David Goldhill, Columnist

Reggie Jackson and the Cost of Health Care

People assume that absurdly high prices are what explain America’s high health-care tab. But it's the other way around. It's America’s willingness to pay more for health care that forces up costs.

September 23, 2014 at 1:03 PM UTC

By David Goldhill

David Goldhill, the president and chief executive officer of the cable TV network GSN, is the author of “Catastrophic Care: How American Health Care Killed My Father -- and How We Can Fix It.”

Mr. October watches his health-care costs leave the park. — Mr. October watches his health-care costs leave the park.

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When Reggie Jackson's five-year, $2.9 million contract with the New York Yankees kicked off baseball's free-agent era in 1976, a box seat at Yankee Stadium -- the best in the house -- would run you $5.50. Thirty-eight years later, the minimum salary for a major leaguer is just below Jackson's then-record amount. The biggest stars earn more for four games than Jackson did for an entire 162-game season. Now, tickets to a Yankees game range from $18 for the bleachers to $300 for the best seats. The connection seems obvious: The extraordinary run-up in player salaries has driven an outrageous rise in ticket prices.

But as any student of the baseball industry -- or any industry, for that matter -- knows, the relationship is exactly the opposite. As more people spend more money on baseball-related entertainment, baseball raises prices. Even so, game attendance has more than doubled since Jackson signed his big contract. Ticket prices, broadcast contracts, concessions and in-stadium advertising have exploded. And those are just baseball's old-fashioned revenue streams. Today, there's also pay television, luxury boxes and "VIP" experiences, high-end restaurants, logo licensing and collectibles. All of this comprises what economists call "raising the demand curve" for baseball.