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February 14, 2007
Why they make so much
Russell Roberts
When college football coaches get a lot of money, people complain about the injustice of it. Some of those complainers are fans, who have romantic ideas about college sports. But they're the reason coaches make so much.
In this piece at the Boston Globe, I tell complaining college sports fans to look in the mirror. An excerpt:
But if those fans want to find someone to blame they should look in the mirror. They are the source of that salary they find so exorbitant. Their desire to revel in victory is what drives the university to pay not an exorbitant salary but merely the going wage, what it takes to attract a talented coach away from other universities and the professional ranks.
At Alabama, that fan is tired of losing to Auburn. At Oklahoma where Bob Stoops makes more than $3 million to coach the football team , alums from Oklahoma want to revel in victories over Texas. Now and then, they expect a national championship. At Ohio State, Jim Tressel makes a few million to ensure that the Buckeyes stay competitive with Michigan.
What I didn't have room to explore in the piece is the role of large public universities in the escalating rewards to college football and basketball success. If you look at the top 20 teams in each sport, you'll see the dominance of large public universities with an occasional USC in football and Duke in basketball. Part of the reason for this is the political pressure large numbers of alums put on Presidents of universities and implicitly through politicians to have a successful team.
The other interesting topic is the NCAA. One reader came to the defense of the NCAA as a well-intentioned organization that tries to keep the game honest.
I disagreed.The NCAA relentlessly prevents universities from paying their players in any remote fashion. They have so much trouble keeping the market from working that they ban any scholarship athlete from taking any job of any kind while on scholarship. That's to prevent the restaurant owner from overpaying the busboy as a form of bribe.
What they did to Alabama in a recent recruiting scandal is what they do to every school that tries to reward any player. They punish them. Some see that as a virtue because it stops something we call "cheating." But what we call cheating is a natural consequence of trying to stop market forces from working. Because that avenue of competition is ruled out, colleges pay coaches large sums of money and build absurdly luxurious dorms and practice facilities as a way of attracting good players.
The NCAA is a cartel. It is a way to reduce competition among rivals. It has no moral compass, no intentions. Anything resembling a moral compass is hype, spin and PR that exploits the public's romance about university life. They're not evil, either. They're just a way to make life easier for colleges and their leaders who see football and basketball as a way to make money and to have goodies to hand out to supplicants who want access to good seats, and the opportunity to rub elbows with glamorous coaches and players. Expecting the NCAA to put the interests of students first is like expecting Congress to pass a law against "special interests." It just isn't in the nature of the beast.
The NCAA is a private, voluntary organization. IMost cartels die quickly because of the temptation to cheat on the agreement. The form that the cheating takes here, is to build luxurious dorms--there's no way to limit and monitor luxuriousness. If you could, they would. But that's mild. So why doesn't more cheating occur? One answer is that it does and that there's a lot more under the table payments going on than the NCAA discovers.
The other answer is that no one team can cheat. If one team refuses to abide by NCAA regulations, and leaves the NCAA, they have no one else to play against. You need a group of teams to defect and start their own league. The appeal of that is that by ignoring the NCAA, they could pay the best players and have the best teams and get even more TV money etc. But the risk is high and the overt payments to players might handicap viewership and fan interest for cultural and romantic reasons. Even so, a group of teams did defect in some sense a while back and get their own TV package. Notre Dame did it, too. And the BCS is a sort of cartel within the cartel--it essentially recognizes that not all cartel members are created equal and deserve equal treatment.
College sports is a big business. I have no problem with that. (Though whether it should be tax exempt is another question. The threat of removing that exemption does limit the venality.) But it is a big business built on the bizarre illusion that it's not a big business. It's a big business we like to pretend is a game. To pretend it's a game and complain it acts like a business is human but illogical.
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"It has no moral compass, no intentions. Anything resembling a moral compass is hype, spin and PR that exploits the public's romance about university life. They're not evil, either."
Not evil? No moral compass and not evil?
False depiction of what they do and they are not evil? Posing as a public interest group while engaging in self service and they are not evil?
Posted by: R. Steven Cox | Feb 14, 2007 2:24:25 PM
R. Steven Cox,
Good point. But there's no "they're" there. The NCAA doesn't have intention. They're just a collective voice for the constituent institutions. When Miles Brand became the head of the NCAA, someone told me that he's great, he stood up to Bob Knight, so he'll be good for the students, he cares. But my counter was that if he wants to keep his job, he'll serve his masters, the large, successful sports Division I sports programs.
Posted by: Russ Roberts | Feb 14, 2007 2:50:52 PM
Russ is right on, except about Bob Stoops. So long as Pete Carroll is at USC, Stoops will never win a National Championship. Also, the NCAA are more accountable to the University Presidents than to the athletic departments. That's why we'll never see a playoff in college football. The bowl system as presently constituted is too much of a cash cow to the big schools and the conferences. The independents (are there just 4 left?) have lucrative deals (ND) or aren't big enough to matter. Without football, Title IX could never work at most schools. Or it would force all kinds of cutbacks to mens' sports. My own alma mater, UC Irvine, has faced this because it doesn't have a cash cow men's sport -- no football team, basketball has never been the big ticket in town, college baseball just doesn't sell tickets.
Posted by: Brad | Feb 14, 2007 3:21:29 PM
Russ,
You're making very good, very strong points. There's actually an interesting battle taking place behind the scenes within the NCAA.
The powers within the NCAA (the Division I-A football powerhouses in the six power conferences) have been backing rules that would make it harder for schools to attain I-A status and make it harder for current I-A programs in non-power conferences to stay there. For example, they keep trying to raise the minimum average attendance at home games, excluding free passes, that must be maintained throughout a three-year period.
