Tong: David Price and the economics of baseball inflation

From Scott Tong at NPR’s Marketplace on December 2, 2015:

By now, any reasonable sports fan has seen the headline: David Price — $217 million. Welcome to the Major League Baseball arms race, in this case a race for a left arm that throws a fastball 95 mph. The Boston Red Sox are the winning bidder.

All of which raises the question of how inflated baseball salaries really are.

To geek out on sports inflation, it’s useful to look at the concept of money supply. Really. The more money in any economic system, the higher prices want to go. And baseball teams have more money than ever; the average club is worth $1.2 billion, according to Forbes.

“The biggest reason has basically been these television contracts,” said analytics researcher Jesse Wolfersberger, who writes for Hardball Times. He said TV stations pay so much to teams because advertisers pay so much to stations.

“In live sports, people don’t skip the commercials,” Wolfersberger said. “So a whole bunch of money is getting funneled into sports networks.”

By one estimate, in the last dozen years, baseball salaries have inflated 60 percent. But team revenues have gone up 120 percent. So all this baseball money supply is chasing a few select men who stand on a hill and throw. Preferably lefties.

Read the full article here:

Originally published: December 3, 2015. Last Updated: December 3, 2015.