Sunday, June 27, 2010

Why negotiations under "free" agency are not, in fact, "free."

Do you think that today's baseball players are overpaid?

Do you think that baseball players were underpaid prior to free agency?

Do you think that the correct salary level for players lies somewhere in the middle?

If you answered "yes" or "no" to any of the above questions, you are wrong.

It is not up to voters, courts, legislators or anyone other than the free market to set salaries (or any other price). Salaries, in a free market, are set by the voluntary agreement of the participants. The Marvin Miller apologists will say that free agency made such agreement possible. Players were not "free" to negotiate until "free" agency came along. The apologists then get bogged down in a discussion of language and clauses and technicalities, all of which miss the point.

In fact, under "free" agency, freedom of contract and freedom to negotiate are illusions. Prices and salaries are not arrived at freely when -

  • one side is forced to hire the other side under penalty of fines and sanctions;
  • contracts are not always recognized (and sometimes punished);
  • the dollar amounts "agreed" upon will be subsidized by the government; and
  • one side is prevented from defining itself as it sees fit and is forced to separate into factions, each of whom must, under penalty of law, compete with each other (even before the negotiations with the other side begin).

All of these conditions have existed in Major League Baseball since the Marvin Miller era took root.

  • The owners are forced not only to hire free agents, but to bid up their salaries to some arbitrary level, or else they will be fined hundreds of millions of dollars for "collusion;"
  • Should owners attempt to contract with each other to limit or avoid a free agent bidding war, such contract will be invalidated and the owners, again, will be fined for collusion;
  • No matter how much the owners are forced to pay, local governments (backed by eventual federal bailouts) will subsidize the salaries by building (and incurring bond debt to pay for) improved stadiums capable of raising more money; and
  • Major League Baseball is treated legally as multiple individual employers with no relation to each other, instead of being able to define itself as one employer, so that the law can more easily require each arbitrarily defined "employer" to bid against each other for "free" agents.

It will take many posts to document how each of these conditions makes it impossible to consider any baseball salary truly "free." The salaries are arrived at through a combination of compulsion and bribery. The owners are compelled to pay, and then subsidized by the municipalilties and, ultimately, the taxpayers.

The players have a gun to the owners heads. [More accurately, the owners are herded into the colisseum and forced to fight each other like the gladitorial contests of ancient Rome.] The owners then get to turn that gun to the heads of the cities, who then turn it on the hapless taxpayers. The taxpayers are then told that the resulting World Series victory will restore civic pride and "revitalize downtown."

All of these factors introduce force and arbitrariness into salary negotiations. Salaries become a matter for public debate instead of simply being decided by market conditions.

It is telling that the same people who believe that "free" agency liberates contract negotiations also would have no opposition to such things as government salary boards (or a "pay czar") that would determine wages, prices or other terms left normally to the market.

No comments:

Post a Comment