Sport and Economics

On March 19 in my American Sport in the 21st Century class, we discussed salary caps and stadium subsidies. We learned terminology regarding salary caps such as: hard cap, soft cap, salary floor, luxury tax, cap room and the term salary cap itself. We also learned about the owners of professional sports and the advantages of monopoly and monopsony. Stadium subsidies has arguments for and arguments against it. Arguments for stadium subsidies are: stadium and teams create jobs, stadium construction infuses money into local economy, team will attract other businesses, team will attract media attention that boosts tourism, product sales and economic development and a team will create positive psychic and social benefits. Arguments against stadium subsidies are: stadium jobs are seasonal and offer low pay except to athletes and executives, construction materials often are bought outside the local area, new businesses often are franchises located in other cities, discretionary money is limited and feeling good does not benefit everyone.

(Luxury Tax)

Salary Caps and Terminology

A salary cap is the limit a team can spend on players' salaries per player per team. This is used as a method to keep costs down and balance the league. This becomes major issues in negotiations and occurs in the NFL,NHL, MLS, and NBA.

Hard Cap-maximum amount that cannot be succeeded

Soft Cap-expectations that allow teams to exceed the salary cap

Salary Floor-minimum that must be spent on the team as a whole

Luxury Tax-amount levied by league on teams that exceed the cap

Cap Room-amount of money an owner can spend under the limit

(Representation of Salary Cap in Cartoon)

Sport Salary Caps

NBA Salary Cap- Soft Cap ($63 million)

NFL Salary Cap- Hard Cap/Hard Floor ($73 million, $51 million)

NHL Salary Cap- Hard Cap/Hard Floor ($143 million, $108 million)

Advantages of Monopoly/Monopsony

-Enables team owners to share revenues, negotiate high media rights fees, prevent formation of new teams

-Enables team owners to draft new players to one team only, control careers of athletes, minimize bidding for athletes' contracts

(Collage of Monopsony words)

Sherman Anti Trust Legislation

As I was searching the web, I found an article, stated here: Sports Law . This article explains an occurrence that had happened to Curtis Flood. Curtis Flood was an MLB player for the Cincinnati Reds, then went to the St. Louis Cardinals and was very successful during his baseball career. Curtis Flood challenged the MLB reserve clause. He stated that it was unfair that it kept players to a single team in which they had signed for life even though players went above and beyond for their contracts with that certain team. When Flood had played with the Cardinals for a while, he was then traded to the Philadelphia Phillies but refused because of their record and the stadium that they played in. He gave up a $100,000 contract by his refusal to be traded to the Philadelphia Phillies. Curtis Flood didn't stop there. He wrote a letter to the commissioner of MLB, Bowie Kuhn, declaring that he wanted a free agent. The commissioner denied him request and stated the propriety of the reserve clause. In response to the commissioner denying him request, Curtis Flood had filed a lawsuit against Bowie Kuhn stating that the MLB went against the antitrust laws. This case eventually went to the Supreme Court and ruled in favor of the MLB. Curtis Flood then sat out the season of 1970 and began to play with a different team in 1971 but that didn't last long. Even though Curtis Flood had lost the lawsuit, the reserve clause was struck down in 1975. I picked this article to write about because we had learned about the Sherman Anti-Trust Legislation in class. We learned that it caused problems for African Americans. Also, I thought it was interesting to learn about a player challenging the Sherman Anti-Trust Legislation.

(John Sherman of the Sherman Anti-Trust Legislation)

(Curtis Flood)