Normative Narratives


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Transparency Thursday: Is There Anything More American Than Baseball?

Baseball is America’s pastime. Despite the NFLs meteoric rise as America’s most popular sport, and the global expansion of basketball, baseball remains uniquely American in more ways than most people generally realize.

For one, baseball is “Americas Pastime” because it has been around longer than football. The exact origins of baseball are debated, but historians agree that it has existed since the early-mid 19th century. In a way, American and Baseball grew up together, and will be forever intertwined. The dog days of summer, hot dogs and cold beer, and watching a baseball game have become an enduring image of American culture. The image of the hard working American also has parallels to baseball players, whose 162 game schedule is unrivaled by any other major sport.

The following analysis is much less nostalgic and much more economical. It is inspired by the fast-approaching beginning of the 2013 MLB season, and a recent report by Forbes which states that the average value of MLB baseball teams rose by 23% last year, the “biggest year-over-year change in valuation ever calculated by Forbes magazine”.

“In its report, Forbes, which has been tracking the league’s finances since 1998, revealed that the money that all teams made from the $450 million sale of the Montreal Expos in 2006 was invested in hedge funds that are now worth more than $1 billion.

“The value of a team used to be about a team itself,” Forbes executive editor Michael Ozanian said in a phone interview with ESPN.com. “Then it shifted to the stadium value and then to the television deals, and now it’s more about what’s not on the field at all.”

Is there any other sport that parallels the U.S. economy so? I think not. Both represent capitalism in their purest forms. America is one of the strongest pro-market advocates of all the world powers. MLB has the most free market-driven amongst major sports.

In baseball, there is no salary cap, and competition is protected through a redistributive luxury tax system. In the U.S., as in baseball, the open market determines someone’s wages, and poorer parties are compensated by redistribution of wealth to help ensure equality (who does this better, the U.S. or MLB, is open to debate). Other major sport’s wages are also determined by market forces, but are influenced in general by salary caps, which distort market values.

The MLBPA is the strongest of all the players unions. Strong unions, believe it or not, used to be a bastion of American wealth. The MLBPA was perhaps too strong, to the point where regular steroid threatened the integrity of the game. Just like in America, vested interests continue to hold sway until the system is “brought to its knees”, and only then is real reform discussed (in baseball it is PED testing, in the American economy financial and tax reform).

Baseball as a sport exemplifies American ideals, and as a business mirrors the U.S. economy. Teams increased value represents not an increase in popularity of the sport, but savvy off field investments by teams.

How would you feel if your team lost lots of money in the financial market and it affected the on-the-field product? We already saw this to a certain extent with the Wilpon-Madoff debacle, but most people assumed this was an isolated issue—the recent Forbes report suggests perhaps all teams are more vulnerable to financial market shocks than we may realize.

But restricting team’s investment opportunities would be decidedly un-American. Perhaps MLB should put a limit on the amount a team can cut it’s payroll from year to year, ensuring that off-the-field investments do not affect the product a team puts on the field?

Most people will not care about this issue unless it affects them directly—out of sight out of mind. Mets fans were outraged that their team’s payroll took a hit when the Wilpon’s lost money in the financial market. I would also not be surprised if eventually we find out the Marlins salary-dump was somehow linked to losses not directly related to baseball activities.

Perhaps investment in financial markets is an unstoppable force, and that any entity that has a large amount of capital—including major sports organizations—will naturally be drawn to it. I do not know if the commissioner’s office has the power to regulate how owners invest their profits even if it wanted to.

Banks have to have a certain amount of reserve cash to back up their assets, known as a reserve requirement. Perhaps the commissioner’s office should institute a similar policy to ensure that financial market fluctuations do not affect the integrity of the game. Or should the system stay as it is, and address teams financial woes on a case-by-case basis as it currently does ?(such as the Dodgers MLB managed bankruptcy)

http://espn.go.com/mlb/story/_/id/9104778/forbes-mlb-teams-see-historic-23-percent-surge-average-values

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Monday Morning QB: The World Baseball Classic and Professional Sports as a Development Tool

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It seems that 200 MLB players will be participating in the World Baseball Classic this March. For those of you who do not know, the WBC is a global baseball tournament held every 3 years in March–this March will be the third such tournament. You may expect the Americans to dominate on the global stage, as baseball is the “American Pastime”, but you would be wrong. Japan has won both of the two World Baseball Classics so far, the U.S. has never even made it to the finals (and only made it to the semi-finals once).

