Lamar Jackson and the NFL’s Salary Cap Capably Indicate What ‘Inflation’ Isn’t

Baltimore Ravens quarterback Lamar Jackson took a big chance on himself last season. Rather than sign a long-term deal with the Ravens that would have been measured in the hundreds of millions, he decided to play another year ahead of less restricted free agency. The gamble paid off.

Jackson performed well, only to see his market value rise even more. The talk now is that the team signing him will have to lead with a contract offer worth $500 million or more.

Talking about the contract and potential destinations last week, ESPN’s Max Kellerman (on a show he co-hosts with Keyshawn Johnson and Jay Williams) pointed to the bigger meaning of the contract size that Jackson can likely expect. Paraphrasing Kellerman, if Jackson gets $500 million, the latter will count heavily against any team’s salary cap on the way to shrunken pay opportunities for running backs, among other positions.

Sports fans know the story here. While it used to be that running backs were routinely picked at the top of the NFL’s annual draft, somewhere in the 1980s the NFL’s emphasis on passing and the quarterbacks who pass the ball grew. Nowadays, quarterbacks generally command the largest share of any NFL team’s salary cap, and it’s not even close. No doubt we’re talking impressive salaries no matter the position given the popularity of the NFL, but the modern economics for running backs aren’t anywhere near as impressive as they are for quarterbacks.

Kellerman made exactly this point. If Jackson is able to command what he’s expected to, the running backs on the team of his choosing will see their share of the salary cap decline. There’s an inflation story to this, or better yet a story of what inflation isn’t. Readers can likely see it.

If the price of quarterbacks is rising within a capped salary system, this logically coincides with fewer dollars to purchase the services of players at other positions. There’s nothing terribly outre, or difficult to comprehend about this.

Indeed, while the numbers are bigger it’s useful to point out that NFL teams face the same tradeoffs that we do as individual shoppers. If Milano double dark chocolate cookies are increasingly expensive but also difficult to go without, that means we have fewer dollars for other goods and services.

It’s hopefully a reminder of a simple truth that in any market economy, a rising price logically signals a falling price elsewhere. That is so because our resources as individual consumers aren’t unlimited. Tradeoffs once again. The NFL is no different. Though spending per team is as previously mentioned capped, even NFL teams face tradeoffs. And as the value of the quarterback position grows and grows, this reality is felt through reduced valuation of other positions. Rising prices aren’t necessarily “inflationary” as the tradeoffs made by NFL teams and individual consumers hopefully indicates.

To which some will point out that while quarterbacks command an ever bigger slice of the total NFL salary cap pie, the pie itself continues to grow. So true. And it’s also generally true for individual consumers. Over time, we make purchasing decisions with disposable income that continues to grow. The only thing is that increased wealth per NFL team or per individual consumer is not evidence of inflation as much as it signals growing productivity per entity. Productivity is not inflation either.

Inflation is a decline in the unit of account. It’s a shrinkage of the purchasing power of the unit, in our case the dollar. Please keep this in mind with Lamar Jackson’s presumed contract demands in mind. He can once again command an impressive salary owing to the rising value of the quarterback position. This isn’t inflation as much as it’s the market economy at work. And it’s through prices that the market economy organizes itself.

As for actual inflation, it’s useful to stress yet again that the dollar in recent years has risen against foreign currencies, and more notably has been flat to up against the more objective and more constant measure of value that is gold. In other words, this would be the first inflation in world history that didn’t coincide with currency decline. Meaning it hasn’t been inflation.

Lost in all the frustration about rising prices has been forgetfulness about what happened in March of 2020: the very global cooperation among producers that had revealed itself through ever falling prices for so many goods and services was compromised by lockdowns. Work divided relentlessly pushes production costs down, only for the division of labor to be eviscerated by political panic. Except that rising prices are not inflation; they’re at best an effect of a currency devaluation that never happened. Think about it.