and contempt – depending on the intent of the user.

Everybody – including even Native Americans – knows that Washington football team owner George Preston Marshall, one of the legendary patriarchs of the NFL, did not choose the team name “Redskins” in order to disparage Native Americans or hold up to ridicule or contempt. He chose it to emphasize the fighting and competitive qualities he wanted the team to exemplify, because Indians in the old West were known as fierce, formidable fighters. Whether he actually meant to honor Native Americans or merely to trade on their reputation is open to debate, but it is an open-and-shut, 100%, Good-Housekeeping-seal-of-approval-certified certainty that he was not using the word “Redskins” as a slur. Why? Because by doing so he would have been committing commercial suicide by slandering his own team, that’s why.

That brings us to the second area resemblance of between the Lanham Act and the Employment Act of 1946. The Employment Act was unnecessary because free markets when left to their own devices already do the best job of promoting high incomes, low unemployment and strong purchasing power than can be done. And free markets are the best guarantee against the use of disparaging trademarks, because the inherent purpose of a trademark is to promote identification with the business. Who wants their business identified with a slur? We don’t need a huge bureaucracy devoted to the business of rooting out and eradicating business trademarks that are really slurs. Free markets do that job automatically by driving offending businesses out of business. Why otherwise would businesses spend so much time and money worrying about public relations and agonizing over names and name changes?

If the only reason for the persistence of legislation like the Employment Act and the Lanham Act were starry-eyed idealism, we could write off them off as the pursuit of perfect justice, the attempt to make government write checks it can’t cover in the figurative sense as well as the financial. Idealism may explain the origin of these laws but not their persistence long after their imposture has been exposed.

Absolute Democracy

By coincidence, another political-correctness scandal competed with the Redskins trademark revocation for headlines. The story was first reported as follows: A 3-year-old girl suffered disfiguring facial bites by three dogs (allegedly “pit bulls”). She was taken to a Kentucky Fried Chicken franchise by a parent, where she was asked to leave, after an order was placed for her favorite meal of sweet tea and mashed potatoes, because her presence was “disrupting the other customers.” Her relatives took this story of “discrimination” to the news media.

Representatives of the parent corporation were guarded in their reaction to the accusation, but unreserved in the sympathy they expressed for the girl. They promised a donation of $30,000.00 to aid in treatment of her injuries and for her future welfare. They also promised to follow up to confirm what actually happened at the store.

What actually happened, according to their follow-up investigation, was nothing. This was the result of their internal probe and a probe by an independent company they hired to do its own investigation. Review of the store’s surveillance tape showed no sign of the girl or her relatives on the day in question. A review of transactions showed no order for “sweet tea and mashed potatoes” on that day, either. KFC released a finding that the incident was a hoax, a conclusion that was disputed by another relative of the girl who was not one of those supposedly present at the incident.

Perhaps the most significant part of this episode is that KFC did not retract their promise of a $30,000.00 donation to the girl – despite their announced finding that her relatives had perpetrated a hoax against the corporation.

The Redskins trademark case and the apparent KFC hoax are related by the desire of interested parties to use political correctness as a cover for extracting money using the legal system. Pecuniary extortion is crudely obvious in the KFC case; $30,000 is the blackmail that company officials are willing to pay to avoid being crucified in a public-relations scandal manufactured out of nothing.

Their investigation was aimed at avoiding a charge of “discrimination” against the girl, which might have resulted in a six- or seven-figure lawsuit and an even-worse PR scandal. But their willingness to pay blackmail suggests an indifference to the problem of “moral hazard,” something that clearly influences Daniel Snyder’s decision not to change the Redskins’ team name. Willingness to pay encourages more blackmail; changing the team name encourages more meddling by activists.

The Redskins case is more subtle. Commentators stress that plaintiffs are unlikely to prevail on the legal merits, but doubt that the team can stand the continuous heat put on it by the PR blowtorch lit by the TTAB verdict. That is where the money comes in – owner Daniel Snyder will have to pony up enough money to the various Native American interest groups to buy their silence. Of course, this will be spun by both sides as a cultural contribution, meant to make reparations for our history of injustice and brutality to the Native American, and so on.

