Supply and demand in professional sports: The real meaning of worth

“The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity”

-Adam Smith, Wealth of Nations

Why is it that whenever an athlete signs a multi-million dollar contract, someone always questions whether he’s “worth it?”

Whether it’s Chris Johnson’s four-year, $53 million deal or Larry Fitzgerald’s eight-year, $120-million, the first thing to come out of any pundit’s mouth is whether an athlete is worth that sort of money.  It’s time to get some new material, boys.

I’m no economist but I do understand that an athlete’s salary is largely determined by supply and demand, with the market bearing a particular figure…  which is usually followed by quite a few zeros.  If the Titans, Cardinals or any other professional sports franchise is willing to pony up that kind of coin for what they consider an asset, then yes… technically, that’s their worth.

Supply and demand.

There are very few running backs in the NFL like Chris Johnson, or at least the Titans seem to think so.  The same can be said with the Cardinals and Larry Fitzgerald.  He is their franchise wide receiver, took them to their first ever Super Bowl and not only that, has flowing locks.  How could he not be worth $120 mil?  Drop in the bucket, right?

Just like any other commodity, athletes are worth what the free market will bear.  In 2007, the Orlando Magic signed Rashard Lewis to a six-year, $110 million contract.  In retrospect, was it a bad deal?   Perhaps.  But were other teams, during that free agency summer, willing to pay that much for Lewis?  Absolutely.  So did the winning Magic bid determine his worth?  Yes.  NBA owners may be currently crying broke, but they have Adam Smith, and their own bad decision-making, to blame.

Athletes are investments, people.  And before you think it’s inhuman to refer to a person as a commodity, doesn’t the company you work for invest in you, perhaps by helping you with your education, work conferences, etc?  You are either an asset or a liability, and trust me, your employer has a pretty good idea of your net worth, or at least he should.

I have a relatively extensive baseball card collection. Years ago, I hosted a table at a local card show.  One morning, I sold a Jose Canseco rookie card for ninety dollars to an eager, young A’s fan.  That’s what the card was worth at the time, as proven by the fact that he handed me over ninety dollars with little hesitation.  These days, that card is barely worth the cardboard it’s printed on, but at one point in time, it was worth that much.  Good thing I sold high.

I don’t know if we’ll ever get to the point when we are no longer offended by the kind of money athletes earn for a living.  You’d think we’d be used to it by now.  These are numbers we cannot grasp… but they are all too real.

If that sort of thing bothers you, I suggest you fasten your seatbelts, for we are about to enter the Winter of Albert Pujols’ Content.  Wherever he ends up, Pujols will likely land the most lucrative deal this side of Elin Nordegren.

And as usual, someone, somewhere will ask whether he’s worth it.  Remember, if someone’s writing the check, that means he is.

32 thoughts on “Supply and demand in professional sports: The real meaning of worth

  1. Pingback: Supply and demand in professional sports: The real meaning of worth, NFL | BallHyped Sports Blogs

  2. Good article. Although sometimes it’s probably an owners ego and not economics that drives some signings. But a big fan of this post.

  3. First of all, Alex, thanks for the kind words.

    There’s no denying owners’ egos, a la Jerry Jones, Mikhail Prokhorov or the late George Steinbrenner, are factors in free agent bidding, but more often than not, at least in the NBA and NFL, owners are handcuffed by salary caps and contract situations.

    When a high-profile free agent hits the market, it’s not like thirty teams with owners who want to show you how big their pocketbook is can all make a play. More often, only few teams can, but that’s still enough to drastically drive up the asking price for a player.

    I didn’t mention sports agents (dirty word) in the piece because there’s probably not one among us who thinks they’re not the lowest of the low.

    Where’s the enlightened Jerry Maguire when we need him? You had me at hello, Jerry. It was just a mission statement.

  4. Chris

    It’s not just the environment (NBA, NFL, NHL, MLB) or the fact of a high profiled athlete but simply the idiocy of the GM’s and team owners . If they weren’t so enamored like a virgin being deflowered for the first time then this issue would be meaningless . I mean if you’ve got to deal with the likes of Scott Boras or Drew Rosenhaus it’s not rocket science to think that they’re not going to demand top $ for their client .

