By Richard Hill for TheFootballEducator.com
Economics is the science and analysis of the network in which goods and services are produced, exchanged, and consumed. Some economists have taken to analyzing alternative “markets” with the same economic principles in order to evaluate the system as a whole, in a new brand of study called “freakonomics”. I believe the National Football League can be considered one of these alternative markets.
Consider the basic elements required in an economy: You need to have a good, product, or service, you need to have a buyer and seller, and there has to be an interaction between the two parties. The end result is a party with the ability to consume or utilize the good or service. Let’s break this concept down amongst front office responsibilities.
When we use the term “service”, we’re not talking about the overall team providing an event for fans. We’re microscoping on the team itself- the wide receiver’s service is catching the ball, the linebacker’s service is making tackles on defense. Each player is considered its own product or service and each player position can be considered its own industry in the economy. Of course there can be some overlap- safeties and cornerbacks can be fluid, as are some tight ends and fullbacks- but the basic economic concepts still stand (and some more advanced ideas can be further explored).
The NFL as an economy
We can view the NFL as an economy consisting of players, coaches, front office personnel, owners, college football factories, the players association, Roger Goodell, and many other variables. If the players are the services, the coaches are the management for the service company. The front office and scouts can represent the demand and the buyers in the economy, while Mr. Goodell is the governing body who oversees the rules and regulations.
Now that we know the participating players in this economy, we can start to look at macroeconomic and microeconomic theories to further analyze our market.
Since economics is the science and analysis of exchange and consumption networks, macroeconomics focuses the scope of the study to the overall economy or, in this case, the league. Macroeconomics focuses on output, unemployment, inflation, and other factors that establish relationships between production and business strategy.
The business of football
In the business of football, the output is the performance by the team put on the field- the result of successful (or unsuccessful) team building, coaching, and execution. An example of a macroeconomic trend is the recent growth in quarterback numbers over the past decade, as players like Peyton Manning, Tom Brady, Drew Brees, and Aaron Rodgers consistently put up numbers only dreamed about before the turn of the century. Economists would be interested in why quarterback output has risen- and they’d most likely see a combination of improved player skill, as well as changes in the rules that reduce the contact defensive players are allowed to commit down the field.
Evaluating unemployment is not just seeing which unfortunate players are without jobs, but evaluating why certain players are increasing in play time. A clear shift in tight end usage due to the success of the Patriots with Rob Gronkowski and Aaron Hernandez, as well as Jimmy Graham with the Saints has led every team looks to try to find their own pair of weapons to utilize in the middle of the field. Another example would be the rise of 3-4 defenses after the Patriots success at the turn of the century- and the Patriots’ subsequent shift back to the 4-3 as the supply of players suitable for 3-man fronts declined due to increased demand by other teams.
Inflation represents the increase of prices in an economy, while deflation is a general decrease in the prices. Much like real life, central agencies create policies to regulate price changes and, in the case of the NFL, the CBA is a recent example of price setting as the players and the league came to agreements to set limits on rookie salaries. For teams, the challenge is how to monitor he rising demand in contracts as players outgrow their initial deals and as certain positions (tight ends) see inflation in their average contract values. Additionally, teams have to determine how they wish to spread their inelastic salary cap amongst players with fluctuating price levels.
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Next up – Microeconomics (I promise it’ll all make sense!)