Athletes take money to make market corrections

Quarterback Cam Newton of Auburn University.


Kai Ryssdal: The rest of the college football season pretty much breaks down like this: If Oregon and Auburn can stay undefeated -- ranked number one and two in the country -- they'll meet for the national championship in January. If that happens, you're going to be hearing the name Cam Newton a whole lot more. He's the quarterback at Auburn. His name's being tossed around as a possible Heisman trophy winner, for one thing. But the NCAA, as it happens, is investigating exactly how Newton came to be playing at Auburn in the first place. There are some questions about whether his father asked for cold hard cash before his son signed on.

The general state of play in college athletics has commentator Jon Wertheim thinking.

Jon Wertheim: Once upon a time, the labor market in big-time college sports worked relatively well. Athletes were amateurs, and therefore, couldn't be paid for their services, but they received a full scholarship. And in return, the school used their services to fill up the bleachers and make some extra revenue if sports teams did well. Fair enough.

Yet today, schools have turned their athletic departments into mini-industrial complexes -- flush with licensing deals, conference television networks and BCS and Final Four appearances that generate tens of millions in revenue. And athletes in those big money sports are finding that an undergraduate degree is worth less than it was a generation ago. True, they have no student loans, and countless other kids and families are rightfully envious of this four-year free ride. Still, it's hard to dispute that the labor market in college sports hasn't become distorted. Star athletes are dramatically underpaid relative to the value they create.

It's a fundamental of economics: When industries are regulated and markets don't work freely, there will be corrections. We see this with the thriving black market in Communist countries; we see this with tax loopholes. And college sports are subject to this principle as well. Tell athletes who generate millions for their school that their compensation must be capped at the value of their scholarship, there will be attempts to correct this inefficiency. So you see stories of athletes and their families trying to get more of middlemen trying to grease the skids of alumni -- and sometimes even the schools themselves -- meeting the asking price.

Distasteful as it may seem to some of us, athletes seeking to correct a distorted labor market are simply acting rationally. The NCAA will investigate each affair and express shock and outrage at these unseemly incidents, but the economics professors at the NCAA's member schools? They're surely less surprised, because they know better.

Ryssdal: Jon Wertheim is a senior writer at Sports Illustrated. Send us your comments, sporting or not.

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If student athletes are making so much money for schools that they should be compensated, then why are we pretending they are students rather than employees of the school? Hire them as staff if they should be paid, and give them the same educational opportunities that other college and university employees receive, but only if the classes don't conflict with practice and game schedules.

While I completely disagree with Mr. Wertheimer's idea of what a "market correction" is, I understand what he is saying, and maybe college athletes don't get comparable benefits in the form of a scholarship compared to the revenues for their school. But the same could be said of professional athletes, who get a fraction of what the franchise owners make. But, in professional sports, it is okay to offer someone a lot of money, and if that's what a student athlete wants, they need to go pro, not accept bribes from school recruiters.

The combination of public universities in a free market of athlete labor seems difficult to comprehend. Surely there is nothing immoral in profiting from your skills - but if it is funded through public school it may be. The fundamental problem is the mixing of the two. In most European countries there are no university sports teams. The soccer teams have to fund their talent pipeline themselves. Should public universities fund sports talent the same way as say science? While contribution to society of science is easy to understand, it is harder in regards to sports, or maybe the arts. Good news is that we the consumers have the choice - we may simply not watch it anymore if we feel the funding mechanisms for sports talent are immoral.

First of all, athletes who get full-ride scholarships (those in sports where money is changing hands like football) get a six-figure education for free. All they need to do is take advantage of the opportunity to learn and improve themselves. More importantly, this just shows how tremendously out of whack our priorities are when 26,000 children die each day around the world of preventable diseases and nearly half live on less than $2 a day. Forget market economics - this is about the sustainability of our 'give me more and give it to me now' culture.

Unlike being born into a society with a black market, or a loophole-laden tax system, NCAA student-athletes are there of their own free will. If they break the (well-established) rules, it's not market inefficiencies that are to blame: it's dishonorable, greedy contract-breakers, overly eager to cash in on the professional lifestyle that awaits them, a short 4-5 years away.

Sure it seems unfair. But many of these athletes are essentially 'majoring' in their sport. They get to hone their skills and present them to potential employers.

How many other students get that sort of chance?

Maybe a fair deal, would be to offer anyone who doesn't get a pro contract a free ride to return to school (at any time) and get a real academic degree.

Just a thought.

I still think athletes get an incredible value from attending college. How many are prepared to leap straight into professional sports from high school? The vast majority of college players get invaluable experience playing against top caliber peers until they are ready to join the pros. Maybe colleges should start charging players for this experience and access to top-tier coaching and facilities.

As a former student athlete who studied economics, I found this story interesting. However, the main critique I would pose is that analysis assumes student athletes operate in a labor market. I think there could be a healthy debate as to the validity of that assumption.

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