    Simply look at the monies paid out by the likes of the Dodgers , Mets and Giants in recent years ? I mean the Dodgers still owe 6 players over $30 million for guys who are no longer on their roster .

    That $1.2 billion isn’t the steal that some might believe it to be in terms of that idiotic bid by William Burke with the assist of the Chinese government . Only an a_shole would come with such a ridiculous bid given the organization’s financial …… instability !

  5. It’s not just the owners ! Look to the likes of sports’ agents Scott Boras , Drew Rosenhaus and Mark Bartelstein as for many of the reasons why things have also gotten so completely out of whack !

    tophatal …………..

  6. Summed up in one phrase: Most owners have more dollars than sense. Sometimes I wonder how people can become so wealthy and still be so dumb. That must be why I’m so poor. I’m too smart.

  7. Al…

    The Giants have actually fared pretty well in the spending money department, plus they have a World Series to show for it.

    Same can’t be said for New York and L.A. who have dramatically underachieved.

  8. Nice post. I feell ike everyone the Raiders sign everyone says we overpay, but at the same time Crazy Al loves to pay his players what they want, so I don’t see the big deal in overpaying since it is his money after all.

    Dude, you totally ripped me off on that Canseco card!

  9. Al…

    There’s no doubt that free agency, sports agents and arbitration are responsible for escalating salaries… and ticket prices.

    Perhaps franchises need agents to counter the Boras’ and the Rosenhaus’ of the world.

    They could say things like “You want $80 million to play here? Don’t you understand that playing for us is an honor and a privilege? We’ll give you $60 million and call it a day.”

    Unfortunately, it doesn’t work like that.

    I guess my point with the piece was, athletes are in high demand. I’m okay with them making what they make.

    A lot of people, however, aren’t.

  10. Chap…

    I guess what it boils down to is this.

    Al kinda brought this up earlier.

    Even though the athletes are able to warrant that much on the open market, ultimately it’s going to affect ticket prices.

    If the Raiders plop down $100 mil to sign Russell and $75 mil to sign McFadden, Davis and co. are gonna have to jack up season ticket prices.

    As long as they can manage a successful roster without screwing the fans over, then who cares what athletes make?

    Now if the fans end up paying those salaries through $100 nosebleeds and $10 Michelobs, then I guess, yea, I have a problem with it.

  11. This is what free markets get you…Money is one component of the game, but making smart decisions is another. You will never hear me fault an agent or a player for getting as much as they can; that’s the name of the game. Ask David Garrard today about the value of getting paid when you can.

    If you think players and agents are at fault for the grossly-inflated salaries in sports, then go find that kid and give him his $90 back.

  12. I got into an argument once with a teacher who said just what you are talking about…she tried to tell me teacher should make athlete money because “teachers are so important to the future.”

    After I told her to shove it up her ass because the average public-school teacher couldn’t teach a ham to be salty, I told her that as soon as people are willing to spend $1,500 for a ticket to watch her teach, she can demand the big coin.

  13. Chris

    It’s one thing to plonk down money on the premise that you’re allegedly getting the best talent out there . But how often does that actually work ?

    I see that Goodell poo-poo’d the idea of the Colts hiring Tressel and he’s instituted a suspension of the former Buckeyes’ coach . Nice ! Jim Irsay and Bill Polian ought to pull their fingers out of each others’ sphincter and get a god damn clue !

    So Lou Holtz believes his son was somewhat lucky with the team’s defeat of Notre Dame ? How so Lou ? It wasn’t the weather that defeated “The Irish ” was it ? LOL,LOL,LOL !!! Good ol’ Lou if he’s not sending his saliva in your face at over 75mph then he’s talking absolute bull_hit !

    tophatal ….

  14. Hey Chris!

    I go back to the days when Willie Mays got the unheard of amount of $100,000 per season with the SF Giants! And then there was the bidding war between the NFL and the AFL for Joe Willie Namath’s services… Seems to me he signed for the outrageous amount of nearly $500,000!

    Now I know you’ve got to figure in inflation to get to today’s dollars, but still those contracts don’t even equate to bench warmer wages today…

    You’re right about the market determining a commodity’s worth and I’m a free market advocate in everything except when it comes to professional sports. With the exception of MLB the bigtime sport leagues do have salary caps to insure a competitive playing field, but still, these players are getting paid WAY to much… And yes I’ve heard every argument used to justify these pay scales…

  15. J-Dub…

    I always knew you had a little commie in you.