Of course, Snyder may turn out to be as good as his word; he may never agree to change the Redskins’ team name. The NFL – either the Commissioner or the other owners exerting their influence – may step in and force a name change. Or Snyder may even sell the team rather than be forced to change their name against his will. That would leave the plaintiffs and Native American interest groups out in the cold – financially speaking. Does that invalidate the economic theory of absolute democracy as applied to this case?

No. Plaintiffs stand to benefit in an alternative manner. Instead of gaining monetary compensation for their efforts, they would earn psychological (psychic) utility. From everyday observation, as well as our own inner grasp of human nature, we realize that some people who cannot achieve nevertheless earn psychic pleasure from thwarting the achievements of others. In this particular case, the prospective psychic gains earned by some Native Americans from overturning the Redskins name and the prospective monetary gains earned from blackmailing the Redskins’ owner are substitute goods; the favorable verdict handed down by TTAB makes it odds-on that that one or the other will be enjoyed.

This substitution potential is responsible for the rise and continued popularity of the doctrine of political correctness. “Race hustlers” like Jesse Jackson and Al Sharpton have earned handsome financial rewards for themselves and/or clients by demonizing innocuous words and deeds of whites as “racist.” What is seldom recognized, though, is the fact that their popularity among blacks at large is owed to the psychic rewards they confer upon the rank-and-file. When (let us say) a white English teacher is demoted or fired for teaching the wrong work by Mark Twain or Joseph Conrad, followers of Jackson and Sharpton delight. They know full well that the exercise is a con – that is the point. They feel empowered by the fact that they may freely use the n-word while whites are prevented from doing so. Indeed, this is simply a reversal of the scenario under Jim Crow, when blacks were forced to the back of the bus or to restricted drinking fountains. In both cases, the power of the law is used to earn psychic rewards by imposing psychic losses on others.

Legal action was necessary in the Redskins’ case because plaintiffs were bucking an institution that had been validated by the free market. The Washington Redskins have over 80 years of marketplace success on their record; the free market refused to punish their so-called slur against Native Americans. In fact, the better case is that the team has rehabilitated the connotation of the word “redskins” through its success on the field and its continuing visibility in the nation’s capital. Goodness knows, countless words have undergone this sort of metamorphosis, changing from insults to terms of honor.

When plaintiffs could not prevail through honest persuasion they adopted the modern American method – they turned to legal force. However tempting it might be to associate this tactic exclusively with the political correctness of the left, the truth is that it is the means of first resort for conservatives as well. That is the seeming paradox of absolute democracy, which represents the dictatorship of the law over free choice.

Inevitably, advocates of political correctness cite necessity as their justification. The free market is not free and does not work, so the government must step in. The planted axioms – that free markets usually fail while governments always work – are nearly 180 degrees out of phase. The failures of government highlight our daily lives, but the successes of the free market tend to be taken for granted. The famous episode of Little Black Sambo and its epilogue serves as a reminder.

The Little Black Sambo stories and Sambo Restaurants

The character of Little Black Sambo and the stories about him have been redefined by their detractors – that is to say, demonized as racist caricatures that dehumanize and degrade American blacks. This is false. In the first place, the original character of Little Black Sambo, as first portrayed in stories written in the late 19th and early 20th centuries, was Tamil (Indian or Sri Lankan) – a reflection of the ecumenical reach exerted by the term “black” in those days. Eventually, the character was adapted to many nationalities and ethnic identities, including not only American black but also Japanese. (Indeed, he remains today a hero to children of Japan, who remain blissfully untouched by the political correctness familiar to Americans.) This is not surprising, since the stories portray a little boy whose heroic perseverance in the face of obstacles is an imperishable life lesson. Presumably, that is why the stories are among the bestselling children’s storybooks of all time.

When American versions of the story portrayed Little Black Sambo as an American or African black, this eventually caught the eye of disapproving blacks like the poet Langston Hughes, who called the picture-book depiction a classic case of the “pickaninny” stereotype. Defenders of the stories noted that when the single word “black” was removed and any similarity to American or African blacks deleted from the illustrations, the stories attracted no charges of racism. Yet black interest groups echoed the psychologist Alvin Poussaint, who claimed that “I just don’t see how I can get past the title and what it means,” regardless of any merit the stories might contain. The storybooks disappeared from schools, nurseries and libraries.

