It’s that time of year again. Football season. Nothing is more grand, nothing is more perfectly the epitome of a free market (okay, there’s salary caps and collective bargaining, and … okay, maybe it’s not. But still, the game is.), competition, and winning.
The reason I love football so much is that it is pure competition. Coaches want to win, and to do so, they must maximize their resources. They must choose the best players, cannot discriminate as they would otherwise suffer, and must produce or get fired.
The game is really simple: you try to move the ball the other team tries to stop you. Get the ball over the end zone, score more points than the other team, you win. Period.
The referees act as the state ought to. They simply ensure a level playing field, and nobody gets an advantage. And in effect, the best referees are actually invisible. They don’t interfere with the game, don’t tell the teams what they can, must, or can’t do.
One feature of the game, that has a direct relationship to economics, is the playing field. It is called the gridiron, in reference to the yard lines that span the width of the field across the entire field of play, 100 yards in length.
Now, how does the playing field reflect economics? Simple. It is in essence the “money supply” of the game. Everything is measured in yards: first downs, penalties, every statistic with the exception of scoring.
Money is the life blood of a modern capitalist economy. Without it, it would be impossible to take advantage of division of labor or trade. It would impossible to calculate the complex capital structure, neither could we effectively coordinate savings and investment.
Thus, money’s role as a medium of exchange facilitates trade between peoples, states, and countries. Money’s role as a unit of account makes possible the multitude of economic calculations among and between consumers and producers. And lastly, most importantly, money’s role as a store of value enables savers and investors to coordinate their actions via the interest rate mechanism.
As for a medium of exchange, regardless what happens to the value of money, people will exchange money for goods and services. Even after the Roman Emperors so debased their currency, and Roman citizens began to horde gold, they still used the worthless tokens with the Emperor’s face stamped on it. (Though the army still demanded payment in gold only.) Even if worthless, it is still far easier to use video game tokens than actually carry your wares around. The double coincidence of wants is a powerful deterrent to barter systems.
However, tamper with the money and it’s use as a unit of account deteriorates. Miscalculations and misallocations of resources occur, and do so at an increasingly harmful rate the more the currency is debased.
Worst of all is when the store of value function is affected by debased currency. The greater the debasement, the greater the discoordination betweem savings and investment. And the results, as we’ve seen the last year or so, are disastrous.
So, let’s return to our football field. The field is, and has always been, 100 yards long. A first down is and has always been 10 yards. We’ll call yards, for sake of argument, dollars. And, since the yard is fixed, we can consider it equivalent to a commodity currency. Thus, there are no more, nor fewer yards available.
Thus, as a medium of exchange, as teams move up and down the field, the are trading yards. As a unit of account, they know exactly how many yards to go for a first down, and that directly affects their play calling and personnel decisions.
As a store of value, it is not necessarily the game, but in the stats where this is most important. We’ll address this in a short while.
So, with a playing field based on a commodity currency, such that 100 yards today is the exact same as 100 yards twenty five years ago, we could say there has been no inflation.
Let’s now introduce the new commissioner whom we’ll simply call Ben. (yeah, real creative I know!!) He decides that to make the game better he needs to add more yards to the playing field. But, here’s the problem. The fields aren’t any longer. There is no more land available, in other words, no more productive capacity. So, creating more yards, i.e. money, doesn’t enlarge the field. Then, what happens?
Austrian economics teaches us that inflation is increases in the money supply. Rising prices are the result of inflation.
When new money enters the economy, that is inflation, but at that moment in time, prices haven’t yet risen. So, the first to acquire the money benefit from the new money at old prices. As the money circulates, prices do rise, and those who receive the money later, suffer. They receive ostensibly the old nominal dollar value yet in newer, less valuable dollars.
And what makes this process even more troublesome, is that it is asynchronous and not universal. In other words, prices don’t all rise simultaneously, and they don’t do so in all sectors or markets.
Now, Commissioner Ben decides to make the field 150 yards long. Since the field is not physically longer, he simply creates more yards “out of thin air”. Now the field is 50 yards “longer”, in other words, there are 50 more yards available. In effect, what happens is now a yard is worth only 2 feet as opposed to 3 feet.
