Monday, August 11, 2014

"Team Market", "Libertarianism" And The Right Direction for College Athletics

When you look at politics, whether on a formal or informal basis, you see fads appear and disappear as so many fashion trends.

Today the fad goes to "libertarianism", which, supposedly is being revisited by the younger set and some of the cognigentia as an interesting, currently viable political philosophy.

I've always been of the philosophy that people can believe politically in what they want.  Generally, I have no quarrel with "libertarians".

Until their worldview creeps into a narrow subset of collegiate athletics, using faulty, incorrect applications of economic theory to justify an economic world that is wrong - and dangerous.




Joe Nocera and and Andy Schwarz are probably not considered "libertarians".

Nocera, whose wife works with the legal group that is representing Northwestern quarterback Kain Colter in the college football player unionization efforts, and Schwarz, who, by his own admission, has done paid work in the prosecution of cases against the NCAA, probably think of themselves as realists, perhaps even void of political party - in the case of the NCAA.

But when reading Schwarz' manifesto about the two schools of thought driving NCAA reform, you can't help but slap the label "libertarian" on his long, long argument on Deadspin.

We rarely acknowledge that there are at least two distinct criticisms of the way the NCAA runs college sports. One is that the NCAA is too commercial, too much like other professional sports, and that college sports would be better off if they were run closer to the way club sports run—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). 
The second is a very different critique: that the NCAA should be as commercial as the market wants (which is probably a little bit more commercial than it is now, but not that much), but that in that effort it cannot deny its athletes access to same market system of compensation that every other participant in the enterprise enjoys. I like to call these two views of the world Team Reform and Team Market, respectively.

Without rehashing all the arguments, Team Reform is simplistically painted as a force for the de-commercialization of college sports.  By trying to put limits on the spending on collegiate athletics and enforcing of increasing academic standards, Team Reform is painted as being economically ignorant and backwards, while Team Market, with the S on its chest and the free-market, "libertarianism" banner subtly waved below it, is shown as the Brave New Correct force for good in regards to giving everyone a fair share.

One part of Schwarz' argument ought to be highlighted - his thoughts on the corrupting power of money.

It galls me to think of what "[student-athletes] not yet corrupted by money" means. Am I corrupt because Deadspin paid me to publish this piece? Am I corrupt when I work to support my family? Is Dr. Pastides corrupt when he is paid by the University of South Carolina? Is the University of South Carolina corrupt when it takes donations from its alumni? Even the "yet" drives me nuts—how many years of earning money at our craft does it take before we become corrupted by it? In America, we're supposed to value hard work and money well-earned. Corruption is what you get from violating the law, not from earning what you're worth in the marketplace. It literally (and I mean literally literally and not figuratively literally) outrages me every time I read this quote. 
The view that bringing money into things is inherently corrupting seems to ignore the fact that, even leaving sports revenues aside, the college campuses that tend to have major sports also generate hundreds of millions or billions of dollars annually from their education businesses (you know, selling college to students). I think education is a noble calling, but until I see university presidents and their boards living like an order of Franciscans and working for room and board and a living stipend, I won't believe it's not also a business. And that's fine—after all, as Calvin Coolidge explained, "the chief business of the American people is business."

To me, trying to argue that money is not a corrupting influence is to ignore the entire history of man.  "It wasn't all the money and noblesse that corrupted Marie Antoinette, your honor - it was all that cake!"

Similarly, the idea that, in college football, "bringing money into things" involves every college and university - that's narrow, and wrong.

In 2012, the National Football Foundation reported that there were 650 NCAA institutions that sponsor college football.  Since 1978, the number has increased by more than 150 schools, and this doesn't include the number of institutions of higher learning that are not NCAA-certified.  If you include these NAIA schools (which at present total 89), you approach 750.

Setting aside those that don't even sponsor football, of the ones that do field an intercollegiate football team, less than 5% make any money at all.  In fact, those schools pay to play the sport.

