Wins, Losses, and Empty Seats: How Baseball Outlasted the Great Depression

Wins, Losses, and Empty Seats: How Baseball Outlasted the Great Depression

Wins, Losses, and Empty Seats: How Baseball Outlasted the Great Depression

Wins, Losses, and Empty Seats: How Baseball Outlasted the Great Depression

Synopsis

Organized baseball has survived its share of difficult times, and never was the state of the game more imperiled than during the Great Depression. Or was it? Remarkably, during the economic upheavals of the Depression none of the sixteen Major League Baseball teams folded or moved. In this economist's look at the sport as a business between 1929 and 1941, David George Surdam argues that although it was a very tough decade for baseball, the downturn didn't happen immediately. The 1930 season, after the stock market crash, had record attendance. But by 1931 attendance began to fall rapidly, plummeting 40 percent by 1933. To adjust, teams reduced expenses by cutting coaches and hiring player-managers. While even the best players, such as Babe Ruth, were forced to take pay cuts, most players continued to earn the same pay in terms of purchasing power. Baseball remained a great way to make a living. Revenue sharing helped the teams in small markets but not necessarily at the expense of big-city teams. Off the field, owners devised innovative solutions to keep the game afloat, including the development of the Minor League farm system, night baseball, and the first radio broadcasts to diversify teams' income sources. Using research from primary documents, Surdam analyzes how the economic structure and operations side of Major League Baseball during the Depression took a beating but managed to endure, albeit changed by the societal forces of its time.

Excerpt

You own a baseball team during the 1930s. Your customers are facing declining incomes. In addition, the consumer price index is falling. In the words of the old American Express ads, “What will you do?” Before you decide, consider that you also possess both price-setting (monopoly) power for your product and single-employer (monopsony) bargaining power over your primary labor input. How will these powers affect your decisions?

You have these powers because Major League Baseball is a cartel. A cartel is a group of firms that band together to make some decisions jointly for the group’s mutual benefit. Members may see greater profits as the cartel tries to establish monopoly prices, although individual firms may find it advantageous to cheat on the cartel agreement. The American League and National League gained an explicit exemption from antitrust laws in a Supreme Court case dating from the struggle with the Federal League in 1914–15 Because the cartel gives you territorial protection against other teams moving into your city, you have price-setting power. You have single-employer power thanks to the reserve clause that binds players to just one team.

Economists and the general public are keenly interested in cartels. Since antiquity, people have suspected conspiracies that injured the public interest by fixing prices and other shenanigans. Since the enactment of the Sherman Antitrust Act (1890) and the Clayton Antitrust . . .

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