So, now what? Well, is a first down still 10 yards? Is it the same physical distance (30 feet) or the new monetary distance (20 feet)? If it’s the physical distance, than a first down now is “15 yards”. If it’s the monetary distance, then in actuality, it is only 6 2/3 yards. But that would be rather preposterous, so of course it would be the physical.
What about the chains? They would obviously remain the same if they are using physical, not monetary, distance. But what about penalties? Is offsides still 5 yards or 7 1/2? And how are players and coaches supposed to accurately know game situations? 2nd and 8 yards to go isn’t the same as last year. The decision making process is interfered with.
And as the game progresses, do we measure the running back’s gains in yards physical or monetary distance? Is a 100 yards rushing effort really a good game any more? Does a 300 yard passing day mean the same thing?
Well, Commissioner Ben is at it again. He decides that if 150 yards was good, 200 yards is better? But the field isn’t any longer. So now this weeks games are played with yards being 18 inches long instead of the usual 36. Or is it actually 24 inches, since a yard was 24 inches last week. Any ideas?
Now, we’re still confronted with the 10 yards for a first down dilemma. But, now, to make matters worse, where three weeks back 2nd down and 8 was 2nd down and 8, last week it 2nd down and 8 was 2nd down and five. Which means you need more “yards” to go the same distance. Which means you’re calculations of play calling and personnel are mixed up.
This week, it’s even worse. 2nd and 8 is more like 2nd and 3, or was it 2nd and 8 is…you now, I can’t keep track of exactly what the ratio is and what the original or most recent “yardage” was or is.
Well, the chains are the same length, so you know how far physically you have to go. But pretty soon you haven’t any idea how many yards (dollars) you are going. How do you figure all that out?
Now, it gets even better. We know that many player contracts are based on the amount of their rushing, passing, or receiving yardage. Ah ha, now you see the problem. Historically, a 1000 yard rushing season is considered excellent. But, if a yard is 3 feet all season long, then no problem. But, as the yards keep shrinking, i.e. losing value, suddenly a 1000 yards season is perhaps a physical 350 yard season, hardly comparable. (now, anyone who plays in the NFL and rushes for 350 yards rushed for 350 more yards than I ever did. They made it, and no slight should ever be meant they the rushed for “only” 350 yards. They worked tremendously hard to get there, and deserve all the credit for making it. This is simply just a silly example.)
So, the contract will create problems for the owner, and of course, it will need to be renegotiated.
Then there’s the store of value, which as we’ve already seen, even in a season, leads to many problems. But, what about the retired players, those whose accomplishments and legacy are part of the game’s proud past?
Well, if the single season rushing record is roughly 2100 yards, doesn’t it stand that the inflation makes record keeping pointless. Surely, 2100 yards, if a yard is but half it’s original measure, is a fairly easy goal. Not physically, but monetarily.
And what about during the season inflation? Surely the first games when a yard was 3 feet should count more than when they were 2 feet, and much more than when they were 18 inches, and so on. How could we accurately define the season rushing leader?
Of course, the ultimate point of the game is to score points, and a touchdown hasn’t changed in value, nor a field goal. Thus, the only measure that truly counts hasn’t changed. But then again, the 6 pints for a touchdown is a nominal figure. It could be 1, as in you scored 3 (touchdowns) they scored 2 (touchdowns). It would be no different than how many physical items you have, their price being meaningless.
But, it’s not necessarily the end result, it’s the game play that is terribly affected. I’m sure, given a more detailed and lengthy analysis, many more contingencies and disruptions could certainly be detailed. But just in this short analysis, one can easily see just how distorted the game can become. And it isn’t just a minor on field inconvenience. It affects seasonal and contractual issues as well. It affects the rules, causes numerous calculation errors, and interferes with the decision making process of all participants, both in the present and in the future.
Even worse, how can one expect to agree to contracts based on performance, which many are, when the valuations of performance are constantly shifting?
Lastly, it simply ruins the game. And when you think about what the fed has done the last several years, it does seem rather apropos doesn’t it?