    If you’re interested, I know some people who can help you work on Cuban citizenship. I hear they have pretty good baseball there.

    And I already offered Chap his ninety bones back in a separate e-mail.

  16. Dub…

    I know you’re not a Cowherd guy but his arguments regarding athletes’ vs teachers’ salaries are similar to yours, minus the ham references.

    He basically says, when you can find a teacher who can hit .350 with 40 dingers in the Majors, then pay him what he deserves.

  17. Al…

    You and I have both been around long enough to know there ARE no guarantees in life.

    You can go out tomorrow, buy a brand, new car and have it be a lemon.

    Similarly, ‘Zona can invest millions in Kevin Kolb, have him be a bust and set their franchise back years.

    And for the record, I see no similarities at all between an NFL suspension of Pryor and an NFL suspension of Tressel.

    I feel like I’m taking crazy pills… and unfortunately, I’m not. Perhaps I should start.

  18. Dwin…

    The stakes are much higher now.

    I’m pretty sure Mays, Namath and company weren’t hurting for coin or attention back in their day, although I agree they’re not living nearly as large as the modern day athlete.

    Now that you mention it, there’s absolutely nothing wrong with current athletes doling out a required percentage of their salary for a veteran’s fund to take care of those who no longer have the means.

    We can call it that Dwindy fund.

    Assuming you haven’t trademarked that already.

  19. Chris

    The only commodities I believe in are the ones traded on the Futures Exchanges . I know the trends and I watch the geo political arenas closely .

    Kolb won’t be the only determining factor as to the fate of the Cardinals this season.

    There’s a litany of players who’ve been rewarded exorbitantly and they have a lot to live up to . I look at this way , the real guys who are now smiling will be their (players’) agents as they know that they will be getting paid no matter what the end results are .

    Do you think that Rosenhaus feels aggrieved when one of his clients gets a multi year, multi million contract ? It’s what Drew Rosenhaus and Scott Boras are known for . Ask chappy how he feels about Scott Boras ?

    tophatal ….

  20. Supply and demand isn’t always at play. Just look what happened in your backyard with Rashard Lewis. Otis (and the team owner) looked at the market for Rashard’s services and overpaid by at least $40 million. That’s not S&D…it’s stupidity.

    Last year in an effort to unload that wretched contract they took on one that was even worse. Yeesh

  21. Ya know, Al, the ones who might end up winning in this whole new CBA are the players who are UNDERpaid throughout the season yet have contract renewal coming up with teams that are under the cap.

    Take, for example, the Buccaneers. Tampa Bay has a whole lot more they’re mandated to spend to reach the salary floor before season’s end. Obviously, they’re going to cough up money for Freeman but there may be another player or two that earns a healthy paycheck come December if they play their cards right.

  22. Here’s my point, Drew.

    That was actually a pretty weak free agent summer. Lewis was coming off a strong season and was bound to get that money, if not from Orlando, then from some other franchise.

    Also keep in mind, Lewis gave the Magic a few decent, albeit inconsistent seasons AND was part of that Finals team. Personally, I think they gave up on him too quickly.

    But, if three or more teams were willing to pay him that sort of money, then that demand determined his worth. He just got lucky he was the big name of that particular summer.

  23. Chris

    Ask yourself this how many GM’s in the NFL do you believe be genuinely astute and who do their jobs competently ? Think about it before you answer ?

    As for the NBA , ’til Stern , the league hierarchy and the owners are on the same page this situation will be even more protracted . There’s a reason why Spurs’ owner Peter Holt was called in to be a part of the league’s group meeting with the union.

    There’s a distinct distrust of David Stern and how he has been handling the situation. It’s common knowledge that owners such as Dan Gilbert , James Dolan , Prokhorov , Joe Lacob , Peter Guber , Gavin Maloof and Mark Cuban are dissatisfied with the mess as it now stands . They’re still behind his (Stern) negotiating with the union but the moment the courts are dragged into this mess I can assure you that several of the owners in question will be looking to circumvent David Stern and deal with the union direct themselves . The last thing that they want is for this all to go to mediation in front of a Federal judge who’s liable to side with the union because of the mere fact that league hierarchy has been unwilling to be completely transparent with their finances and opening up their books for public scrutiny .

