The following is a response to Robert L. Kehoe III’s “Hunger Games,” which The Point published on March 19, 2015.
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Robert L. Kehoe III’s “Hunger Games” takes on a heavy burden: demonstrating that Pulitzer Prize-winning civil rights historian Taylor Branch, New York Times columnist Joe Nocera, and one of this essay’s authors, Andy Schwarz, are on the wrong side of justice when arguing for the economic rights of college athletes. Kehoe challenges the notion that college athletes should have access to freedoms shared by other American adults, including the right to economic self-determination in a market free of anticompetitive collusion. Market proponents advocate a simple view: that the collective agreement across all of Division I that establishes athlete payment ceilings is price fixing, and that all Americans, including college athletes, have a right to seek compensation for their talent and skill in a market free of price fixing.
Kehoe makes what he conceives of as a moral and economic argument against a market-based system for paying college athletes. From the moral perspective, Kehoe contends that “money has already served to encourage a Romanized spectacle with little connection to the presumed goals and values of institutions of higher learning”—and, thus, athletes’ economic rights to earn money should be (a) disdained, and (b) easily trumped by the need for academic institutions to make and then spend more money on other efforts. From an economic perspective, Kehoe argues that America’s university system is far too poor to afford to live by the same economic rules as the rest of us.
Mr. Kehoe’s thesis overlooks the economic origins of “amateur” athletics and misconstrues the nature of athletic-department accounting and nonprofit decision-making, buying into a false history of institutional poverty that does not exist. Allowing economic competition for athletes today will neither destroy (or likely even change) the current system that prevails at most schools throughout the United States. And, to the extent that Kehoe is correct that choosing a life free from compensation is the nobler choice, athletes in a “Team Market” system would also be free to choose the uncompensated life, rather than having the choice made for them.
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Kehoe’s first misstep is to buy into the common error of assuming that athletes only recently have come into the world of commerce after centuries of healthy gymnastics for the pure love of the contest itself. He is correct to point out that the Romans (who conquered the Hellenistic world and thus became the political overlords of the Pan-Hellenic games, including the original Olympics) had no compunction about paying athletes for their success. For example, Gaius Appuleius Diocles, a charioteer in the mid-second century, retired with career earnings that are estimated to have been in the tens of billions.
But professional athletics is older than the Roman Empire. In fact, the tradition of showering athletes with wealth as well as fame can be traced to the noble Athenians. As Brian Cronin notes in this LA Times editorial, Greek athletes were handsomely paid for their Olympic victories:
In 600 B.C., a winning athlete from Athens was given 500 drachma, an enormous sum—enough that he could theoretically live off of it for the rest of his life. By 200 B.C., Greek athletes had formed professional athletic guilds similar to today’s Players Associations for the various professional sports. In fact, professionalism in the Olympic Games were so widespread that they even drew criticism back then from observers who noted that the financial rewards of the Games were causing young Greek men to shirk their other studies to concentrate on athletics, resulting in these men becoming worse soldiers and scholars.
Cronin continues, “The idea of extolling the virtues of athletes who are not compensated for their performances was not an Ancient Greek idea,” but was actually invented from whole cloth over the course of the nineteenth century by Victorian aristocrats who were intent on keeping sports unsullied by the working class. “Amateurism” then became entrenched in our collective mythos with the establishment of the modern Olympic Games:
Brookes’ ideas regarding amateurism (which was “athletes should not be paid for their efforts”) remained the standard for all the other games of the era and ultimately became the standard adopted by the Olympics. However, this standard seemed less interested in celebrating the nobility of “playing for the love of the game” so much as they were celebrating the nobility of, well, the nobility.
The argument that athletic endeavor without remuneration is its own best reward buys implicitly into this classist notion, perpetuated for the explicit purpose of denying the British working class access to sport, and not, as Kehoe suggests, as a means of distinguishing sport from spectacle.
In Kehoe’s worldview the NCAA’s collusive economic system is anchored to the bedrock of Greek virtue filled with “moral values needed to sustain our democracy,” but in reality it is instead tied, rather loosely, to the shaky moorings of British classism: aristocratic, classist propaganda aimed at making a life of rent-collecting leisure superior to living off the sweat of one’s own brow. This myth of an idyllic amateur past has also seeped into our view of college athletics, despite the fact that the first hundred years of college sports (and first fifty of the NCAA) were venal in purpose and lucrative in monetary rewards, with athletes’ pockets overflowing with pecuniary recompense.