In 1957, two restaurant owners in Santa Barbara, CA, opened a casual restaurant serving ethnic American food. In the manner of countless others, they chose a name that combined their two nicknames, “Sam” (Sam Battistone) and “Bo” (Newell Bohnett). Over time, Sambo’s Restaurant’s popularity encouraged them to franchise their concept. It grew into a nationwide company with 1,117 locations. Many of these were decorated with pictures and statuary that borrowed from the imagery of the “Little Black Sambo” stories.

The restaurants were a marketplace success, based on their food, service and ambience. But in the 1970s, black interest groups began raising objections to the use of the “Sambo” name and imagery, calling it – you guessed it – racist. Defenders of the franchise cited the value and longstanding popularity of the stories. They noted the success and popularity of the restaurants. All to no avail. By 1981, the franchising corporation was bankrupt. Today, only the original Santa Barbara location remains.

This was certainly not a victory for truth and justice. But it was a victory for the American way – that is, the true American way of free markets. Opponents of Sambo’s Restaurants went to the court of public opinion and made their case. Odious though it seemed to patrons of the restaurants, the opponents won out.

So much for the notion that free markets are rigged against political correctness. In the case of Sambo’s Restaurants, people concluded that the name tended to stigmatize blacks and they voluntarily chose not to patronize the restaurants. The restaurants went out of business. This was the appropriate way to reach this outcome because the people who were benefitting from the restaurants decided that the costs of production outweighed the benefits, and chose to forego those benefits. The decisive factor was that bigotry was (apparently) a cost of production.

Instead of achieving their aim through legal coercion or blackmail, activists achieved it through voluntary persuasion. Alas, that lesson has now been forgotten by both the political Left and Right.

DRI-290 for week of 5-18-14: The Role of Economics in Sports

An Access Advertising EconBrief:

The Role of Economics in Sports

It is a commonplace that sports today is “just a business.” Once upon a time, so the thinking goes, sports was a magical realm, a “kid’s game” in which everybody played for fun and decisions were motivated by “the love of the game.” Now, though, it’s “all about the money.” From this, we might draw the inference that sports were once an economics-free zone.

The cliché applies: Nothing could be further from the truth. Indeed, sports today are ruled less by economic considerations than formerly. That isn’t quite the same thing as saying that money plays a smaller role. It doesn’t; the role of money has been distorted by the introduction of non-economic factors.

By applying the logic of economics to baseball, the national pastime, we can appreciate the historical role played by economics and understand how this role has been misshapen in recent decades.

Profit in Baseball

Baseball began as a game played for fun. Its origins are shrouded in mystery but date to before the Civil War. (Thus, the celebration of Abner Doubleday, Civil War general in the Union army, as baseball’s inventor is undoubtedly misplaced.) Professional baseball began in 1869 with the first professional team, the Cincinnati Red Stockings. Since then, profit has been inseparable from the game of baseball as a commercial enterprise.

Until recent decades, owners of baseball teams earned revenue from one primary source – the admission of baseball fans to watch games in person. The calculation of profit was quite straightforward: an admission price was charged to games and collected – either from advance ticket sales or at the gate prior to game time – and the revenue from the sum of all such sales was weighed against the costs of owning the team. The costs varied with circumstances, but less in true economic terms than might be supposed. For example, a team that owned its stadium would not pay rent according to a lease, but an economist would still reckon that rent as an implicit cost, since the team is foregoing the rent it could earn by leasing the stadium out to somebody else. Salaries paid to players and administrative staff, wages paid to low-level employees, travel costs, marketing costs – these comprise the standard costs of operating a baseball team and are subtracted from revenue in reckoning profit.

Like so many things in life, though, even this simple calculation has its complications. Revenue always has been, and remains today, a function of market size. The larger the potential number of fans, the greater is a team’s revenue potential. But for most of its history, revenue was also a function of stadium size. The Philadelphia Phillies have been a National League mainstay for over a century. For the first third of the 20th century, they played their games in the Baker Bowl, a tiny stadium whose capacity never exceeded 20,000 people and was typically less. The New York Yankees, on the other hand, played in a stadium befitting the nation’s largest city, as New York City was for nearly the first century of professional baseball’s existence. Yankee Stadium, built expressly to house the Yankees in the early 1920s, could hold around 70,000 people. Even the Polo Grounds, home of crosstown National League New York Giants, held over 60,000. Cleveland’s Municipal Stadium held over 80,000. If that seems incongruous, given the city’s comparatively modest size, our later discussion will rectify that impression.

