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Saturday, April 01, 2006
Should Sports Teams be Owned by Public Corporations?

Rumors continue to circulate that the Tribune Company, a publically owned diversified media company, plans to sell the venerable and perpetually unsuccessful Chicago Cubs. Chicago Tribune columnist Rick Morrissey joins the plea yesterday: “Sell them to Mavericks owner Mark Cuban or Aon Executive Chairman Patrick Ryan. Sell them to somebody. Just sell them.” For years, Chicagoans have speculated that the rational-thinking corporate executives at Tribune have concluded that a less successful franchise is actually profit maximizing. These executives, constrained by fiduciary duties and the shareholder primacy norm, focus on that bottom line and not on producing a winning team. Morrissey’s call to sell the team to an individual, rather than another corporation, reflects the belief that an individual owner might spend irrationally in a way that finally leads the Cubs to win. In many ways, though, it is also a rejection of the capitalist system and Adam Smith’s invisible hand.

It’s possible that irrational spending on sports franchises is actually socially optimal, if those franchises have what economists call “positive externalities” on the city or community that are not captured in the simple decision of how much to spend to produce a certain level and quality of sports. But if there really is such a market failure, a better way to correct it would be via regulation or public intervention (rather than placing restrictions on who can own a team based on speculation about who might spend in a socially optimal manner). If in fact having the Cubs win would offer benefits to the city of Chicago that are not enjoyed by the team’s corporate owner, perhaps the team should be “nationalized” via eminent domain. As many readers recall, the City of Oakland attempted to exercise eminent domain over the Raiders to keep them in the city; that effort was initially well received in the courts but subsequently rejected on dormant commerce grounds.


As a Brewer fan, I hope the Cubbies don't change owners and give Dusty a 10 year extension.

Anonymous CJ -- 4/01/2006 4:20 PM  

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