After a blown call that contributed to the Green Bay Packers losing to the Seattle Seahawks two Sundays ago, the NFL’s decision to lockout their referees due to disagreements in negotiations over a proposed transition from a pension system to a 401(k) came under intense public scrutiny. The situation even drew commentary from Wisconsin politicians, including Gov. Scott Walker and vice presidential candidate Paul Ryan. Walker’s official Twitter account posted a message containing the hash tag #Returntherealrefs, and Ryan opened a rally with comments supporting the return of the real referees. Even President Barack Obama and presidential candidate Mitt Romney weighed in, expressing the support for the consensus that the NFL needed to reach a deal with the referee’s association.
These comments raise some interesting questions beyond the apparent conclusion that even politicians have a little bit of common sense. Walker’s victory in a recall election was a blow to public sector unions — unions for people employed directly or indirectly by the government like teachers or police officers — and their collective bargaining rights. Walker has also come under fire for controversy in his avoidance of disclosing his position on right-to-work — for less — legislation that would greatly reduce the capability of unions to collect dues from members and in turn their collective bargaining power. In a right-to-work environment, would the NFL’s referees have been able to sustain their demands?
Clearly the NFL Referees Association members are the best referees available, but the NFL chose to lock them out and replace them with scab referees — including some who had been fired by the Lingerie Football League for on-field incompetence. Ignoring the possibility that it could be more difficult to referee under such distracting conditions, surely Roger Goodell and the NFL must have understood that the product quality of the NFL would decrease. And it did, to the tune of Vegas bookies issuing refunds for bets on the Packers.
However, it is not always in the interest of any corporation to deliver the best product. In a short economics lesson, the NFL functions much like a cartel — a la oil’s Organization of Petroleum Exporting Countries or Pablo Escobar’s Medellin cartel. Together, they offer the only supply. In turn, the cartel faces relatively inelastic demand. If they raise the price, or equivalently decrease the quality, they do not see much decrease in consumption, and profits increase. The NFL must have calculated that maintaining product quality was not worth an estimated $3 million and the loss of future power over negotiations with players. Therefore, the conditions of the market failed to ensure the best possible product. In light of this easily understood counterfactual, there is little logic in relying on markets to always function in the public interest — or any corporation to function in the interests of the public.
In fact, if corporations were to act in the public interest — say health insurance corporations — and not in the interests of its shareholders, they would be breaking the law. Corporations have a fiduciary responsibility to maximize profits for shareholders, and this case, the lockout’s silver lining for the only publicly held NFL team. Instead of blind faith in markets, perhaps soon politicians’ common sense will appear beyond their tweets.
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