Economists have developed a theory of the firm. They teach it to students in microeconomics courses. It is designed to apply broadly to business firms of all kinds, shapes and sizes. Given the tenuous connection traditionally made between sports and business, that attitude might seem arrogant. It turns out to be well-justified confidence.

The traditional formula for profit maximization in the economic theory of the firm requires equality between marginal revenue and marginal cost. But in order to apply the theory, we must have a measure of output. Businesses exist in order to produce goods and services. What do baseball teams exist to produce, anyway? In the ultimate sense, they produce satisfaction by entertaining fans. But this feeling of satisfaction is subjective; it is a non-operational definition of output. Is there something hard-edged and quantitative that we can measure as a source of this satisfaction?

Yes. It is winning games. If this doesn’t make baseball fans happy, it is hard to think of something else that does. Now all we have to do is identify the process by which the wins are produced – what economists call the production function. Inconceivable as it seems, it is only in the last 15 years that any real headway has been made in quantifying this formula. For over a century, professionals and amateurs alike were content to apply more or less subjective criteria to this concept.

Everybody always knew that good players and athletic talent were the raw material from which the production function sprang. But exactly how did they interact to produce winning baseball? Everybody had their own pet theories. Owners and their administrative staffs applied the theories to the selection and grooming of talent. Really, all that was done was to throw money at the problem. The amount of money and the direction of the throw varied widely from team to team and owner to owner. And baseball fans throughout America developed a time-honored set of prejudices, educated guesses and conventional thinking about the subject.

Bigger Market = More Revenue = Larger Expenditure on Player Salaries = Better Team

Even without a clear theoretical idea of the production function, though, we can still say a lot about how economic logic influenced the conduct of baseball operations and the course of baseball history. Regardless of how you go about calculating the marginal revenue associated with an additional win, it will be larger for a (say) New York City than (say) a Kansas City. (That is true even though New York City has two baseball teams to Kansas City’s one.) That an owner in New York City will find it profitable to expend a larger amount on player salaries than will an owner in Kansas City. All other things equal, this should produce better teams in New York City. In the broader context, that means that larger-market teams should tend to be better teams.

“All other things equal” (or “ceteris paribus,” as economists prefer to disguise it) is the great weasel phrase joining theory to reality. As we will see in the second installment of this discussion, those things became unequal indeed when a few wise guys cracked the code for the production function in baseball. But this generalization certainly worked well for over a century of baseball history.

No baseball team has come within a country mile of the Yankees’ 27 world championships. The St. Louis Cardinals hold second place, and for most of baseball history St. Louis was among the most populous cities and metropolitan areas in the nation. The New York Giants and Brooklyn Dodgers also rank among the most successful teams in history despite vacating New York in the 1950s. The Los Angeles Dodgers picked up the mantle doffed by their Brooklyn predecessor.

Chicago might seem a conspicuous exception to this rule of thumb, but even there it held good in the early days of the modern era. The Chicago White Sox and Chicago Cubs were two of the most successful teams in the first two decades of the modern era beginning in 1901. The Cubs set the all-time record for wins in a season in 1906 and appeared often in the World Series until 1918. The White Sox vied with the Philadelphia Athletics and Detroit Tigers for American League supremacy during that era and upset the Cubs in the 1906 Series. The Cubs enjoyed periodic success until after World War II, their final World Series appearance to date being 1945.

“Free Agency Will Be the Death of Baseball”

Much has been made over the years of the fact that major-league baseball enjoys exemption from the anti-trust laws, thanks to a federal-court decision in 1922 (Federal Baseball Club of Baltimore v. National League et al). While it is technically true that “major-league baseball” constitutes a combination of businesses that restricts its membership via the issuance of franchises, this exemption means very little in practice.