- The first-ever intercollegiate sporting event, a rowing match between Harvard and Yale in 1852, was sponsored by a local railroad advertising its line to the region. One of Harvard’s rowers had already graduated, beginning the intercollegiate bickering over eligibility we still cherish to this day. (See Robert Smith’s “Pay for Play” for more details.)
- Football players at the University of Pittsburgh were paid throughout the early twentieth century. In 1939 the freshmen football players went on strike, upset that upperclassmen were paid more.
- When colleges began paying football coaches near the dawn of the twentieth century, many felt that doing so violated the amateur spirit and would spoil the fun. Harvard refused to pay their football coach—until they got tired of losing to Yale and hired a full-time coach in 1905.
- Throughout the 1930s and 1940s, the Southwest Conference allowed athletes to be paid by their university as employees, and only abandoned this practice in 1956, when the NCAA created the “grant-in-aid” concept, inaugurating a seven-decade run of price fixing that still exists today.
The NCAA often distorts this past. In a recent oral argument at the Ninth Circuit, the very first substantive sentence by the NCAA’s attorney, Seth Waxman, stated that the NCAA’s founding purpose was to fix prices, that is, to preserve amateurism. Nonsense. The NCAA formed to prevent death through head injury;1 price fixing was a convenient (albeit unsuccessful) secondary goal tacked on later as an oft-ignored aspiration for the first forty to fifty years of the NCAA’s existence. Indeed, the NCAA only made its first recommendation against the crass practice of paying athletes through scholarships in 1922, and its first outright prohibition came as late as 1948.
The period between the NCAA’s founding in 1906 and its ban on payments to athletes in 1948 saw college football thrive, expanding from 64 to 117 teams. Pay and play came into contact without destroying the universe like commercial matter and anti-matter.
The NCAA only acknowledges its more venal past when convenient. In the O’Bannon case, NCAA President Mark Emmert initially testified, “Traditions and keeping them are very important to universities. These individuals are not professionals. They are representing their universities as part of a university community.” Yet in the recent Ninth Circuit appeal of O’Bannon, the NCAA argued that commerce has always been a part of college sports:
Although the revenue generated by FBS football and Division I men’s basketball has grown over the years, college sports was highly commercialized when Board of Regents was decided—a fact that could not have been lost on the Supreme Court, given that the agreements at issue there called for broadcasters to pay hundreds of millions of dollars to broadcast a limited number of college football games in light of college football’s ability to “generate an audience uniquely attractive to advertisers.” … Indeed, the district judge in that case had called college football “big business” … The reality is that commercialism and its attendant pressures have been a part of college athletics from the very first sporting event. (Emphasis added.)
The ahistorical foundations upon which Kehoe builds his economic argument should caution us against his conclusions. But even if the myth of Greek or pre-WWII college “amateurism” were true, it would serve as a poor analogy for the economic questions of college sports.
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College athletes are being paid now, as Kehoe recognizes, through scholarships. But it is hard to accept Kehoe’s assertion that scholarship values already may be as high as $500,000 (almost certainly a gross overestimate) and still maintain that college sports do not already violate the notion of playing for the joy of the game. The economic argument has never been that the current system offers athletes no value, but rather, that in a market-based system, the athletes on FBS football teams and Division I men’s basketball teams will earn all of those existing benefits and more. Not that they are unpaid by these in-kind services, but that they are underpaid because their true market value would include all of those benefits plus a paycheck.
To this Kehoe responds that “money has already served to encourage a Romanized spectacle with little connection to the presumed goals and values of institutions of higher learning.” To this we ask why schools feel the need to collude to achieve this noble goal, unless in reality they know it is a path athletes would not choose for themselves.
If there is something truly morally superior about opting for underpaid effort in lieu of working for market rates, then athletes can only choose nobility if given the option. The question in the amateurism debate is not whether athletes should or should not be paid, but whether colleges should or should not collude to prevent athletes from being paid more. Absent the NCAA’s scholarship limits, what would schools offer college athletes?Why not let schools offer athletes what they please? True Kehoean nobility will shine through among those schools and athletes who, absent collusion, willingly enter into arrangements where no more money is exchanged than is involved in current scholarships.
