Some Comparative Economics of the Organization of Sports: Competition and Regulation in North American vs. European Professional Team Sports Leagues

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What is the future of comparative economics? This question has been with us since the collapse of the former communist regimes associated with "socialist centrally planned economies". Various responses have been suggested in the literature during the post-communist period of economic transformation and I will briefly sketch a few of them below (see section 1). But no one could imagine that a possible dividing line between a quasi-socialist system and a deregulated market economy were to persist in some area until today, 2010. Had it been so, would not all those involved into comparative economics have taken this opportunity to prolong the use of their usual economic and institutional tools of comparative analysis in that area? Amazing as it may seem, such an area does exist and my contribution is devoted to briefly present it as an avenue for new comparative economic research.

There is a dividing line between the North American closed league system in professional team sports--a sort of island of regulated "quasi-socialist" economy in the middle of a liberal American market capitalism--and the European open league system which has rapidly been almost completely deregulated, starting from European football (soccer) in 1995 and spreading throughout other European sports and all open professional team sport leagues. There are four dimensions along which closed and open team sports leagues can be compared: organizational (section 2), in a Walrasian model (section 3), using a Nash-equilibrium conjecture (section 4), and through empirical testing (section 5). I will briefly screen all four. The empirical evidence will show that European open leagues differ from North American closed leagues in that teams' budget constraints in the former are soft while they are hard in the latter. We thus meet Kornai's insight in unexpected places. A disequilibrium model would fit open leagues better.

1) Which future for comparative economic studies?

Jan Tinbergen (1961) was the first economist and Nobel Prize winner who stated and predicted that the core object of comparative economics, capitalism versus socialism, would vanish, since the two opposite institutional and economic systems may be replaced by a single system. This hypothesis is known as one of convergence between economic systems (Andreff, 1992). The collapse of the Soviet-type systems between 1989 and 1991 followed by two decades of post-communist transformation did not exactly confirm Tinbergen's (and others') convergence prognosis. The two former systems did not merge because one of them--the Soviet system--was definitely submerged by the other with a restoration of a capitalist market economy in former Soviet economies. Did the total collapse of the communist system and the associated globalisation of capitalism put an end to comparative economics and turn the latter into a branch of economic history? Nuti (1999) has contented that "nothing could be further from the truth". Let me offer an elaboration on Nuti's seven arguments:

1) Some Soviet-type economies are surviving in countries like Turkmenistan, Tajikistan, North Korea and even Cuba.

2) There are countries, namely Vietnam and China, which are neither traditional Soviet-type systems, nor post-transitional economies such as Central and Eastern European countries which have joined the EU; sooner or later, their systemic transformation will become a special case, as Kornai (2006), who adds the Muslim countries to the list, suggested. He concludes that 'transitology' (a variant of comparative economics when a system changes or collapses) is not over.

3) As long as we have different systems, the question of actual or possible transition from one to the other remains a topic for comparative economics, since different transition paths have been observed in the 1990s. Even within capitalism, institutions evolved in various countries at various speeds (Kornai, 2006).

4) Within the capitalist system itself, there exist several prototypes of a market economy which distinguish the Anglo-American model from a Japanese and South Korean networked version, German Mitbestimmung, and even more so (the former French) state capitalism in various developing countries (see also Boyer, 1993). …