Over the course of baseball history, various competitive leagues have arisen. The American League itself was once one of those, just as the American Football League once competed with the National Football League. And major-league baseball has often reacted to its competition by absorbing it, as the NFL did the AFL. At other times, the Federal League (in 1915) and the Mexican League (in the late 1940s) briefly constituted significant threats to the major leagues.

Even more significant, though, has been the very substantial inter-industry competition provided by competing forms of sports and entertainment generally. Today, pro football and pro basketball have supplanted major-league baseball in the attraction of athletic talent. Insofar as the antitrust exemption applies to the product market in which major-league baseball operates, it has become a dead letter.

By far the most important antitrust issue faced by baseball concerned its input market. Economists have traditionally contended that baseball teams should compete with each other for players in the labor market. Until 1975, labor-market competition for players was severely restricted by the reserve clause. That clause granted exclusive bargaining rights to a player to the team first to sign that player. In recent years, a draft has assigned initial bargaining rights in baseball, as in football and basketball. It is still true that the right of players to initiate transfers to different teams is restricted in various ways.

The first economist to publicly question this arrangement was Gerald Scully in 1974 in a pathbreaking article in the American Economic Review. Scully maintained that competitive bidding normally drives a worker’s wage at or close to marginal revenue product – the value of additional output created at the margin by the input. In the case of uniquely talented inputs such as athletes – the antithesis of homogeneous unskilled labor – a player should earn his incremental contribution to revenue. By allowing freedom of player movement, players would naturally move where they would earn the most money.

Owners and baseball administrators spoke with one voice in response to this theory. They hated it. They loathed it. They reviled it. Almost unanimously, they proclaimed that to allow players the freedom of movement, or “free agency,” would be the death of organized baseball. Owners would be unable to recoup their “investment” in players. They would be unable to make enough profit to stay in business – the result would be carpetbagging teams moving from city to city in an effort to skim the cream of popularity off the top before moving on to the next city. Most of all, fans would lose their sense of identification with players who rented their services to the highest bidder rather than establishing loyalty to a city and its fan base.

An often-repeated fallacy is that the higher salaries associated with free agency would cause ticket prices to skyrocket upwards. Economists often use this as a case study in their microeconomics classes. Assuming owners want to maximize the revenue earned from ticket sales, they will choose the ticket price (or range of prices) that accomplishes that objective – with no regard whatsoever for what players are paid. The profit maximizing price depends on fan tastes, incomes and the substitute forms of entertainment available, which are the parameters of what economists call the demand curve. It is unrelated to supply-curve considerations such as player salaries.

But don’t fans pay player salaries ultimately, through ticket payments and various other means? Indeed they do. In fact, it is useful to employ the framework of the late, great Nobel laureate Ronald Coase from his classic article “The Theory of the Firm.” A business firm is a middleman between the players and fans. It is too costly for fans to contract directly with players for entertainment, so the team acts as a business intermediary. Free agency settles the question of how the fans’ payments are divided between players and team, not how much the total payment will be. The reserve clause allocated more to the team (e.g., the owner) than was economically efficient; free agency changes the division to favor the players more.

Of all these predictions, the least likely was the one that was most widely subscribed. Most people believed that free agency would cause players to move between teams much more freely and often than before. But economists like Scully contended that this would not happen. And years after the case of outfielder Curt Flood set in motion the eventual destruction of the reserve clause, they produced studies showing that player movement was no more rapid or frequent after the reserve clause was gone than in its heyday.

Although Scully and his colleagues thought they needed econometrics to persuade the public, simple logic should have sufficed. On second thought, a glance backward at baseball history should have been enough. This is how Scully put it in his contribution to the Fortune Encyclopedia of Economics: “When players are not free to move, does a small city that acquired a star player… keep him? …A small-city franchise…holding the contract of the player expects him to contribute, say, $1 million in incremental revenue to the club. In a large city that same player’s talents might contribute $3 million. Since the player is worth more to the big-city team…the big-city team will pay more for him [so] the small-city franchise has an incentive to sell the player’s contract to the big-city team and thereby make more money than it could by keeping him. Thus, players should wind up allocated by highest incremental revenue, with or without restrictions on player-initiated movement.”

There are countless examples of this principle in operation. The most famous example involved baseball’s greatest player.

