Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, November 18, 2004

The NHL lockout, again

Nearly everyone in Canada knows someone who knows a real live National Hockey League player. In a country like this, with a sport that has been such a large part of our culture, I guess all we need are two degrees of separation, not six!

The friends I have who know current members of the NHLPA tell me that not many of them have found lucrative alternative employment in hockey. A very few are working for pro-rated salaries of $3oo,ooo or so in Russia (displacing players who were making the equivalent of at most $20,000). Others have found jobs paying far less with other European teams. Another 20 - 30 are playing with AHL teams for roughly five hundred dollars per game plus three hundred dollars per practice. Others are selling cars, working at Future Shop, or working construction jobs. But many of them are "staying home, drinking" as one put it, playing video games, or working out in gyms and doubling as fitness instructors.

In other words, aside from a few of them, most hockey players of NHL calibre earn enormous rents compared with their next best alternatives outside the NHL. Nevertheless, my friends tell me these same players pretty much expect not to play at all with the NHL during the 2004-5 season.

If this casual empiricism about the players' opportunity costs is even close to correct, then maybe my earlier speculation about the possibility that cracks might develop in union solidarity is correct. If well over 80% of the players are facing massive foregone earnings to fight a hard salary cap (that would primarily reduce the earnings of the most highly paid players), I wouldn't be too quick to write off the possibility of some sort of agreement before January 1st.

If, however, the league doesn't resume play by then, it is very interesting to speculate about the future of hockey in North America.

Wouldn't it be fun to see a revamped set of leagues along the lines of premier soccer, whereby teams that finish last would drop back to the AHL, with 2nd tier status, while the best AHL teams would be promoted to the NHL? Skip Sauer at The Sports Economist has some thoughts on applying this to MLS as well. One thing for sure: if losing NHL 1st tier status were the result of finishing last, the cost of bagging a few games just to get the first draft pick would be a lot higher than it has been!

Under this scheme, games between celler dwellers near the end of the season would become very meaningful.
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