Baseball as a Business

I want to add an addendum to my ownership post. Economic theory posits that a combination of labor and capital results in economic activity. It can be any combination including (in the case of services) all labor and no capital. My favorite example is digging a hole. You can dig a hole by yourself with your hands. Add a shovel, and you’re more effective. This example provides two points. The first is how capital and labor (the shovel and the person) work together to improve efficiency. The second is to show diminishing returns to capital given a limited supply of labor: I am no more efficient with two shovels than I am with one. Now, I can throw an additional wrench and give the man a caterpillar truck. This makes me even more efficient.

Baseball is about a 50/50 split. I think we can all agree most of the value stems from the player competition. But the owners offer some value too, in the form of media (to broaden the audience and bring in revenue) and physical capital like the stadium. Since the physical capital lasts longer than the labor, and costs more money up front to provide, the owners of the capital are the managers of the sport.

But in baseball much of this physical capital is actually funded by taxpayers. In Cleveland we use a sin tax to fund Jacob’s Field. Miami practically paid for their stadium. All across the nation debates have raged over the ethics and practice of publicly funded stadiums. Which brings me to my further argument in favor of greater fan involvement in our teams: we are not only the sole provider of revenue through our watching, consumption of advertising, and buying tickets; we are also in many cases providers of capital to ensure the game can be played.

Miami fans have every right to HATE the Stanton trade, in my opinion ownership did break a contract with the fans as they expected more from them. They paid for that stadium and paid to watch the team. They deserve more, and wherever fans helped pay for the stadium through their taxes, they should take a greater interest in their investment.