| Abstract: |
Simon Rottenberg’s seminal 1956 article in the Journal of Political Economy,
1956, is generally accepted as the starting point for the development of the
economics of sport. While he recognised that certain features of professional
sports leagues were unusual he saw little reason to treat this industry any
differently from a conventional industry. He discusses the importance of
uncertainty of outcome, the monopsonistic nature of the labour market, the
nature of the product and demand (attendances). He considers alternatives to
the reserve clause, such as equal revenue sharing, maximum salary limits,
equal market franchise distribution and roster limits. Each of these is
rejected in favour of a free market solution which, on the basis of the
invariance principle, he suggests will perform just as well as the reserve
clause in allocating talent to where it is most productive. The ensuing
literature has focused on all these issues, many of which have created
considerable debate amongst sports economists. In particular the assumption of
profit maximisation has been challenged and a divergence of views, reflected
in the so-called North American and European models of sports leagues has
emerged. Over the last 50 years sports leagues have expanded, TV markets have
opened up and legal challenges to existing practices have multiplied. This
paper seeks to evaluate Rottenberg’s contribution to a rapidly expanding field
and to judge its relevance today. |