Monday, November 25, 2013

Cartels: The NCAA

If you have exclusive control of a valuable asset you can charge big rents. The nice thing about free markets is that it's hard to maintain exclusive control if other people can just compete with you. That's where governments come in. The big famous cartels, like OPEC, are mostly creatures of governments. Less famous ones include the National College Athletic Association, or NCAA. They have this really sweet deal where they get all sorts of government subsidy, sell a valuable product, and don't have to pay their most important employees, the players. They can do this, since they collude to punish any school that they catch paying a player. Most of the member schools are part of the government, and the government helps ensure that players are not allowed to sell their services to the highest bidder.

Physicians have another cartel, and again it works through the government, fundamentally by controlling the number of residencies and hence the supply of physicians.

Yet another example is the New York City taxicab market, which is controlled by means of government issued permits, preventing competition. There are a million examples, I suspect, in our economy.