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All's Not Perfect With Sports Either

By Jeffrey Standen

A paper (linked here, which I came across here) by law professor Clayton Gillette compares the market for law professors to the market for free agent professional athletes, notably baseball players. And guess what: the athletes come out on top! (Sports and law plus a little industry gossip: basically everything TSLP cares about, all in one paper!) Gillette's basic point is that sports free agency works pretty well for sports, in terms of bringing about at least a decent version of an optimal distribution of the best players among teams. But in the world of legal education, "free agency" among law professors (by which he means the growing phenomenon of professors' quitting one employer for another) does not obviously seem to auger much good for anybody except the free agent professor, and even then not for sure.

It is nice to be flattered, and Gillette's rosy view of sports presents exactly the kind of idyllic image that keeps those stadia turnstiles spinning. But alas, it's all untrue! I'm unhappy to report that the world of sports is just as screwed up as the nutty world of legal education. If free agency works well enough in the former then it should work just as poorly in the latter.

In other words, if Gillette is looking for an ideal version of an unfettered labor market, he's looking in the wrong direction. To put it another way, if you like it when people use sports metaphors to talk about serious subjects, then grab a bat and step up to the plate, this entry is for you.

1. First of all, baseball general managers in hiring free agents make mistakes all the time. Players typically perform better in their final contract year on the cusp of free agency. They just as typically suffer a drop in performance after the big free agent deal is signed. Teams signing free agents do not on average win more games (compared to their previous season) than those that refrain from signing free agents. So how is that a good free agent market? Gillette points out that sports GM's have the luxury of looking at relatively clear performance data in selecting free agents, whereas law schools have only the murky and subjective analysis of the quality or merit of academic performance. True, but sports GM's have a huge disadvantage in comparison to law faculties: the careers of athletes are remarkably short. Unlike law professors, who dawdle in comfortable desk chairs and lean on the podia for decades, athletes come and go in a few brief seasons. What's more, even a great law professor whose performance, due to age or indifference, diminishes over time still brings huge reputational benefits to his new school. In the world of sports (outside of perhaps a few legendary players) once a player's performance diminishes he loses most of his value to his new team. So, even though baseball GM's do have better data to examine in hiring than does the law school hiring committee, the relevance of that data to future performance is pure guesswork. In legal education, hiring schools get exactly the reputation they buy. Law schools have better data in hiring free agents.

2. Next, Gillette argues that hiring faculties focus almost exclusively on a free agent's published scholarship, and thus do not usually examine closely all the relevant performance data about a free agent professor, such as classroom teaching or institutional service. Gillette envies the baseball general manager, who has data about every aspect of the free agent's performance at his fingertips. Yes, the GM has all this information, but appears not to use it! Chicks dig the long ball, and so do baseball's GM"s. Salaries correlate highly with slugging; everything else seems to matter barely at all. Think Manny Ramirez' next contract will be diminished much because the guy plays the outfield like a little leaguer? The same holds true in other sports: NBA players get paid according to scoring averages, no matter how many zillion shots (and team losses) it took the ball hog to achieve that average. Remember, Allen Iverson is a wealthy man. Even though hiring GM's have all this data about every aspect of player performance, when it comes to setting the salary at the highest end they throw all that data away and pay for home runs, much like hiring schools pay for the "home runs" in legal scholarship. Is it irrational, as Gillette suggests? Or is the school/baseball GM simply responding to an explicit or implicit understanding that the home runs contribute more to winning games (or achieving school rank) than do other assessment factors? In other words, would a hiring faculty that had cheap, quantifed and meaningful evidence of the teaching/institutional performance of a potential hire rationally give it much regard?

3. Gillette's big point is that baseball teams have a residual claimant (that would be the team owners, although perhaps the season-ticket holders might qualify too). The presence of a residual claimant ensures that all the costs and benefits of a new hire are considered before an offer is made. In comparison, the "owners" and other stake-holders for law schools are too diffuse, disinterested and impermanent to oversee the machinations of the hiring committee. In legal education, he argues, the fact that a new hire may, for instance, be a substandard teacher or a negligible institutional contributor will be overlooked simply because the people affected by these performance deficits (students, alumni, even other professors) will not be involved enough or care enough to assert their interests.

This optimistic view of baseball mischaracterizes it. Unlike law schools, baseball teams are not engaged in unalloyed competition. They compete on the field, but cooperate off it. Just ask Bud Selig. Bud says that MLB is a single product, a single entity, an argument he and every sports commissioner has made for years in court and everywhere else. The Red Sox vs. the Yankees is a competition between teams, but it is the competition itself (brought about by cooperation between the teams and oversight by MLB) that is the product fans pay to see. This unique blend of cooperation/competition that characterizes professional sports in America is also its greatest obstacle: there is no single residual claimant for Major League Baseball, no single owner who can assess the aggregate costs and benefits in filling rosters, scheduling games or anything else. So to get his teams to do the "right" thing, by which I mean the profitable thing, Selig has to lead his collection of teams through weeks of discussion and argument, and months of haggling and cajoling. Just like a faculty committee. Remember, it took nearly a decade for MLB to put a franchise in Washington, D.C. (even though it was completely obvious that it would be hugely successful, which it has been) all because the law school grad who owns the team in Balitimore didn't want some newbie stepping on his turf. Sound familiar? Sounds like a faculty meeting.

4. Gillette seems pretty happy with the results of free agency in baseball. Clearly he's a Red Sox fan.

Full post as published by The Sports Law Professor on September 04, 2008 (boomark / email).