    It’s the same mess that the NFL wanted to avoid with Judge Arthur Boylan . And we all know how that ended up don’t we ?

    tophatal ……….

  24. Chris

    So TO is offering financial advice to the Eagles’ DeSean Jackson ? Told (TO) Jackson he ought to sit out ’til the Eagles offers him the money he desires . Since when TO become such an astute businessman ? Last I heard his a$s was on his sickbed mourning the fact he won’t be playing this season and VH1 is still televising his lame a__ed show ! Care to add to this ?

    I’ll take advice from a family member as and when needed . But if TO were the last god damn person on earth he’d be the last person I’d be seeking any form of advice from !

    tophatal …………….

  25. Chris

    Clemens’ attorneys led by Rusty Hardin do you think that they’re trying to prove his guilt or innocence ? This just in see link provided ……. Judge: Clemens team juror contact violated orders ———
    WASHINGTON (AP)—A judge said Wednesday that ex-baseball star Roger Clemens’ defense team violated court orders by contacting jurors after his mistrial.

    U.S. District Judge Reggie Walton is sending a letter to the jurors assuring them the court did not provide their contact information but asking if they now will speak with prosecutors.

    Prosecutors asked permission to contact them after discovering they spoke to a defense investigator. The prosecutors also asked the judge to require the defense to turn over its interview notes, but Clemens attorneys argued against doing so. Walton ruled that prosecutors must file a motion by Sept. 30 citing legal authority for him to issue such an order.

    ——————

    Part of the transcript above .

    What part of are you ___king crazy is that Hardin and the defense team don’t seem to understand ?

    tophatal ……………

  26. Hear what you’re saying but NO team was going to give him that kind of money (let alone 3 or 4). He was overpaid by $40 million. Magic were bidding against themselves.

    Even an $80 million deal was too much for Shard but that was the (inflated) market value. $120 million was not market value/supply and demand.

  27. Chris

    So you believe the college coaches shouldn’t be held to any type of standard when they knowingly violate rules ? Because in essence you’re condoning Tressel’s actions.

    I see it’s start as one means to go on with regard to the Bucs and the fans’ attendance ? No one is going then ! Their game against the Lions will be blacked out ….. and to think that the organization will eulogize Lee Roy Selmon while commemorating those who died on 9/11 as part of the tenth anniversary of that tragic event .

    tophatal ………..

  28. Al…

    To answer your first question re: GM’s, I think we’d both agree more are less competent than not.

    As witnessed the fact that their decisions were responsible for lockouts in two of the four (three) major professional sports.

  29. Al…

    Re T.O., I have some crazy friends too.

    Rarely do I listen to their advice.

    How many friends do you think he has that, when he calls them, they just let it go straight to voice mail?

  30. Chris

    I tend to redirect the unwanted messages anyway ! So Zygi Wilf feels AP (Peterson) is worth $ 100 million ? But somehow he and the Vikings’ front office are trying to coax the state legislature to set aside $ 1.2 billion as a bond issue to facilitate a new venue for the team. Here’s a guy who’s conservatively worth approximate $ 2 billion who hasn’t even suggest that he’d in part finance the deal with shelling not even 1/10 of the cost with private financing or his own money .

    But yet there are idiots who now suggesting that this new CBA deal benefited everyone . In what universe ? The NFL has never once dealt with the fact that they force municipalities into building them grand edifices but the moment these franchises bolt elsewhere the cities are left with a monstrous white elephant …………… and taxpayers’ monies is left to use for its upkeep.

    Kudos to the Bucs and in particular the Glazers for showing their true colors ! They have none ! The family hadn’t the temerity to purchase tickets to insure that the game against the Lions wouldn’t be blacked out locally much less for the fans of the NFL locally could witness the eulogies for Lee Roy Selmon and that of those who were part of the fallen on 9/11 . Bast@#ards (the Glazers) !

    tophatal ………..

  31. Al…

    A friend and I actually opted for the Rays game instead of the Bucs.

    And before fans continue to bitch about the Trop, I will say that the air conditioning was mighty nice on a hot, Florida afternoon.

    Not to mention the Rays are now only three-and-a-half back of the Sox for the wild card.

    Nice sweep, boys.

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