For the first time in 20 years, a former editor-in-chief of The Economist forgot to bet on his home team, the Leicester City Football Club. This year’s 5000 to 1 odds suggested he would again have lost his money. But you know what happened.
Where are we going? To the economic systems that shape football.
Football’s Capitalism and Socialism
The English Premier League has 20 clubs who play 38 matches to select the champion. You get 3 points for a win, 1 for a draw; 0 for a loss. There are no conferences, brackets, playoffs or wildcards. Your points decide your position.
Resembling capitalism, European football includes minimal revenue sharing among owners, no salary cap constraints, and unfettered player selection. Furthermore, rather than being favored, losing teams receive no player selection priority and can descend to a lower league for minimal point totals. Seven years ago, the system was particularly brutal for Leicester City when they were “relegated” down two levels–the equivalent of a baseball minor league team–because of poor performance.
But the payoff for winning is staggering:
NFL rules have been compared to socialism because their salary caps limit the interaction of supply and demand, teams cannot engage in “free trade” when acquiring players, they pool and divide revenue, and losing teams are awarded higher draft picks.
Our Bottom Line: Competition
We could say that we have a sports paradox.
In countries with a history of national health systems and a commitment to income redistribution and equality, football leagues let teams freely compete. Meanwhile, in the home of capitalism, the NFL and other professional sports leagues limit competition through a safety net for those who achieve less.
Considering their ruthlessly capitalistic environment, the Leicester City win is even more astonishing.Read More