Athletes’ Salaries Too High? Sports Fans, Blame Yourselves
In the Market, the Consumer Is the Ultimate Boss
Gene Callahan is the author of Economics for Real People.
I was sitting in a sports bar recently when the bartender and three of the patrons near me began discussing the salary of New York Yankee third-baseman Alex Rodriguez. (Rodriguez currently makes roughly $25 million per season.) One of the customers said it was absurd that Rodriguez makes so much when, for instance, teachers, charged with educating our children make only $50,000 or $60,000 per year. The bartender defended Rodriguez’s salary, asking, “If someone offered you $25 million, would you turn them down? And besides, if the owners can pay ballplayers that much, how much are they making?” (His second defense of Rodriguez’s income level is, of course, open to the objection that the owners are even more overpaid than are players.)
I am presenting an account of their conversation here not because I suspect that the readers of The Freeman are especially interested in Rodriguez, but because it struck me as representative of a type of complaint commonly made about the workings of the market: To many people it just doesn’t seem right that pop stars/investment bankers/athletes get paid so much more than nurses/firemen/teachers.
What no one participating in the barroom banter that afternoon seemed to consider was the question of just who is responsible for the size of Rodriguez’s salary. The correct answer, especially given that we were in a sports bar, is that the discussants themselves ultimately are the ones setting such high rewards for being an outstanding athlete. (Not just the four of them, of course, but them in concert with all other sports fans.)
It is the very fans who often grumble about the “ridiculous” wages paid to top athletes who in effect set their salaries. That’s because in a market economy the price paid for any factor of production (including labor services) arises from the choices consumers make about the items they wish to buy and how much they are willing to pay. Producers face costs in providing a good, and if they estimate that buyers will not pay at least enough for their output to cover their costs plus some profit, the good will not be produced. Those estimates can turn out to be over-optimistic: producers are often mistaken in gauging consumer demand, and many a business has gone under because it spent more to manufacture its offerings than consumers were willing to pay. But competition among entrepreneurs for buyers’ dollars rewards those entrepreneurs whose forecasts are generally most accurate with profits that allow them to remain in business and invest even more in the future.
Consumers must bid enough to prompt producers into action, and the price of every good—industrial products as well as consumption items—can be traced to consumer choice. Producers of items needed for the production of consumer goods will find it rewarding to produce those items only if consumers value the final goods enough to pay for the resources and work necessary to create them.
What’s more, the costs producers face in their operations are not determined by nonhuman factors such as energy expenditures, chemical transformations, or the abundance or scarcity of various raw materials; rather they are the consequence of the producers’ evaluation of alternative ways in which they might earn their livings by meeting consumer demand. Of course, producers must not ignore physical reality in their business decisions: it will clearly require far more time and energy to manufacture skillets from iron mined on Mars than from the same metal mined on earth. However, unless consumers value “Martian skillets” more than the terrestrial variety, expending all that effort to procure otherworldly metal will not result in a higher price being paid for it. It is the preferences of consumers that drive the formation of prices all the way backwards along the production chain. If some resource could be used in the creation of a consumer good, but producers judge that their efforts to acquire it will not add enough to the value of the final product to be worth their while, they simply will choose not to employ it; they have no power to drive up the price of the end product by picking an extravagant way of manufacturing it.
This aspect of the market economy, which has been termed “consumer sovereignty,” is entirely independent of how concerned a proprietor is about the welfare of his customers. One entrepreneur may start a firm because of a sincere conviction that the product or service he plans to provide will bring immense benefits to his clientele. Another may be motivated solely by his desire to become fabulously wealthy. But to succeed, both will be equally bound to judge accurately as to how much consumers will value his offerings. Certainly, an unscrupulous businessman may try to deceive consumers about the true nature of what he is selling, but that is more accurately classified as theft rather than commerce and properly is subject to legal sanctions.
