What do sugar, salt,
rapists and breast cancer have in common? Answer: You can have too much of all
of them, but in different degrees. Any incidence of rape or breast cancer is
too much, whereas with sugar and salt, healthy amounts are good for you, and excessive
amounts are bad for you. Sports stars are like sugar and salt - in moderation
they are a good thing, but in excess there is superfluity, which amounts to a
bad thing.
What do we mean, though,
by excess? Quite simply, it's easy to imagine excessive sports stars, just
like it's easy to imagine excessive amounts of pretty much anything. A world in
which 90% of people were sports stars or taxi drivers or carpenters would be
fraught: we'd have too few doctors, shop workers, chefs, farmers, and so forth.
So it's easy to imagine what having too much of an occupation means.
It's then easier to ask,
is the current number of sports stars too large? Consider if we just replaced
one random tennis player and added one financial advisor to the market - the
loss to the sport would be meagre (he or she would just be replaced in the
hierarchy by another, slightly less good player) but the gain in the business
sector would be significant.
Financial advisers have much better market incentives than sports stars. The rewards of a financial adviser (or a coffee grower, or a butcher) depend on the price of their supply per unit, which depends on the price consumers are willing to pay, which depends on the signals in the market of supply and demand. That's a sure fire way of producing neither too many nor too few of them.
Sports competitors are not
constrained by anything like the same mechanism. Because of this, the reward of
being a sports competitor is out of line with the value of his or her
contribution. The many losing sports participants are contributing in an
environment in which they are making up the numbers for the winners. This
doesn't make them worthless, it just makes them too numerous.
Because we could remove 10%
of all sports participants and still have the sport enjoyed almost as much, the
top sports stars that reap astronomical rewards for adding only slightly more
value to the sport do so at the expense of other competitors. A financial
adviser, on the other hand, only reaps rewards to the same extent that price
signals dictate, meaning there are almost no deadweight financial advisers in
the same way that there are deadweight sports participants. The reason being,
deadweight financial advisers would find the market dictates they do something
else, whereas deadweight sports participants merely remain in the pool as
losers.
