January 22, 2000
At $10 a Fan, That's $17 Million
By STEVEN E. LANDSBURG
OCHESTER -- Can Derek Jeter really be
worth $17 million a
year? George Steinbrenner thinks so, and
in many ways that's
all that matters. By
and large, the public seems to think
so, too.
Somewhere, perhaps, a sportscaster is grumbling that fans will be
forced to pay Jeter's salary through
higher ticket prices. If so, that
sportscaster has it backward. With
Jeter on board, the Yankees can --
and probably will -- charge more for
tickets, but that's true whether Jeter
gets seventeen million dollars or seventeen cents.
It's not his high salary
that raises ticket prices; it's his ability to raise ticket prices (and cable
revenue) that causes his high salary.
Others might grumble that something must be wrong when a ballplayer earns more than 300 kindergarten teachers. Surely it's more important to mold a child's future than
to entertain a baseball fan.
But
here's what the grumblers overlook:
Jeter's enormous salary comes to
well under $10 per fan, while even the
most poorly paid teacher earns well
over $1,000 per student.
In fact, it's precisely his ability to
reach a large audience -- now greatly amplified by cable television --
that makes Jeter so valuable.
If his
audience were national instead of
regional he'd be worth far more.
That's why Jeter has to settle for an
eight-figure salary while national figures like Jerry Seinfeld and Oprah
Winfrey are well into nine figures.
So is there any legitimate reason
to grumble about a great ballplayer
being paid what he's worth? Maybe.
High salaries for superstars encourage kids to train for superstardom,
and most of those kids won't make it.
Some of them might otherwise have
been doctors or engineers or kindergarten teachers.
Up to a point, competition for superstardom is a good thing because
it leads to better superstars.
But in
medicine or engineering or teaching,
the competitors who don't make it to
the top are still socially valuable.
Lives are saved and enriched by
the world's thousandth-best doctor
and thousandth-best teacher.
But
there is no place in professional
baseball for the world's thousandth-best shortstop.
A successful doctor doesn't push
other doctors out of the profession; a
successful shortstop renders some
other shortstop unnecessary.
That's
a reason to encourage more competition in medicine and less in athletics.
So, is Derek Jeter worth $17 million?
Absolutely, in the sense that fans
are willing to cough up that much
and more to see him, so he must be
providing $17 million worth of entertainment. But suppose (just for the
sake of argument) that he displaces
another shortstop who would have
provided $16 million worth of entertainment.
Then his net contribution
is only $1 million, but he gets a $17
million reward. In that sense, he's
overpaid.
When athletes are overpaid, too
many kids train for athletics and not
enough train for college. That's a
problem, but any cure would probably
be worse than the disease.
Capping
athletic salaries might stem excessive
competition, but that doesn't make it
right.
The fans love Derek Jeter, and
they want to reward his grace and his
skill. That's their choice. Who has the
right to stop them?
Steven E. Landsburg teaches economics at the University of Rochester and is the author of "Fair Play."