Surely there is little virtue in pursuing sport without compensation just because a player has no better options. It is the freedom to choose that reveals and instills virtue. A child forced by her parents to eat vegetables may achieve a good outcome, but she did not make a wise choice. If a year of eating vegetables were a means of acquiring a million-dollar salary, society might question the virtue inherent in 18-year olds who spend exactly one year at the salad bar (without any other viable choices) before heading off to earn their keep in a more carnivorous world.
The same holds true for “one and done” players who groom themselves for the NBA. Facing a monolith of 351 Division I schools that have colluded to fix wages through their cap on athletic scholarships, a high-school graduate’s ability to choose among different systems is severely constrained. In O’Bannon, Judge Wilken found the NCAA to have monopoly power over the industry. The choice to play in Europe or in the NBA D-League is not a sufficient substitute to challenge that power. The monopoly power is not natural—it is created through the unnecessary collusion among all 351 Division I schools to agree to a single, identical payment cap. The amateurism of our current system is just naked price fixing half-dressed in a toga costume—no more Greek in spirit than the degree to which our college fraternity system accurately represents Plato’s Academy or the Lyceum of Aristotle.
Moving from history to economics, let’s address the second major myth in Kehoe’s argument: colleges are broke and so, even if athletes could be paid under NCAA rules, few colleges would be able to pay them.
Kehoe’s sole source for this claim of industry-wide penury is the NCAA itself, an organization whose express purpose is, inter alia, to fix prices and then extol the virtues of that price fix. The lack of critical judgment he brings to this assertion is unfortunate, because again he buys into the myth told by those who have money that letting others earn it through economic competition is wrong. But that is how the best propaganda works. It becomes part of the fabric of a collectively known “truth” to the point that the message is almost immune to factual refutation. Nonetheless, dozens of economic scholars have published arguments that dispel the illusion of nationwide athletic department poverty. For example, as Brian Goff wrote in “Effects of University Athletics on the University: A Review and Extension of Empirical Assessment,” published in the Journal of Sport Management in 2000, while the NCAA typically argues that only fifteen to 25 FBS schools generate positive surpluses from sports, economic research shows that only ten percent of FBS schools lose money on their athletics departments. How many other industries can boast that ninety percent of market participants make a profit?
Economics offers the simple yet compelling concept of revealed preference: the idea that if you see an economic actor making a choice between two viable options, his/her choice reveals that the option chosen was preferable to the option not chosen. And so, when schools choose to join Division I from lesser (and less expensive) divisions, or choose to join FBS (the old Division I-A) football, they do so because they see the net value of such upgrades to their programs as preferable to keeping the cost of athletics low. Since 1985, Division I has grown by 27 percent. Since 1985, revenue across FBS football has grown at a steady eight percent a year, through boom and bust. Twice the NCAA has actually had to impose a moratorium on new entry, in a futile effort to stave off demand to get into Division I.
That is not what an industry looks like when it is perpetually teetering on the brink of financial collapse. College football is expanding from a Saturday-only sport to a Tuesday, Thursday, Friday and Saturday sport. Since the NCAA lifted the Division I moratorium in 2012, Appalachian State, Charlotte, Georgia Southern, Georgia State, Old Dominion, South Alabama, Texas State, UMass and UTSA have all entered FBS football.2
Why do so many schools, even rich ones like the University of Michigan, seem to make so little money? Because they spend it. Confusing the profits of an enterprise with the use of those profits is a basic economic error. People do not say a Wall Street banker failed to profit from his work simply because his yacht and alimony payments consumed his post-tax earnings. Spending college football revenues on other sports is a very different economic concept than actual expenses needed to generate those revenues. What is unusual is not that most schools spend every dollar they receive but that some schools make so much money that they cannot spend it down to zero.
Many people, Kehoe included, confuse the meaning of NCAA statistics. Rather than showing that only a few schools make money, these numbers reveal that some institutions are so flush that they ran out of plausible sports-related causes to spend all their profits on, down to zero. The claim that most schools are broke simply does not stand up to factual scrutiny; college sports are more valuable and in more demand than ever before.
Then why do schools create the false impression that bankruptcy looms? Sports economists Brian Goff and Dennis Wilson summed up decades of academic research with a paragraph analysis that cuts to the heart of the issue:
Astute university and athletic decision makers have faced a dilemma with regard to whether to establish accounting practices that highlighted the value rents flowing to the school or not. On one side, the realization of these values places pressure on universities in regard to the façade of amateurism and the lack of compensation to players. Keeping awareness of the rent flow low, permits either certain athletic or other university officials discretion over use of the flows. As a result, the most common practice over many decades has been to minimize or diminish apparent surpluses.
