When the world’s two most expensive transfers, Neymar’s €222 million move in 2017 and Mbappe’s €180 million transfer in the same year, detonated the European football market, the conventional opinion was simple: “Greedy owners are ruining the game”. This narrative suggests the problem is “unchecked capitalism” and that the solution is stricter control.
This diagnosis is fundamentally wrong. The unprecedented inflation of player prices is not a failure of the free market. It is a textbook example of market distortion caused by central planning. The regulatory mechanism intended to ensure “fairness” and “stability” – in this case, UEFA’s Financial Fair Play (FFP) regulations – has instead acted as a catastrophic economic force, creating an artificial monopoly that directly fueled the rising costs.
Scarcity and Demand: When Everyone Wants the Same Talent
Every economics class begins with the understanding of scarcity, and elite footballers are the ultimate scarce good in football. Only a handful of players can perform consistently at the world’s top level. Meanwhile, the demand for these players has grown exponentially.
Television rights and global streaming have poured billions into football. Even mid-tier clubs now have budgets that rival those of traditional European giants. The supply of talent, however, cannot expand quickly. Great players are not manufactured, but rather developed slowly and unpredictably.
This inelastic supply, combined with surging demand, explains why prices continue to rise year after year. Neymar’s move didn’t just make headlines, it set a new psychological benchmark. Suddenly, every club recalibrated what “world-class” meant, and the prices rose in response. The result is a market that inflates itself through expectation and scarcity rather than true productivity growth.
How Competition Distorts Prices
In economics, the winner’s curse describes how auctions often lead to overpayment. The winner wins by being the most optimistic (and therefore least rational) bidder.
Football’s transfer market works the same way. When several clubs compete for the same player, the fear of losing to a rival drives prices sky-high. PSG’s signing of Mbappe at just 19 years old, or Chelsea’s €121 million purchase of Enzo Fernandez after a single standout tournament, reflects this auction-like frenzy.
These signings often fail to deliver comparable returns. This is pure winner’s curse behaviour: competition and pride overtaking rational calculation.
Solution That Became the Problem
Introduced in 2009, FFP regulations were born from a noble idea: to stop clubs from spending more than they earn. The goal was to prevent “financial doping” by wealthy owners and “save” clubs from reckless spending.
The “solution” was a rule that, in essence, says clubs must “break even”. You can only spend what you earn in football-related revenue.
However, the FFP rules are a direct violation of economic freedom. They tell a private individual (an owner) that they are not allowed to invest their lawfully earned money into their own asset (a club) as they see fit. Imagine the government telling Jeff Bezos he wasn’t allowed to pour his Amazon profits into Blue Origin to compete with SpaceX, just because SpaceX had more “organic revenue” from rocket launches. It’s anti-competitive and fundamentally anti-growth.
FFP’s great failure is that it protects already established powers. Clubs like Real Madrid, Manchester United, and Bayern Munich – the “old money” of football – already have colossal global fanbases and massive commercial revenues built over decades. They don’t need owner investment to pass FFP checks.
But what about a new, ambitious owner who wants to take a mid-table club like Newcastle United and challenge the elite? FFP effectively blocks them. They cannot inject the capital needed to buy top players until they have the revenue to match it. But they can’t get that revenue until they have the top players.
FFP has essentially pulled up the drawbridge, locking the established elite inside the castle and leaving everyone else outside.
This created a “Concentration Effect.” Instead of 10 or 20 clubs bidding for a top player, FFP ensures that only five clubs with massive “FFP headroom” can compete. When these five giants go to war over the one available superstar, the price becomes astronomical. FFP didn’t stop the inflation – it concentrated it.
Incentive for “Creative Accounting”
When you regulate how money is accounted for, markets don’t stop spending, they just find loopholes.
The most obvious recent example is Chelsea’s use of amortization. Amortization is an accounting principle where the cost of an asset (a player) is spread across the length of the contract. So, a €100 million player on a 5-year contract costs €20 million per year on the FFP books.
Seeing this, Chelsea’s new owners simply gave their new signings wildly long contracts. Enzo Fernández and Mikhailo Mudryk were both signed on eight-and-a-half-year deals. This allowed Chelsea to limit Enzo’s cost to only €14 million per year, making a mockery of the regulations.
This isn’t a free market. It’s a distorted market rewarding the most creative accountants and not the best football experts. The spending still happens, but it’s now tied to absurd and unnecessary long-term risks that could cripple even the most financially secure clubs if a player fails. Recognizing its folly, UEFA has already tried to close this loophole, limiting amortization to five years, which is a clear admission that its own rule created the distortion.
The Real Solution: Deregulate the Pitch
The problem therefore is not “too much money” in football. It’s regulations that prevent that money from flowing freely, competitively, and rationally.
The solution is not more rules, like the even more complex “salary caps” being proposed. The solution is economic freedom by abolishing the Financial Fair Play system.
Let individuals risk their own capital. If the owner of Newcastle United wants to invest 2 billion of his own money to try and win the tournament, he should be allowed to. It’s his property. This is the very essence of a free market: the right to invest, compete, and crucially – to fail.
The protectionist argument for FFP is that it saves clubs from themselves. But a free society does not bubble-wrap individuals or companies from the consequences of their own bad decisions. If a club is run recklessly, it should face the market discipline of relegation or, in extreme cases, bankruptcy. This is the economic concept of creative destruction. The failure of one poorly-run entity allows its assets (players, stadiums) to be reallocated to a new, better-run one.
By trying to plan “fairness” centrally, UEFA has only succeeded in entrenching an oligopoly. It protects the established clubs from competition and forces new-money clubs into absurd accounting loopholes.
Football inflation wasn’t created by the shortcomings of capitalism. It was inflated by the regulators who believe they can plan a market better than the individuals within it. It’s a textbook example of how regulation, however well-intentioned, creates distortion and punishes competition. To get a healthier, more competitive, and more rational transfer market, the central planners need to get out of the way. The red card should be for UEFA.
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