Sports Economics: The Mystery of the 2,333,232% Pay Raise
Students will use the "Handy Dandy Guide to Economic Thinking" to solve an economic mystery. Yasiel Puig left his home country of Cuba in 2012 to further his career as a professional baseball player in the United States. After joining the Los Angeles Dodgers, Puig saw his annual salary increase more than 2,300,000%.
Essential Question: Why did major league baseball player Yasiel Puig receive such an enormous raise when he decided to leave his home country of Cuba to come play in the United States of America?
After examining the "Handy Dandy Guide to Economic Thinking," students will read, and then try to solve, an economic mystery relating to major league baseball player Yasiel Puig’s decision to defect from his home country of Cuba in 2012. Students will then read articles related to the plight of the baseball system in Cuba as additional Cuban players relocate to the United States of America to play professional baseball.
- Explain why people generally respond to incentives in predictable ways.
- Describe differences in command and market economies in regard to control of the labor force and economic freedom.
- Define economic freedom as the fundamental right of every person to control his or her own labor and property. Including the right to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state.
Ask the students to read the Handy Dandy Guide to Economic Thinking and The Economic Mystery. Students read the clues assigned to their group. Be careful. Only some of the clues are useful in solving the mystery. Students then decide which clues are most relevant to solving the mystery. Use the clues and one or more of the ideas from the Handy Dandy Guide to Economic Thinking to figure out a solution to the mystery.
Handy Dandy Guide to Economic Thinking
1. People choose.
2. People’s choices involve costs.
3. People respond to incentives in predictable ways.
4. People create economic systems that influence individual choices and incentives.
5. People gain when they trade voluntarily.
6. People’s choices have consequences that lie in the future.
The Economic Mystery…
Outfielder Yasiel Puig currently earns $7,000,000 in 2015 ($583,333 per month) playing Major League Baseball for the Los Angeles Dodgers. In 2011, Puig was earning roughly $300 per year ($25 per month) playing baseball for Cienfuegos in the Cuban National League.
Why did Yasiel Puig’s salary increase by 2,333,232% in such a short period of time?
1. Yasiel Puig is a very talented baseball player.
2. The state-controlled Baseball Federation of Cuba is the governing body of the sport of baseball in Cuba.
3. Cuba’s climate allows players to play baseball year round.
4. The Dodgers moved to Los Angeles in 1957.
5. Cuba has had a state-controlled planned economy for roughly 50 years.
6. The Los Angeles Dodgers play in the second largest market in the United States.
7. The Cuban government outlawed professional sports in 1961.
8. Yasiel Puig defected to the United States in 2012.
9. Fidel Castro is a huge baseball fan and played the sport himself as a younger man.
Clues 1, 2, 5, 6, 7, 8 explain the mystery of the 2,333,332% increase in Yasiel Puig’s yearly/monthly salary.
Clue #1- Yasiel Puig is a very rare talent. He can hit, throw and field at an extremely high level.
Clues #2, 5, 7- Cuba has a command economy which results in the government deciding how much players earn. All Cuban baseball players get paid at very similar levels.
Clues #6- The Los Angeles Dodgers are a very wealthy team with enormous television revenues coming in each year. Because the Dodgers are in search of a profit, they seek out the best players in hopes that these players will lead them to victory. More victories normally translate into more financial earnings.
Clue #8- By leaving his native Cuba, Yasiel Puig was no longer constrained by the state-mandated pay scale in Cuba.
By deciding to leave his home country of Cuba for the United States of America, baseball player Yasiel Puig was able to sell his labor to the highest bidder in a free market economy. Unlike the command economy he left behind in Cuba in 2012, the free market economy of the United States allowed him to earn a much higher income from his employer, the Los Angeles Dodgers. While playing for Cienfuegos in Cuba, Puig earned a monthly state salary of roughly $25 per month. While playing for the Dodgers in Los Angeles, Puig earns roughly $583,333 per month.
There is no extension activity.
1. View the How Will Improved U.S.-Cuba Relations Impact MLB?video with students and ask them to answer the following constructed response question:
- How might the restoration of diplomatic relations between the U.S. and Cuba bring about an end to Cuba’s black market smuggling of baseball players?
How can the Cuban government change economic incentive structures to get Cuban baseball players to stay in Cuba? (Possible answers may include: the government will need to drastically increase the pay of Cuban baseball players, the Cuban government might eliminate travel restrictions for players, or the Cuban government may need to privatize Cuban professional baseball teams.)
How might the lifting of the U.S. embargo against Cuba actually help Cuban baseball leagues? (Possible answers may include: by allowing major league scouts and teams into the country, some of these scouts and teams may decide to invest in Cuban baseball facilities, or Cuban players allowed to move back and forth between the two countries may decide to invest some of their earnings in their home country.)