Comments on economics, mystery fiction, drama, and art.

Thursday, January 17, 2008

Why Do People Think Rising Player Salaries in Baseball Drive Ticket Prices Up? A Lesson in Framing the Narrative

This is another attempt (as in my price gouging post) to look at the way people frame things, and how those frames make a huge differences in the narratives that people see applying to particular situations.

Here’s my base situation. Sports economists look at the tremendous increases in earnings of professional athletes and conclude: “The consumer demand for viewing (etc.) professional sporting events has increased. This increase in demand leads to an increase in the demand for talent. Given the restrictions on entry, this increase in demand for talent drives up the earnings of athletes. But, also, the increase in consumer demand for the sport drives up ticket prices. It is, therefore, a fallacy to look at rising ticket prices and rising earnings and conclude that rising earnings drive rising ticket prices. It is, in fact, just the reverse—rising ticket prices drive higher earnings.”

But that’s not the “popular” narrative. And, not infrequently, the popular narrative differs from one sport to another.

Consider the case of baseball. The popular narrative goes something like this: “An aggressive and well-led union has managed to get a group of divided and incompetently-led owners of baseball teams to accept free agency and salary arbitration which have combined to drive up player salaries. This has led to increased costs of running a baseball team, and owners have passed the burden along to their fans.”

To sports economists, this is nonsense. But it is a narrative that has a lot of power. Because it conforms to other situations that people are familiar with, and in which a similar narrative might very well apply. Consider, for example, the case of the US automobile industry. It’s not hard to accept the argument that, among other things, an aggressive and well-led union won wage and benefit increases from US auto companies that drove up costs, and thus drove up the prices of US-made cars. And the same for the steel industry.

Because the auto/steel narrative makes sense, and because it, in fact, aligns fairly well with reality, people are willing to generalize it to a situation where it might not fit. For example, if we take the next step in the auto narrative: “These rising car prices, coupled with a permissive system for allowing imports, led to an explosion of sales of imported cars. The result was the decline in the domestic auto industry.” (Substitute “steel” for “autos” as needed.) One can disagree with pieces of that narrative (and I do), but it’s clearly not an extension of the narrative that we could apply to major league baseball. Rather than “imported” baseball taking over in the US, US baseball is increasingly attracting the better players from the Japanese and Korean leagues, after we had already drawn the best of the best from Latin America.

(Oddly, people tend not to apply the baseball narrative to football or basketball. Here, the popular narrative goes something like “A charismatic and brilliant sports commissioner—Pete Rozelle, David Stern—created new popularity, and new markets, for football (or basketball), and revenue exploded. By imposing salary caps, these sports held salaries down, but the leaders in these sports wisely shared some of the additional revenue with players, so salaries did rise, but not enough to be threatening.”)

My own contention would be that the powers of the commissioners of the various sports have not been a truly determining factor. Sooner, or later, the rapid growth in demand for professional sports was going to have the same effects on all of the sports that have grown in popularity—football, basketball, tennis, golf, soccer, auto racing (at least for NASCAR) and, yes, baseball. (Hockey, in the US, at any rate, seems not to have shared in the boom.)

So why the differences in the narratives? At least in part, it’s a result of the way in which the media have framed the stories. Baseball’s leadership has looked bumbling and incompetent, compared with the other major sports. So the media have created a narrative that placed that bumbling at the center of the narrative, instead of realizing that it hasn’t been all that important. And I say that with apologies to the detractors of Bowie Kuhn.


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