How Much Would Lebron James Make without A Salary Cap? (Part 2 of 4)

How much would Lebron James make from the Cavs if there was no salary cap? This is a question completely absent from the public consciousness because of how ingrained the salary cap is.

The salary cap has been integrated so pervasively, that some of the top sports publications now create a ‘salary cap analysis‘ for each team. Part of the fun for fans these days is to extrapolate which players your team can afford under the cap in the near future, and the future prognosis of your team based on the “health” of your team’s salary cap for the next few years. Sports fans sometimes call talk shows just to talk about their team’s salary cap. The cap has become a spectator sport in itself.

During tough times for a team, I’ve heard fans comfort themselves that even though their team is losing, at least cap space is being cleared for the future. Talk about strange silver linings! These fans are being influenced to celebrate that their team has cleared out a few million in cap space to spend on next year’s players. They applaud this as if their team is parsimoniously putting aside money to build for the future like a newly married couple, and not actually a behemoth private enterprise with unpublished profits. Either these cap aficionados need a new hobby, or it’s fun to pretend to spend other people’s money, even if it is a fake budget.

One of the lines that is oh-so-common and oh-so-ridiculous is when a fan says, “No way we can afford that guy” when talking about a player coming up for free agency. This statement is not being made based any real financial numbers that make up a budget, as discussed in Part 1 of this series. Rather, it based on the salary cap–a concept that does not belong in a game that is printing money in the United States, unless that game is being played on a board and it’s called Monopoly.

So how much do professional sports players deserve to make? How about whatever a free market system would pay them–the way other entertainers get paid. Over the last 12 months, Katy Perry has made $135 million. So while we hear her roar, it sure would be interesting to see what Lebron James would make from his team without a salary cap. Bloomberg estimates that Lebron’s $21 million a year salary from the Cavs brings the city of Cleveland an added $215 million a year. It’s difficult to find an exact number of how much money Lebron generates for the Cavs, but Cavs owner Dan Gilbert paid $375 million for the Cavs in 2005, and today the team is valued at $915 million. The cap-induced $21 million salary to Lebron is quite a gift to Dan Gilbert.

We will never know what Lebron would earn if there were a true bidding war for his services. All we hear right now is Dan Gilbert roaring with delight as he stands behind the rules and pays his star player a fraction of his value, while the American public looks away and pretends that Adam Smith is not giving us a big invisible middle finger on this one.

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One thought on “How Much Would Lebron James Make without A Salary Cap? (Part 2 of 4)

  1. Always a fun read. By far my favorite blog!

    Two questions for you:

    1. How can you put out two blog postings now on the subject of “Salary Cap” and not mention the word “fair” even one time? I understand if we were in a courtroom it wouldn’t make sense for you as Prosecutor to help the defendant, but in a blog..? Two articles about the cap and not one mention of the word “fair” or “fairness,” which is what the cap is all about.

    2. If you think sports should be unfettered with non-Capitalist notions, and whomever can afford to pay the most should do so, would you apply this same thing to college sports? Or high school? Maybe the Ivy League becomes the future SEC, with Harvard, Yale, and Princeton, having the most money in college, just paying for all the best coaches and players?

    In all seriousness I think you’re misappropriating Capitalism. To oversimplify, Capitalism and the free market is just a way (the best way?) to optimize something, namely the price for a good. Buyers and Sellers negotiate to set a price. You’re arguing the salary cap stands against this concept. I would argue in fact that what is being optimized is the value of the LEAGUE, not the value of any specific player.

    Analogy. I own a grocery store. I want to optimize profits for the store, and my profits overall. I may set my price for steak artificially low because it brings in customers who then purchase additional items, for additional profits. Overall my profit is maximized.

    In reverse, take the argument for Unions. A union wage is frankly set higher than the market needs to bear, in most cases. The pro-Union argument claims that the overall welfare of the community is improved with the practice, although it’s an increase to a specific Employer, who is paying a higher wage.

    Looking forward to the next one!!

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