Magazine article Regulation

Income Inequality and the NBA

Magazine article Regulation

Income Inequality and the NBA

Article excerpt

Why not redistribute players salaries? Or other people's incomes?

If income inequality in the United States is growing, how much effort should we put into reversing it? The answer to that question depends on the answers to two further questions: how much would dampening inequality also dampen economic growth, and how important is a more egalitarian society compared to a wealthier one? The Obama administration puts a high importance on reducing inequality and perceives the tradeoff between the two as being slight. Republicans in Congress have a different perspective.

Of course, modeling the macro economy as having a stable, measurable tradeoff between inequality and economic growth grossly oversimplifies how the world really works and ignores the forces that have hastened inequality. A more integrated global economy and technological changes have brought greater rewards to education as well as to rare, unique skills. Merely increasing taxes (again) on those earning over $400,000 a year is a blunt response to the forces that conspired to create the phenomenon in the first place.

Northwestern University economist Robert Gordon suggests that much of the increase in measured income inequality in recent years has been driven by a separate but related market evolution. This has been manifested by changes in the income structure of entertainers (such as athletes, movie stars, and musicians) and a cadre of elite professionals (such as lawyers, management consultants, and financial executives).

Perhaps the best way to understand the forces that have increased income inequality and think through what our economic response should be is to focus on how those same forces affected one particular market: professional basketball. The National Basketball Association's explosion in popularity has created a few spectacularly rich people, but the typical NBA player is far from wealthy and most of the wealth created by the NBA's rise in global popularity has gone to people who don't play the game, but instead hold solidly middle-class jobs. Taxing the resulting inequality away is easier said than done.

NBA NADIR AND RENEWAL

The overall popularity of basketball has not changed appreciably in the last three decades--at least not in the United States. What has changed is the ability of basketball consumers--both here and around the world--to watch the top professional teams play the game in the NBA. In the 1970s, few homes had cable television and those that did received relatively few channels, none of which carried much pro basketball. For a while the NBA was not even regularly carried on the broadcast networks. In the mid-1970s, devoted Chicago Bulls fans (like I am) living in central Illinois could not watch them on TV, listen to them on the radio, or even count on their box score appearing in the local newspaper, not even for playoff games. The 1980 NBA championship--which featured Magic Johnson's Los Angeles Lakers against Larry Bird's Boston Celtics--was shown on tape delay after the Tonight Show.

I kept track of my team (which contended for the NBA title in the 1970s) by reading day-old Chicago Tribunes at the local library and catching snippets of their late-night games on the West Coast on WIND-AM, when the Chicago radio station could be faintly heard on a clear night. Basketball fans had to get their fix by going to the local high school gym on Friday and Saturday nights. In the small town where I grew up, the junior high games regularly sold out--in a gym that held over 1,000 people, more than the number of people who resided in the town.

Today, the ubiquity of cable and satellite television means that watching an NBA game almost any night of the week is as easy as picking up a remote. What's more, the actual broadcast has greatly improved over the last 30 years, with just about every basketball fan owning a high-definition television with stereo sound, a great improvement over the analog televisions of the past. …

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