Return without risk

It’s May, and another semester is over. It’s time to turn my attention to the important things of life, like sports. Unfortunately, my two favorite baseball teams, the Orioles and the Astros, are each firmly ensconced in last place, and likely will be for the duration of the season. The NBA just had its powerball lottery to find out who gets to draft John Wall, the Kentucky point guard who is leaving after one year and may have to race to beat his coach out the door. The winner of the lottery was the Washington Wizards, who used to be the Bullets, before that unfortunate moniker became symbolic of the plight of our nation’s capital. The NBA playoffs drone on to the inevitable Lakers-Celtics final.

But the real attention is being paid to two NFL players, Houston wide receiver Andre Johnson and Tennessee running back Chris Johnson, who want to have their contracts renegotiated. Both are arguably among the best players at their positions, and it is understandable that they are interested in being paid more. They are not actually holding out, since this is the season of voluntary workouts. But these types of posturings often end up with players being late reporting to training camp, and generally violating explicit parts of their contracts. Theoretically, fines result, but often negotiations will end up minimizing or eliminating those fines, perhaps in the context of a restructured contract.

So is it ethical for players to do this? It is legal, as long as they are willing to live with the terms of the contract, or retire, and they do not play for another team. It is certainly self-interested behavior, and it is rational for people to act in their self-interest. It is really the only leverage these athletes have. But is it ethical?

Well, technically, yes—this is what we call ethical egoism. In other words, what is ethical is what is best for me. But in the sense of what most people think of as ethical, the answer is no. Yet these players will have many apologists in the press who will excuse the behavior because NFL players have a short window of opportunity, and their careers can end at any time, and NFL owners will ruthlessly cut them if they are hurt. All of these claims are true. But it is still unethical for NFL players to hold out when they are under contract.

Andre Johnson is burdened by an eight-year, already renegotiated contract under which he received a guaranteed $15 million. I am not mocking the amount that he has received, and my opinion does not depend on the details of the numbers. Assuming it was an arm’s length transaction, whether or not he used an agent, he signed the deal weighing his risk and return. This risk included his potentially short career and the aforementioned heartlessness of management if he is hurt. If he was deliberately misinformed by the Texans, then my opinion would change.

Ethical egoism, of course, does not value the keeping of promises. Ethical egoists will ignore promises unless they believe the cost of violating the promise will exceed the benefits. For a football player, there are at least two costs to consider—the legal costs of violating the promise and the reputation costs of being a proven liar. Any rational person who is negotiating with a known liar will demand a bigger return, which means that future football teams’ negotiations with the player will not yield the player top dollar. But if a football player sees his career as limited to a few years, he calculates the reputation costs as being near zero. He may never get to negotiate another contract. So all he has to calculate is the legal costs, and that’s why he has an attorney. And if he feels no duty to keep promises, then what he does is hold out.

Team management does cost-benefit analyses as well, and their calculations may cause them to choose to renegotiate or, in the case of Denver’s Brandon Marshall, trade the player to get value. I may personally prefer not to negotiate with liars, but they are looking to maximize their self-interest as well. But once you renegotiate one player’s contract, watch out for his teammates to come calling, particularly those the team can least afford to lose. I think those costs are routinely underestimated by NFL teams when they deal with the Johnsons of the world.

Andre Johnson could have insured that he would get full market value by signing one-year contracts, or at least short-term contracts. But he would have had to live with the risk that the full market value for his services in a given year (and forever), likely because of injury, was zero. Professors complain for similar reasons, particularly when people are hired in at higher salaries. We want to receive market value, but the market is determined for those who are willing to leave their universities, not for those who want to stay where they are. You have to be willing to assume the risks that go with moving to a new place, with all its uncertainty, if you want to make top dollar. And, in some cases, you have to be willing to give up tenure. The return is linked to the risk.

What professors want is what Andre Johnson wants—return without risk. It’s great if you can get it, but it takes a fool being on the other side of the transaction. Andre Johnson is not holding out, and he has the right to posture all he wants during voluntary workouts. He is just being selfish. But if he holds out this summer, he is violating a promise, and he is being unethical.