Over at his excellent Jerry Aldini weblog, Matt Fenwick makes a vigorous argument against a salary cap, and in favour of better business management, to help resolve the longstanding NHL business failure. I started to write a comment in reply, but it got so long-winded that I thought I ought to post it here instead…

Dear Jerry/Matt:

I appreciate the force and clarity of your argument, Matt. I’d like to offer my perspective on only one aspect of what you’ve said.

You speak of the free market, and how that ought to define the relationship between players and owners. Ultimately I agree. However, I think this misses at least two points.

(1) The CBA can be interpreted as just another one of the rules that owners must follow in putting their teams on the ice. Believing in a free market does not mean I think the Avalanche should be able to have 9 skaters and 2 goalies just because they can afford it. The concept of “free market” represents how the whole society should be organized, not how each individual group within society must function. I am a supporter of free speech as much as I am a supporter of the free market, but I think it is fine for a private employer to fire someone because of his or her remarks. Or, to take a well publicized example, for a radio station to refuse to air The Dixie Chicks because they’re dumber than paint. Government intervention? No way. But I’m happy to see a private business make its own decisions. Having a free market, just like having free speech, does not mean you can’t have rules within an industry specifying how employers and employees should interact.

(2) Because it is a competitive sports league, it seems as if (for example) the Vancouver Canucks and the Ottawa Senators are in competition with one another. However, as far as the business is concerned, the entire NHL is one industry, which is in competition (for fan interest) with the NFL, Major League Baseball, and for that matter movies and television and musical entertainment. If the Canucks or the Senators sink under the waves because they are operating under unfavourable economic rules (e.g. other teams have payrolls twice as large), this hurts the whole industry. As a business, the Canucks and each of the 29 other teams are partners–perhaps the way that the marketing division and the research division of a large tech firm are partners, or maybe the way Radiology and the Emergency Department in a hospital are partners. If ABC Tech Firm decides, as an industry, that its marketing and research divisions should each share X% of the budget, we don’t get our knickers in a twist about the free market, crying “each division should sink or swim on its own!” If the Radiology Department and the Emergency Department have to share a defined fraction of the budget, the Emerg docs don’t whine that there’s no free market, and that their department is managed better so they should get more cash. Well, actually, they do, but that’s another story… My point is: if the owners agree amongst themselves that they should each have roughly the same amount of $ to spend on their teams, in order to make the whole NHL industry more competitive with the NFL/MLB/etc, it’s hard for me to disagree with them. Naturally they still have to bargain this out with their employees, hence the CBA, but ultimately it is up to the owners, as the employers, to make the final financial decisions. It is no more a constraint on the free market for the owners to “collude” in setting a salary cap than it is a constraint on the free market for the Board of Directors of IBM to set the budgets for each of its divisions.

I am therefore a strong supporter of the salary cap, and an equally strong supporter of the free market. There’s no contradiction.