Whether Kehoe wrote in ignorance of these findings or knowingly dismissed them without comment is unknown. But even if these peer-reviewed scholarly papers are wrong, and colleges are (somehow) going bankrupt, that is still not grounds for collusion. The market outcome will work even if Kehoe is right.
The market rate for an athlete at a school that is broke and sees no chance to increase profits from acquiring his services is basically zero. If colleges truly cannot pony up the funds, no one is forcing them to. No model of free market conduct would predict extravagant pay in the face of industry-wide poverty.
For example, consider coaching pay, which has stagnated over the last decade because colleges are broke.
Oh, wait… No, that has not happened at all. In fact, FBS coaching pay has more or less doubled in less than a decade, even while the entire country suffered through stagnating wages due to a massive recession and slow recovery. The four coaches in the 2015 NCAA Men’s Final Four together earned more than $20.5 million this year. Pity the poor author of this 1922 letter to the editor who awaited “the day when all coaching of college football teams shall be voluntary, carried on for love and not for hire” because to “place amateur athletics under the control of paid and therefore professional coaches is to weaken the amateur spirit.”
Kehoe says that schools are effectively too poor to pay athletes. If so, then simply offering them the option should not change pay level any more than giving a factory worker the option to buy a golf course in Dubai changes real estate prices in the Emirates. Fear of a spending frenzy only makes sense if the schools also fear their claims of poverty are false.
Even if colleges start paying more than the current scholarships for athletes, there is a natural line where, once schools truly cannot afford it, the Romanized debauchery grinds to a halt. What is the Kehoean economic model that postulates that like dominoes, school after school will fall for overpaying for athletes that generate no positive return, especially when these schools also claim they have no interest in professionalizing their talent pool, or in operating in such a system?
Kehoe, citing the Chronicle of Higher Education, argues:
Without the NCAA’s redistribution of their March Madness money, ‘many smaller athletics departments’ wouldn’t be able ‘to support the day-to-day activities that keep their programs afloat.’ Indeed, the NCAA’s basketball revenue supports all three divisions of competition, 23 sports, 89 championship seasons, billions of dollars in athletic scholarships, and subsequently hundreds of thousands of male and female students whose competitions go largely unrecognized, unsponsored by global corporations and mostly unattended. (As a non-scholarship Division III soccer player I was one of them.)
Why, exactly, would any of that have to change? The world could still have a tournament between powerhouse programs and Cinderellas, and could still involve a distribution of money across schools.
It is a straw-man argument (and not a very good one) that says that if Georgetown University (NCAA Division I in Washington, D.C.) chooses to spend a bit more cash on athletes and a bit less on coaches, administrators, construction firms, etc., then Georgetown College (NAIA Division I, in Campbellsville, Kentucky) has to do the same. It is equally silly to presume that Georgetown University, competing with the University of Kentucky for tip-top talent, will force Georgetown College to cancel its sports programs because the sort of athletes the latter normally gets will somehow cease to exist, or be unwilling to attend for just a scholarship, or perhaps for no compensation at all, just for the love of the game and the love of learning. If there truly are only twenty schools with money, the rest of the college sports ecosystem can soldier on and survive as is.
If most schools really cannot afford to pay their athletes, the perils of market compensation cannot seep too deep into the sports pecking order. A positive payment equilibrium certainly will not pervade down to Mr. Kehoe’s DIII school—Kehoe and all future Kehoes are safe from cash-induced perdition. Regardless of how well compensated FBS football or Division I men’s and women’s basketball athletes become in a world of greater choice, most programs will retain Kehoe’s supposed nobler form of “amateurism” by necessity. Do not forget that all of these schools are unlikely to cancel recreational sports and intramurals, which actually provide the entire campus with the chance to seek mens sana in corpore sano free from the siren’s call of a salary.
Instead, there might be a dozen, ten dozen, or twenty dozen schools that would offer more than current scholarship limits to a hundred or so elite athletes, leaving the rest untouched. Why is that bad?
It’s not. Say six-dozen schools competed for football talent in a free market, while the remainder of the system kept the old model. Those latter schools could still get slightly less sought-after talent in exchange for the old level of compensation: simple tuition remission and room and board (or a monthly check to cover the latter). In such a world, every elite athlete would be given the opportunity to choose Kehoe’s mytho-Greco-British refined nobility or Schwarz’s debased Romano-American commercialism. For one thing, it would become clear whether the socio-economics of elite male athletes engender more serious concern for nourishing the soul or for supplementing a family income (often so low that the athlete also qualifies for a Pell Grant).
