December, 2001, Vol. 124, No. 12
Book reviews from past issues
The Economics of Sports. Edited by William S. Kern, Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 2000. 130 pp. $33, cloth; $14, paper.
Webster’s Seventh New Collegiate Dictionary defines sport as "a physical activity engaged in for pleasure," but popular professional sports have turned these recreational activities into an industry. As William Kern notes in his introduction to The Economics of Sports, in today’s newspapers "you are as likely to find that discussions of the economic aspects of sports occupy as much space as do the results of the games." It is on this basis that Dr. Kern compiled a series of six papers derived from a lecture series at Western Michigan University during the 1998–99 school year. Essays include discussions of the role of monopolies in sports, the effects of sports on regional economies, the profitability of sport franchises, and even one paper on pay discrimination among players based on race.
At the professional level, sports franchises are unique among American businesses for several reasons. By definition, teams both compete and cooperate within the boundaries of a defined league. While individual teams strive to dominate their league, successful domination leads to diminished competition. Unlike most monopolies, it is not clear that it is in a team’s interest to so totally dominate a league as to eliminate all possible competition. Such domination can lead to lower revenues as fans tire of watching noncompetitive events. It is in the economic interest of teams to balance competition as a way of maximizing revenue, while still appearing to strive for victory every year. This is the subject of Rodney Fort’s and Andrew Zimbalist’s essays. While looking at different issues, both come to the conclusion that professional sport leagues should be broken up to encourage more competition. Both authors advocate a legislative solution, but these seem unlikely solutions because it is unclear if fans want more government intervention in their sports teams. Unfortunately, neither author addresses these concerns in their essay.
Sport franchises also are unique in the psychological impact they can have on a host organization, whether that group represents a city or a university. Leaders will often argue that obtaining a sport franchise boosts the status of the host organization and lead to greater economic payoff, while losing an existing franchise will have the opposite effect. City leaders will commit a variety of subsidies to obtain a new franchise and to avoid losing a present one. University presidents argue that their teams actually provide subsidies to other nonrevenue sports and to academic programs. Robert Baade, John Siegfried, and Timothy Peterson look at the issues of subsidies and the role of sports in economic development in their essays, while Richard Sheehan addresses similar issues in college sports. Because measuring intangibles such as increased pride and recognition are difficult, the authors confine themselves to a discussion of cost-benefit analysis based on measurable data. In the end, all of the authors conclude that teams have less economic value to both cities and universities than many of their most adamant boosters would like to admit.
The final essay diverges from all of the previous essays by not discussing monopolistic power or economic payoffs, but rather focuses on racial discrimination in sports. Looking at salaries, hiring, and retention practices, Lawrence Kahn uses economic data to examine the role of race in the "big three" of professional sports — baseball, football, and basketball. He concludes that while salary discrimination has largely been eliminated in these sports, the data indicates that there may still be discriminatory policies in the hiring and retention of minority players.
Each of the six essays could make for an interesting journal article, and all of the articles eschew academic language, thus making them readable for the noneconomist. Unfortunately, except for focusing on sports as a common subject, the parts do not add up to a whole book. At the end, the reader of this rather short book finds that the book covers too broad a subject in too few pages. In total, the essays offer neither the depth of discussion on a single topic, nor the breadth of coverage of all of sports. For instance, while the title purports to discuss the entire sports industry, most of its focus is on baseball, football, and basketball. While these three sports represent the largest segments of the sporting industry, they also represent a declining share of the total sports dollar. NASCAR fans will find no mention of their sport, nor will fans of other sports, such as those included in Olympic competition. Readers interested in a single sport will want to go beyond these essays to learn more, while those interested in a general survey of the industry will have to do the same.
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