Economics Questions

Re: Salary Caps

Kakugo — Mon, 13 Apr 2009 07:28:40 GMT

I have no experience of sports like baseball, soccer, basketball and so but I have lots of experience in motorsports.

You may be shocked to learn that the ones constantly pressuring for cost-cutting measures and more restrictive rules are the biggest players in the field, the factory-backed teams and the ones with budgets four to five teams the privateers'. To cut a very long story short they know very well what they are doing, they know that performance improvements with tighter rules tend to become unbelievably expensive and hence will consolidate their dominance and they know that teams "thinking outside the box" will be penalized and perhaps forced to retire. You are a smart lot so I don't need to tell you that sports is simply politics wearing a more attractive apparel.

Re: Salary Caps

BobT — Sun, 12 Apr 2009 00:00:36 GMT

Regulus:
a salary cap prevents the financially better off businesses from assembling the best team possible

Thats the point of it... the league wants the teams to be competitive. The teams agree to this when they join the league. What is the problem here?

Re: Salary Caps

David Baker — Sat, 11 Apr 2009 23:07:50 GMT

you are failing to recognize my point that some firms want to pay more than the limit imposed by the salary cap

for example, teams residing in bigger markets like (London, New York, etc. etc.)

surely, we can't expect homogeneous revenue streams for each of the teams in a particular league

a salary cap prevents the financially better off businesses from assembling the best team possible

Re: Salary Caps

William — Sat, 11 Apr 2009 21:34:11 GMT

Regulus:

Higher revenues for everybody?

Salary caps prevent firms with the resources to spend above the constraint from earning higher revenue and players from earning higher revenue.

Every salaried employee has a salary cap in every business, it just isn't advertised like it is in sports. The only way they wouldn't is if they were involved in some type of profit sharing. A business can only pay an employee so much until the business decides the employee is no longer worth it. This works in all co-ops or franchises as well. There is nothing remotley immoral, contradictory, or evil about it, it may be ineffeciant or less profitable but that is up for a debate I don't care about, and I think is outside of the original intent of this post

On a side note, an athlete can easily establish himself as his own "product" or "brand" by doing outside endorsments/ training videos/ whatever.

Re: Salary Caps

David Baker — Sat, 11 Apr 2009 14:29:43 GMT

Higher revenues for everybody?

Salary caps prevent firms with the resources to spend above the constraint from earning higher revenue and players from earning higher revenue.

Re: Salary Caps

hayekianxyz — Fri, 10 Apr 2009 20:12:01 GMT

Golf is for real men.

Re: Salary Caps

Thedesolateone — Fri, 10 Apr 2009 17:41:53 GMT

Byzantine:

Thedesolateone:
The league obviously has the right to - but if the league wants to make money through pleasing customers, then don't institute a wage cap.

Why is this a certainty based on one league in one extremely tedious sport?

Could I not say the same thing back to you?

Re: Salary Caps

David Baker — Fri, 10 Apr 2009 17:14:55 GMT

Salary caps are pursued by firms with lower capital reserves because they are unable to pay the wages that those with larger pools of wealth can afford.

Their argument essentially boils down to their inccorect notion of fairness, but is carefully disguised via the trojan horse of competitiveness.

In any industry, surely employers will want the freedom to invest in what they believe will add good value for money.

If we think competition is best when firms are constrained and talent is spread, then I think we are failing to grasp what the term actually means.

Re: Salary Caps

David Baker — Fri, 10 Apr 2009 13:26:19 GMT

To simplify the discussion, let us look specifically at the English Premier League.

The league is a business just as the clubs participating in it.

It is fair for clubs to choose to invest in accordance with their means and players to maximize their earnings to the extent that their employers are willing to pay.

We can think of this in terms of a society outlining its rules for competitiveness and its impact on business participating within.

Re: Salary Caps

William — Thu, 09 Apr 2009 23:51:27 GMT

Also in this franchise I believe any team can split and start it's own thing if it wants (don't quote me on that)