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The Case for Paying College Athletes

The Supreme Court has decided to hear a case challenging the legality of NCAA rules restricting compensation for college athletes. Legal issues aside, the policy case for abolishing these rules is strong.

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Earlier today, the Supreme Court decided to hear NCAA v. Alston, a case challenging the legality of NCAA rules barring most compensation for college athletes:

The Supreme Court will hear a landmark antitrust case against the NCAA that could upend the business model for college sports by allowing colleges to compensate student athletes.

The high court said Wednesday that it will hear appeals filed by the NCAA and one of its member conferences over a May decision that found the group's limits on player compensation violate antitrust law…

A group of current and former players challenged the NCAA rules that prohibit athletes from accepting money or other forms of compensation. Following a 2019 trial, a federal judge found the restrictions anti-competitive and said the NCAA must allow colleges to offer student athletes education-related benefits, such as graduate school scholarships, study abroad opportunities or computers for educational use.

The U.S. Court of Appeals for the 9th Circuit affirmed that decision earlier this year.

Economists have long argued that the NCAA rules barring compensation for athletes are essentially a thinly veiled cartel, complete with severe punishment for defecting participants, all the way up to the "death penalty." The main difference with other cartels is that the NCAA system has better PR, and has thereby managed to persuade many people that they are actually serving the public interest by promoting tradition and protecting the integrity of "student athletes." That said, I don't know enough about antitrust law to know who should prevail on the legal issues in the case. I will leave those questions to others with greater relevant expertise.

Legal issues aside, however, there is a strong policy rationale for ending restrictions on student athletes compensation. I summarized it back in 2010 and 2011, building on earlier pieces by economists David Henderson and Nobel Prize winner Gary Becker. Most of what they and I said remains relevant today. As Henderson put it:

The NCAA runs a tightly controlled cartel whose "profits" go to colleges and coaches. It's not simply a private cartel but one backed by government force. Armen Alchian and William Allen, in their 1964 textbook, University Economics, were the first people I know to point this out. They pointed out that those colleges that decided to pay athletes would find their academic accreditation at risk. So why don't new schools sense a profit to made and then enter and compete players away by paying them? Alchian and Allen answer: "[N]o new school could get subsidies from the state or major philanthropic foundations without recognition by the present accreditation group." They add, "We have finally arrived at the source of the value of membership in the NCAA and related organizations: subsidized education."

One could argue, "Well, the student athletes will cash in on their skills later when they go on to become professional athletes." Not so, as the NCAA admits in its advertising [noting that most players don't go on to professional careers].

Becker added:

The toughest competition for basketball and football players occurs at the Division I level. These sports have both large attendances at games-sometimes, more than 100,000 persons attend college football games- and widespread television coverage…. Absent the rules enforced by the NCAA, the competition for players would stiffen, especially for the big stars…

To avoid that outcome, the NCAA sharply limits the number of athletic scholarships, and even more importantly, limits the size of the scholarships that schools can offer the best players….

It is impossible for an outsider to look at these rules without concluding that their main aim is to make the NCAA an effective cartel that severely constrains competition among schools for players. The NCAA defends these rules by claiming that their main purpose is to prevent exploitation of student-athletes, to provide a more equitable system of recruitment that enables many colleges to maintain football and basketball programs and actively search for athletes, and to insure that the athletes become students as well as athletes.

Unfortunately for the NCAA, the facts are blatantly inconsistent with these defenses….

A large fraction of the Division I players in basketball and football, the two big money sports, are recruited from poor families; many of them are African-Americans from inner cities and rural areas. Every restriction on the size of scholarships that can be given to athletes in these sports usually takes money away from poor athletes and their families, and in effect transfers these resources to richer students in the form of lower tuition and cheaper tickets for games…

 

A few of my own thoughts from those earlier posts:

[T]he NCAA cartel is not just a private arrangement. It is propped up by the federal government, which uses the threat of denying federal funding to force schools to comply with cartel rules. If this federal intervention were lifted, the cartel might well fall apart…

The traditional NCAA response to such criticism is that the players are "scholar-athletes" who get compensated with education. This is probably true for many college athletes in lesser-known sports. In Division I football and basketball however, the players are essentially full-time professionals. Most of them have little time to spend on their studies, and many have academic credentials far weaker than those of the regular students at their schools. Few people can do well academically if placed at an institution where their credentials are far below the norm and they had to work at a demanding full-time job at the same time.

I don't believe that student athletes are morally entitled to be paid for playing. If no one wants to pay to watch them, I have no objection. The reality, however, is that there is a high demand for their services which is being artificially suppressed by government coercion. Indeed, some schools and boosters pay players under the table despite the threat of severe NCAA sanctions if they get caught.

Another particularly galling element of the NCAA cartel system is the way in which it is surrounded by a veneer of righteousness. The NCAA has managed to persuade the media and most of the public that the real bad guys are actually those schools that try to undermine the cartel and pay their players at something more closely resembling market rates. Few people seem to care that most of the athletes who get shortchanged are poor minorities who are being deprived of a key opportunity to create a nest egg for their future. As [David] Henderson points out, only a small percentage of them go on to make big bucks in the pros.

