Professional sports offer a rules-based system for competition, within which players are free to pursue whatever strategies and tactics they believe will yield victory. In this sense, sports resemble the market economy, which guarantees participants the freedom to pursue success by the means that they deem most effective, within a regulated system. Sports and markets provide a degree of creative free play—a kind of contained chaos—that generates often-surprising outcomes. Just as competition among technically superb athletes can be uniquely exciting, market economies—in rewarding brilliance, diligence, and innovation—have proved uniquely capable of generating broad societal benefits, especially when compared with centrally planned economies that try to script results, in the manner of, say, WrestleMania.

Yet sports and markets also share a common vulnerability: a general tendency exists for competitive strategy, through continual refinement, to evolve in ways unpredictable to the game’s creators and fundamentally inconsistent with the game’s structure and objectives. This occurs partly through trial and error, partly as the characteristics and abilities of the players become optimized and specialized, and partly as more sophisticated tools of analysis and execution identify and exploit ever more obscure opportunities for efficiency. In baseball, for instance, even as pitchers and hitters have become stronger, advanced analytics help position fielders in the places that each hitter is most likely to send the ball. The game’s analytical emphasis has thus shifted toward the “three true outcomes” of the walk, the strikeout, and the home run—the three plays that end with no involvement from defensive players but for the pitcher and catcher. The share of at-bats ending in one of those three ways has been climbing steadily and now exceeds one-third. This new focus is entirely within the rules, but it leads to longer games, with less on-field action.

In basketball, the Houston Rockets have led a parallel revolution by focusing on three-point shots and free throws, which tend to offer the highest expected value. The Rockets’ best player, James Harden, has risen to superstardom with a skill set suited perfectly to this strategy—herky-jerky drives to the basket that cause opponents to foul him constantly and a signature “step-back three,” in which he fakes a drive and then jumps backward, creating just enough space to launch a three-point shot over a lunging defender. This has proved extraordinarily effective—Harden was the NBA’s Most Valuable Player last year—but it can also be terribly repetitive, even ugly, to watch. Fouls slow the game down, and the ensuing free throws are the least interesting way to score. Step-back threes require no passing or movement but only four players standing to the side while their teammate dribbles and dribbles, and then shoots—and misses more often than not.

More serious than the decline in base hits in baseball or elegant passing in basketball is the frayed connection, in our market economy, between optimal competitive behaviors and the social goods that they are supposed to support. Corporate profits and stock-market valuations have surged for decades, while the incomes of typical workers have stagnated. Growth and wealth have concentrated in ever-narrower geographic areas. Productivity barely rises.

A report released in May by Republican senator Marco Rubio highlights a fundamental shift underlying some of these trends: businesses are no longer the nation’s long-term investors. “Developing productive, long-life capital assets,” the report argues, is “the primary task required of any successful economy.” Market capitalism presumes that the business sector, borrowing from elsewhere in the economy, will fund the creation of these assets. But that “money circuit” has short-circuited: in aggregate, the business sector now lends more than it borrows, a practice “quite at odds with traditional models of corporate finance,” as Federal Reserve economist Roc Armenter observes.

Rubio quotes economic historian Alfred Chandler: “The continuing productivity, competitiveness, and profitability of these enterprises and of the industries and nations in which they operate depend on constant reinvestment.” But this “constant reinvestment” isn’t happening. The data show instead a “financialization” of the economy: “Nonfinancial companies’ balance sheets look increasingly like financial institutions’ balance sheets: that is, they increasingly borrow and lend for profit.” Firms generate profit growth through arbitrage opportunities like the offshoring of labor, by “rationalizing” their workforces, and by investing in financial assets or just buying back their own stock.

These are the modern economy’s “step-back threes.” They lie within the rules and they put wins on the board, but they aren’t yielding the broader benefits for which the game exists. Firms have found a new way to win, and it isn’t pretty. Meantime, thanks to its ballooning deficits, the federal government has become the nation’s primary investor—though here, the term “investor” is a misnomer. While government gladly borrows and spends, it’s not making investments that will pay long-term dividends, but rather, funding safety-net and retirement programs that finance immediate consumption.

When competition fails to yield desired benefits, we modify the rules. In sports, we might redefine a foul or push back the three-point line, lower the mound, or invent the forward pass. We introduce free agency, implement salary caps, and redefine the pathways through which players can enter a league. Similarly, we should reconsider and modify some of the current rules that govern the market economy, which, in too many cases, is no longer serving its broader purpose of contributing to the improvement of society.

After all, the game is for the fans, not the other way around. For the public to continue participating in the game—and to believe in it and benefit from it—those who make the rules must govern with creativity and adaptability.

Photo: Jose Garcia/Wikimedia Commons


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