Often the understanding of consumer sovereignty as presented above is attacked for not taking into account the character flaws and cognitive shortcomings of the flesh-and-blood people who really populate any economy. However, asserting that in a free market the consumers are sovereign in no way implies that every decision they make about spending their money is perfect and immune to moral or prudential criticism. If a father bets extravagantly on horseraces while neglecting to provide adequately for his children’s needs for food, clothing, shelter, and education, then his friends and family are quite justified in reproving his conduct, and if the neglect is severe, legal remedies may be appropriate. If a wealthy heiress spends her inheritance entirely on lavish evenings of debauchery, then a newspaper’s society columnist is perfectly entitled to bemoan that she is not putting her fortune to a better use. And while it is not immoral if I buy apples for $10 a bag despite their being available for $5 just down the street, a friend may sensibly and helpfully point out that I am needlessly wasting my money.
The recognition that, in the market, the consumer is the ultimate boss does not rely on any idealized model of him as a perfectly rational, fully informed, utility-maximizing supercomputer, whose choices are beyond reproach and are incapable of being improved on through reasoned consideration.
Some critics of “consumerism” argue that, in today’s market societies, consumers’ choices about what to purchase are “not really free” because they have been unduly shaped by massive and pervasive marketing efforts designed to convince people that they want or even need products that they could easily forgo, some of which actually diminish their quality of life. A paradigmatic case is cigarettes: smokers are persuaded to buy them because tobacco companies have made them seem glamorous or sources of great pleasure, but in reality they ruin the health of smokers, who will come to regret their habit.
Not Immune from Error
It is true that consumers are no less immune from error in their choices of what to buy than are producers in their choice of what to make. But if we are to allow free speech and treat our fellow citizens as autonomous individuals responsible for and entitled to make their own decisions, then it follows that they must be allowed to evaluate arguments as to how they should allocate their time and resources themselves. In a free society the proper remedy available to those who deplore smoking or are convinced that their fellows should buy fewer Britney Spears CDs and more Bach is to persuade others of their beliefs. That such efforts at persuasion will sometimes fail is an inescapable consequence of treating others as free agents rather than as one’s vassals whose lives can be directed as one wills.
It is important to note than nothing argued here suggests that every salary we see today is the result of consumers’ voluntary choices. To the extent that any interest group, such as corporate managers, can successfully lobby for favorable legal restrictions on free-market processes, such as laws hampering corporate takeovers, then the members of that group might be able to earn more than they would through purely voluntary transactions. Similarly, the owners of baseball teams who receive municipal subsidies to build fancy, new stadiums can pay their players more than they could without that government largess.
Nevertheless, the enormous salaries earned by sports stars are chiefly the result of the willingness of their fans to pay to see them play. If my neighbors in the sports bar are seriously distressed that star athletes make so much more than educators, the power to alter that situation lies with them. They can stop paying so much for ESPN and tickets to ballgames and instead spend the money they save on their children’s schooling. I certainly would not complain about such a shift in people’s priorities. But it is the only way a free people can address the situation.
Pingback by The Struggle to Convince Sports Fans of their Power | Sports Fans Coalition, Inc. on 6 March 2010:
[...] is that we sports fans have a tremendous responsibility to speak up when our fan dollars are being misused. When large corporations, even if they are [...]
Comment by Will on 15 March 2010:
Well what do you think hes a talented player who has alot of fans which buy alot of his gear and alot of yankee accesories thats how they make their money so dont complain about it if their isnt going to be a time where there wouldnt be any baseball fans at their stadiums buying food and tickets….
Comment by I'm gay on 29 April 2010:
i love how the big boys use their big wood to smack the balls everywhere it gets me so stiff
Comment by im straight on 4 May 2010:
ur really gay
Comment by dont worry about it on 9 September 2010:
agreed.