Perhaps the Victorians who barred anyone ever employed as “a mechanic, artisan or labourer” from amateur sports were right: the working class is too sullied and ignoble to appreciate the true joy that is amateurism. But if so, let athletes and their families reveal their unsuitability for the aristocracy through their own choices, instead of forcing them into an amateur club whose nineteenth-century proponents would never have let them join in the first place due to their class and race.
Economics is a theoretical field, but also one that cherishes the scientific method—hypotheses must be tested to move beyond speculation. Creating a freer system where each conference can determine the rigor of its commitment to “amateurism” versus the vigor with which it competes for talent would be an opportunity for Kehoeism and Schwarzism to hold forth in the rough-and-tumble gymnasium that is the agora. Many supporters of collegiate athletics, or at the very least many economists, would gladly agree to a five-year test to see what happens. Prediction: many of the 351 Division I schools would stray from their vows of economic chastity, absent the cartel agreement that punishes them severely for doing so. But if the system cannot stand without squelching out the alternative, how noble is it really? If no one will choose the path of righteousness without being forced to, how righteous a path is it?
The following is a response to Robert L. Kehoe III’s “Hunger Games,” which The Point published on March 19, 2015.
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Robert L. Kehoe III’s “Hunger Games” takes on a heavy burden: demonstrating that Pulitzer Prize-winning civil rights historian Taylor Branch, New York Times columnist Joe Nocera, and one of this essay’s authors, Andy Schwarz, are on the wrong side of justice when arguing for the economic rights of college athletes. Kehoe challenges the notion that college athletes should have access to freedoms shared by other American adults, including the right to economic self-determination in a market free of anticompetitive collusion. Market proponents advocate a simple view: that the collective agreement across all of Division I that establishes athlete payment ceilings is price fixing, and that all Americans, including college athletes, have a right to seek compensation for their talent and skill in a market free of price fixing.
Kehoe makes what he conceives of as a moral and economic argument against a market-based system for paying college athletes. From the moral perspective, Kehoe contends that “money has already served to encourage a Romanized spectacle with little connection to the presumed goals and values of institutions of higher learning”—and, thus, athletes’ economic rights to earn money should be (a) disdained, and (b) easily trumped by the need for academic institutions to make and then spend more money on other efforts. From an economic perspective, Kehoe argues that America’s university system is far too poor to afford to live by the same economic rules as the rest of us.
Mr. Kehoe’s thesis overlooks the economic origins of “amateur” athletics and misconstrues the nature of athletic-department accounting and nonprofit decision-making, buying into a false history of institutional poverty that does not exist. Allowing economic competition for athletes today will neither destroy (or likely even change) the current system that prevails at most schools throughout the United States. And, to the extent that Kehoe is correct that choosing a life free from compensation is the nobler choice, athletes in a “Team Market” system would also be free to choose the uncompensated life, rather than having the choice made for them.
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Kehoe’s first misstep is to buy into the common error of assuming that athletes only recently have come into the world of commerce after centuries of healthy gymnastics for the pure love of the contest itself. He is correct to point out that the Romans (who conquered the Hellenistic world and thus became the political overlords of the Pan-Hellenic games, including the original Olympics) had no compunction about paying athletes for their success. For example, Gaius Appuleius Diocles, a charioteer in the mid-second century, retired with career earnings that are estimated to have been in the tens of billions.
But professional athletics is older than the Roman Empire. In fact, the tradition of showering athletes with wealth as well as fame can be traced to the noble Athenians. As Brian Cronin notes in this LA Times editorial, Greek athletes were handsomely paid for their Olympic victories:
Cronin continues, “The idea of extolling the virtues of athletes who are not compensated for their performances was not an Ancient Greek idea,” but was actually invented from whole cloth over the course of the nineteenth century by Victorian aristocrats who were intent on keeping sports unsullied by the working class. “Amateurism” then became entrenched in our collective mythos with the establishment of the modern Olympic Games:
The argument that athletic endeavor without remuneration is its own best reward buys implicitly into this classist notion, perpetuated for the explicit purpose of denying the British working class access to sport, and not, as Kehoe suggests, as a means of distinguishing sport from spectacle.
