Sports Fans,Athletes' Salaries,and Economic Rent

Abstract

Many fans in the United States are increasingly distressed by the fact that spectator sports, one of their favorite recreational activities, are just another commercial enterprise. They attribute this state of affairs to the greed of professional athletes, a charge they often make without any understanding of the concept of economic rent, a major component of the salaries received by those who play professional sports. This note demonstrates the relevance of the principle of economic rent to the salaries paid professional athletes. The paper places the remuneration of professional athletes within the wider context of the entertainment industry and explains athletes' salaries from the standpoint of labor supply and demand and investment in human capital. It addresses the issues of monopoly and monopsony and the existence of quasi-rents in the short run and pure economic rent in the long run. The paper ends by noting the key role derived demand plays in determining the salaries of professional athletes. Ironically, the source of that derived demand is the fan, the individual so distressed by the commercial nature of professional sports.