Comment by i'm gayer on 30 September 2010:
hey i’m gay. i like it like that too
Comment by bitch on 30 September 2010:
fuck bitches
Comment by suck balls on 1 October 2010:
fuck u
Comment by retard on 27 October 2010:
i love you gene, you make evryone feel so stupid with ur really smart words
Comment by Anonymous on 29 October 2010:
i wanna offer u guys a modeling contract, ur salary would start 8,000 and will increase every photo issue. contact me at 7328040903 ask for stephan! thx
Pingback by The Struggle to Convince Sports Fans of their Power | Sports Fans Coalition on 2 November 2010:
[...] is that we sports fans have a tremendous responsibility to speak up when our fan dollars are being misused. When large corporations, even if they are [...]
Comment by JewBagel on 10 November 2010:
NO ONE CARES
Comment by LoserFace on 10 November 2010:
I CARE
Comment by Aye Ayyyye Ayyyeee on 10 November 2010:
I like feeling balls. touching balls, runnung balls, throwing balls…… thats right, i iz a quarterback
Comment by bob on 10 November 2010:
matt mcduff is gay
Comment by Anonymous on 7 December 2010:
My husband and I have thought this for years and now someone finally put it eloquently. (and by the way, my husband was an athlete). That’s the problem with Americans. People don’t know how to delay gratification–the see it–they want it.
Thank you for the article.
Comment by hello on 7 December 2010:
jamrcus russell is the best example for this, he was paid millions of dollars and his enormous salary was also influenced by the fans that wanted to see him produce in the Nfl starting quarterback role. So yes…. it is our faults……
P.S. those are dumb comments above me… grow up… losers
Comment by Anonymous on 7 January 2011:
YOU ALL SUCK
Comment by MAH on 7 January 2011:
YOU ALL SUCK
Comment by poop fart on 10 January 2011:
POOOOOOPPP!!!!
Comment by Comment by on 10 January 2011:
konichiwa
Comment by Jenkens on 8 February 2011:
He likes potatos in the butt
Comment by nuthan on 12 March 2011:
hi this is nuthan sports fan
Comment by Luffy on 29 March 2011:
They earn too high
Comment by anonymus on 13 September 2011:
great post !
Comment by James on 1 November 2011:
You people are so immature. I understand this post; it makes a great deal of sense. I’m actually writing a report on how athletes’ salaries are far too high, and I’m using your site as one of my sources. Great points made!
Comment by sam on 4 December 2011:
also writing a paper and using this as a source, but i would greatly appreciate if you would update your statistics to what they currently are now.
Comment by jessica on 12 January 2012:
heyy i think they do get paid to much so shutup jerks
Comment by Cari Beth on 16 January 2012:
Jessica,
It might make you look better if you use reason and critical thinking when formulating your postings. Simply emoting is not viewed as productive. It wastes your time and that of others.
Good article btw! The concepts of supply and demand fit nicely into the cogent explantions given. I also appreaciate how market distortions like subsidies and lobbyiests were brought out too.
Comment by Tom on 17 January 2012:
Sir,
I fully agree with your article and I have been saying the same thing to my friends for years. I would just like to ask why you haven’t mentioned the possible occurrence of monopsony in your article. The players do have a specific talent that is in high demand.
Thanks again for a great article.
Comment by cpanel reseller hosting on 3 February 2012:
Wow, amazing blog layout! How long have you been blogging for? you make blogging look easy. The overall look of your site is great, let alone the content! cpanel reseller | reseller hosting |
Comment by a4784967 on 5 February 2012:
I’ve said that least 4784967 times. SCK was here
Comment by Vacations in Siesta Key on 5 February 2012:
Some truly howling work on behalf of the owner of this internet site , perfectly great articles .
Comment by Camcorders on 6 February 2012:
I love your blog.. very nice colors & theme. Did you create this website yourself or did you hire someone to do it for you? Plz reply as I’m looking to construct my own blog and would like to find out where u got this from. cheers
Comment by marketing auckland on 6 February 2012:
There might be clearly lots to learn about this. I believe you made some good factors in Features also. http://www.demo.getlisted.co.nz/marketing-auckland
Comment by gravesend electrician on 6 February 2012:
You really make it seem so easy along with your presentation but I to find this matter to be actually one thing that I believe I would by no means understand. It sort of feels too complex and extremely huge for me. I am looking ahead in your subsequent put up, I¡¦ll attempt to get the grasp of it!
