This week, Los Angeles Angels outfielder Mike Trout signed a new contract that is worth $430 million over the next 12 years, giving him the largest contract in North American professional sports history.
Trout smashed the previous record of 13 years and $330 million set by Bryce Harper, now of the Philadelphia Phillies, only a couple of weeks ago. And he smashed it by a lot.
This is now the fourth major contract signed in baseball’s offseason. In addition to Trout and Harper, Manny Machado signed a 10-year, $300 million deal with the San Diego Padres, and Nolan Arenado signed an 8-year, $260 million deal with the Colorado Rockies.
Every time a deal like this is cut, you only have to wait minutes before you start hearing the bellyaching from the peanut gallery.
“No one is worth that much,” say some.
“These athlete salaries are out of control,” say others.
And my favorite, “It is immoral that big time athletes get paid this amount of money, when teachers make nothing. That says something about our society!”
In short, these opinions form due to a toxic combination of jealousy and envy, coupled with economic illiteracy.
The reality is that athletes not only should get paid what they get paid, but they are worth every single penny and we should stop griping about it. Their value, set by demand for their incredibly rare and marketable talent, is real, and it translates into an incredible amount of economic activity.
Let’s start with something simple: demand. In the United States, there is a massive demand for the product that is created by baseball players. In 2018, for instance, 2,895,575 tickets were sold to games at Fenway Park to see the Boston Red Sox play. Complain as we all do about the price of going to a game, we pay it. 35,748 people showed up to watch each game in Boston, and that is just half of the games that the Red Sox play.
Most years, Major League Baseball sees total attendance of 70 million fans, or more. That’s a lot of tickets.
And of course, that doesn’t count all the jerseys, hats, keychains, t-shirts, license plate covers and novelty items sold by the teams, the league, and approved vendors. It doesn’t count the television revenue, internet streaming subscriptions (of which I have one) and ancillary revenue from dozens of other sources.
In short, baseball — and all other sports — generate a massive amount of revenue based on the product we see on the field.
That product, unlike most other professions that make significantly less money on average, can be done at the quality demanded by the market only by a very, very small number of human beings.
There are 30 Major League Baseball teams, each of which has 25 roster spots at any given time. That means that while you’re watching the game on a lazy Friday night, there are only 750 human beings who are qualified and capable at that given moment to play at this level.
750, out of a nation of 327 million people. And as most baseball fans know, roughly one-third of all players playing in the majors are actually foreign born, meaning that the pool of human capital the league draws from is much, much larger than just that 327 million people.
The necessary skills and athletic dedication required to play baseball at that level, and in so doing sell tickets, jerseys and hats, is unbelievably rare. Try hitting a 95-mile-per-hour fastball some time. You aren’t going to fare well.
Teachers, on the other hand, are not that rare. Estimates are broad, but most fall somewhere in the neighborhood of 3 to 4 million teachers in the United States who are employed in public and private elementary and secondary schools.
If you want to be a teacher, the thing that you need the most is a dedication to helping children learn, and an ability to teach effectively, which is a far broader reaching skill in the general population. There is no artificial, outside limiting factor for the profession, and as such we have a lot more people doing it than playing professional baseball.
More importantly, though, the revenue model that provides funds that pay for teachers has nothing to do with a marketable product sold, creating economic activity. Educators aren’t selling things to consumers, they are providing a service, and that service is usually paid for by tax dollars.
So, high supply of labor, low supply of revenue. Lower wages.
Baseball players, on the other hand, are in incredibly high demand, with incredibly low supply, with massive marketability of skills, and a direct economic stimulus that generates billions of dollars resulting from the work being done.
So, call me a capitalist, but no, Trout’s contract doesn’t bother me in the least bit, and I’m not jealous or resentful over it.