Puck Labor Day

Yesterday Americans celebrated the achievements of workers: those faceless, unsung heroes adding sprigs and sprockets to various widgets on the assembly lines of material progress and achievement (or something). We proponents of free markets have strong feelings on the matter; we tend to believe the modern labor movement has been detrimental to economic progress. But as a September 15 deadline approaches for completion of a new collective bargaining agreement between the National Hockey League and the National Hockey League Players Association, and a lockout looms large just eight years after a season-destroying lockout, hockey fans in 30 North American cities are learning a hard economic lesson about labor disputes. While the struggle between labor and management dominates the spotlight, consumers (fans in this case) go largely unnoticed. Contrary to what Harrison Mooney at Yahoo!’s popular Puck Daddy blog writes, hockey fans should leverage the tools at their disposal to insert themselves into the discussion.

Generally, the economic principles underlying a work stoppage as the result of a labor dispute, along with its effects on consumers, are relatively simple: as a work stoppage at a firm begins, supply of a good becomes restricted and prices rise because demand remains unchanged (unless, fearing a diminished supply, consumers go on a consumption binge, increasing aggregate demand in the short run — in which case prices rise even faster). Those higher market prices give competitor firms producing the same good (even lower quality versions of the same good) an incentive to meet the unsatisfied demand, and new profit margins allow the competitor firm to acquire additional human capital and technology to achieve better economies of scale, helping them to compete in the long run against the firm suffering a stoppage.

This scenario doesn’t translate easily to professional sports, least of all to professional ice hockey — though there are some similarities. If the parties fail to reach an agreement and a lockout occurs, consuming hockey-related entertainment would become cost-prohibitive for American fans. Some pros would head to Europe: all-star New York Rangers goaltender Henrik Lundqvist may play in the Swedish Elite League in the event of an NHL work stoppage, or all-star Pittsburgh Penguins forward Evgeni Malkin may play in Russia’s Kontinental Hockey League. Unless roster sizes or the number of players on the ice abroad increases, however, European hockey franchises won’t necessarily achieve economies of scale in human capital (though having NHL stars on the roster would invariably reduce their marketing costs). That says nothing of the fact that, as soon as the NHL, the best hockey league in the world, reopened for business, Lundqvist, Malkin, et al. would conclude their European vacations with haste.

The prices consumers would face during an NHL lockout would be astronomical: (a) add the price of an international plane ticket, the price of international accommodations, the price of a hockey ticket, and the opportunity cost of time off from work, and that’s one new set of prices a consumer faces; (b) add the opportunity costs of jail time and/or legal penalties/fines for viewing pirated video feeds of international competition over the Internet, and that’s another price a consumer faces; or (c) do not consume professional hockey at all. In no way is an NHL lockout good for the average fan.

Nor would minor league hockey in North America bear the demand for NHL hockey; the quality of play is lower, the stars are lesser known, and the arenas are smaller and less accessible. Washington Capitals fans would need to drive to Hershey, Pennsylvania to see their American Hockey League affiliate Bears, and Nashville Predators fans like me would need to fly to Milwaukee, Wisconsin to see our AHL affiliate Admirals.

But fans aren’t hapless, and shouldn’t become feckless.