“The Curse of the Bambino?” No, Just Economics at Work

In 1920, Boston Red Sox owner Harry Frazee was in trouble. His trouble wasn’t baseball-related. The Red Sox had won the World Series in 1912, 1915, 1916 and 1918. They had baseball’s greatest player, Babe Ruth. He was the American League’s best left-handed pitcher who had lately taken to playing the outfield in his spare time – and had led the league in home runs in 1919 and 1920.

No, Frazee’s troubles were related to his main business, which was bankrolling Broadway shows. Financing shows was and still is a high-risk business. Now Frazee was in debt up to his ears. He was contemplating selling baseball’s best and most popular player, Babe Ruth, to the New York Yankees, in spite of the pleading of his general manager, Ed Barrow.

Eventually, Frazee did just that. He got $100,000 (the tax-free equivalent of several million today) plus a $300,000 loan. And Babe Ruth went on to set a flock of records in a Yankee uniform and earn more in a single year than the President of the United States. Frazee went on to sell numerous other players to the Yankees in the next few years for another $305,000 in sale proceeds. And he produced successful shows such as “No, No, Nanette.”

According to baseball history, Frazee was an idiot who sacrificed his fans to his personal bank balance. But economics tells us that the Red Sox could never have paid Ruth anywhere close to his maximum potential salary. Only the Yankees, with their tremendous geographic and demographic reach, could have paid Ruth the salary he later commanded. It is no coincidence that Barrow, who criticized Frazee so sternly at the time, later went to work for the Yankees himself, became baseball’s most famous general manager and entered the Hall of Fame in his own right. Barrow also became rich by working for the Yankees.

Is it a coincidence that all the great power hitters, the players who commanded the biggest salaries and drew the most fans to the park, played for large-market teams? Lou Gehrig played alongside Ruth on the Yankees. Joe Dimaggio joined Gehrig in the 1930s and flanked Mickey Mantle in Mantle’s formative years. Roger Maris dueled teammate Mantle on his way to hitting 61 home runs in 1961. Yogi Berra was their teammate. Willie Mays played for the New York Giants, then moved with them to San Francisco, finishing up his career back in New York with the Mets. Duke Snider’s glory years were spent in Brooklyn before he, too, ended up with the New York Mets. Jimmie Foxx’s two primary teams were the Philadelphia Athletic and Boston Red Sox. The exceptions, Harmon Killebrew (Minnesota) and Ralph Kiner (Pittsburgh), were one-dimensional players who were slow runners and mediocre defensive players; thus, their value was limited by their liabilities.

Misers? Or Profit-Maximizers?

Connie Mack was one of baseball’s most beloved figures. Prior to that, he was a well-known and skillful major-league catcher. He owned and managed the Philadelphia Athletics for 50 years, from 1901 to 1950. He managed his teams to 8 World Series appearances and 4 championships. He retired as manager at age 87 and died at 95. Late in life, he was universally revered as the “grand old man” of the game.

Yet on three separate occasions he created furious controversy by selling his star players wholesale or (less often) trading them. He didn’t merely trade away one popular, talented player. He either sold or traded all his stars and started all over again with young players. At the time, he was not much more popular in Philadelphia than Frazee had been in Boston. He was even accused of being “no better than a miser, selling the contracts of players to line his own pockets.”

In order to have meaning, the word “miser” must denote inordinate stinginess. It must imply actions of thrift and economy that exceed in intensity those of ordinary men. But when we examine Connie Mack’s actions by the standards set by Scully and the principles of economics, they resemble instead the same kinds of profit-maximizing actions that any businessman would take.

In 1907, pitcher Rube Waddell was arguably the best pitcher in the American League, certainly the best left-handed pitcher. He had just set a season record for strikeouts (349) that was to last for over half a century. His off-the-field behavior was just as fast and even less controllable than his blazing fastball and wicked curveball. His drinking and carousing gave Mack the excuse for selling his contract to the St. Louis Browns, where he set a single-game league record for strikeouts (16) in 1908. Mack also disposed of Waddell’s batterymate, catcher Ozzie Schreckengost. The sale of the popular duo was highly unpopular with the public, although team members were more willing to bid goodbye to Waddell’s eccentric antics. The players had been instrumental in the two American League pennants won by the Athletics in 1902 and 1905.