Comment by photocopiers london on 6 February 2012:
I want to express some appreciation to you for bailing me out of this circumstance. Because of looking through the internet and coming across principles that were not pleasant, I thought my life was over. Existing devoid of the answers to the problems you have sorted out all through your review is a serious case, and the kind which could have negatively affected my career if I had not come across your website. Your main natural talent and kindness in maneuvering a lot of things was vital. I’m not sure what I would’ve done if I had not encountered such a thing like this. I’m able to at this time relish my future. Thank you so much for your high quality and results-oriented guide. I will not be reluctant to endorse your web sites to any individual who needs to have assistance about this matter.
Comment by Jules Malla on 6 February 2012:
Thank you so much for providing individuals with such a memorable possiblity to check tips from this blog. It really is so pleasurable and also full of a great time for me and my office co-workers to search your site more than 3 times in a week to read through the latest items you have. Of course, I am just usually astounded with the outstanding opinions you give. Some 1 facts in this article are truly the most effective we have ever had.
Comment by Automatic Toilet Seat on 7 February 2012:
thanks for good article, have a nice day!
Comment by buy sell and loan on 7 February 2012:
I adore your wp style, wherever did you download it through?
Comment by Beau Fulcher on 7 February 2012:
There are certainly quite a lot of particulars like that to take into consideration. That is a great level to bring up. I supply the thoughts above as general inspiration however clearly there are questions just like the one you deliver up the place the most important thing will likely be working in honest good faith. I don?t know if best practices have emerged round things like that, but I am certain that your job is clearly recognized as a good game. Each girls and boys really feel the impact of only a second’s pleasure, for the remainder of their lives.
Comment by uiqoxdj on 7 February 2012:
hINCpc qhfddtabaqzf, [url=http://bfxrywyoxalt.com/]bfxrywyoxalt[/url], [link=http://ymmhgiuoemtu.com/]ymmhgiuoemtu[/link], http://tkjejaolvdwb.com/
Comment by Medical Answering Service on 7 February 2012:
Thanks for such a fantastic weblog. Where else could anyone get that kind of information written in such a perfect way? I’ve a presentation that I’m presently writhing on, and I have been on the appear out for such wonderful data.
Comment by fotografia slubna bydgoszcz on 7 February 2012:
anjriiiiiiiiiiiiiiiiiiiiiitttt, kemarin pagi gw di telp sama ni Perusahaan, suruh ktmu dengan Bp. Robert,
langsung gw dateng kerumah cewek gw, n ngajakin dia ke mall buat beli kemeja baru, celana, sepatu, ikat pinggang, kaus kaki sampe kaos dalam gw beli karna saking excited nya di panggil kerja di Perusahaan bonafid gw pikir. belanja keperluan buat interview habis 500rbu. gw pikir karna mau di interview di gedung mewah, jadi penampilan harus meyakinkan biar di lirik & lgsung di terima kerja. tadi nya gw udah semangat banget dateng & sebelumnya gw catet tuch alamat di secarik kertas,nahh tuh kertas hilang, akhir nya gw buka laptop & searching2 dech ke Mr. GOOGLE.. ehhhh ketemu ni forum yang 99% bilang negatif..
Comment by Gry symulator farmy2012gry on 7 February 2012:
I happen to be commenting to make you know what a useful discovery my friend’s girl encountered visiting your web site. She even learned plenty of details, including what it’s like to possess a great teaching character to get the mediocre ones with ease gain knowledge of several advanced subject matter. You truly exceeded our own expectations. Thank you for displaying these interesting, dependable, revealing and in addition easy guidance on this topic to Janet.
Comment by kent seo on 7 February 2012:
Thank you for another informative web site. Where else could I get that kind of information written in such an ideal approach? I’ve a undertaking that I am just now working on, and I have been on the look out for such info.
