Rules Gone Wild: Part II (by Dwayne Barney and Paul Cleveland)

 

helmetAthletics departments are devoting ever more resources to insure that the NCAA’s rules are being enforced, but judging from the number of NCAA investigations and sanctions the institutions’ efforts are largely futile. Given the impossibility of monitoring everything, most institutions walk a tenuous path hoping to avoid investigation. Moreover, in a world where everyone is guilty, competitors can attempt to prompt NCAA investigations in order to gain a competitive advantage.

The Association has so many bylaws that the thought of an investigation strikes fear into administrators.  Given that membership is entirely voluntary, how can this happen?  What is it that induces universities to voluntarily participate in an arrangement that many find to be burdensome?  The economic theory of rent seeking provides some insight into the matter.

The cash generated by intercollegiate athletics in general, and college football in particular, is enormous. An appearance in a Bowl Championship Series (BCS) game is highly coveted, since the payoff from these games result in millions of extra dollars of revenue for the universities involved. Likewise, an appearance in the NCAA’s final four in basketball generates huge sums of cash for the participating institutions.

Besides the direct cash payments to the universities, indirect benefits take the form of increased sales of season tickets, concessions, and merchandise with school logos. Given the large amount of money on the line, the competition between universities for the best student-athletes is intense.  

In a recent column on academic pretense, Thomas Sowell pointed out the “hypocrisy” of academicians and school administrators who are vehemently opposed to paying student-athletes.(See the article titled “Academic Hypocrisy” at http://townhall.com/columnists/thomassowell/2012/02/21/academic_hypocrisy/page/full/). 

Head football coaches at major colleges normally receive annual salaries well in excess of a million dollars. Assistant coaches are also handsomely rewarded, as are athletic directors. But student-athletes are not allowed to share in the windfall arising from their work on the field.  For the guys on the field, even a booster-bought snow cone is prohibited. In commenting on the various recruiting and other NCAA violations being reported, Taylor Branch (2011, p. 1) observed that, “the real scandal is the very structure of college sports, wherein student-athletes generate billions of dollars for universities and private companies while earning nothing for themselves.”1

In his article, Branch (2011) provided an excellent review of the history and development of the NCAA. Branch’s scathing portrayal of the NCAA is largely focused on the institution as a rent-seeking cartel: “The NCAA makes money, and enables universities and corporations to make money, from the unpaid labor of young athletes.” (2011, p. 5). The argument is a familiar one from the theory of rent seeking. In a competitive market, productive inputs (student-athletes) would tend to be paid a wage equal to the value of their marginal product. Prices of inputs would be bid up, thereby reducing the economic rents accruing to universities and their athletic departments. To capture more of the economic rents, universities join in a cartel (the NCAA) to enforce a list of rules and thereby prevent an all-out bidding war for student-athletes. 

As with any cartel, once the rules and guidelines are in place there is strong incentive for any particular cartel member to cheat on the agreement. In the case of the NCAA, the cheating takes place when individual schools or their boosters offer impermissible benefits in an attempt to recruit and keep a star athlete. An individual school can benefit economically by offering something to entice recruits to enroll in their institution and play for their team. For this to work, competing schools need to toe the line lest an all out bidding war occurs. Predictably, when a rival school is caught red-handed in some sort of NCAA violation, there is a high level of righteous indignation and scorn brought down on the offending institution. Any discovered violation on the part of a competitor is generally regarded as a purposeful attempt to cheat on the system and thereby gain an advantage, and offended institutions expect the guilty school to suffer the harshest of penalties for such violations. By way of contrast, a school’s own violations are almost always explained away as the result of an inadvertent slip up—the “sort of thing that could happen to anybody really.”

The NCAA actively works at defining and enforcing rules against any form of compensation or benefit directed at student-athletes.  But what constitutes illegal compensation aimed at attracting and keeping a star athlete?  In attempting to answer this question the NCAA has developed an incomprehensible rule book. The next blog in this series will provide some humor by looking at some of the specific NCAA bylaws that are particularly asinine.

 

[1] See “The Shame of College Sports” Atlantic Monthly, October 2011.  Available online athttp://www.theatlantic.com/magazine/archive/2011/10/the-shame-of-college-sports/8643/2/

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  1. Eamonn said:

    In addition to being a jobs program for coaches and other staff, college football serves as the minor league for the NFL, so I wonder how much influence they have on NCAA policy. Pro sports are experts in economic rent-seeking as well since most of their facilities are financed by localities through taxes and muni bonds, yet the gains go to the team owners, not the local citizens. I can imagine there would be a lot of backlash against having paid college football players, at least among regular students and those who still think colleges should be focused primarily on academics. Maybe letting the market work by spinning them off as private minor league teams is the solution.

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