Spoil sport

The Age’s Business section published an article by Paul Kerin about the AFL in the aftermath of the Melbourne Storm salary cap rorts ironically titled How to be a good sport. The title was ironic because the article was an assertion driven, evidence free playing of the man rather than the ball. Paul Kerin has determined that a free market in sport is inherently better for consumers and players and that the interests of all parties will be best served by a free market in players and indeed clubs. If 10 clubs in Melbourne are too many then the ideal solution would be for one to fold and perhaps the franchise would be taken up by a Perth or Adelaide based club. Paul Kerin gives us an Economics 101 textbook solution to the supposed problems of the AFL while disregarding the inherent tendency for unregulated free markets to tend towards the oligopolistic dominance of a small number of market participants.

The major problem with the article is that Kerin spectacularly fails to make his case against the AFL, proceeding first by innuendo in the aftermath of the Melbourne Storm debacle – Brian Waldron says everyone cheats and the AFL uncovered evidence of this a decade ago and fined clubs; and secondly, simply by offering an ideological assertion devoid of any proof that competitive balance would “probably” improve in the absence of a salary cap with a free market in players and clubs.

Ross Booth has examined the evidence in a paper in Economic Papers December 2004 titled The economics of achieving competitive balance in the AFL 1897-2004. Booth’s analysis characterises the clubs as win maximisers subject to a budget constraint as opposed to profit maximising businesses. The league itself is concerned with profit maximisation and adopts a range of measures designed to ensure competitive balance as this will heighten the level of interest in the competition, to the benefit of all clubs. In order to achieve greater competitive balance the AFL has instituted salary caps, player drafts and fiscal equalisation strategies.  And by and large it has been successful in terms of achieving competitive balance. In the 11 years from 1998 to 2009 all bar three of the 16 clubs (Richmond, Western Bulldogs, Fremantle) have played in a Grand Final, and two of those clubs may be a chance to play in a Grand Final this year. Similarly, all bar one club (Geelong) has finished in the bottom four over that time.  This seems to present a prima facie case that the AFL is doing some things right in the quest for competitive balance. Booth provides a much more rigorous analysis of the issue of competitive balance.

It may be that there are rorts in the AFL system and it is certain that clubs will sail as close to the wind as they can within their interpretation of the rules. They will “probably” get busted soon enough if they go too far. But it remains true that football supporters can see evidence that with good recruitment and player management the fortunes of a wooden spoon club can be turned around with a “5 year plan”. Compare this situation with the home of free market economics in sport, the European Soccer Leagues. Any club can win the Scottish League if they are called Celtic or Rangers. Any club can win the English Premier League if they are called Man U, Chelsea or Arsenal (perhaps Liverpool), or if they are taken over by some megalomaniac kleptocrat. And the other European Leagues are just as bad. At this point the proponent of free market economics in sport would probably prefer not to consider the parlous financial state of the clubs within the EPL, and especially of those subject to the promotion / relegation yoyo. Nor would they wish to consider the state of play within the various American sports leagues where greater regulation, as in the NFL, tends to lead to greater competitive balance and stronger growth when compared to the more unregulated market based MLB (goddam Yankees).

Paul Kerin has committed a fundamental category error by identifying the clubs as profit maximisers, identified a problem which has been tackled with reasonable success some time ago (rorting the salary cap), and proposed a defective solution based on an ideological presumption that free markets are inherently superior without considering any evidence from free market based sports leagues. All in all he has given us a wooden spoon standard contribution to any discussion about the future of the AFL.

A free market in sports is, to paraphrase George Orwell, like having a Celtic boot and a Rangers boot standing on your face forever.


About Greg

Middle aged male, resident at the finest of all latitudes, 37. Reputedly an indoor cricketer.
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