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Fines in Sports

Jon Weinbach has a good read in yesterday's WSJ, "When Players Don't Pay." Weinbach has unearthed a lot of data on fines in sports from news accounts and such. For example: "the NBA levied about $13.9 million in fines during the recently completed 2004-05 regular season, and about $5 million during the 2003-04 season." That's a lot of dough! But the focus of the story is more on what is not reported - the fact that most of these fines are appealed and many are reduced or eliminated. The discussion here is mostly anecdotal, but quite interesting nonetheless.

Weinbach is apparently not a fan of the hidden lenience embedded in the process. The last word, for example, is reserved for the arbitrator's decision which cut John Rocker's fine for mouthing off to SI writer Jeff Pearlman from $20,000 to $500, as if that were a bad thing. And Weinbach's effort to cast the story in a negative light traps him in an obvious error when discussing fines in NASCAR:

And then there's Nascar, which returns penalty money as a matter of course. At the end of each season, fines collected from drivers and crews are pooled together and disbursed to the top 25 racers. (Shares are determined by where the drivers finish in the final point standings.) As a result, some violators not only get their penalty money back, but they actually earn a profit. In last year's Nextel Cup, Nascar's top series, the racing circuit levied 73 fines totaling $384,495, for infractions such as installing illegal windows or shoving another driver after a race. The team of champion Kurt Busch collected 22% of the total -- or $84,588. Not bad, considering the team had been fined several times during the season, for a total of $21,000. "We don't look at it as recouping fines," says a spokesman for Mr. Busch. "It's just prize money." Adds Chip Williams, a former public-relations director for the National Association for Stock Car Auto Racing, who now advises several top drivers: "It's sort of like a really good mutual fund. You put in money and you can get a solid return at the end of the season."

That's a great quote (where do these marketing people find minds like Chip Williams?), but the notion that Busch earned a profit or got a solid return for being a miscreant strains credulity. Busch gains from winning the cash donated by other drivers, not from putting up his own so other drivers can take their share.

I put a different spin on the facts that Weinbach presents. The overarching economic question is this: why do professional sports leagues rely on fines to affect behavior? To my knowledge, fining employees is not common practice in most firms. What is unique about pro sports that makes fines a useful tool?

More specific to Weinbach's piece, I am actually quite sanguine about his findings on appeals and leniency. Like Weinbach, I've given some thought to fines since the brawl between Pistons fans and Pacers players in Detroit. I stated at the time that Commissioner Stern's draconian punishment of the players hit the wrong target. More recently, Stern's bombastic $100,000 fine - and threatened ban - for Jeff Van Gundy's miniscule escalation of the standard "stinkin' refs" line was absurd. The man is simply out of control! So I'm pleased that Weinbach has documented the checks and balances in the system, and that they are routinely used.

Thanks to Carl Bialik for the link. And while I'm at it, a question for Matt Stephenson, the mad genius of Catallarchy comments. Let's accept for the moment your proposition that diminishing marginal utility of income implies pro sportsmen play for the love of the game. Can you rationalize the use of fines to motivate good behavior on their part?