In a world where there is a "libertarian" Team Market, how can this be explained?  Isn't Adam Smith's invisible hand supposed to dictate where college sports are to be played?

Shouldn't the programs that don't make money be shuttered, and let the colleges that do make money pursue their business model?

Ah yes - the dirty little secret of Team Market that they won't tell you.

Market forces engage in creative destruction.  Businesses are supposed to fail.  Businesses are in business to do one thing - make money.  Those that don't should get out of the business, and do something else with their time.

But if that's the case, and college football is only a business, then why on Earth would schools be sponsoring football?

If schools are only in it to make money, even as institutions, it's a pretty poor way to do it - it costs a boatload of money, its presence on the campus is highly regulated, and the athletic competition rules are stringent.

The answer is, of course, that sometimes you can't price a business on it's revenue-generating capacities alone.

Whenever I read any article about how college athletics is a business, I always flash back to the many times I've been in the media interview room after Lehigh games.

In particular I remembered a question posed to CB Jarard Cribbs in 2010 after one of Lehigh's very satisfying victories, an unexpected 44-14 drubbing of Colgate at Murray Goodman stadium.  In that game, Lehigh shut down Raider RB Nate Eachus, a candidate for the Walter Payton award, to one of the lowest rushing games of his college career.

The paraphrased question was: Was it a bit disappointing that the victory over Colgate didn't come before more fans?  (A little under 7,000 fans attended the game.)

His answer was: "If you can't get fired up to play against the top rusher in the country, you shouldn't be playing football," Cribbs said. "This is the type of game you live for. It was a great feeling to be able to capitalize like we did."

It's guys like Cribbs that defy what Team Market is about.

Cribbs didn't care that the game took place in front of 7,000 fans, although that's a lot more than at some college football games.  He also didn't care that Lehigh was spending money on their program so that he could have a place to compete.  He just cared that he had the opportunity to compete, that he could continue to play the game he loved in high school for four years at college.

But in a Team Market world, guys like Cribbs don't exist.  Football players only exist to play semi-professional ball, independent of going to school, failing to acknowledge that by establishing such a hierarchy, they force student-athletes to make a choice, to play ball or go to school.

Guys like Team Market focus on the fallacy that the workload of playing football and competing in sports cannot be done.  In fact, it can, and is, done all the time, and not just in the halls of Patriot League and Ivy League schools - it happens in all 50 states, in all sorts of colleges and universities.

This also shows the biggest problem with the Team Market concept - that it only focuses on the twenty or so schools that are generating more unsubsidized revenue than expense, and effectively ignores the other 730 or so institutions that are paying to field intercollegiate football teams, because those 730 schools don't fit into their definition of a college football program.

The trouble is with this philosophy that by paying athletes at 20 schools, you destroy sports at the other 730 schools.

Why?  Because school participation in college football can be expected to decrease.  As a good economist should know, as costs increase, litigation costs increase, and "college football player" becomes a job for the school, smaller schools sponsoring the sport will eventually get priced out of the market.

By defining college football player as a paying job, something that only really fits in a handful of universities, it destroys the sport everywhere else it's played.

Recently, a news item appeared in regards to a so-called charter school called Prime Time Prep, purportedly run by former NFL CB "Neon" Deion Sanders.

The accusations against it involve not only a lack of academics, but also falsifying athletics records so that their students can participate more intensely in sports.

While deplored by most, you would think Team Market would be defending places like Prime Time Prep.

After all, in regards to youth development, Prime Time Prep is only doing what is already being done for elite, money-making European soccer teams - identifying young, athletically talented players, giving them world-class training with athletic celebrities, and moving them up the chain into "semi-professional ball" - as Team Market sees it - in the NCAA.

What could be more market-based than that - identifying employment talent, and selling it to the highest bidder?  Why bother dragging pesky things like "educational standards" into it?

Without realizing it, by advocating things like paying college football players, Team Market wants college athletics to be like European soccer.

