The reference was to a previous system, not the current one. I'm not 100% on the details at the moment- i'll have a hoke for the book and see if there's anything to it or I'm just remembering it wrong.
Right, i've finally dug this thing up. The salary limiting rule in baseball, in place until 1975, was known as the "reserve clause", meaning that players couldn't sign a new deal with anyone unless their current team let them go, effectively limiting their salaries to whatever their club wanted to pay them. It was eventually abolished for legal reasons after Curt Flood was traded from St Louis to Philadelphia against his will- but because he was legally nothing but property, he could do nothing about it.
The significance of this particular system is that, apart from being rather inhumane, it didn't do what it was designed for i.e. the Yankees had just as much success with the system in place as they have had without it. The economic theory behind this was determined by Ronald Coase in a massive study (which won him the 1991 Nobel Prize for Economics).
Coase Theorem dictates that, "When there are no transaction costs, the assignment of legal rights has no effect upon the allocation of resources among economic enterprises". In other words, players were distributed with the reserve clause in place exactly as they would have been without it- they were just paid less money. Football clubs can't be all kept roughly the same size simply by legally ruling that they have to pay their employees the same wages any more than making Tesco's and Sainsbury's pay their checkout girls a fixed wage will ensure they'll always be roughly equally successful.
Another interesting study was conducted by
David Berri, who noted that the biggest factor in maintaining a competitive balance in any sport was the total number of participants. And, significantly, found that football was the
least predictable of any sport- Watford are more likely to beat Chelsea than their basketball or rugby equivalents.
