Bob Woolmer is dead. The Indian cricket team is out of the World Cup. And envy has dissolved into fury across the country.
The question every neighbourhood pundit with an audience is asking is: Why should our cricketers be paid so much? Do they deserve it? Perhaps a bit of economics can help answer that jealous question, since modern cricket is actually a multinational business masquerading as an amateur sport.
A look at the labour market for cricketers is a useful starting point. Successful cricketers are a bit like derivative traders or rock musicians or authors. They are a small group of people who have an exceptional chosen talent. One result is that the distribution of earnings in professions such as sport and music is extremely skewed towards a few successful practitioners, when compared to the way earnings are distributed in more traditional occupations. Why?
The economist Sherwin Rosen, who has done seminal work on the economics of superstars, shows how small differences in abilities and talent can result in enormous differences in compensation. A salesman who can sell 10% more than his peers in a company is likely to get paid 10% more. A batsman with a 10% faster-than-average response to a ball travelling towards his throat at 100 miles per hour is likely to end up earning 100 times more than the average cricketer.
Given the slim chances of success, why do young boys want to become cricketers?
Every evening, I see dozens of young boys at the nets at a maidan near my office. They want to be the next Sachin Tendulkar. His earnings are an incentive for them to practise hard. I know of friends who were good cricketers, took huge risks by focusing on cricket rather than their studies, practised seven days a week—and failed to make a career of it. One reason why young boys take the risk is that they know that they can earn serious money if they make it to the national team, and are willing to struggle against the odds.
In other words, rewards are high because risks are high. There are perhaps thousands of talented cricketers who struggle through life, while the money that can be earned from playing the game gets concentrated with a few dozen cricketers who break out of the cesspool of domestic cricket and play on the world stage.
Yet, there is an important difference between those who play individual sports such as tennis and those who play team sports such as cricket. It is called selection. A tennis player is not selected by anybody. He can rise to the top rankings purely based on his abilities—and productivity. There was no group of national selectors in Switzerland who decided that Roger Federer is good enough to play at Wimbledon. He does not owe his winnings to selection.
A cricketer cannot make his mark at the highest level unless he is selected in the national team. This fact is what makes the labour market in cricketers so special—there is only one buyer of their skills. Economists call this a monopsony. The national cricket boards are part of a buyers’ cartel. You either get selected to play in the national team, or you languish in the shadows. There is no other option. In football, for example, there is a professional league where clubs play each other. A footballer not selected to represent his country can still make a career by playing for a professional club like Arsenal.
A cricketer has no option if he does not get selected in the national team. There used to be a time when good cricketers—especially in Mumbai—would get jobs in large companies only for their cricketing abilities. Office cricket tournaments were a big draw till the early 1980s, and I used to watch national stars turn out for their club and company. The televised blitz that Kerry Packer unleashed in 1977 has restricted the market for cricketing talent while expanding the demand for it. Cricketers no longer get jobs because they have scored a few centuries in domestic cricket. The cricketing monopsony has gotten even more powerful over the past two decades—too powerful, in fact.
The stranglehold that BCCI has over Indian cricket ensures that all attention is focused on a few individuals that BCCI thinks should play for the country. From that come long-term contracts with advertisers and the media—and neither would like competing cricket tournaments that will splinter audiences. The revenue model is based on the assumption that there will be a handful of identifiable superstars, irrespective of their actual performance.
A more open cricket market will be a boon for most cricketers (who are denied an adequate chance to play at the top level) and audiences (who cannot choose which players they want to watch). It would be a good idea to break the cricket monopsony and make the market more competitive.
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