Through the Broken Window

There is an article in the Wall Street Journal today about the NFL and how Adam Smith would have appreciated their example of 'enlighten self-interest'. Although I am not sure what Adam Smith's reaction would have been, it seems unlikely that it would have been overly positive. I say that, for a couple of reasons.

The NFL has, since 1960, employed the use of revenue sharing and the salary cap in attempts to maintain a competitive league, where "anyone can win". The reasoning behind this is to try and limit the perennial champions, i.e. domination of one or two teams simply because of their large pocketbooks (...Steinbrenner and the Yanks). Since the NFL pools its funds and pays out capped salaries, more revenue-poor teams can get some assistance on paying the bills.

The author seems to forget, however, that these are businesses. These sports giants get mounds of public subsidies, economic development funds, and continual tax dollar assistance for new stadiums and re-builds. They have also been able to establish a business-level and job-level price ceiling, and provide a price floor on wages. In economics, we would call this collusive operation an oligopoly. Have we conveniently forgotten about the Sherman Anti-Trust Act as well?

So what would Adam Smith be so happy about? Apparently, he would be pleased to view the collective works of the team owners acting in their own self-interest. Oddly enough, it is exactly what the author touts as the ‘love’ of Adam Smith that so many people see problems with Capitalism, i.e. the self-interested actions without any checks on power (Corporatocracy). Additionally, he completely disregards the corporate welfare by localities and the coerced redistribution simply because some owners have more money.

Now I understand that this is a voluntary agreement (at least initially) by the owners and there is nothing wrong with that. However, the NFL has been able to maintain a monopoly (USFL) on professional football in the United States for quite some time – all at the expense of the taxpayers.

Through sports welfare, the NFL has been able to maintain competitive teams for more than four decades, so why couldn’t it work for the United States? Luckily, we have a small testing ground, with which to view the effectiveness of welfare programs. The United States has for a long time running, given generously to those in need (and those not in need) and has not seen very positive results. Poverty levels have increased or stayed the same for decades now and we are starting to become strapped for cash in all of our entitlement programs. Overall, I would not call it a success.

But, I suppose it could work for the NFL, but not likely in the long run.

Here's the article.