They'd prefer athletic programs to instead be athletic clubs, like Barcelona or Manchester United.  Other athletic clubs can spawn to compete with them, preferably with deep-pocketed Russian or Qatari owners, or go bankrupt and fail.

Academics?  What academics?  They're semi-professional athletes, Team Market says.  Why shouldn't they be treated like employees?  They're not students.  They're fresh meat, provided to us by places like Prime Time Prep.  Who gives a crap whether they get an education?

You may think I'm exaggerating, but in Schwarz' manifesto, it can be demonstrated that it is not.
In Team Reform's words (in this instance, those of the Knight Commission), the goal of reform is to emphasize "academic values in an arena where commercialization of college sports often overshadow[s] the underlying goals of higher education."
....
I think the theory behind de-commercialization is that if the product isn't selling quite as well, there will be less incentive for schools to provide the product at any cost, and as a result the economic pressure to pay more for coaching, facilities, and even players will decline. As will, goes the theory, the incentive to invite in athletes unable to perform academically or to provide them with phony educations designed to keep them eligible just so they can continue to generate revenue through athletics. At core, it is rooted in the idea that money itself is a corrupting force to academia and that absent the lure of filthy lucre, the administrators of college campus would return to their quasi-parental role of educating young men, independent of their ability to generate revenue as athletes. It is rooted in paternalism, in that assumes the problem is that the men and women who run campuses are letting money divert them from their duty to serve in loco parentis for these young, unmolded, uncorrupted men.
Here he paints Team Reform into a straw man for "de-commercialization" of collegiate athletics, when most Team Reform want to do nothing of the sort - or, at least, the ones that pay close attention to the environment of college athletics.

But Team Market is for the "commercialization" of athletics.
Team Market doesn't force anyone to pay anyone anything. Team Market just wants to end the collusion that currently prevents the market outcome from emerging. Team Market wants to let economic actors make choices and play out the consequences. In contrast, the schools, those who claim there is no consumer demand for paid athletes, are also the ones most reluctant to put that claim to a market test.
First of all, it's pretty shocking that Schwarz wishes to de-emphasize academic values in regards to college athletics when at least some level of academic mission is central to the brand of collegiate athletics.  It's hard to believe that anyone has to make that obvious assertion, but there it is.

Second - is there really any doubt that the role of teachers, which is what coaches at the collegiate level are, are at some level serving in loco parentis as people of guidance and - wait for it - teachers?  Schwarz says this as if it's a terrible thing that coaches are also teachers and parental figures.  I don't care if you're a D-III coach or Nick Saban - that's part of the job description.  That's not a part of Bill Belichick's job description - and a huge difference between college athletics and pro athletics.

But most important - and incorrect - is Schwarz' assertion that standards, especially academic standards, are a form of de-commercializing college football and preventing "economic actors to make choices and play out consequences".

Isn't it strange that the only values quoted by him as a member of Team Reform's toolbox are academic in nature, and that by extension, academic standards equals "de-commercialization"?

That sounds awfully..... "libertarian".

Some "libertarians" have been outraged at other types of academic standards, too.  It's called the "common core" standards that schools must meet.  Recently, a libertarian group in Utah sued to keep Common Core out of the school system, because they wanted to prevent common core to be applied to the school system.

You can see this line of thinking in the manifesto.  "Standards?  They're restricting the Markets... Team Market will lead the way!  Get rid of these standards!"

Nowhere in the manifesto is it mentioned how academics would be preserved in a market-based world at these institutions of higher learning - for good reason.  After all, Team Market cares about the Market, not the education of the kids.  Education is just a "benefit", a form of compensation, that Team Market would prefer to become optional.

Then there's Team Market and their view on the Ed O'Bannon case, the landmark, long-dragging court case that finally had a ruling late on Friday.

