Principles of Microeconomics

In the spring of 2007, the Houston Astros were holding an open tryout in Maracay, Venezuela, and a 16-year-old, 5' 5" kid named José was just trying to get on the field. The Astros thought he was too short and that he was lying about his age, so they rejected him. The next day he came back with his birth certificate and convinced the Astros to give him an evaluation. They liked what they saw, so they gave a young José Altuve $15,000 and put him into their minor league system. Over the next 11 years, José became an MLB All-Star, a Gold Glove second base- man, the first person in the history of major league baseball to lead his league in hits for four years in a row, and the league MVP when the Astros won the World Series for the first time in history.

So what would you pay a player like José Altuve? Well, on March 19, 2018, the Astros signed a contract with him for $151 million over five years, the largest contract in Astros history. What principles of economics could possibly justify this? Ask yourself, how many people can sup- ply the skills that professional sports players can? Well, actually, start by asking yourself how many people can supply the skills that college graduates can. One of the advantages of educa- tion is that the supply of people who are as well-educated as you are narrows as you reach higher levels of education. This scarcity—paired with the demand for well-educated people in the market—is why people with a college degree earn an estimated one million dollars more over their lifetime than people without.

But, getting back to José, how many people can play great defense at second base, lead the league in batting, and lead their team to their first World Series championship? The supply is literally one, making José Altuve a very limited resource. Facing such scarcity, what do you pay to keep José Altuve? Everything you’ve got.