Sunday, January 13, 2013

Will Hutton- Doesn't Get Rent Seeking

Will Hutton writes about football in the UK. It is pretty much all nonsense but consider this passage in particular:
Britain is a rent-seeker's paradise, as many more football clubs other than Birmingham City can testify. We have created a looters' charter, with football as a playpen, within which the super-rich can do what they want. A recent flash point is the price visiting fans are charged for their tickets. (Manchester City fans protested at the £62 they were asked to pay for today's game at Arsenal.) If the price of admission, along with travel, is prohibitive, then the game is played to only one set of supporters in the stadium with one set of chants. The experience of a game shrivels.
 The idea that football attracts rent seekers is preposterous. Three days ago Chelsea FC reported their first profit since Roman Abramovich took over, but in reality it was just an accounting quirk. Overall the Russian oligarch has spent around a billion pounds on Chelsea football club. Manchester City's owners have also spent an amount they will never claw back. Promotion and relegation ensure that clubs continually have to spend almost all their surplus cash on higher wages just to keep up with their rivals.

Owning a football club is not an opportunity to seek rent but rather a rich man's hobby which he may enjoy but won't profit from.

It is different in league systems with no promotion and relegation such as the major American leagues, because there the pay roll can be capped and the scarcity value of a place in the league can be leveraged to encourage extravagant subsidies from tax payers.


Mark Wadsworth said...

"Owning a football club is not an opportunity to seek rent but rather a rich man's hobby which he may enjoy but won't profit from."

Yes, but that's not where the rents come in. The "club" as an entity separate from the players cannot make money.

It is the football players themselves who collect the surplus profits.

I explained this here:

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James Higham said...

What's the correlation between footballers' pay packets and usefulness on the field?

Ross said...

James- it's quite high actually.

Transfer fees and manager's wages have little correllation though.