Thursday, December 05, 2013

Why Would We Deliberately Choose to Create Inequality?

-- Posted by Neil H. Buchanan

In late 2011 and early 2012, I wrote a series of Dorf on Law posts (here, here, here, and here), and one Verdict column (here), discussing the argument that colleges should pay cash salaries to their athletes in money-generating sports.  Over the last two weeks, I have written three posts (here, here, and here) about how recent rules changes in professional and college football have been misunderstood, drawing an analogy (with the help of some readers) to the recent changes in the filibuster rules in the U.S. Senate.

Obviously, I have not followed through on my vow from two years ago to stop paying attention to football.  Today, my Verdict column is again devoted to the question of how college football players are compensated.  My motivation in writing that column was two-fold.

First, I felt the need to respond to a surprisingly large number of commentators who assert as fact that college football players are "paid nothing."  We hear this claim not just from the usual lunkheads, but from supposedly well-informed people like former Duke basketball star Jay Bilas, ESPN's estimable Bob Ley, and the editorial board of The New York Times.  (To be clear, some of the lunkheads are on my side, too.  Mike Golic, who comes across as a nice guy, but who cannot make a sustained argument that does not boil down to, "This makes me angry, and that's the way I feel," happens to oppose cash payments to college players.)

The second motivation, related to the first, is that I recently saw some up-to-date statistics on graduation rates for college athletes.  Looking at the numbers, what struck me was that the usual presumption that college athletes are all failing to graduate is spectacularly untrue.  Even my 2012 Verdict column implicitly assumed that essentially none of the scholarship athletes in major college football ends up graduating.  The reality is significantly better than that.  The numbers are in dispute, but even the pessimistic estimates for football graduation rates are in the 67% range.

I thus argue that it is a gross exaggeration to describe college football players as being "uncompensated."  They are receiving full-ride scholarships at a time when those are worth $20,000 - $60,000 per year, and the majority of the players are getting college degrees.  Some fraction of those degrees might be based on a fair number of non-rigorous courses, but our presumptions on that issue are also based more on supposition and exaggeration than reality.  In any event, it is simply "a true fact" that college football players are being compensated, and many of them get out of it the benefits that a college degree can confer on a person.

In the column, I try to be as clear as possible that my purpose is not to engage in either a cost-benefit analysis from the standpoint of the players (Are the benefits worth it, given how much damage football can do to the body and brain?), nor am I proposing a balancing test to determine whether college players receive a fair proportion of the revenues that college football generates.  My point was simply that players are definitely being compensated, and that their compensation has a dollar value that is quite high.  For someone to say that they receive "nothing" requires them to trivialize not just the education that players receive, but all of the other perks of being a college football player.

My further argument is that trivializing the value of a college degree reflects a surprising degree of anti-intellectualism.  Why are so many well-educated people willing to act as if a full-ride college scholarship is "nothing"?  They are essentially saying, "Meh!  Free college is fine, but there's real money involved here.  Don't give me your snobby stuff about the value of a college education!"  Once big dollars are involved, all of a sudden the only thing that matters is whether the big stars are getting a slice of the pie.

Moreover, it is only the big stars that we are talking about, when it comes to "winning" under a cash payment system.  Although some reformers have talked about creating a college equivalent of the NFL Players Association, i.e., a union, to represent players' interests, that is surely not going to happen.  (And, to be clear, the NFLPA is notoriously weak, because of the short playing careers of its members.)

The idea that rank-and-file players are going to be well served by a pay-for-play system is hard to take seriously.  And it is the rank-and-file players who are actually benefiting from the current system.  The top-flight stars are actually part of the reason that graduation rates are lower than they would otherwise be, because many of them leave college early for the pros, to make a few million dollars.  The guys who stay and graduate are the ones who figured out that the NFL is not in their future.  (And, as I noted in today's column, it turns out that any college attendance, not just a B.A., increases future earnings.)

My argument is thus based on two contestable assumptions.  First, I assume that a wage-labor system would almost immediately see the end of full-ride scholarships -- and even of "academic ineligibility" as a concept in college sports.  That is, I am asserting that we cannot reasonably expect that players will be paid both in full-ride scholarships and in wages.  (If I am wrong about that, there are still reasonable concerns about the effect that this would have on college campuses.)

