Ken Rogoff Sits Court Side Crying About the Political Economy of Superstars

It looks like my itty-bitty hiatus has had absolutely no effect at all on the blogosphere. This helps, because we can all pretend leaving a picture of a bird drowning itself in a chocolate fountain is a normal last post to see for about a week. I know, again with the fountain bird, but I’m still not over it. I’m also not over Harvard economist Ken Rogoff’s piece on Lin and other star wages vs that of CEOS – that managed to slip under people’s radars. I saw it on Greg Mankiw’s blog, who quoted a good chunk of it. The funny part is I don’t know if it was in support of that bullshit or what.

What amazes me is the public’s blasé acceptance of the salaries of sports stars, compared to its low regard for superstars in business and finance. Half of all NBA players’ annual salaries exceed $2 million, more than five times the threshold for the top 1% of household incomes in the United States. Because long-time superstars like Kobe Bryant earn upwards of $25 million a year, the average annual NBA salary is more than $5 million. Indeed, Lin’s salary, at $800,000, is the NBA’s “minimum wage” for a second-season player. Presumably, Lin will soon be earning much more, and fans will applaud.

Yet many of these same fans would almost surely argue that CEOs of Fortune 500 companies, whose median compensation is around $10 million, are ridiculously overpaid. If a star basketball player reacts a split-second faster than his competitors, no one has a problem with his earning more for every game than five factory workers do in a year. But if, say, a financial trader or a corporate executive is paid a fortune for being a shade faster than competitors, the public suspects that he or she is undeserving or, worse, a thief.

I’m considering myself a little bit rusty blogging wise, as well as struggling to find a good reason to blog at length on any subject, so I’m just going to share a few thoughts with no real self editorial process behind them.

People accept superstar athlete salaries because they perform highly specialized and entertaining functions((slam dunks, duh) that generates money hand over fist for some franchises) not just any geek off the street can do. The NBA not only requires a high level of skill, but it’s extremely important to be physically gifted as well. When the NBA finally gets its hands on draft prospects one of the first steps is to measure their height, wingspan, vertical, upper body strength, etc. Players that fail to meet the physical expectations of the NBA often end up across the Atlantic because they fail to excel at this elite stage versus those who are physically imposing. Guys like Duke’s Jon Scheyer, decide not to even bother fighting this sobering reality, and go straight to over seas to hoop. When players are physically gifted and skilled at an elite level, scary things like Kevin Durant and Lebron James happen. Two players that consistently perform and amaze with rarely seen(among other players) displays of athleticism. If you just want to see skills without the physical gifts, check out the WNBA. A complete snooze fest in comparison, that makes nowhere near the amount of money as its parent company.

CEOs on the other hand are not gifted. The average person is aware of this and holds them in low regard for several more reasons. Their performance doesn’t require the same amount of freak specialization as the NBA, nor is it entertaining to watch a CEO decide to ship jobs over to India in order to cut costs. Their performance can be boiled down to the profit margin, and in some cases it requires business practices the American people are not so fond of, to remain in the black. CEOs are also believed to be inheriting most of their success by being granted a large amount of resources to succeed since birth, thanks to wealthy parents. There are tons of former engineering majors with advanced degrees chomping at the bit to be the CEO somewhere, and they just might do it as they climb the ladder of high paying positions. The average tenure of a CEO is about six years, CEO superstars seem to be much more expendable than the NBA’s. Lebron is not expendable, he had the NBA on its knees for an entire year and summer. The NBA is lucky that there is a cap when it comes to its superstar talent. We also know NBA salaries are the result of labor disputes with ownership. Considering how much money each side has spent making their case with lawyers, economists, gypsies, etc, I’m willing to assume that Lin’s 800k is somehow a reasonable number in the grand scheme of things. These salaries are handed out to about 450 players on any given year, with the average NBA career lasting less than five years. Many players came from poverty before essentially winning the lottery that is being drafted into the NBA. By the way, sixty percent of these players will end up bankrupt. Many CEOs came from positions where they were already handsomely rewarded, even if they were a consistent fuck up.

Rogoff ignores much of this and decides to ask if the reason behind a superstar’s pay is his/her role as a role model. In jaw dropping and painful fashion, he cherry picks some of the worst examples of role models in sporting history. Kind of pathetic for a Harvard economist, in my opinion. Well, Mike Vick doesn’t fuck me to death with extra charges every time I require certain services, unlike some CEOs. The reality is, in the minds of many, the CEO should claim personal responsibility for every bit of annoyance and pain brought to the public sphere by firms. Is this the case? No, more often than not we will read some Rolling Stone story about the golden parachutes some Goldman Sachs doucher received. We will read about the revolving doors of CEOs and their links to the government, but Rogoff has the nerve to say there’s a sports lobby equally as powerful as the one on Wall Street. As far as the city stadium situation goes, that’s on the owners, not the players.

There’s obviously a ton of good and bad I’m leaving out, but we’re all about brevity in this camp. To put it simply, the only superstars outside of sports and entertainment I’m willing to appreciate are behind non-profit firms. The rest can fuck off, as far as garnering my appreciation – as if they even give a shit after making decisions that exploit large swathes of people.


How Intellectuals Betrayed the Poor

I guess everyone is tired of that bird and the chocolate fountain at this point. Here’s a video to end the lull. I would argue that we aren’t experiencing a free market though – just massive collusion between firms and every branch of government.