Sports and economic systems

There has been increased attention paid to the issues of economic justice and college sports this Fall, spurred in part by the publication of an essay in the Atlantic by Taylor Branch, excerpted from his book The Cartel. I am a big sports fan and have written a bit about the role and tradeoffs of big time college sports in Universities, and made a proposal for how some college athletes could be paid that emanated from discussions with Harold Pollack.

One big picture question has always fascinated me, and I am wondering if there is scholarship or reader thoughts about this question:

  • Why does the USA have more economic control in our professional sports of football, basketball and baseball (free agency, salary caps, hard constraints to entry) than Europe has in its top sport of Soccer?

This seems ironic if you go with the assumption that the USA has a more market based economy than does Europe. While this insight is fairly obvious and therefore maybe not novel, it fascinates me that in a nation that values markets, we have so much economic control in our professional sports. And in Europe which has more governmental economic intervention, they have an essentially unfettered market in their top sport of Soccer. If I had a Billion dollars to spend, I could buy a lower flight or struggling top flight English Soccer club and could buy my way to star players and presumably improved results in a quite straightforward manner (the limiting factor would be how much money I had, and it would take some time). In the U.S., it would be very hard to buy a team, and even if I managed to do so, I would face many barriers to spending my way to the top.

Why is this the case? Has there been serious scholarship (economic, sociological, historical) that explains the seeming disconnect between the overall economy and the economics of sports in the USA and Europe? Is the existence of big time college sports in the USA somehow part of the answer?

DT

Should college athletes be paid, ctd?

I think the short answer is that some of them should be paid.

Harold Pollack and I discussed whether college athletes should be paid on bloggingheads last week. Harold’s position is that asking whether paying athletes will harm college sports is the wrong question and I find his argument convincing. Talking with Harold over the past few weeks helped me to realize that I approached the issue as a fan who thinks there are benefits (and costs) that are broadly distributed via college sports, but there are issues of economic justice in play. This lead me to suggest the following for football and men’s basketball, the sports in which questions about economic justice are largest:

  • Scholarships should cover the full cost of attendance
  • All players in these two sports should get a modest “spending money” stipend
  • Star players should receive a share of the money earned from the sale of their likeness and/or jersey

An analysis in a story by Ryan McGee in the latest issue of ESPN The Magazine generally supports my idea, I think. ESPN worked with Jeff Phillips and and Tyler Williams of MIT’s Sloan Entertainment, Media and Sports Club to estimate the fair market salary that 10 University Florida student athletes would receive if they were able to openly and freely shop their talents. A figure adapted from the story that I created is below

The five football players analyzed would receive an estimated salary of between $1 Million and $3.1 Million* per year; these are star players as these 5 would receive a total of around $9 Million of the $57 Million annual football profit (football teams get 85 scholarships, though there are likely over 100 players counting walk ons). The two men’s basketball players (Boynton and Prather) are also team stars, but their “salary” would be lower based on the much lower profitability of men’s basketball v. football at the University of Florida (basketball gets 12 scholarships). The other three athletic programs lost money.

Such an analysis would differ from school to school, but the upshot of the story by McGee is that football is the real economic powerhouse in NCAA sports, with men’s basketball being the only other sport that consistently turns a profit at most universities. A system by which all players on teams in the two most profitable sports received some compensation beyond going to school for free with a small number of stars receiving large sums, the amount derived by some sort of market signal, would seem to be a positive change.

*The estimates were based on the net income of 5 sports programs at University of Florida (football $57.7 M, men’s basketball $1.4M, and losses of between -$1.1-$1.9M for the other three sports). The print article states the full methodology for how they assigned the different salary for the 5 football players, for example, is at ESPN.com/insider but I cannot find it on the free side of a paywall. For the football players LB=line backer; RB = running back; WR= wide receiver; OT= offensive tackle. For the two basketball players G=guard and F=forward.

update: tweaked a bit of the language.

 

 

 

Sharing the wealth in college sports

Harold Pollack and I are doing Bloggingheads this week, talking about the policy and politics of the budget deficit debate, the failure of the CLASS Act, and the economics of college sports, a topic that has been in the news, driven in large part by Taylor Branch‘s book, The Cartel. On college sports, Harold says

Many people claim that college sports works better under this system than it would under a system in which the stars are openly paid. They note that paying college athletes raises difficult logistical questions: Who would be eligible for workers compensation? Would there be efforts to equalize pay across sports and between men and women? Does the economic value of a full scholarship exceed a fair market wage? Is the answer to this question different for men’s football or women’s soccer?

I don’t know the answers here. I do know that these are the wrong questions. Even if rules promoting amateur competition make things simpler, even if restrictions on player compensation have clear social benefits, we don’t generally accept such arguments to constrain people’s ability to negotiate the terms of their employment. (my emphasis)

I must say I find Harold fairly convincing here, though my first inclination when observing the problems in big time NCAA sports is to think of a way to address some of the economic unfairness while maintaining the nature of the athletic competition (e.g., making sports work better). I think my fanhood makes me think of college sports as a public good of some sort, or at least to identify benefits that sports bring that may not be obvious, and which are spread quite broadly. I do think the answer differs by sport. My thoughts on what to do about football and men’s basketball (the two most lucrative sports)

  • Scholarships should cover the full cost of attendance
  • All players in these two sports should get a modest “spending money” stipend
  • Star players should receive a share of the money earned from the sale of their likeness and/or jersey

This proposal is imperfect, but could represent a midpoint between the current reality and viewing the issue purely as one of economics and collective bargaining as Harold has framed it. It would provide some extra spending money (in addition to the value of a scholarship) for all players in the two major revenue sports, while acknowledging the reality that superstars generate a great deal of money, and that they should share in it via a market-based mechanism. It should be an interesting discussion as Harold and I flesh out some of these issues on Thursday.