There are a number of reasons for the lack of dominance by the U.S. For one, lots of the best MLB players come from Latin America (the Dominican Republic specifically), so the MLB talent does not favor the U.S. as much as it may have in the past (when baseball was dominated by white Americans). This map from 2011 is a pretty recent visualization of how baseball has become more global in recent years, if we had an updated map for 2013 you would expect to see even more international players.

There is also the argument that “Team America does not take the WBC seriously”. Many players from MLB rosters are barred from playing in the WBC by their team (older guys, pitchers, players coming off injury traditionally do not play in the WBC). This affects the rosters for all the clubs, but disproportionately the American team as it has the vast majority of MLB players. Also, the WBC runs parallel to spring training in America; many MLB players are just getting into playing shape and use the WBC as an opportunity to shake the rust off, as opposed to some international players whose seasons may be in “full swing” (no pun intended).

There is also the argument that MLB players will not help you win this competition. Japan, the only team to win the WBC, has never had many MLB players on their roster. This year, Japan will look to defend its WBC title with zero MLB players, that should be fun to watch. With MLB players just getting warmed up, other teams have a much better chance at competing in the WBC then one may expect.

Sports can be a powerful development tool for undeveloped countries.Professional sports bring to the table billion dollar profit margins that can go an even longer way in a poor developing country than they could in the U.S. These programs are a true win-win for professional sports leagues and developing nations. The professional sports leagues can expand their markets to new regions, and the process of discovering talented new players is essential for the future profitability of any sport.

The benefits to the developing country are not what one may think. It is natural to think of the sport star who signed a big contract giving back to his home country, and for this most part this does happen. However, these benefits are small compared to the more “organic” process of economic development. By linking sports programs to educational and nutritional programs, even those who do not go on to become professional sports stars will be helped in achieving their potential. The social capital and camaraderie learned in sports is a more abstract advantage than schooling and nutritional guidance (human capital), but are nonetheless important skills for young people to learn.

Participating in these sports development programs are not only fun for kids, but they teach them valuable life skills. Instead of selling drugs, joining militias, or working as poor child laborers, these children learn marketable skills and are given the opportunity to realize their full potential (something we in the developed world often take for granted). The next great MLB player could come from one of these programs, but so could the next Nobel Prize Laureate. The benefits from these “investments” will take time to pay dividends, but the return on these investments could be absurdly large for both professional sports leagues and developing countries. These programs are a true example of a win-win relationship, and there is a strong argument for “scaling-up” these programs.
Baseballs development initiatives tend to be in Latin America and Asia, where baseball is popular. Comparable programs exist for other major sports as well. Any NBA fan could tell you about “NBA Cares“, where star players help out in poorer communities around the U.S.. Less well known is the SEEDS program, which supports similar programs in developing countries (currently operations are based in Senegal, but the organization has an ambitious goal to expand to other countries in the future).

Certain sports naturally fit better in different countries. Asia and Latin America have a history of baseball. Also due to the fact that these regions are generally more developed than Sub-Saharan Africa, the cost of playing baseball is a bit more achievable (and is subsidized in certain cases by MLB). In Africa, basketball and soccer are more popular, as all you need to play these sports is a ball and an arena. Different sports for different folks, but they all have the same potential for spurring economic development and raising the standard of living.

Baseball seems to be making inroads in the African market as well. Uganda became the first African team to play in and win a Little League World Series game last year after missionaries brought baseball to Uganda in the 1990s. Some of the best athletes in the world are born in Africa, I would not be surprised to see MLB take further steps in promoting it’s sport in Africa in the coming years / decades.  South America is another potential untapped growth region for MLB to consider.

So while you’re enjoying the WBC, or the Olympics or World Cup in the future, know that you are not only enjoying sports, that you are not only displaying national pride, but that you are also (indirectly) advocating the use of sports as a poverty reduction tool. All that socially constructive behavior by sitting on your couch at home, not too shabby!!

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