Second, I am assuming that the net benefit paid to the majority of player-workers will be less than they are currently being paid.  A full-time worker making $10/hour, 40 hours per week and 50 weeks per year, has a gross income of $20,000.  What wage would universities end up paying, for part-year workers?  As it stands, big-time programs are willing to use all 85 of their allotted football scholarships, but there are plenty of would-be players who would willingly settle for less than that amount, especially if their myopia were being manipulated by receiving offers of immediate cash.

This is ultimately an empirical prediction, but I find myself returning to the conclusion that I discussed in one of my earlier posts.  A pay-for-play system will serve a small number of players very well but will end up harming the rest.  The economist Robert Frank popularized the concept of "winner-take-all markets," where the spoils of any particular economic activity are received by smaller and smaller groups of big winners, while others fight for scraps.  The current NCAA system, whatever its other flaws, prevents that from happening.

One might offer the simple, crude "free market" argument that the best players should be paid as much as the market can bear, and the rest do not deserve more than they can get.  That argument is incredibly weak, but even those who find it convincing should at least be clear that they are not concerned about the poor players who are "getting nothing" now.  Choosing to make the most vulnerable players worse off, by pretending that they have nothing to lose, is a cruel joke.


CJColucci said...

What about paying student-athletes a modest stipend, say, the equivalent of a part-time minimum wage job, so they can have a little walking around money to compensate for their service to the college community and the foregone income? I remember getting a couple of hundred dollars a year in the 1970's for my work as an editor of my college newspaper.

David Ricardo said...

While I would agree with Mr. Buchanan that indeed college football players do receive significant compensation for their services, not only in the form of their scholarship but also with their campus lifestyle (special dorm, luxury training facilities, travel, stipends on expenses on bowl trips etc) however.

1. The argument that cash payments in lieu of scholarships would be less than the value of the scholarship only works if all the schools conspire to deny every player a scholarship, something unlikely to happen, especially since the athlete must be a student. What is more likely to happen is that marginal players would receive only the scholarship and stars would receive the scholarship plus payments or more likely, the right to capitalize on their celebrity. (And anyone who doesn’t believe that substantial payments are happening under the table right now is not paying attention to the real world.)

2. The failure of football and basketball players to participate in the largess they bring to the college athletic system is solely the result of a monopoly that for some reason is allowed to exist in a nation that prides itself on being a country with free and open and competitive markets. In every real economic sense the NCAA operates as a19th century trust and in a better world would be subject to anti-trust provisions of basic law. There appears to be no economic justification for allowing this monopoly, but if someone does think it is justified in terms of economic benefits to the overall economy I would certainly like to hear it.

3. The NCAA rules take away what most of us regard as basic economic rights, for example the right to control our own image, to enter into compensation arrangements outside of the college and in general to freely engage in commerce. One wonders, for example, how those who author Dorf on Law would feel if their respective universities demanded that all outside income related to their professional activity and notoriety as lawyers and economists had to accrue to the university, and that all of the universities in this nation entered into an agreement to enforce those provisions for all of their faculty.

At a minimum the players should be allowed that same rights as other celebrities, and this would not consist of payments by the college. And yes the better players would make more money than the scrubs; that is how our economy works. Hopefully the current legal attacks against the NCAA will alleviate some of this economic injustice.

The issue here is not whether or not college football and basketball players are receiving value, the issue is whether or not they are victims of a monopoly where there is no economic justification for that monopoly to exist and are receiving less than value than they would get in a free and openly competitive marketplace. Given the billions that accrue to the colleges, the NCAA, the athletic personnel, the networks and others it is clear that this is the situation. As an economist I fail to see any justification for this in any basic economic analysis.

Funny Games said...
This comment has been removed by the author.
Funny Games said...

In every real economic sense the NCAA operates as a19th century trust and in a better world would be subject to anti-trust provisions of basic law.LOL Elo Boost | FUT 14 Coins
There appears to be no economic justification for allowing this monopoly, but if someone does think it is justified in terms of economic benefits to the overall economy I would certainly like to hear it.

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