Joe Nocera, proud member of Team Market, talked about it:
Team Market, to which Schwarz (and I) belong, believes that there’s nothing all that wrong with commercialized college sports — which has tens of millions of followers, after all — so long as the value, as he puts it, goes to the value creators, which most definitely include the players. Team Market is thrilled with the judge’s decision. 
The N.C.A.A. and the big-time college sports establishment are not terribly worried about Team Reform, which has generally been toothless and has no real way to effect [sic] its agenda. But they have long been terrified of Team Market, which has the potential to truly change the nature of college sports. The O’Bannon case is only the first lawsuit to go to trial; there are other antitrust lawsuits coming down the pike that could force even bigger changes.
Calling Team Reform "toothless" is misguided, as any school that has suffered an APR violation will be able to tell you.

But why is Team Market thrilled with the judges' decision?
A federal judge ruled Friday that the NCAA's limits on what major college football and men's basketball players can receive for playing sports "unreasonably restrain trade" in violation of antitrust laws. 
U.S. District Judge Claudia Wilken, in a 99-page ruling in favor of a group of plaintiffs led by former UCLA basketball player Ed O'Bannon, issued an injunction that will prevent the NCAA the "from enforcing any rules or bylaws that would prohibit its member schools and conferences from offering their FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses in addition to a full grant-in-aid." 
Although Wilken's ruling could enable football and men's basketball players to receive more from schools than they are receiving now, Wilken imposed some limits and she rejected the plaintiffs' proposal that athletes be allowed to receive money for endorsements. "Allowing student-athletes to endorse commercial products would undermine the efforts of both the NCAA and its member schools to protect against the 'commercial exploitation' of student-athletes," she wrote.
It might seem funny to see the declaration of victory, because, the Ed O'Bannon ruling is clearly not the unmitigated success that Team Market might seem to want on the surface.

After all, the judge imposed some limits on the market value on college scholarships, which, of course is against the Religion of Markets as an artificial price control.  There was also the rejection of the proposal that the athletes should be able to get endorsement deals - or, as Team Market might call it, seeing what the market might bear for the student-athlete's presence in ad revenue for a product.  (Others might think millions of unregulated dollars in the hands of a handful of 18 year olds and also expose them to, for example, game-fixing, but hey, I'm just a guy who writes about football.)

But the ruling did change, at a stroke, the NCAA's definition of what a "scholarship" is, though the definition seemed strangely similar to the "full cost of attendance", which has been a point of debate within the NCAA for more than three years.

To Team Market, I guess, the "victory" was that something went against the NCAA - meaning, of course, that the NCAA, in Team Market's eyes, is the only obstacle to their utopia of a market-based economy where athletes are only valued, and developed, for their athletic ability.

Perhaps it's the thought of further legislation - to strip the market controls that the Judge Wilken put in place, to make more of a free market solution that involves cash incentives.  Perhaps they envision a future where Texas and Texas A&M start bidding wars for a particularly coveted starting quarterback.

After all, it's what the market will bear, right?
In a market we might also see a lot of the Team Reform goals met. On a recent airing of Meet the Press, Secretary of Education Arne Duncan, an earnest member of Team Reform, advocated for a system in which each college athlete would be guaranteed a scholarship that lasted not four or five years, but for however long it took for the athlete to complete his undergraduate degree, and perhaps even an advanced degree. Duncan wants to see this come about by a common agreement among all schools. 
But Team Market thinks just letting schools compete will get us to a similar spot. For athletes who want a promise that they can return to school for as long as it takes to get a bachelor's (or master's or Ph.D., as Duncan suggested), that's easily negotiated and relatively inexpensive for a school to provide, compared to a cash payment. In the world envisioned by Team Market, athletes who want to get paid in more and better education are able to do that. Team Market just doesn't force that same outcome on the men who'd prefer to be paid in other ways. 
As a highly (and perhaps over-) educated economist, I appreciate the incredible value that can be generated from completing one's undergraduate education, but I am deeply troubled by the noblesse oblige attitude that an agreement among those with all of the economic power to restrict what the on-field talent receives to education is sufficient as long as the education agreed upon is "good enough." Education is great, but in this case it is also a form of company scrip, the tables scraps of the feast the system dines on regularly. The Team Market view is if that's what you think will work in the marketplace, make the offer and see if it works. Just don't prevent others from offering something different, like cash, and letting athletes and fan bases who value one or the other offer sort themselves out. When Duncan, however well intentioned, makes it clear he thinks a real education that leads to a degree is fair enough compensation to replace a market outcome, he too is saying his values are what matter, not the give-and-take of a market system we rely on to set value throughout the rest of our economy. No matter how benevolent the dictator, he is still a dictator. 
Just like "libertarianism", Team Market's big reveal is that the solution to everything is less regulation, less oversight, and the Invisible Hand of Adam Smith guiding athletes specialized in football at the expense of academics.

