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Posted by: Michael Mandel on October 07
It’s the post-season, and once again the Yankees and the Red Sox are in the playoffs. Here’s a very simple reason why: There are too few baseball teams in New York and Boston relative to the size of the local economies. As a result, New York and Boston teams have access to more economic resources than anyone else. The conclusion: If baseball wants competitive balance, the best way is to add an extra team in NY and Boston.
My reasoning is simple. The economic resources potentially available to a baseball team depends on the size of the local economy, and the number of baseball teams in the area. In cities with two teams, the economic resources have to be shared (this updates an analysis that I did in 2002 in BusinessWeek).
Take a look at this table. The first column reports the 2003 personal income, in billions, for each local area with a baseball team. The second column reports the 2003 personal income per team…that is, for cities with two teams, we divide the first number in half (the data is based on BEA economic areas).
|Local personal income, 2003|
|Area||billions||billions per team|
|New York (2)||926||463|
|Los Angeles (2)||590||295|
|San Francisco (2)*||376||188|
|*Includes Oakland and San Jose|
The cities which jump out, as having the highest personal income per team, are New York and Boston. New York has a local economy nearly 60% larger than LA’s, with the same number of teams. And Boston has only the sixth largest local economy—but the five larger economies support two teams, while Boston only has one.
On economic grounds there absolutely should be a third baseball team in the New York area, as was true until the Dodgers and the Giants left. With three teams in the New York area, personal income per team would still be ahead of almost everyone, but the difference would no longer be so enormous.
The case for an extra team is less clearcut for Boston, where an extra team would push personal income per team into the lower half of the distribution. Still, it’s probably a good idea.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.