What they're afraid of are more schools like Buffalo, qualifying for I-A status who would then vote for some sort of playoff system or a "more equitable distribution" of revenue among all I-A schools. There are safety checks in place, such as on the Management Council, which really controls the agenda that Miles Brand follows. Each of the power conferences has two seats on the Management Council, while the other conferences only have one seat each (and some of them may still share a seat here and there).
For those who want the playoff system, I think there is a much better chance of that happening if the power conferences get their way and force out quite a few of the Buffalos and North Texas States from Division I-A. That way, they wouldn't have to share the revenue from the playoff system with all those other schools...it would go to the I-A schools in the power conferences. But that is years away from happening, if it ever does, and there are huge political problems because of all the congressmen and senators who are alumni of the Tulanes and Central Michigans.
Posted by: tw | Feb 14, 2007 4:28:43 PM
I think you make the same mistake that many commentators make when looking at college sports. You look at Division I football and basketball, and conclude that they are representative of college athletics as a whole. This is incorrect. Division I football and basketball are aberrations. They are significant deviations from the norm, and should not be used as the basis for condemning (or praising) the system as a whole.
Yes, Division I football and basketball are a "business" for those schools fortunate enough to have teams that people will actually pay money to watch. But how many schools is that? For the vast majority of NCAA institutions the athletics program is a huge net drain on resources. Full scholarships (tuition, books, room and board) for football, basketball (men and women), lacrosse, field hockey, swimming, water polo, baseball, softball, hockey (men and women), fencing, squash, track & field, bowling, archery, badminton, rugby and all the other sports costs the colleges far, far more than they make from ticket sales, TV rights, and other sports-related revenues. Even for most schools with revenue-generating football or basketball programs, the "profit" from those programs will quickly be eaten up by the costs of fielding teams in the other sports.
The NCAA is not out to "exploit" the student athlete. The NCAA is trying to preserve the idea of the true student-athlete. The NCAA is trying to hold on to the principle that football players at big time schools are no different than a member of the womens' volleyballl team. They are students who play a sport, and they are being given a tremendous opportunity to get a world-class education while they are at it. Yes, the football or basketball player may be helping the school bring in some revenue. But those few players good enough to sell tickets or turn TV dials are also using the University as a means of marketing themselves to the pro leagues where, if they are good enough, they will become millionaires at a very young age. The members of the water polo team don't bring in big money, but they aren't going to be 23-year old millionaires either.
The point is that the NCAA is not just big time college football and March Madness. The NCAA is also all those students playing all those non-revenue sports in empty gyms. And any changes to the rules have to make sense for all student athletes and their schools, not just football and basketball players at a handful of well known Universities.
Posted by: Earl B. | Feb 14, 2007 5:28:33 PM
If airline executives or pipefitters did what the NCAA does, they'd go to jail.
Earl, what's your definition of "exploit." The star football and basketball players could get tens of thousands of dollars more in an open market; the NCAA fixes things so they can't get it,expropriating their producer surplus; universities, conspirators in this racket, pocket the extra money. If "exploit" means anything, that ought to be it. What does it matter how the university spends the money?
I don't buy the argument that they'll get compensated by large pro salaries. How does being underpaid now get you more money later on? It doesn't. All you're saying is that, "The money they'll earn as pros ought to be enough." We can say that about a lot of jobs, but no one contends the industry can collude against the entry-level employees.
Posted by: AC | Feb 15, 2007 6:18:52 PM
Russ,
I work at a university. Whenever I hear a college professor complaining about coaches' salaries, I ask him one thing. How much money do you bring into the university? If the college professor brought in tens of millions of dollars, he too would be paid accordingly.
Posted by: A.J. | Feb 15, 2007 10:33:04 PM
Sir
In the exchange processes known as Division I football and basketball, it seems as if all actors are generally satisfied with the outcome. Sure, the schools, media, coaches, vendors and fans all have complaints (on the margin) regarding the present set-up. Yet, absent better proposed solutions, the status quo is to them acceptable.
Even the proletariat of players, who I'm sure have some complaints about the present arrangement, continue to matriculate in exchange for the scholarships, which, to many of us, seem an underpayment for their services.
When has the market ever demanded maximized outcomes? For now the optimized outcome has all parties in the exchange reasonably satisfied. If significant change is to occur, it will have to come from large numbers of the presently consenting players.
Posted by: John Flanagan | Feb 16, 2007 9:49:53 AM
A.J.,
If you go back and read the piece at the Globe (and ignore the title which I didnt write) you'll see I'm not complaining about the level of the salary but merely trying to explain the market forces that produce the high salary. Here at Cafe Hayek, I'm arguing that the NCAA tries to restrain those market forces but can't--instead of the players getting some of the value they produce, a disproportionate share goes to the coach compared to a more free market world.
Posted by: Russ Roberts | Feb 16, 2007 10:30:46 AM
If players were paid for performance, I think that interest in basketball/football would drop to the level of interest in minor league baseball and hockey, or at least close to it.
Then there wouldn't be any money to pay the players with.
Posted by: Steve | Feb 16, 2007 1:05:40 PM
Bob Stoops will win another title before Pete Carroll. Matt Leinart and Reggie Bush were one of a kind players that benefited from a system they no longer have. No Norm Chow.
Posted by: Todd | Jun 9, 2008 8:09:18 PM
Posted by: laptop battery | Oct 13, 2008 3:06:31 AM
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