Over the last century, professional baseball has grown to become one of the most popular forms of American entertainment. Indeed, the sport's nickname - "America's Pastime" - has become embedded in the nation's lexicon. More than 60 million fans attended major league baseball games in 1997. However, America's love affair with baseball is not without controversy.

The players' strike in 1994 led to repercussions in attendance and team merchandising still felt around Major League Baseball (MLB) ballparks. The perception that greedy owners who control huge television and merchandise revenues run the game has alienated many fans. Recently, the United States Congress has considered several pieces of anti-trust legislation aimed at MLB that, if passed, might change the way the game is run and played forever.

Most notably, fans and sportswriters around the country have criticized what many regard as grossly overpaid players. Indeed, many modern fans have difficulty justifying Chicago White Sox player Albert Belle's $10 million dollar 1997 salary or the six-year, $61 million deal signed last year by the Florida Marlins' Gary Sheffield. Newspaper accounts decry seven- and eight-figure salaries paid to grown men playing a boys' game.

Fans seem to hearken back to the days when baseball was a working- class sport and when working-class people could relate to a working-class baseball player. Critics claim that, because few working-class people can imagine making $1 million, baseball has lost its original fan base and has destroyed the fan-player relationship.

Are MLB players overpaid? Are the owners overpaying players and thus acting outside their own self-interest? Are owners paying players their true market worth? These are questions that economic analysis can shed light on.

This lesson will help answer these questions and others concerning MLB salaries and the players' market, by using the economic concepts of markets, perfect competition, factor inputs, market failures and monopsony. By substituting economic analysis for simple rhetoric, students will be able to develop a more sophisticated understanding of the complexity of these questions.

Now go on to Part 1