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Economics of Baseball

Just about everyone is aware of the problems that have

faced Major League Baseball for years. Every time a new

labor agreement is needed, there seems to be a battle

between the players and owners. And the players have won

every time. Baseball salaries are the highest of any sport,

the gap between large-market and small-market teams is

getting wider every year, and fan interest continues to

drop. This year, as the most recent labor contract was

coming to an end, it looked as if the players association

was going to go on strike. But at the last minute, an

agreement was reached, and baseball will go on, at least for

now. But has this agreement really helped solve the

problems of baseball? I will look into the facts of this

new contract and see if there is any chance of competitive

balance being improved, and if fans will continue to lose

their interest in Major League Baseball.

It has been argued that this new agreement will help

baseball regain competitive balance. But I believe that

this is only a very small step in the right direction, and

that any hope of balance in baseball will occur later rather

than sooner. One of the main points of interest, and one

. . .

Ever since they have instituted the salary cap, competitive

balance in the league is unparalleled. In

football, once a player is cut from the team, he is owed no

money except for his initial signing bonus. A player can sign for $10 million

a year for 5 years, play miserably for the next 3, and even

if the team cuts him, they must pay him for the next 2

seasons of his contract. These would

be the institution of a salary cap, and the problem of

guaranteed players contracts. This tax will however slow down the

sky-rocketing salaries being offered to players. This

money in essence can be used for anything the commissioner

wants, but is meant to be given towards the smaller-market

teams with low payrolls to help make them more competitive. This simply states that if a teams

payroll exceeds the said amount, that they have to pay a

penalty. So that $10 million over those 2

years is being wasted on a player not even on the team, and

cannot be used by the owner to improve the overall team. If

baseball instituted a salary cap around this same amount,

teams could not spend over that, and it would redistribute

some of the talent. This would definitely help regain some

form of competitive balance.

The luxury tax is again a small step in the right direction,

but the amount you have to spend before you are penalized is

simply too high, and will even rise in the next few years. Although they just seem to be

too small. Not only does

this keep athletes playing up to their potential, but allows

you to cut a player and have that money free the following

year to spend on some more talent. This states that a total of $10 million

will be taken from the central fund and that it can be

redistributed by the commissioner at his discretion.

Approximate Word count = 1006
Approximate Pages = 4 (250 words per page double spaced)

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