The Golden Age That Never Was

Guest post by Andy Schwarz (1985, MA)

For college sports fans like me, the Ides of March is a far less ominous event than for fans of Shakespeare or classical history. The middle of March means March Madness has begun, two three-week single-elimination tournaments (men’s and women’s basketball) in which upsets are celebrated, blue-blood programs usually rule in the end, and seemingly everyone, even former President Obama, wants to talk about bracket picks. Amidst this celebration of the sport, you’ll sometimes also hear a word or two about the business of producing college sports, the rising pay of college coaches, the question of whether NCAA-enforced amateurism rules are fair or necessary, and whether the game has grown too commercial.

It’s easy to find people who think there’s something wrong with the way college sports work as an industry, but it’s harder to find agreement about what that something is. Many critics assert that major college football and basketball have become too commercial, too much like professional sports. They say that college sports would be better run like club sports—no major television contracts, low (if any) coaching salaries, and certainly no athletes receiving pay in excess of the current scholarship (or perhaps a small stipend to cover incidentals).[1]  You know, like in “the good old days.” This notion, while well-intentioned, is predicated on a fiction. In truth, that Golden Age of purely amateur college sports never existed.

Since the first intercollegiate athletic competition, a rowing match between Harvard and Yale in 1852 sponsored by a railway line looking to encourage tourists to travel to New Hampshire, college sports have been commercial.[2]  Furthermore, in the first Golden Age of college football, the 1920s, there were no national amateurism rules, and many schools paid athletes so much that they could “put aside a capital sum with which to embark upon a business venture after graduation.”[3]  When the Great Depression hit, the push to impose amateurism strengthened, though not without serious transitional friction. Historian Ronald Smith tells a fascinating story of the 1938 University of Pittsburgh football team, where the sophomores went on strike because they were asked to do on-campus work for their paycheck, while the upperclassmen got paid just for their football effort.[4] 

It wasn't until 1956 that the National Collegiate Athletic Association (NCAA) imposed amateurism rules that were enforced nationally. Around that same time, the euphemism of “student-athlete” was invented as a means to persuade courts that athletes' pay, now reduced to scholarships, did not make them eligible for workers' compensation insurance.[5]

In 2016, college athletes are paid, both in cash and in kind, and the NCAA papers over this contradiction by creating a special definition of the word pay in its bylaws: any cash or other benefits that the NCAA approves are not pay, and any cash or benefits the NCAA forbids are pay.[6]  Amateurism in the NCAA is not the absence of pay, but the absence of market-driven pay. In other words, it’s price-fixing.

From the recognition that the “good old days” were not a paradise of amateurism and that amateurism is just an euphemism for an industry-wide wage cap comes a three-pronged economic approach to improving college sports: (1) recognize that many arguments offered against a more market-oriented compensation system rest on economic fallacies; (2) focus on athletes as Americans with all of the usual rights of access to a labor (or quasi-labor) market; and (3) deny schools the right to reach a national agreement as to players' maximum pay.

Four major arguments have been advanced in favor of allowing the 351 schools in Division I to agree to a maximum compensation level for their athletes:

• Amateurism (as a strict form of a salary cap) helps maintain competitive balance.
• By keeping money out of athletes' hands, amateurism serves to keep athletes focused on their studies.
• If athletes' pay could rise to market levels, pay would skyrocket, which in turn would drive down fans' interest in a sport where athletes currently play solely “for the love of the game.”
• Amateurism generates excess revenues from men’s sports that can be funneled into women’s sports under Title IX, leading to better gender equity in sports.

These arguments have gained a lot of traction, but economists have shown that all of them get the outcome backward. In truth:

• Capping player pay doesn’t help (and may hurt) competitive balance.[7]
• Having money doesn’t hurt educational outcomes. In fact, the academic consensus is that a lack of income is a primary impediment to graduation.[8]
• Market-based salaries will not skyrocket if fans really would walk away from the sport if athletes were paid too much. (Rather, if that were so, the market would set a pay level compatible with consumers’ tastes.)[9] 
• Funding for women’s sports would grow, not shrink, in a market system in which Title IX remained in force.[10]  This is because a functioning labor market will set pay with the Title IX match built in, just as businesses set salaries knowing that payroll taxes go along with each dollar of salary.

It makes no sense to try to turn back the clock to a time that never was, especially if doing so won’t yield real benefits. But it is worse to do so when the effort requires a collective decision to deny athletes the basic economic rights that we all share in our society—i.e. to  reap the rewards of our abilities in a market free of collusion. A scholarship certainly has value, but if the market rate would be higher still, then denying athletes the incremental value by agreement among schools is a classic example of what economists define as collusive exploitation.

The current system is sometimes justified because the exploitation generates money for a good cause. But the intense competition in college sports actually funnels the extracted wealth to coaches, athletic directors, a bureaucracy that is paid to ensure athletes aren’t, and even the shareholders of construction firms that build over-the-top locker rooms designed to entice elite athletes.

The two views of how to change the industry, which I have called Team Reform and Team Market,[11] both recognize that the current collusive system is exploitative, extracting value from athletes and spending it elsewhere.[12]  Team Reform uses many of the same arguments as the defenders of the status quo for why paying athletes would be bad, including the mythology of a Golden Age of amateurism that never was.[13]  The Reformist arguments may also subtly (and perhaps unintentionally) trigger racist beliefs as to the dangers of young black men given “too much” money “too soon.”[14] 

To Team Market, the tragedy is not that college sports are too commercial, but that as a society we often tout the workings of the free market at the expense of the nation’s poorest communities.  To Team Market the solution is to take advantage of this rare spot where market forces would raise the income of a minority community, and to let the vibrancy of capitalism kick in for athletes just as it does for their coaches and their professors, to drive their pay toward their share of the value they create.

