Grand Cards: Forbes Tries (and fails) to Explain Economics Through Baseball Cards

Monday, August 31, 2009

Forbes Tries (and fails) to Explain Economics Through Baseball Cards

An interesting article today on entitled "Baseball Cards and the Current Economy" in which our author tries to explain how the baseball card industry can explain various bits of the real economy. (h/t to The Sports Economist) The problem is that in so doing, he reveals a shocking lack of insight on how the baseball industry currently operates and even a false impression of things that went on during the 80s/90s heyday.

To wit:
Inflation is the process by which monetary authorities devalue their currency, and as Zimbabwe is teaching us now, one way to devalue is to overissue the currency in question. When too much money is printed, it loses value, and inflation is the result. Much the same has occurred with baseball cards. With a growing number of companies issuing baseball cards, there's nothing particularly unique or rare about them. Lacking the rarity that attached itself to Wagner's card in the '30s, and Griffey's rookie card today, their value has plummeted.

Were baseball cards, at the core, victims of the inflation that accompanied overproduction? Why yes, yes the were. Yet the use of present tense in the article is rather disturbing, seeing how only two companies (essentially) have produced baseball cards since 2007 and that only one will be operating with MLB's blessing in 2010. And let's not forget that little tidbit about the rarity of Griffey's rookie card today. Oh John, that card is not rare. Nothing from the early 90's is rare. And although the Griffey card retains value because it is iconic and is the only true Griffey Rookie, it isn't worth anything close to what it was 15 years ago.

The article also, somewhat confusingly, makes comments about anti-trust law and competitive markets:
Politicians frequently wring their hands over businesses being too profitable on the backs of allegedly hapless consumers, but their worries are overdone. As evidenced by the market for baseball cards, new entrants did as they've always done when it comes to lowering profit margins in pursuit of, yes, profits.

Anti-trust law is of course based on the idea that some companies can grow too large, and in doing so, might be able to exert economy-sapping control over markets for certain goods. Anti-trust lawyers have built careers around placing roadblocks in front of companies they deem too powerful, but the baseball-card industry reveals how difficult it is to predict the future of anything.

Uh, ok? So, in the late 80's, baseball cards enjoyed a competitive market. With extremely high profits and relatively low barriers to entry, Topps (the former monopolist) was joined by Fleer, Score, Upper Deck, Donruss, ad infinitum until Marginal Revenue equaled Marginal Cost and profits disappeared. Mind if I throw a Relevancy FAIL on this one? The market is a regulated monopoly once again--Topps is the sole producer after MLB determined that a competitive market essentially doomed the industry (they're right, mind you--as marginal producers systematically fell by the wayside as they became unprofitable), yet the article, which specifically mentions monopolies and anti-trust, makes no mention of this impact whatsoever. What gives?

All in all, this little piece does not really have anything to do with anything and uses general information about the downfall of the baseball card industry to make unnecessary comparisons to economic concepts. In fact, the only valuable bit of insight comes from the Sports Economist post that led me to the Forbes article:

Tamny points out that the card market was undone by entry. What were once collectibles became commonplace. No matter what marketing spin the card companies could put on a Derek Jeter or Greg Jefferies card, ultimately the flood of cards undermined the essential element -- scarcity -- on which a market for collectibles is based. The card market could come back in a couple of decades, but I'm not betting on it

Bingo! Cards lost their value because they became commoditized. Everybody thought that their cards would be worth something so they saved everything and the companies produced a ton and we were all left with piles and piles of cards, which is a problem considering that the only historical value of cards has been their scarcity as a collectible.

In the market today we are now 10 years+ removed from the collapse of the industry, and I think we all realize that things are never going to be the way they once were (for better or worse). Certainly though, there have been enough fundamental changes in the market (number of producers, eBay as a substitute for card shops, catering to the cards as memorabilia crowd, price discrimination via product differentiation, competitive market vs duopoly/monopoly etc.) to make a number of extremely interesting economic arguments that can draw relevant parallels to the economy as a whole.

Instead, we get an article that states that "the rise and ultimate decline of the baseball-card market serves as a micro example of what happens in the economy every day," while utterly failing to show us how.


  1. Did the author really use Derek Jeter and Greg Jefferies in the same sentence? :)

  2. Good critique. Imagine a financial periodical trying to explain the current economy in any way shape or form. As if.

  3. The only exception I have to your points is that even though there are a mere twoproducers this year an soon to be one, it's as if we have many more as there are a slew of products from each company. Topps does a much better job differentiating their product line as opposed to UD that puts out similar sets in 9 different forms much like donruss and their football products however they are separate releases none the less. If topps and UD were putting out 1-2 issues each then I don't think we would be in the mess we are. The result is that there is no scarcity whereas in 1980 if you wanted Ricky you had to chase the same card as everyone else. Now it's a
    free for all and the market is just as segmented as it was in 1996 albeit with two manufacturers.

  4. I couldn't agree with you more. Taking rookie cards as an example, even with two (one) companies, there is no longer a player's "ROOKIE CARD". It is less confusing now, with the little rookie logo, but they are spread across different releases, and can number in the dozens. From an economic perspective, I think the single producer model still holds, as the one company makes all production decisions, but you're right, this still won't be like Topps circa 1973.