In Kehoe’s worldview the NCAA’s collusive economic system is anchored to the bedrock of Greek virtue filled with “moral values needed to sustain our democracy,” but in reality it is instead tied, rather loosely, to the shaky moorings of British classism: aristocratic, classist propaganda aimed at making a life of rent-collecting leisure superior to living off the sweat of one’s own brow. This myth of an idyllic amateur past has also seeped into our view of college athletics, despite the fact that the first hundred years of college sports (and first fifty of the NCAA) were venal in purpose and lucrative in monetary rewards, with athletes’ pockets overflowing with pecuniary recompense.
The NCAA often distorts this past. In a recent oral argument at the Ninth Circuit, the very first substantive sentence by the NCAA’s attorney, Seth Waxman, stated that the NCAA’s founding purpose was to fix prices, that is, to preserve amateurism. Nonsense. The NCAA formed to prevent death through head injury;11. The NCAA’s own “History” webpage stated as much from roughly June 16, 2010 through August 10, 2012, before being taken down sometime before June 5, 2013, per the Internet Archive Wayback Machine. price fixing was a convenient (albeit unsuccessful) secondary goal tacked on later as an oft-ignored aspiration for the first forty to fifty years of the NCAA’s existence. Indeed, the NCAA only made its first recommendation against the crass practice of paying athletes through scholarships in 1922, and its first outright prohibition came as late as 1948.
The period between the NCAA’s founding in 1906 and its ban on payments to athletes in 1948 saw college football thrive, expanding from 64 to 117 teams. Pay and play came into contact without destroying the universe like commercial matter and anti-matter.
The NCAA only acknowledges its more venal past when convenient. In the O’Bannon case, NCAA President Mark Emmert initially testified, “Traditions and keeping them are very important to universities. These individuals are not professionals. They are representing their universities as part of a university community.” Yet in the recent Ninth Circuit appeal of O’Bannon, the NCAA argued that commerce has always been a part of college sports:
The ahistorical foundations upon which Kehoe builds his economic argument should caution us against his conclusions. But even if the myth of Greek or pre-WWII college “amateurism” were true, it would serve as a poor analogy for the economic questions of college sports.
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College athletes are being paid now, as Kehoe recognizes, through scholarships. But it is hard to accept Kehoe’s assertion that scholarship values already may be as high as $500,000 (almost certainly a gross overestimate) and still maintain that college sports do not already violate the notion of playing for the joy of the game. The economic argument has never been that the current system offers athletes no value, but rather, that in a market-based system, the athletes on FBS football teams and Division I men’s basketball teams will earn all of those existing benefits and more. Not that they are unpaid by these in-kind services, but that they are underpaid because their true market value would include all of those benefits plus a paycheck.
To this Kehoe responds that “money has already served to encourage a Romanized spectacle with little connection to the presumed goals and values of institutions of higher learning.” To this we ask why schools feel the need to collude to achieve this noble goal, unless in reality they know it is a path athletes would not choose for themselves.
If there is something truly morally superior about opting for underpaid effort in lieu of working for market rates, then athletes can only choose nobility if given the option. The question in the amateurism debate is not whether athletes should or should not be paid, but whether colleges should or should not collude to prevent athletes from being paid more. Absent the NCAA’s scholarship limits, what would schools offer college athletes?Why not let schools offer athletes what they please? True Kehoean nobility will shine through among those schools and athletes who, absent collusion, willingly enter into arrangements where no more money is exchanged than is involved in current scholarships.
Surely there is little virtue in pursuing sport without compensation just because a player has no better options. It is the freedom to choose that reveals and instills virtue. A child forced by her parents to eat vegetables may achieve a good outcome, but she did not make a wise choice. If a year of eating vegetables were a means of acquiring a million-dollar salary, society might question the virtue inherent in 18-year olds who spend exactly one year at the salad bar (without any other viable choices) before heading off to earn their keep in a more carnivorous world.
The same holds true for “one and done” players who groom themselves for the NBA. Facing a monolith of 351 Division I schools that have colluded to fix wages through their cap on athletic scholarships, a high-school graduate’s ability to choose among different systems is severely constrained. In O’Bannon, Judge Wilken found the NCAA to have monopoly power over the industry. The choice to play in Europe or in the NBA D-League is not a sufficient substitute to challenge that power. The monopoly power is not natural—it is created through the unnecessary collusion among all 351 Division I schools to agree to a single, identical payment cap. The amateurism of our current system is just naked price fixing half-dressed in a toga costume—no more Greek in spirit than the degree to which our college fraternity system accurately represents Plato’s Academy or the Lyceum of Aristotle.