As a Presidential Scholar and an educated professional with multiple degrees, I value education highly, but I do not think that “Isn’t the scholarship enough?” is a fair question here. I would ask the entire Presidential Scholar community to push back against the myths that allow the current system to persist, and to do so in a way that recognizes the rights of athletes as paramount. If you would not work for room and board, and if you would not accept collusion among all members of your industry to cap your pay, then do not accept that we must deny those rights to others. If you do, you’re accepting a separate and unequal system of economic justice. Amateurism is not noble if it is imposed on a class of people who would otherwise earn a living; it is exploitation, and each of us who lets it stand is complicit.

About Andy Schwarz

Andy Schwarz is an antitrust economist with a subspecialty in sports economics who has served as an expert in a variety of legal cases. He was the case manager for the NFL’s economic expert in L.A. Raiders v. NFL, which led him to question whether the same antitrust justifications for NFL rules made sense as justifications for “amateurism.”  In “Neither Reasonable Nor Necessary” (Antitrust Magazine, Special Sports Issue, Spring 2000), he and his co-author concluded that the answer was no, and from this began his consulting roles on White v. NCAA and O’Bannon v. NCAA.  His small part in the legal efforts to change the way college athletes are treated under the antitrust laws is documented in the recent book Indentured: The Inside Story of the Rebellion Against the NCAA by Joe Nocera and Ben Strauss.

Andy is a frequent contributor to Vice Sports and Deadspin and has written for Slate, The New Republic, Forbes.com, 538.com, and ESPN.com, inter alia. His academic papers analyze secondary ticket markets, law and economics topics, NCAA bylaws, and the economics of virtual goods. He has co-authored a chapter in the Oxford Handbook of Sports Economics. Andy holds an M.B.A. from the Anderson School of Management at UCLA (Class of ’94) as well as an A.B. in history from Stanford University and an M.A. in history from Johns Hopkins.

Andy was a Presidential Scholar from Massachusetts in 1985. His parents still have the plaque on the wall. Follow him on Twitter @andyhre or read his blog at sportsgeekonomics.com

Footnotes

1. For an excellent expression of this viewpoint, see Gerald Gurney, Donna A. Lopiano, and Andrew Zimbalist, Unwinding Madness: What Went Wrong with College Sports and How to Fix It, The Brookings Institution (2017).

2. Ronald Smith, Pay for Play: A History of Big-time College Athletic Reform, University of Illinois Press (2011), pp. 1-2.

3. Carnegie Report, p. 243. 

4. Smith, op. cit. pp. 79-80.

5. Walter Byers (with Charles Hammer), Unsportsmanlike Conduct: Exploiting College Athletes, University of Michigan Press ( 1995), pp. 69-76.

6. NCAA Bylaw 12.02.9.

7. See for example, Katie Baird, “Dominance in College Football and the Role of Scholarship Restrictions,” Journal of Sport Management, Vol. 18, No. 3 (2004) (http://bit.ly/2kUS9XW); Rodney Fort, “College Sports Competitive Balance ‘Beliefs’ and the Rule of Reason: applied Theory and a Literature Review” The Antitrust Bulletin, Vol. 62, No. 1 (2016). (http://bit.ly/2lSpFh8) This finding is counter-intuitive to many fans who have been told, for example, that the NFL is an example of a league in which salary caps have led to parity.  But this misreads the data.  The NFL uses imbalanced schedules, so that poor performing teams play other poor teams more often, and powerhouses tend to meet more often as well.  In addition to this, a large driver of parity in the NFL is the fact that team revenue varies very little (so all teams have the same marginal incentive to acquire talent) and that there is a strong spending floor, meaning that even if a team doesn’t have an incentive to spend, collective bargaining forces them to.

8. For a summary of this literature see Jeff Guo, “Why poor kids don’t stay in college,” Washington Post, October 20, 2014 (wapo.st/1NPqMAW).

9. Andy Schwarz and Richard J. Volante, “The Ninth Circuit Decision in O'Bannon and the Fallacy of Fragile Demand,” Marquette Sports Law Review, Vol. 26, No. 2 (2016) (http://go.mu.edu/2mfW1mG).

10. Andy Schwarz. “Don’t Let Anyone Tell You the O’Bannon Ruling Conflicts with Title IX,” Deadspin, August 13, 2014, (http://bit.ly/2lCzgI1).

11. Andy Schwarz. “How Not to Reform the NCAA,” Deadspin, August 1, 2014, (http://bit.ly/2mtUMvU).

12. See for example, Matthew Mitten and Stephen Ross, “Look to regulatory, not antitrust, solution for college sports,” Sports Business Journal, July 14, 2014, (http://bit.ly/2lCvzSE).  Mitten and Ross full appreciate that “the current structure results in significant economic exploitation of elite Division I football and men’s basketball players, without whose efforts these revenues would not be possible.”

13. Andy Schwarz and Kevin Trahan, “The Mythology Playbook: Procompetitive Justifications for ‘Amateurism,’ Biases and Heuristics, and ‘Believing What You Know Ain’t So,’” The Antitrust Bulletin, Vol. 26, No. 2 (2016). (http://bit.ly/2mlQVCa)

14. Prejudice or Principled Conservatism? Racial Resentment and White Opinion toward Paying College Athletes, Kevin Wallsten, Tatishe M. Nteta, Lauren A. McCarthy, and Melinda R. Tarsi, (http://bit.ly/2mg0q93).  It is not uncommon to see opposition to athlete pay focused on stereotypical uses of money such as purchasing “tattoos and rims” or “bling.”  In “How Not to Reform the NCAA” (see supra note 11), I refer to this as “Fear of a Black Wallet.”