There is a conceptually simple, though politically difficult, solution to this problem. The government should withdraw its support for the NCAA cartel. Universities will gradually stop pretending that Division I football and basketball players are primarily students, and start treating them as the employees they actually are. The players will get paid for their work, and they and the universities won't have to waste time and money forcing players to attend bogus classes in order to keep up appearances. Those who have the desire and academic credentials to do real coursework should of course be allowed to do so….

It's also worth noting that the same universities who loudly condemn the very thought of paying players often pay huge salaries to coaches and athletic administrators. I don't begrudge these people their riches. But it seems strange to claim that paying players any salary at all will somehow sully the academic ethos, while simultaneously contending that there's nothing wrong with paying big bucks to Mike Krzyzewski or Jerry Tarkanian.

If the Supreme Court rules against the NCAA, perhaps things will move in the direction I advocated. It is also possible that some universities will reconsider whether it is actually desirable for academic institutions to be so heavily involved in what are essentially professional sports.

UPDATE: It's perhaps worth noting that this is the second time in three years that the NCAA will have a major case before the Supreme Court. In 2018, the NCAA (along with the Trump administration and various professional sports leagues) was on the losing side in Murphy v. NCAA, a major victory for constitutional federalism and for sanctuary cities.

NEXT: N.Y. Aims to Ban "Symbols of Hate" Sold by Private Vendors at State (or State-Funded) Fairgrounds

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22 responses to “The Case for Paying College Athletes

  1. If colleges can pay players maybe Michigan and Texas can have good football teams again?!?

  2. It should be noted that while schools have righteously defended their grossly iniquitous treatment of their “student athletes” (a very clever PR coinage), especially those most susceptible to serious injuries and long-term disabilities (football!), and pulling in enough to pay some coaches a few million in salaries (then there are the other money-making opportunities on the side), many schools are eliminating many of their non-revenue generating sorts at the same time these days (crew, wrestling, gymnastics, track and field, golf, skiing, tennis, squash, fencing, etc.) This is one instance in which woman may be better protected than their male counterparts since Title 9 dictates that women’s sports will suffer less so long as there are huge football and basketball squads.

    And how about the “C” word, (C-O-R-R-U-P-T-I-O-N), which is no stranger to colleges’ “amateur” sports arrangements. Plus, you’d be hard pressed to show that the money sports contribute to schools’ educational missions.

    PAY THE ATHLETES, DAMN IT!

  3. There could be a market for a new, real college football league, only populated by real students who don’t get paid. Then these paid, fake students and the entire league will collapse from idiocy.

    Who will be proud of the paid league? Who will be proud of the true student league?

    Enjoy your lie league, if you think you will favor the former.

    1. I think you will see a split. Football and basketball factories will pay their athletes. A lot of more minor schools will go to a nonprofit amateur model.

  4. I think this will be a case of ‘be careful what you ask for because you just might get it.’

    Paying athletes WILL change the college sports landscape especially if there isn’t some type of “salary cap” like we see in professional sports.

    And just a reminder, the NCAA is a for-profit corporation (not a govt entity) and participation with the NCAA is voluntary.

    But there are some benefits, e.g. major networks (NBC, CBS, etc.), like to deal with just the NCAA for broadcast rights instead of 100s of colleges.

    NCAA also sets standards (recruitment, rules, etc.), across the members colleges, again instead of having hundreds of different standards.

    If the students do get paid, things will change and it won’t be like today just with payments.

    Everyone (colleges, NCAA, broadcasters, alumni, athletes [and prospective athletes], agents, states), etc. will want a piece of the action.

    1. “But there are some benefits, e.g. major networks (NBC, CBS, etc.), like to deal with just the NCAA for broadcast rights instead of 100s of colleges.”

      NBC paid for exclusive broadcast rights to air Notre Dame football games. In most cases, broadcasters buy rights from the various conferences rather than the NCAA or the individual schools. I’ll hazard a guess that no broadcaster in Alabama has any interest in airing games from the Pac-12, they want games involving Alabama or Auburn, and will settle for SEC games.
      What NCAA DOES do is set the benchmarks so that games are between different schools have comparable resources available for athletics. UCLA vs another PAC-12 team is a more-or-less fair fight, but UCLA vs. University of Nevada Reno is a mismatch.
      There are some aspects where the NCAA acts like a monopolist, and some others where the NCAA is beneficiary to natural network effects (factors beyond the NCAA’s control that tend to limit competition.)
      For example, note that NCAA has some competition in scheduling college football games. There is not a real post-season tournament of college football to select a national champion. There are a series of playoff games that selects a champion from a pool of some teams, but there’s also a substantial number of teams that lack such a playoff tournament and instead feed a series of exhibition games which sometimes pit the best teams against each other at the end of the football season, and frequently do not. (There are a number of teams who are undefeated across 10 games this season who will not have a chance to play for a national championship as presently constructed, while a 5-win Ohio State University team may get an opportunity to do so, and Clemson will likely get a shot at repeating as champion if they can get to the end of the season with the one loss they sustained when many of their top players were ineligible to play because of COVID.)

