What Can Our View of Sports Teach Us About the Free Market?

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"Serious sport has nothing to do with fair play. It is bound up with hatred, jealousy, boastfulness, disregard of all rules and sadistic pleasure in witnessing violence: in other words it is war minus the shooting."

~ George Orwell, "The Sporting Spirit"

Some of the recent and seemingly traumatic sports stories, e.g., the continuing Barry Bonds saga — "If he breaks it, will they come?" — are interesting. They illustrate for me underlying beliefs that people have about sports, beliefs that color their impressions of life in general and "the market" in particular. Given that sports is even more transitory than say, television, one might simply conclude that this is of little consequence and move on. It's only sports, so who cares, right?

At least a few people appear to care very deeply about the purity of sports. I'm not one of them. Now, don't get me wrong. I love sports and have played and watched them for years. I just don't go in for all the — cue music — "integrity of the game" nonsense. (For the record, while I tend to regard Barry Bonds as a bit of an insufferable a**hole, I don't think his entry in the record books needs an asterisk. Sports are full of records achieved under differing conditions. How is this one special, really?)

I began to formulate this essay when it dawned upon me that one's view of "fairness" in sports, where the entire situation is centrally-planned and overseen by rule-enforcers, might affect one's view of that which should not — according to libertarian theory — be centrally-planned and overseen by rule-enforcers: the free market.

My premise is simple: Does the fact that sports apparently benefits from central planning overly influence people's understanding of why such a practice does not work in real life, say, with the free market? I wonder.

Almost everyone has some opinion about sports. Often these opinions suffer from selective logic. For example, in the Bonds case, I find it ironic that there is still any question about his steroid use. Let’s stop trying to generate a question where only an answer exists. He took them. He took them on purpose and he took them for a while.

This is the same as McGuire, Sosa, Palmeiro, Canseco, and a bunch of other guys — most of them nameless nobodies — who went from utility hitters to home run threats around the same time. Let’s stop the insanity on that. Gary Sheffield may have a few faults, but he admitted on TV that he and Bonds both took the stuff. The “question” of Bond’s steroid usage has to be one of the world’s worst kept secrets. (Next thing you know, we’ll be debating if Paris Hilton likes home movies.)

Allow me to make two other points regarding Bonds before I move on. First, there is legitimate dispute about the timing of these events relative to “cheating” in Bonds' case. As I said, unlike some, I’m not enamored with the “purity” of sports. If Bonds took steroids or anything else during a time when it wasn’t “against the rules of the game” what’s the big deal? That’s not cheating.

Lastly, as I've mentioned once, twice, and even three times before, I don’t think drug usage is something that should be legislated against or precluded coercively. If a person wants to spark up, toke up, smoke up, shoot up, etc., that’s their business. If baseball really cared — given that they can institute almost any rule they wish, assuming the Collective Bargaining Agreement didn't preclude it — they could just state flatly, “Anyone under suspicion of using performance enhancers will be stricken from the record books.”

Instead, Selig (baseball's commissioner) sits around looking like a man late for a root canal and lets the public fret about the game's "integrity," with help from sports talking heads. And that’s the real take-home message. The people who could decide leave the “decision” to us. This is simply something else for sports enthusiasts to argue about, like whether or not the 90’s 49ers were better than the 00’s Patriots. Who cares? Fun, yes. Important, not so much.

Central Planning: The Cure for What Ails You?

So what does all this sports stuff have to do with freedom and liberty? More than one might imagine. For one thing, people tend to view capitalism as a game on par with sports. For another thing, people tend to view success in the market as predicated upon winning at some cost to everyone else. This is the ever-popular zero-sum-game view. Lastly, rules are imposed in sports to preclude participants from gaining an unfair advantage. Similar rules, such as laws against price gouging, are implemented for exactly the same reasons. The fact that such laws operate in direct conflict with the market is lost on almost everyone in the mainstream, including many consumers.

For example, if we are to believe the mythology, in order for a capitalist (read: greedy scum sucker) to succeed, many must necessarily fail. In fact, in his wake there will inevitably be, so the theory goes, a veritable cornucopia of mangled bodies and broken dreams. This is exactly the image used by people like Mao to paint capitalism as the cause of the problems that were actually inherent in the system he proposed to replace it.