Comment by office photocopier on 7 February 2012:
Hey, you used to write great, but the last several posts have been kinda boring¡K I miss your tremendous writings. Past few posts are just a little bit out of track! come on!
Comment by get rid of bad breath on 7 February 2012:
Does your site have a contact page? I’m having trouble locating it but, I’d like to shoot you an e-mail. I’ve got some recommendations for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it improve over time.
Comment by ffice decoration on 7 February 2012:
Hello! Have you tried porno izle?
Comment by Zaproszenia z hello kitty do wydrukowania on 7 February 2012:
Thanks a lot for giving everyone an extraordinarily breathtaking opportunity to discover important secrets from this blog. It is always so brilliant and as well , jam-packed with amusement for me personally and my office friends to visit the blog at minimum thrice in 7 days to study the newest stuff you have got. Not to mention, we are usually pleased considering the magnificent information you give. Selected 1 areas in this posting are indeed the most suitable I have had.
Comment by Marisol Wallace on 7 February 2012:
I appreciate your post, it is interesting and compelling. I stumbled upon my way here through Google, I’ll come back another time
Comment by buyback on 7 February 2012:
This blog has got a whole lot of really helpful stuff on it! Cheers for sharing it beside me!
Comment by hosting coupons codes on 8 February 2012:
Outstanding post, I conceive folks need to larn a lot from this internet internet site its actually user genial .
Comment by psychic readings online on 8 February 2012:
Great weblog here! Also your internet site lots up quick! What host are you the use of? Can I am getting your affiliate hyperlink for your host? I wish my web website loaded up as rapidly as yours lol
Comment by wbjxdyfb on 8 February 2012:
PG7GC0 htlpzvufcjsd, [url=http://mgtgwwmucxgq.com/]mgtgwwmucxgq[/url], [link=http://dvitrxoetyth.com/]dvitrxoetyth[/link], http://awavkzivflyv.com/
Comment by rozy garza on 10 February 2012:
fuck alll uuuuu
Comment by guy on 22 February 2012:
wutever
Comment by ecig review on 23 March 2012:
I appreciate an unbelievable publish, may examine your others posts. many thanks for your thinking within this, I felt a lttle bit made an impact to by this article. Many thanks again! You earn a terrific moment. Portrays natures best by the wonderful report here. I do think that if a greater number of people consideration for it like this, they’d have got a better time period receive the suspend ofing the matter.
Comment by vale on 16 April 2012:
Thanks for your marvelous posting! I actually enjoyed reading it, you will be a great author.JN0-343//
I will ensure that I bookmark your blog and will come back in the foreseeable future. I want to encourage that you continue your great job, have a nice weekend!think you’ve made some truly interesting points.
Comment by Christina on 22 April 2012:
I am in 6th grade and doing a persuasive essay for my 4th nine weeks writing assignment. My topic is: “Pro Athletes aren’t worth the millions they make.” People who throw a football and tackle each other or people who throw a baseball and hit it are being paid way more than people in the military who are fighting for our countries. They are paid way more than teachers who work to shape up the minds of the future. All I am saying is that they should be paid less and deal with it. 11 out of 18 people in my class agree with me. I found a website and Alex Rodriguez would make the yearly salary of President Obama in 120 hours. That isn’t even a full 7 days. People who don’t like this comment are the dumb sports fans that use their big mouths for saying bad stuff about this man’s article. I’m a big sports fan. But they are being paid waaaaay too much!!!
That is all I have to say.
Comment by Christina on 22 April 2012:
In my last post I meant to say country. Sorry about that error
Comment by joey on 30 April 2012:
lol i posted a comment
Comment by ur mum on 3 May 2012:
doi gush!
Comment by Turdburgler on 10 May 2012:
burglin’ turds
Comment by foob on 14 May 2012:
i care u F#%@!$S
Comment by dudefdfgf on 17 May 2012:
gvgvgvj hi