Moving from history to economics, let’s address the second major myth in Kehoe’s argument: colleges are broke and so, even if athletes could be paid under NCAA rules, few colleges would be able to pay them.
Kehoe’s sole source for this claim of industry-wide penury is the NCAA itself, an organization whose express purpose is, inter alia, to fix prices and then extol the virtues of that price fix. The lack of critical judgment he brings to this assertion is unfortunate, because again he buys into the myth told by those who have money that letting others earn it through economic competition is wrong. But that is how the best propaganda works. It becomes part of the fabric of a collectively known “truth” to the point that the message is almost immune to factual refutation. Nonetheless, dozens of economic scholars have published arguments that dispel the illusion of nationwide athletic department poverty. For example, as Brian Goff wrote in “Effects of University Athletics on the University: A Review and Extension of Empirical Assessment,” published in the Journal of Sport Management in 2000, while the NCAA typically argues that only fifteen to 25 FBS schools generate positive surpluses from sports, economic research shows that only ten percent of FBS schools lose money on their athletics departments. How many other industries can boast that ninety percent of market participants make a profit?
Economics offers the simple yet compelling concept of revealed preference: the idea that if you see an economic actor making a choice between two viable options, his/her choice reveals that the option chosen was preferable to the option not chosen. And so, when schools choose to join Division I from lesser (and less expensive) divisions, or choose to join FBS (the old Division I-A) football, they do so because they see the net value of such upgrades to their programs as preferable to keeping the cost of athletics low. Since 1985, Division I has grown by 27 percent. Since 1985, revenue across FBS football has grown at a steady eight percent a year, through boom and bust. Twice the NCAA has actually had to impose a moratorium on new entry, in a futile effort to stave off demand to get into Division I.
That is not what an industry looks like when it is perpetually teetering on the brink of financial collapse. College football is expanding from a Saturday-only sport to a Tuesday, Thursday, Friday and Saturday sport. Since the NCAA lifted the Division I moratorium in 2012, Appalachian State, Charlotte, Georgia Southern, Georgia State, Old Dominion, South Alabama, Texas State, UMass and UTSA have all entered FBS football.22. The sole school to exit FBS since 1996 is UAB. Many have questioned the economics of that decision, including the authors of this essay. (See https://sports.vice.com/article/screw-the-math-uab-can-afford-football-so-why-is-it-choosing-otherwise) But even if that represents a valid economic data point, the entry in the same year of Charlotte has meant the net is unchanged at 128 schools.
Why do so many schools, even rich ones like the University of Michigan, seem to make so little money? Because they spend it. Confusing the profits of an enterprise with the use of those profits is a basic economic error. People do not say a Wall Street banker failed to profit from his work simply because his yacht and alimony payments consumed his post-tax earnings. Spending college football revenues on other sports is a very different economic concept than actual expenses needed to generate those revenues. What is unusual is not that most schools spend every dollar they receive but that some schools make so much money that they cannot spend it down to zero.
Many people, Kehoe included, confuse the meaning of NCAA statistics. Rather than showing that only a few schools make money, these numbers reveal that some institutions are so flush that they ran out of plausible sports-related causes to spend all their profits on, down to zero. The claim that most schools are broke simply does not stand up to factual scrutiny; college sports are more valuable and in more demand than ever before.
Then why do schools create the false impression that bankruptcy looms? Sports economists Brian Goff and Dennis Wilson summed up decades of academic research with a paragraph analysis that cuts to the heart of the issue:
Whether Kehoe wrote in ignorance of these findings or knowingly dismissed them without comment is unknown. But even if these peer-reviewed scholarly papers are wrong, and colleges are (somehow) going bankrupt, that is still not grounds for collusion. The market outcome will work even if Kehoe is right.
The market rate for an athlete at a school that is broke and sees no chance to increase profits from acquiring his services is basically zero. If colleges truly cannot pony up the funds, no one is forcing them to. No model of free market conduct would predict extravagant pay in the face of industry-wide poverty.
For example, consider coaching pay, which has stagnated over the last decade because colleges are broke.
