What have you always wondered about the economy? Tell Us

Athletes take money to make market corrections

Marketplace Staff Nov 19, 2010
HTML EMBED:
COPY

Athletes take money to make market corrections

Marketplace Staff Nov 19, 2010
HTML EMBED:
COPY

TEXT OF COMMENTARY

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.

News and information you need, from a source you trust.

In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.

This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.

Stand up for independent news—become a Marketplace Investor today with a donation in any amount.