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A Market for Lemons

So Professor Bainbridge wrote a quick post about Lance Armstrong where he wonders why not just allow PED’s in sports and be open about it. The post is brief, but I’m going to excerpt this part here (it’s Professor Bainbridge referring back to something else he’d written):

A while back, I argued that:

The only rationales for caring I’ve ever been able to see are (1) paternalism to protect players from themselves and (2) drug use by some creates a market for lemons (see my TCS column Drug Testing and the Market for Lemons). I’m somewhat persuaded by the latter, but at the end of the day it’s just not much of an issue for me. I wouldn’t watch baseball or cycling whether the players were juiced or not, while I would watch football and basketball whether the players were juiced or not.

I used to be a fan of the paternalism argument. Then I grew up. I was completely unfamiliar with his other reason, and had no idea what a “market for lemons” is. It turns out, it ties into exactly the reason I do believe that sports PED should not be allowed.

The theory’s name is based on the used car term for a “lemon” being a car that is known to be broken when sold.

The idea starts with a simple assumption: fans don’t like cheaters(they would be the lemons). That is, they are willing to fork over their money for tickets and the like to watch extraordinary people do amazing things in a given sport. Owners and players are aware of this and thus a perverse incentive develops: to allow cheating but to keep it secret. The cheating leads to increased salaries for players and increased revenues for owners because fans assume, initially, that what they are watching are legitimate efforts by athletes(i.e., they are not watching “lemons”) who are gifted in ways that the rest of us are not.

But the problem comes when the cheating becomes known. If the perception that everyone is cheating is allowed to foster, then the sport is devalued. No one wants to pay to watch cheaters, and the assumption on the part of fans will become that everyone in the sport is cheating; that they are not, in fact, watching extraordinary people.

The “market of lemons” application here is more of an economic argument than I would make. Personally, I’m of the opinion, as hinted above, that people want to watch athletes do extraordinary things in their sport. They want to watch Michael Jordan win back-to-back-to-back Championships and indisputably lead his team to those championships; they want to see Tom Brady win 3 championships and set the single season touchdown passing record; they want to see Randy Moss outrun 3 defenders on the way to making a long touchdown pass; and they wanted to see Lance Armstrong win those Tour de Frances. They want it because it’s something unobtainable to the average individual who cannot play basketball like Michael Jordan, throw a football like Tom Brady, run as fast and catch a football like Randy Moss, nor ride a bike as long and as fast as Lance Armstrong. Anyone who has ever watched a sporting event and ended up jumping up and down screaming like a wildman after seeing something remarkable understands the phenomena.

The key to the experience for the fan; however, is the belief that what they’re watching is someone who excels (amongst those who already excel) because of a combination of talent and dedication, not because they took a chemical that allowed them to practice more than is humanly possible. Because, while not anyone can throw a football like Tom Brady, anyone can start taking a chemical regimen to improve their strength, speed or stamina to a ridiculous point. Body builders from the Ahh-nold era come to mind- their gains aren’t seen as real, just the logical outcome of their chemical regimens.

In the case of Lance Armstrong, the offense is particularly egregious. The whole point of the sport is endurance and recovery and who has the best combination of the two due to their training and whatever intangibles they have. It’s a 3-week event with 100+ miles rides just about every day, in some cases up hills that are hard to walk up, let alone pedal a bike up. For a rider to become depleted and then cheat by artificially aiding his recovery through blood doping or chemical usage destroys the very nature of the competition. No one finds it remarkable, and therefore interesting, to win something when you’re cheating; let alone when you’re better at cheating than everyone else.

In Professor Bainbridge’s case, he admittedly doesn’t care about sports outside of football and basketball. Obviously, the competitors in both those sports can benefit from PED’s, mainly in the context of competing at a high level for an entire season. The question is, would the allure of those sports be adversely affected if a majority of fans came to believe that what they were watching wasn’t legitimate?

I think they would, and I’d point to the Lance Armstrong case as one good data point. The sport’s popularity has cratered since Armstrong left and the discovery of the rampant usage of PED’s throughout the sport. I’d also point to the vilification of other sports figures like Barry Bonds, Mark McGwire and Jose Canseco, to name a few. While the sport of baseball has managed to avoid the perception that PED usage is widespread, it’s popularity certainly took a hit when these players, and others (remember the Mitchel Report?), were determined to have made their achievements using PED’s. I think it’s safe to say baseball was at a crisis point from a fan perspective. Track and Field also serves as examples: Ben Johnson and Marion Jones in particular come to mind.

I think the key is achievement in sport needs to be seen as legitimate. Someone who uses PED’s violates that legitimacy. The perception becomes “Well, anyone can achieve that if they’re willing to mess with chemistry to that degree.” If an entire sport were to become tarnished in this fashion, it would ruin that sport’s legitimacy and interest in it would crumble. As it happens, cycling is a good example of the effect. I see no reason to believe other sports would be immune.

Given all this, I still would rather that government stay out of sport. The public is perfectly capable of dealing with a ruined sport, should it come to that. While there are perverse incentives involved where PED’s are concerned, the viability of a sport trumps that, thus I think it will police itself.

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