On the 'winner take all' inequality in sports, Smith included this as
one of the classical compensating differentials with a high risk of
failure (and with a considerable investment in skill by the worker). As
King writes, "Smith's third reason was 'the probability of success'. The
_dispersion of earnings within occupations_ will affect individuals'
willingness to enter them, depending on their attitudes to risk, and
hence the average earnings between occupations." (Laour Economics, p. 124.)
The argument is that many years of practice and 'apprenticeship' go into
a professional sports figure (in Canada we usually use hockey players
as examples.) Thousands of kids from elementary school age on pay big
bucks to play hockey and hone their skills. Indeed, by the time they are
at the junior hockey league level they are 'owned' (or their rights to
play are) by professional franchises. Why do kids (and more
importantly, their parents) pay so much to give them a chance at the top
leagues? One reason is, of course, the love of the game and the fame of
reaching the top level. But, particularly for many parents, it is the
chance of a big lottery win. Without the attraction of the pot of gold
at the end of the rainbow, how many kids/families would be willing to
make the sacrifices and invest so much in climbing the professional
sports ladder where, by far the majority fall off, most at the lower
rungs. Furthermore, even if they make it to the top and the high wages,
the average career is usually fairly short. I can't remember what it is
for hockey, but I think it is in the 6 year range. For most,
apprenticing for professional sports cuts off the opportunity to train
for another career which means that, after a short though lucrative
career in sports, they face poor job prospects for the rest of their
life, even if they have managed to escape serious injury during their
sports career.
This is true for professional sports but it also tends to be true
for some other occupations and professions -- e.g. most in the
entertainment business be it film stars or rock musicians, lawyers where
by far the majority work hard for modest incomes while the superstars
reap in millions, etc.
The lottery model is not the only reason for very high wages for
the superstars. Here, of course, is the rent model where the price of
'labour' is determined by demand for a fixed quantity of a scarce skill.
Placido Domingo gets the big bucks because people demand to hear his
extraordinary talent. Similarly a soccer play like Beckam or a hockey
player like Gretsky. They receive a scarcity rent for rare talents that,
though honed through training, are given only infrequently by nature.
In other words, the inequality in incomes in the professional
entertainment businesses and in some other professions can in large part
(though not fully) be explained by these two causes, compensating
differentials for risk and talent rents.
One of the interesting implications of this is the influence of
class and race on these income differentials. In the case of
professional sports, this is often seen as a "way out" of
poverty/underclass/ghetto life. The percentage of Blacks in basketball,
boxing, football in the US; the percentage of hockey players from rural
and resource towns in Canada is indicative of this since professional
sports is a ticket out of their class/ghetto where there are few other
avenues of social mobility or those avenues, education in particular,
are blocked by lack of access to higher education. Furthermore, the
distribution of talent is not based on class or race or gender though
the opportunity to develop that talent and turn it into income is highly
mediated by race/class/gender.
Anyhow, those are my thoughts on Michael's original query.
Paul P
Jim Devine wrote:
I wanted to add that no-one rules out the role of "human capital" in
the story _completely_. On the other hand, the Chicago School tries to
use it to explain everything that's not explained by compensating wage
differentials and the like.
BTW, if you think of "human capital" as a worker's ability to work
(perhaps increased by good nutrition, education, experience, etc.)
it's almost synonymous with Marx's labor-power. Of course, Marx's
strictures against seeing wages as akin to interest on "human capital"
still apply.
On 7/15/06, Jim Devine <[EMAIL PROTECTED]> wrote:
Michael Perelman writes:
> Since we have been discussing sports, I have a question about the
> distribution of income. Inequality is supposedly a reflection of the
> "human capital" of workers. CEOs are hundreds of times more
productive
> than ordinary workers.
a lot of economists now reject this explanation, e.g., Krugman. It's
really the Chicago school which clings to that view, redefining human
capital in ways that make it close-to-tautological.
> Here is my question: Looking at sports or entertainment figures you
> find a similar expansion of inequality. I doubt that the ratio of
> incomes of superstars of yesterday to that of the also rans was as as
> extreme as today. Has anybody looked at this?
look at Frank & Cook's THE WINNER-TAKE-ALL ECONOMY (which is mostly NC
economics). It's all about that, with a lot of examples from sports.
(It's a good description of capitalist competition, but I'd skip the
last chapter of F&C.)
CC writes:
>Consider how many boys in Middle School must play football in order to
generate just one high-paid NFL player? Consider all the B Teams. The
junior-high coaches. The Little Leagues. On & On. There is a hell of a
lot of human labor congealed in every pro athlete today. There was far
less in the past.<
MP asks:
>Carrol, you may be correct, but how will that affect the ratio between
the different levels?<
in the winner-take-all market (which comes from Shewwin Rosen's
"Economics of Superstars") suggests that there is a fixed number of
"winners" in any market (e.g., the NFL players) and a large number of
people struggling to get into the winners' circle. The income gap
between the winners and the "losers" is gigantic (given a relatively
small skill gap between the bottom winner and the top "loser"). The
larger that gap, the more people struggle to get into the WC. (I
haven't read Rosen, but F&C do a good job.)
--
Jim Devine / "Capitalism has destroyed our belief in any effective
power but that of self interest backed by force." -- George Bernard
Shaw
--
Jim Devine / "Capitalism has destroyed our belief in any effective
power but that of self interest backed by force." -- George Bernard
Shaw
--
No virus found in this outgoing message.
Checked by AVG Free Edition.
Version: 7.1.394 / Virus Database: 268.10.1/389 - Release Date: 7/14/06