    2. Yes, because rights are subservient to perceived and biased benefits and whoever wants them.

    3. And just a reminder, the NCAA is a for-profit corporation (not a govt entity) and participation with the NCAA is voluntary.

      The NCAA is a 501(c)(3).

    4. “Paying athletes WILL change the college sports landscape especially if there isn’t some type of “salary cap” like we see in professional sports.”

      Which is not in and of itself good justification for not paying college athletes in the money making sports.

    5. Paying athletes WILL change the college sports landscape especially if there isn’t some type of “salary cap” like we see in professional sports.

      It has been changed many times in the past- and always in the direction of the schools and NCAA and television networks making even more money from the slave labor.

      I would not have any problem with truly amateur college sports- i.e., all games on Saturday at 1:30 p.m. local time, small stadiums, no large endorsement contracts or television contracts, strict grade and scholarship requirements to play. And in that environment, if the NCAA argued “let’s keep it amateur”, I’d be sympathetic.

      But the current system is professional sports, except the people actually responsible for making the money work as slaves and all the money goes to undeserving thieves.

  5. “The Supreme Court will hear a landmark antitrust case against the NCAA that could upend the business model for college sports by allowing colleges to compensate student athletes.”

    Strictly speaking, the NCAA doesn’t possess the power to prohibit colleges from paying athletes. What it does have (and the power it actually uses) is the power to prevent its member schools from scheduling sanctioned athletic events against teams with paid players, and counting the wins (or losses) towards postseason competition. So if, say, UCLA hires some strong new prospects to play basketball for them (Mr. James and Mr. Davis) , the Oregon schools and the Washington schools can drop UCLA from their schedule (or not, as they choose) and it won’t affect the eventual selection of the PAC-11 champion and UCLA won’t be entered into the NCAA championship tournament when they say “look, we had 20 wins, if you count our wins over the Mexican national team and the twice that we beat the Clippers.” They can go play in the NIT.

  6. Somehow, no one discusses the obvious fact that colleges are acting like the “farm teams” do for baseball.
    They are doing this like a shell game with a bunch of tax dollars and smoke and mirrors “classes” to keep the semi-pro players “eligible” for “scholarships” that look a lot like paychecks.
    How about just requiring that the pro teams fully fund the college level programs? Or best case, prohibit college level sports that have a professional level?

    1. How about just butting the government out of it altogether? How about just leave it to the collages and atheletes/students? The solution to broken laws is not more broken laws.

  7. Much denial of reality, and “constructive” doctrines in the law. The amateur status is one. If a person spends 60 hours a week on an activity, that is his profession, not an educational extra-curricular activity.

    1. Cool. I’m a professional videogame player.

  8. Private schools which don’t accept government funds should be able to do what they want. State and federal taxpayers should demand that tax-funded schools stick to a clear academic mission with fewer distractions. Staff and faculty make more and sometimes much more than the Secretary of State and Chairman of the Joint Chiefs, while pretending to care about student debt seems like a much more serious concern than scholarship recipients.

    1. In several states, the highest-paid government employee is the football coach at the state university. Schools pay it because their football program drives profits that fund the rest of the athletic programs, and the athletic programs keep the schools in the news in ways none of their research operations do.

  9. I tend to think that federal interstate commerce law is and should be limited in its application to boncommercial businesses, and hence should take the non-commercial nature of universities into account. For this reason, I don’t think that the awarding of scholarships, or other activities of non-profit universities in the fulfillment of their core educational mission, should be treated as commercial acts no different from hiring employees by a commercial business.

    That said, I think that whether something is commercial or non-commercial for constitutional purposes should be subject to a functional test, not strictly a formal one. And I think that the way the NCAA runs athletics is functionally commercial by any reasonable definition.

    1. That is, universities run their athletic programs, at least their highly visible, televised ones, not for educational purposes, but primarily as a means of making money.

  10. Please. There’s little justification in not letting these college pros go full pro, like many in the already professional SEC Football League have. In fact, the NCAA (if they even continue to exist) should start a professional college league with only some members of the current power 5 conferences (why bother with the weakling also-rans?).

    Start with Alabama, Michigan, Nebraska, Notre Dame, Ohio State, Oklahoma, Texas, and USC—the eight schools that started and most consistently continue the arms race in facilities, head coach/coordinator salaries, and sleazy recruiting practices that were the primary initial contributors to the current state of affairs.

    Then, to fill out the rest of College Football League, work on down the dirty schools list (Oregon, Baylor, Penn State, Clemson, Florida State…Liberty? Nominate your school!) until you reach around 32 teams, divide into divisions, add playoffs (where the real money is), and there you go!

    The NFL could use the competition. And same model would work for basketball. The NBA is already moving into creating its own professional developmental system but, if it made sense, they might want to look a similar college licensing approach.

    Existing team names/goodwill are valuable intellectual property and there’s no reason not to monetize them. Nearly all universities would also love to abandon the headaches of sponsoring professional sports, offload facilities and salaries to the TV networks, and just get the licensing money.

    Hey, it’s a Win-Win-Win!

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