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Charl Schwartzel of South Africa tees off at the LIV Golf Invitational at The Centurion Club on June 11, 2022, in St Albans, England.Matthew Lewis/Getty Images

At the same time as Scotland was inventing golf, a Scot named Adam Smith was inventing economics. In The Wealth of Nations, published in 1776, Smith tried to explain how markets work. But that meant he also had to explain monopolies – how they come about, and who benefits from them – because a monopoly is the opposite of a competitive market. You can’t understand one without considering the other.

Smith described a monopoly as something that restricts trade, and has the power to overcharge customers and underpay workers. That’s not ideal for society. But it sure can deliver tidy returns for insiders.

Which brings us to the merger between the Professional Golf Association Tour and LIV Golf. Why is the American-based pro golf monopoly getting into bed with a challenger owned by Saudi Arabia’s absolutist monarchy?

The arrival of LIV in 2022 touched off a fierce and expensive competition, featuring huge payouts to lure star golfers, an antitrust lawsuit and allegations that the PGA was encouraging the families of 9/11 victims to protest LIV.

But that’s all history. The competitors are done competing. Now, they’re in business together. E pluribus profitable unum.

Smith would not have been surprised: “The monopolists,” he wrote in The Wealth of Nations, “by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments.”

He wrote that “the price of monopoly is upon every occasion the highest which can be got,” whereas in a competitive market, businesses sell at a price that is “the lowest which can be taken.” Prices in a monopoly are “the highest which can be squeezed out of the buyers,” but in a competitive market they are, “the lowest which the sellers can commonly afford to take.”

That describes a key part of the business model of most pro sports leagues.

For example, Smith’s explanation of how monopolists benefit “by never fully supplying the effectual demand” explains why Southern Ontario, the largest hockey market in the world, only has one National Hockey League team. The owners of the Toronto Maple Leafs are not exactly eager to welcome competition, and the NHL has the power to prevent it. That also allows owners in less profitable markets to benefit from revenue sharing from profitable teams; competition would risk reducing the pool of funds to be shared with struggling franchises such as the Arizona Coyotes.

Keeping supply below demand also allows leagues to set a price for creating or moving teams and marquee events, including taxpayer-funded bidding wars among cities.

If you watch the (mostly fictional) Blackberry movie, you may be left with the impression that Jim Balsillie’s attempt to buy an NHL team and move it to Southern Ontario was blocked by a league that was offended by his manners. No. What offended the NHL was him trying to do an end run around their monopoly.

That’s been the way of the world in North American pro sports since almost as long as there have been pro sports. Each time a new pro league was created to challenge a monopoly league, the competitor drove athlete salaries higher, exactly as LIV did. But those competing leagues were eventually all either crushed by the monopoly, or merged with it, for mutual benefit.

That’s why the PGA-LIV hookup was entirely predictable. The owners of both are better off. (Fans? Not so much.)

Consider the history. The American Football League was created in 1960 to challenge the National Football League; the two merged in 1970. The World Hockey Association was created in 1972 to challenge the NHL. Just like LIV, the WHA lured away stars with big money, with Bobby Hull signing a contract worth more than a million dollars – then an unheard of sum. The NHL did its best to kill off the WHA, but ended up absorbing it in 1979.

The impresarios behind the WHA, Gary Davidson and Dennis Murphy, also created a basketball league to challenge the NBA. The American Basketball Association, founded in 1967, agreed to merge with the National Basketball Association just three years later. But the process was held up for six years by the players, who filed an anti-trust suit alleging that the NBA was a monopoly that restricted their freedom and kept salaries low. The merger went ahead after the NBA conceded to the players demand for salary-boosting free agency.

And way back in 1901, baseball’s American League went up against the dominant National League. The two quickly decided to stop cutting into each other’s profits. They instead came together and created the World Series.

Monopoly is always better than competition. Just not for the customers.

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