Oh, wait… No, that has not happened at all. In fact, FBS coaching pay has more or less doubled in less than a decade, even while the entire country suffered through stagnating wages due to a massive recession and slow recovery. The four coaches in the 2015 NCAA Men’s Final Four together earned more than $20.5 million this year. Pity the poor author of this 1922 letter to the editor who awaited “the day when all coaching of college football teams shall be voluntary, carried on for love and not for hire” because to “place amateur athletics under the control of paid and therefore professional coaches is to weaken the amateur spirit.”
Kehoe says that schools are effectively too poor to pay athletes. If so, then simply offering them the option should not change pay level any more than giving a factory worker the option to buy a golf course in Dubai changes real estate prices in the Emirates. Fear of a spending frenzy only makes sense if the schools also fear their claims of poverty are false.
Even if colleges start paying more than the current scholarships for athletes, there is a natural line where, once schools truly cannot afford it, the Romanized debauchery grinds to a halt. What is the Kehoean economic model that postulates that like dominoes, school after school will fall for overpaying for athletes that generate no positive return, especially when these schools also claim they have no interest in professionalizing their talent pool, or in operating in such a system?
Kehoe, citing the Chronicle of Higher Education, argues:
Why, exactly, would any of that have to change? The world could still have a tournament between powerhouse programs and Cinderellas, and could still involve a distribution of money across schools.
It is a straw-man argument (and not a very good one) that says that if Georgetown University (NCAA Division I in Washington, D.C.) chooses to spend a bit more cash on athletes and a bit less on coaches, administrators, construction firms, etc., then Georgetown College (NAIA Division I, in Campbellsville, Kentucky) has to do the same. It is equally silly to presume that Georgetown University, competing with the University of Kentucky for tip-top talent, will force Georgetown College to cancel its sports programs because the sort of athletes the latter normally gets will somehow cease to exist, or be unwilling to attend for just a scholarship, or perhaps for no compensation at all, just for the love of the game and the love of learning. If there truly are only twenty schools with money, the rest of the college sports ecosystem can soldier on and survive as is.
If most schools really cannot afford to pay their athletes, the perils of market compensation cannot seep too deep into the sports pecking order. A positive payment equilibrium certainly will not pervade down to Mr. Kehoe’s DIII school—Kehoe and all future Kehoes are safe from cash-induced perdition. Regardless of how well compensated FBS football or Division I men’s and women’s basketball athletes become in a world of greater choice, most programs will retain Kehoe’s supposed nobler form of “amateurism” by necessity. Do not forget that all of these schools are unlikely to cancel recreational sports and intramurals, which actually provide the entire campus with the chance to seek mens sana in corpore sano free from the siren’s call of a salary.
Instead, there might be a dozen, ten dozen, or twenty dozen schools that would offer more than current scholarship limits to a hundred or so elite athletes, leaving the rest untouched. Why is that bad?
It’s not. Say six-dozen schools competed for football talent in a free market, while the remainder of the system kept the old model. Those latter schools could still get slightly less sought-after talent in exchange for the old level of compensation: simple tuition remission and room and board (or a monthly check to cover the latter). In such a world, every elite athlete would be given the opportunity to choose Kehoe’s mytho-Greco-British refined nobility or Schwarz’s debased Romano-American commercialism. For one thing, it would become clear whether the socio-economics of elite male athletes engender more serious concern for nourishing the soul or for supplementing a family income (often so low that the athlete also qualifies for a Pell Grant).
Perhaps the Victorians who barred anyone ever employed as “a mechanic, artisan or labourer” from amateur sports were right: the working class is too sullied and ignoble to appreciate the true joy that is amateurism. But if so, let athletes and their families reveal their unsuitability for the aristocracy through their own choices, instead of forcing them into an amateur club whose nineteenth-century proponents would never have let them join in the first place due to their class and race.
Economics is a theoretical field, but also one that cherishes the scientific method—hypotheses must be tested to move beyond speculation. Creating a freer system where each conference can determine the rigor of its commitment to “amateurism” versus the vigor with which it competes for talent would be an opportunity for Kehoeism and Schwarzism to hold forth in the rough-and-tumble gymnasium that is the agora. Many supporters of collegiate athletics, or at the very least many economists, would gladly agree to a five-year test to see what happens. Prediction: many of the 351 Division I schools would stray from their vows of economic chastity, absent the cartel agreement that punishes them severely for doing so. But if the system cannot stand without squelching out the alternative, how noble is it really? If no one will choose the path of righteousness without being forced to, how righteous a path is it?
If you liked this essay, you’ll love reading The Point in print.