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Wednesday, June 30, 2010

LeBron James and the NBA CBA

LeBron James is going to be a free agent. LeBron James is a superstar who can sell out every game. People will pay just to see him play. LeBron James' fair salary is much more than the NBA maximum salary. Whatever team signs him will receive a windfall.

Some teams have hired one of LeBron James' favorite coaches, hoping to entice him. Because LeBron James will be underpaid, he gets such leverage with teams.

LeBron James says "I want to win an NBA championship." If that were his sole concern, he should sign a 1 year minimum contract with the Lakers or another good team. Given the value of endorsements, it might make sense to do that.

The NBA Collective Bargaining Agreement (CBA) contains a maximum salary clause. This illustrates the problem with democracy. The CBA is determined by a majority vote of players. Only the top 5-20 players are limited by the maximum salary. In exchange, the NBA owners offered a higher minimum salary, which benefits a greater % of union members. When ratifying the CBA, benchwarmers get one vote just like LeBron James. Due to State regulation of unions, LeBron James can't opt out of the CBA and sign his own contract. Due to State restriction of the market, it's hard to form a competing league. Most of the successful competing leagues (ABA, AFL, National League) were formed when the USA had a freer market.

The maximum salary and salary cap hurt superstar players. The players' union accepts these clauses in exchange for things that benefit more players. This illustrates the problem with democracy. As another example, the NFL's "franchise/transition tag" hurts only star players.

Even though LeBron James is a superstar player, he only gets one vote when ratifying the NBA CBA. A benchwarmer gets the same vote as LeBron James. This is the problem with democracy. A highly skilled productive worker gets one vote, just like State parasites. The majority can vote to steal from the minority.

The NBA gives a territorial monopoly to each team. If I bought an NBA team, I would not be allowed to move it to New York and compete with the Knicks. (The Nets paid a concession to the Knicks when they were admitted from the ABA.) This guarantees high revenue for the Knicks, just because they're in a large market. It's the usual "criminal gangs parceling out their turf" problem. I'm not forced to watch basketball; I'm forced to support government no matter what. However, sports teams received State-subsidized stadiums/arenas. I would not get such a perk if I started an entertainment business.

By having a State-backed NYC basketball monopoly, the Knicks are guaranteed high revenues. The salary cap and maximum salary limit their expenses. This guarantees high profits for the Knicks, even if they have a lousy team.

A pro-State troll says "LeBron James earns $20M+ per year! He shouldn't complain." He would be earning even more with no State restriction of the market. The difference is economic rent for the NBA owners and State parasites. If LeBron James didn't have his salary stolen by the State, he might be able to afford to buy his own basketball team after retiring as a player.

LeBron James earns less than his fair market value. The NBA and the State restrict his employment opportunities. It makes sense for an entertainer to be paid a lot of money. If millions of people watch each game on TV, worth $1+ each, or thousands pay $50+ for tickets, then his salary makes economic sense.

The NBA CBA and maximum salary are a examples of State restriction of the market. Most people won't see LeBron James as victim, because he's still making a really huge salary. State restriction of the market makes it hard for people to accumulate capital and start their own business. Without State restriction of the market, LeBron James would probably earn enough to start his own team.


Anonymous said...

Just a rhetorical question.Who contributes more to the society basketball player or Nobel prize winner in medicine? Something is really distorted here. Basketball is, at least in part so popular, because of state subsidies in a form of "free" stadiums and backing by state propaganda(CNN, FOX etc) machine. When a ball hits the basket then the media makes such a big deal out of it. James LeBron makes so much money only because the state created such an opportunities for him and the "state" feels entitled to set the rules how he will be compensated. The state needs him to keep slaves entertained. I certainly agree with FSK that it is unfair that productive workers get the same number of votes as unproductive ones, however productive workers are more likely to be richer than non-productive ones.This money may sometimes allow productive workers to effectively exercise larger number of votes.I, of course, realize that there is another side of this coin - when it gets easier to lobby for perks rather than doing actual work. I really do not get it why would not state back Nobel prize winners instead of basketball players.

Anonymous said...

IBM did some research and found some computer programmers were 100 times more productive than other ones.

Anyone that has worked in the software industry will know that how good you are at programming is not always reflected in your pay.

Politics and who you are friends with matters just as much. In one company a couple of managers hired friends via recruiters they were friendly with. The managers got paid bonuses for recommending their old friends!

Actually I've worked for three companies so far, in which friends were hired solely because they were friends. And these bozos got put on large salaries and higher grades that the rest of the whole group that had been in the company for at least 5 years!

So the ass clowns managed to monetize hire and fire power.

Anyway my main point is that if you are a brilliant software developer you will be underpaid.

When you are young you don't have the world experience to push for what you are worth.

When you are old ageism kicks in and there are less jobs around.

If you are good you are better off working for yourself.

But most people can't start working for themselves as a recent graduate because they have no money.

FSK said...

You mean Nobel Prize Winners like Eric Kandel. He won a Nobel Murder Prize for research supporting the "chemical imbalance" theory of mental illness. For those of you not paying attention, based on my observations, it's a proven scientific fact that the psychiatric industry is one huge fraud/mistake/homicide.

LeBron James would probably earn a greater amount in a really free market. He is a legitimate entertainer. Sports also play a role in keeping the slaves complacent. There are many pro-war fnords in a sporting event, such saying "US troops in Afghanistan are watching USA-Ghana just like you are!"

Someone who really invents a cure for a disease really does deserve to get paid a huge amount. Unfortunately, Nobel Prizes are awarded to people who are good propagandists.

An individual doctor only should get paid for the fair value of his labor, and not for the true economic value of saving someone's life. "Doctors are underpaid relative to athletes!" is an evil fnord, the result of marketing by the AMA. In the present, doctors are overpaid, due to the AMA/State licensing cartel.

In the present, great researchers and great programmers are way underpaid.

Scott said...

That's a pretty interesting article. I didn't think I would find anything interesting about basketball.

Scott said...

Hm, and now in respond to the comments! I agree about the Nobel Prize, many of those who receive one have done nothing. I've even seen an article that analyzed the awards for science and found that almost never is the actual person who made the discovery originally awarded the prize.

With programmers, it's a good point. Companies will pay $70k to $100k for a programmer. This spans 100x range of productivity. It's absurd for someone to do 100 times more work than the guy next to him and be paid only 10/7 more, if that. And then listen to the company complain that they would rather be paying $40k to a body shop for an overseas worker who doesn't speak english and can't comprehend the language in the requirements documents he receives.

The solution in this case is for the programmer to leave and start his own company. This is currently possible, though of course the industry is working hard to set up laws to make it as hard as possible for independents to operate. Soon you will be hearing a lot about liability and requirements to pay an auditor $100,000 to verify and certify code is free from security errors, while providing loopholes so that big corporations are not accountable to the same rules that apply to small shops.

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