Didn't the Left once want the WORKERS to get all the dosh?

And yes, we can prove that markets can beat racism

Worstall @ the Weekend I'm old enough to remember when the British left really was dominated by Marxist thinking, however thinly or thickly that was covered by a layer of Fabianism or some other "socialism lite".

I haven't forgotten that the old Clause 4 of the Labour Party constitution, for example, insists that workers "by hand or brain" really should be getting the "fruits" of their own labour. The underlying point was that anything the capitalist got as profit was expropriation (or exploitation, amend according to taste): all value was created by the labour itself and none by the addition of capital to that labour.

Complete bollocks of course, but then that's Marx for you. Reasonable, even excellent, analysis up to a point and then the leap off the 10-foot board into the deep vat of stupid. It's just as logical to insist that the labourer expropriates value from the capital... that the farmer working the potato field by hand alone will become more productive by the addition of a spade. That spade is a capital good of course. But the capitalist doesn't manage to claim the full value of that increase in productivity: the farmer also gets a better living out of being more productive.

But that was the nonsense that once informed much of that British left. Stupid, yes, but at least you knew where you were with this sort of stupid. We now seem to have something very different, something I never really believed that I would see. We have an avowed man of the left, Will Hutton, appearing to argue in favour of cartels. Further, cartels that protect the capitalists' profits at the expense of the workers' wages. This is the sort of nonsense that an only really come from someone retiring into academe near the end of their work in public life:

It was fuelled by the growing conviction that the inequality so conspicuously on parade is not acceptable. Football’s Premier League felt the same cold wind over the unfair consequences of the latest auction of its television rights. A stunning £5.1bn is being paid over three years by Sky and BT for the right to screen 200 live games a year.

With foreign television rights to come, England’s top football league cannot avoid the charge that it is now the most unedifyingly plutocratic and unequal sports spectacle on the planet. American football may be richer, but takes infinitely more care to spread its largesse more equally around its clubs and players.

In this columnist's opinion, the defining economic feature of the American sports leagues is that they are cartels (and baseball even has express derogations from antitrust law). In football, three teams drop out of the Premier League each year and three teams enter. In American sports, however, there is no promotion or relegation. They also have salary caps, much greater control over wages (until free agency arrives some years after the original draft) and so on.

The end economic effect of this is that American sports teams tend to make a profit for their owners and soccer football teams do not. Indeed, UK football teams tend to spend more than their entire income on wages in a manner that those American teams do not. This is because that relegation pressure flows through into a desperate desire to pay however much that rare talent that might keep you up, or promote you, can count up to.

All, and more, of the revenue of the football industry flows out into workers' wages. Sure, they might be earning immense amounts but they are also, quite obviously, exploiting the capitalists in a manner that just about no other worker in our economy manages. There's no exploitation or expropriation simply because the capitalists aren't being left with the profits. Contrast this with the US, where that cartel behaviour means that a significant chunk of the revenue does stick to capital.

And then we've got a columnist in The Observer, an arch lefty, arguing that this near fascist corporatism is better than that free market outcome?

Eh? How did we get to this pretty pass?

Yes, markets beat racism

On the other hand, this past week also gave us some more welcome news from the playing fields of England that the rather extreme free market for talent at such football clubs is precisely what beat back racism pertaining to wage discrimination in the sport.

This rather speaks to what I've said a couple of times recently about Gary Becker's work - that “taste discrimination” (ie, that based upon personal prejudices about tab/slot arrangements or melanin) is costly to those who do it. This means that a properly free market will tend to get rid of such taste discrimination, leaving only the sort of discrimination that we desire, rational discrimination based on quality, meaning that I write, you code and it's Stevie Gerrard who plays for Liverpool, not you or me (or Stevie coding).

The paper is here and its authors have gone about it in an interesting manner. Their original assumption is similar to the one above where I'm whining about Will Hutton. The premise is: the higher a wage bill then the better a team is going to do. Obviously this isn't entirely always and wholly true, but it's the way to bet over time. Further, we can't actually know whether owners and coaches are discriminating against black players. So, instead, let's try to look for what we would think would be there if they were.

It is rather like that case of Dame Stephanie and FI Group that I mentioned a few weeks ago. Looking back, one can see that she did make super profits by deliberately hiring those married women with children as programmers, which makes us think that yes, there really was taste discrimination against married women being programmers. And it's the absence of that today as a viable business strategy that leads us to think that there isn't any more.

So it is with the football teams. Look at their wage bills, look at where they manage to finish in the tables at the end of the season and then look at how many black players they have. If teams with higher numbers of black players consistently reach positions higher than we would expect from their wage bill, then we'll conclude that there is "taste discrimination" going on. Because that would mean those black players appear to be cheaper than their skill level would infer and that must be because some people refuse to hire them. Others can then hire those skills on the cheap.

And that is exactly what the authors of the paper did find. But, mind you, this is only the case in the past. And I don't think anyone over about 35 needs to be reminded that there really has been a great deal of racism in British football: bananas thrown at the pitch, chimp noises in the crowd and so on.

What appears to have changed matters significantly in relation to discrimination in wage bills was the Bosman ruling. Before this a team could only have so many foreign players. The Bosman ruling (along with certain rules about transfer fees for players out of contract and so on) entirely blew away these restrictions for EU players. There could be no restrictions on where an EU citizen could play. Taste discrimination had just got a whole lot more expensive.

For instead of a racist noting that not hiring black players only really affected those three (say) “foreigners” positions that he had in his team or squad, it now affected all of them. This meant that the discount being gained by those who did not discriminate was vastly larger than it had been before - or, if you prefer, the amount of money the racists were leaving on the table by their discrimination had just hugely increased.

And what the paper finds out is that post Bosman there's been first a decline in their measure of discrimination (those results out of line with wage bills with a “more black” team) and then an elimination of it.

As they say in their conclusion:

Theoretically, a large decrease in labour market frictions can erode the monopsony power of firms, leading to a decrease in wage discrimination. We test whether this result holds empirically using a natural experiment in football labour markets. Our results could be important for public policy. If we consider restrictive contracts to be an important component of the typically nebulous ‘labour market frictions’, increasing labour mobility and reducing frictions could lower discrimination. A heartening interpretation of our results is that the proper labour market conditions can cause wage differentials between white and black employees to disappear even if racist attitudes remain.

Note that the same racist attitudes might still be there, but if you make it expensive enough for people to act on them then act on them, they won't.

All of which is most cheering really: Becker was at least right in part in his economics of discrimination; free markets do seem to reduce such taste discrimination and the football leagues are less racist than they used to be in the wages they pay.

These are all reasonable things really:leaving us only with the question of why Will Hutton is against such things happening and in favour of the capitalists keeping more of the loot. ®

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