Mack set about rebuilding his team. He produced a group of players – Frank “Home Run” Baker, Jack Barry, Eddie Collins and Stuffy McInnis – who became known as the “$100,000 Infield” because of their defensive positions and their aggregate salaries. They spearheaded pennant-winning seasons in 1910, 1911, 1913 and 1914. The first two of those were also World Series championship years.

Yet following the Athletics’ stunning upset loss to the Boston Braves in the 1914 World Series, Mack broke up this winning team through sales and trades over the course of the next three years. At the time, this action was explained by Mack’s financial troubles caused by competition from the new Federal League, which raided major-league teams for players and reportedly drove up player salaries with their competitive forays. But Mack’s actions caused a furor throughout professional baseball and were front-page news in Philadelphia, where he was bitterly criticized in the press.

Once more, Mack slowly and painfully rebuilt his team. Despite having to play in the American League against the powerful New York Yankees of Babe Ruth, Lou Gehrig, Bob Meusel, Herb Pennock and Waite Hoyt, Mack eventually assembled a powerhouse squad that included future Hall of Famers Jimmie Foxx, Lefty Grove, Al Simmons and Mickey Cochrane. They won consecutive American League pennants in 1929, 1930 and 1931 against the “Murderer’s Row” lineup from New York and took two World Series titles in 1929 and 1930.

And once again, Mack pleaded financial exigency – this time citing the Great Depression – as his justification for selling or trading away all of those great players and others. This succession of transactions was nearly as unpopular as the previous one, and this time there was no comeback. Mack’s Philadelphia Athletics won no more American League pennants and mostly occupied the lower rungs of the league rankings until Mack’s retirement as manager at age 87 in 1950.

In retrospect, the citation of financial necessity was flimsy and unnecessary. Mack’s philosophy of player management and development was well-known and documented. He believed in using young players in preference to older ones. He was convinced that maximum value could be extracted from a player by trading or (preferably) selling him before his abilities declined markedly. Sure enough, players such as Waddell, Baker, Collins, Grove, Foxx and Cochrane produced productive years with their new teams. Collins and Grove went on to have unexpectedly long careers; the rest declined in ability and retired or became benchwarmers within a few years after leaving the Athletics.

Mack was obviously following the philosophy of profit-maximization to the best of his knowledge and ability. He used his formidable contacts throughout the baseball industry to scout and develop young talent. He could hardly be accused of stinginess when he paid the impressive talent he developed the high salaries that eventually made the team payroll a financial burden to him.

Economist James Quirk did voluminous research into the financial history of major-league baseball and found that only in the major-market cities like New York City did owners typically earn large profits from their teams. It is also important to note that the large-market owners, like Jacob Ruppert of the Yankees, were already independently rich before entering the baseball business. This enabled them to undertake any investments necessary to capitalize on the opportunities presented by their market size. The norm was represented by hardscrabble owners like Connie Mack, who worked with small- to medium-size stadiums circumscribed by downtown urban environments. Mack played the game better than most of these lower-class owners, which explains his amazing longevity.

Connie Mack borrowed the money he used to buy part-ownership in the Philadelphia Athletics in 1901. He remained part-owner until 1937, when he was 75 years old. Yet he was able to hand on through difficult business and economic circumstances for a half-century as both owner and manager of a leading major-league team. He was a classic example of economics at work in major-league baseball during its first century.

The Changeover

The great manager Casey Stengel is famous for remarking, upon viewing the lack of talent assembled by the expansion-team New York Mets, “Can’t anybody here play this game?” There is no doubt that for baseball’s first century it was a business, not just a game. The problem was that most of its practitioners lacked the acquired skills and natural talent to play the game of baseball from a purely business standpoint. A baseball genius like Connie Mack was able to exist and earn a comfortable living for over fifty years without stacking up the fortunes earned by today’s moguls.

The watershed came when baseball owners started treating the game less like a hobby – as it was viewed by rich, large-market owners – or just a way of earning a decent living – as the lower-level owners experienced it. A man came along with the marketing skills, business acumen and love of the game to take the business of baseball to a new level. That paved the way for the ascension of baseball – and professional sports generally – to the economic level it now occupies. The man’s name was Bill Veeck. His story will be told in our next EconBrief.