Three Simple Requests for Pay-For-Play Advocates

Today Freakonomics posted a pay-for-play plan for college basketball players. As one would expect from economists, it boiled down to “no rules, let the free market decide”. Considering that we may be 5–10 years and a coin flip away from this no being a thought exercise and becoming a legally mandated negotiation, I have three simple requests for anyone trying to come up with an idea for how to pay college athletes.

1. Come up with something more than “the free market”

In no major American professional sports league are players paid their free market value. Salary caps, luxury taxes, maximum and minimum contracts, roster limits, arbitration, rookie contracts, entry drafts, age limits, and free agency restrictions all skew compensation away from free market value. The same goes for most developmental and minor leagues as well.

Colleges still have to agree to be part of whatever league(s) or association(s) that would run professional college sports. Major college powers cannot agree to let each other decide what to mail to prospects, how many texts or phone calls coaches can make, or who can recruit. They are not going to agree to let each other decide how much each player can be paid.

There will be restrictions, there will be limits, and there will be objections and challenges those limits. A good plan should explain why colleges should agree to those limits. Not to mention why players will agree or why colleges would win the negotiation.

2. Start with football

Basketball is tempting as a starting point because the numbers are easier to work with. There are only 13 scholarship players, 15–18 total. For a long time there was also a big pot of additional money (NCAA TV revenue) to work with, although the transformation from BCS to playoff in football has closed that gap.

But any pay-for-play plan has to start with football. Football is where most schools bring in the bulk of the revenue and spend the bulk of the money. True, a few schools would start with basketball then work on paying football players. But aside from the blue bloods (UCLA, Kansas, Indiana, Kentucky, Duke, North Carolina) there are not many FBS schools that would.

So any pay-for-play plan that includes universities paying athletes has to start with a system for football, then see what is left over for basketball. If the answer is nothing or basketball cannot be run profitably, whether schools still sponsor the sport has to be considered.

3. Explain where the money comes from

Within a college sports team, the coaching salaries will often be one of the biggest expenses. Naturally that is where people have gone to find money to pay athletes. And if athletes had to be paid and there was less total money available for everything else, coaching salaries might go down.

But it is just as likely that coaching salaries will stay high, even increase. If everyone is paying athletes roughly the same amount, then the coach will still be a major differentiator between programs. As long as athletes have to be recruited to college and are not assigned or drafted, the best coaches are still worth a lot of money to universities.

At the same time, athletic departments run a bunch of programs that are simply costs. Some have bloated administrative staffs. It is not a safe assumption that universities will cut pay to the coaches of programs that bring in money but keep everything else. Lower coaching salaries need to be explained, as do which staff/departments or which sports get cut.

One Response to “Three Simple Requests for Pay-For-Play Advocates”

  1. The_Truth_Is_Out_There

    John, sorry, but in my opinion, this is a very poor attempt to address some of the complexities of paying athletes. Most of your purported concerns are not really that relevant, as the whole point behind paying athletes is to allow the free market – or pseudo free market – to work things out. That’s the whole point of free markets – it’s the most efficient system in allocating resources that we know of. In fact, these free market principles are at play in college sports now – just the athletes aren’t really benefitting from it – only schools, coaches and administrators (including the NCAA).

    Before addressing your questions, let’s take a look at what the NCAA currently has in place and why this doesn’t really work. First, a college athelete is only entitled to a scholarship. No one can argue that this is fair from any perspective. Why? Because not everyone attributes the same value to a college education as one another. It’s funny how many times I can have discussion with an engineer who thinks the athletes are getting a great deal. But we’ve moved a long ways from the barter system that this basically represents. In other words, this would be like someone employing you and then saying they’re going to pay you with groceries. Sure, these might be nice, but you might not like the groceries your employer picks out for you, and you might not need as many groceries if you’re not married and don’t have any kids. So, your groceries would start to spoil. So, one guy that has a bunch of kids (like the engineer), might think you’re getting a great deal but you don’t really want all these groceries but you’re employer persists in paying you just groceries. Similarly, a gifted athlete may not be that interested in excelling in an engineering class because he has aspirations of playing in the NFL or NBA – not figuring out how to build the next Space Shuttle. Thus, the gifted athlete doesn’t attribute the same value as the 5’7” scrawny engineering student – in other words, that engineering student has no hope of becoming a starting center for the Lakers, so he attributes a larger value to getting his degree and working as an engineer.