To recap what Schwarz is saying: Arne Duncan saying that he advocates college athletes be guaranteed an "education for life" is the equivalent of being a "benevolent dictator", saying from up on high what a scholarship is, and should be, and shamefully preventing the college athletes that want to be paid cash from getting their just due.

Meaning, of course, recruiting bidding wars even worse than what the currently-regulated environment bears today.

But isn't that what Prime Time Prep did?  Trying to change what "academic accreditation" is, lowering the bar to simply become a training ground for elite athletes without all that pesky education stuff, in order to develop world-class football players?

*****

Call me a romantic if you want, but I still believe that the mission of colleges, universities and the NCAA is to provide athletics as an educational mission to its participants.  Coaches are teachers, and by extension mentors, and sometimes even parents in loco parentis.

The vast majority of the tens of thousands of athletes that compete in football at all levels of collegiate competition will not become professionals.

The very few that go on to play professionally play sports with the other folks, who will become doctors, lawyers, clerks, dentists, and even economists.  In their time at university, it will be probably the last time that they connect with those types of folks in their lifetimes.

These "other folks" play not necessarily to become professionals, but to get an education.  They play to continue playing the sport they love for a few more years.

They play to be in the environment of college football - an environment, 95% of the time, is a money-loser and costs the school money.

The environment is worth having at a school.  This is obviously true, since 95% of the schools that have football at their school pay for the privilege, and the vast majority of the schools have no expectation of ever making money at the business of collegiate athletics.

But that's OK, because football enriches people.  It enriches the students playing the game.  It enriches the band members that play at halftime.  It enriches the people who go to the games and sit in the stands.

It's a fragile culture, too.  It only exists because, at 95% of the colleges and universities in this country, the people in charge are willing to pay money that they won't see directly come back as direct campus revenue.

If you make the sport into something that can only be afforded by the richest of schools, it will die.  It will die in places like Division III, Division II, and FCS, where football grows and, currently, flourishes in its mission of educating, entertaining, and enriching.

Football should not die.

The culture of football is a paid privilege at most schools.  It should continue to be a paid privilege at these schools.  And happily, as the current landscape is now, schools that want to have football, for the most part, can have it.  Thankfully, the price of having a football team has not been set so high so that schools do not have to make the terrible choice to discontinue the sport.

Unfortunately, Team Market doesn't get this.

While it critiques others as paternalistic, it ironically, paternalistically assumes that most athletes want to be paid, based on a tiny subset of athletes from a tiny subset of schools in a tiny subset of cultures that compete in football.

Team Market seems to think that it won't get to the spot that Prime Time Prep inhabits, a place where market forces really don't need to be regulated in order to get education and academic goals in alignment with paying and unionizing players.

Unfortunately for them, real life provides a peek as to what will really happen in an unregulated, "libertarian" world of market-based collegiate football.  A hint: it doesn't look like the student-athletes of today.  In fact, it eventually strips the "student" away from that equation entirely - just like at Prime Time Prep.

I'm just glad Mr. Schwarz published his manifesto in it's entirety, so his ideas on Team Market can truly be exposed to the marketplace of ideas.  And then, hopefully, the market will reach its verdict.

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