As Mises said some time ago:

"The history of capitalism as it has operated in the last two hundred years in the realm of Western civilization is the record of a steady rise in the wage earners' standard of living. The inherent mark of capitalism is that it is mass production for mass consumption directed by the most energetic and far-sighted individuals, unflaggingly aiming at improvement. Its driving force is the profit motive, the instrumentality of which forces the businessman constantly to provide the consumers with more, better and cheaper amenities. An excess of profits over losses can appear only in a progressing economy and only to the extent to which the masses' standard of living improves. Thus capitalism is the system under which the keenest and most agile minds are driven to promote the welfare of the laggard many."

Central planning cannot compete with the performance of capitalism with regard to the market, because no central planner can anticipate the appropriate needs of the market. Will we need more shoes and less wheat? Should we divert all sugar production to wine versus fitness drinks? The fact that someone can decide, a priori how many strikes are necessary to be "out" in baseball, and thereby control the flow of a game says absolutely nothing about using such a premise in a market. Many an economist has pretty decisively slain the premise of central planning and many a society has seen the folly of any attempt to centrally plan "up close and personal."

A similar mistake is made when we attempt to preclude a capitalist from obtaining an "unfair advantage" via legislation. A great example of this mythology is the price-gouging law. The premise for this rule is almost identical to the motif of preventing cheating in sports. A law is needed, so the theory goes, to prevent a capitalist from unduly benefiting from the misfortune of others. The problem occurs because this desire to prevent undue benefit — whatever "undue benefit" actually means — comes into conflict with how the market actually operates.

As Munger states in a relatively recent column about an ice shortage following a hurricane:

Even the supporters of price-gouging laws want low prices and large supplies. But they can’t get those things from a price-gouging law. Precisely the opposite happens, as the supply of ice disappears and the effective price, what people would be willing to pay, goes higher and higher. I admit that it’s not intuitive, until you think about it. The only way to ensure low prices, and large supply, to buyers is to allow sellers to charge high prices, the highest they can get.

All emphasis is from the original.

We see that the supporters of price-gouging laws actually support that which results in exactly what they do not want! They want more of an item, that is, a greater supply. They also want a lower price for the item, which is a direct result of a greater supply. In the case of a natural disaster, the market response to scarcity is to increase the price of any item for which the demand is high.

This increase in price can only be "fixed" if supply is increased. And supply will increase only if the new price point meets or exceeds the cost of overcoming the impediments that led to the scarcity in the first place. In sharp contrast to sports, where the prevention of an unfair advantage makes sense, such is simply not the case in the market. This is particularly true when, as Munger states, "the price mechanism was bound and gagged, held hostage in the attic of the legislature."

Conclusion

Capitalism is not a zero-sum game, nor can it be. In fact it is not really a game at all. No central planner can accurately anticipate what should happen. Nor can rules be instituted that conflict with supply and demand, without disastrous consequences. In order to succeed, a capitalist, a businessman, an entrepreneur must provide the best product or service to the most people. At minimum, he must convince people, who are free to choose otherwise, that his product is at least worth the price he charges for it. In any voluntary exchange, both participants must feel that they are getting more than they "deserve" or they would not do it.

If the seller of wares or services is inscrutable, those to whom he sells are absolutely free to penalize him. This is in direct conflict with leaving a mangled trail of bodies in his wake. He must, in fact, endeavor to leave as many happy, or at least fulfilled, customers in his wake as possible, lest he lose all he has built. He must be allowed to charge the highest price required by the market, lest he decide against the endeavor, to the detriment of those who would pay his price, no matter how begrudgingly they may appear to do so.

His competition is only with other men who vie with him in his market. This is certainly the minority of those with whom he interacts. In fact, all of us outside his business are cheering for one of these two (or more) participants to win, since we expect that we win when one of them does. This is a far cry from having some pseudo-omnipotent body make sure these businesses treat us well.

When we've no recourse about selecting another pseudo-omnipotent body, no matter how poorly the initial one performs, it just makes matters worse.

Wilt Alston [send him mail] lives in Rochester, NY, with his wife and three children. When he's not training for a marathon or furthering his part-time study of libertarian philosophy, he works as a principal research scientist in transportation safety, focusing primarily on the safety of subway and freight train control systems.

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