    Also, because the NCAA requires that these student athletes only get a scholarships, this necessitates a bunch of rule making. And where there are a bunch of rules that are subject to varying interpretation and enforcement, this can lead to corruption. As I’ve noted many times, this is the Paul Dee model of competition. He abused his authority on the COI, while hammering other schools – all the while under his leadership, his school was probably the most prolific and abusive in terms of cheating. In other words, all of this rule making leads to corruption – particularly where there is big money. Maybe we should have the schools not get paid with dollars, but instead, they get to run another free advertisement on the networks – sort of like telling athletes that they can only have a scholarship. I bet the schools wouldn’t go for this. So the schools and administrators are eager to take the money, but are equally eager to deny sharing any of those proceeds with the actual athletes. This is fundamentally wrong and is what has led to corruption in college sports. The Paul Dee’s of the world will look to abuse the rules in favor of their school.

    But now, let’s turn to your questions and address why these really aren’t issues:

    1. Something more than Free Market – This is already in place. Many of the rules (e.g., 85 scholarship athletes on a team and 25 initial scholarships) would remain in place. Now, the only issue is to spread some of the dollars to the athletes. Although salary caps are anti-free market, even having some salary cap in place would be better than not paying these athletes at all. So, you could have some sort of salary cap of say $2 million per year for the full football team, and then leave it to the football team to allocate it as they see fit. They might have to pony up $500K for an Andrew Luck, and so would presumably get more less quality athletes with the remaining $500K for the other 84 players. This really isn’t our issue, but rather the school’s. Stanford can figure out how much they’re willing to pay Luck and what that means to the rest of the team.

    2. Start with Football – I’ve already addressed this above. The team can have an overall cap of some sort and then each team can allocate the money how they see fit. Also, we would probably need rules to permit free agency after a year or two to allow an undervalued kid shop his skills to another school.

    3. Where does the Money come from? Who cares. This is really up to the schools. They can determine to not compete in terms of money, and so those schools won’t attract those athletes that are more interested in the payoff. This would be similar to the Ivy Leagues now, who don’t offer athletic scholarships. The money can come from (i) cutting coaches’ salaries; (ii) raising tuition; (iii) SHARING of the revenues that the sports get for the schools; and (iv) alumni, from among other places. Schools would be free to cut non-profitable sports if they didn’t want them. Why should Andrew Luck be basically subsidizing the men’s fencing team?

    But all that aside, the real solution isn’t just paying athletes. The real solution would probably be best served by making professional sports offer true farm leagues, like in baseball. The problem, for example in football, is that the NFL bars kids from playing for three years after graduating high school. So, these kids aren’t allowed to play anywhere, other than in college. And the NFL benefits from colletes, as the NCAA is basically the NFL’s farm league – almost all pros come from the college ranks. Instead, the NFL should have to have a farm system in place, where kids can go play out of high school instead of going to college. Here, the kids would get paid, like in farm league baseball. If, however, the kid opts to go to college, then he can opt into the scholarship only system. This sort of system would better allocate resources – those kids who want to get paid will opt for the farm league, and those who want to get an education will opt for college ball. Undoubtedly, the level of play in college would come down, and it likely would not be as lucrative to colleges as it currently is, but this only seems fair. If the colleges are truly acting as educators, then they shouldn’t be trying to profit off the backs of free labor. Almost certainly, the coaches’ salaries and administrators’ salaries would all come down. Why? If the pie is smaller, then there’s less incentive for schools to pay multiple million contracts to coaches (as in Indiana’s head basketball coach). Clearly colleges are currently willingly participating in the “free market” of college sports when they’re coughing up multiple million dollar contracts – this isn’t some benevolent act for the benefit of coaches. So, it seems odd to argue that the actual labor – student athletes – shouldn’t have a similar opportunity. All this money with all of these rules just leads to lots of corruption. It brings out the Paul Dees, which the sports definitely don’t need.

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