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To pay or not to pay? The interplay of incentives involved in pay for college athletes

​By Sebastian Anastasi
web posted December 4, 2017

When babysitting toddlers, one can be sure that the best way to get them to do something is to tell them NOT to do it. It thus comes as no surprise that when one prohibits them from engaging in certain behavior or touching a certain prized possession, children will likely do the exact opposite of what you asked of them. While this disobedience in toddlers may be no more than stubbornness, the flagrant refusal to abide by the rules practiced among universities and colleges seeking to attract star athletes by illegally paying them, is not so simple. Rather the debate over whether universities and colleges should be allowed to pay their athletes is a complex question of economic incentives. While there may be short-term benefits in the form of decreased corruption, paying athletes could have long-term negative impacts on the future of college students in the market place. This is because when students are paid to play a sport, they are incentivized to commit their time and effort to that sport at the expense of their academics. To properly analyze this situation, one should consider the argument for and against paying college athletes and then look at the best decision based on the overall net benefits or costs.

We all probably have memories of sneaking cookies form the cookie jar. Our parents’ ardent prohibition on “cookies before dinner” could not overcome our massive demand for a treat, driven by the smell of the freshly baked, golden snacks, loaded with melting chocolate chips. In the same way, the huge demand for the service of college athletes, is rendering the prohibition on paying them rather useless. In fact, the prohibition has fueled the creation of a web of corruption and law breaking in college sports. Before we examine those facts though, we must establish a basic understanding of what is driving the problem in the status quo. In analyzing the effects of prohibiting pay for college athletes, it is useful to understand the economic concept of price ceilings. A price ceiling is a limit on how much can be charged for a good or service. When the NCAA prohibits paying college athletes, beyond their scholarships, they are in effect imposing the most severe form of price ceiling possible on the service college athletes provide. From here it is useful to understand the normal economic impacts of imposing a price ceiling. When price controls are imposed on a good or service for which there is a large demand, people will attempt to find alternative ways to pay more to get that good or service. These “alternative means” of paying for the good or service often take the form of black market deals, bribery, and general corruption, in order to get ahead of the other prospective buyers of the good. It is very hard to fight the power of demand; even with the law. In the context of sports, there is a high demand for the “service” or labor of skilled young athletes, driven by America’s sports centric culture. But there are limits on the lengths to which one can go to attract the next college football star to your team, legally. As such the United States has seen the emergence of a complex web of corruption around college athletics in order to build winning rosters and attract the best athletes. This was identified by coach Chris Spatola. According to Scott Davis of the Business Insider: “Chris Spatola, a former college coach and player, compared the situation to Prohibition. Making alcohol illegal did not eliminate alcohol, Spatola argued; it created a black market”.  The situation has gotten so bad that the FBI launched an investigation into these covert means of acquiring the service of young athletes. According to the Business Insider:

The FBI arrested 10 people on charges of fraud and corruption in men's college basketball on Tuesday. The Department of Justice announced Tuesday that assistant coaches at Arizona, Auburn, USC, and Oklahoma State had been arrested along with managers, financial advisers, and representatives of the international sportswear company Adidas.

As ludicrous as it may sound, it is now clear that prohibiting paying college athletes is driving a black-market for rising stars in college athletics. Just as our parents’ prohibitions may not have stopped us from a pre-dinner, pilfered snack, this prohibition isn’t working. But what would the impacts of allowing colleges athletes to be paid be?

One of movies my younger brothers have recently watched is Big Hero 6. In the beginning of movie, young genius Hiro Hamada is involved in “bot-fighting.” As Hiro describes it, while it is illegal, it is “so lucrative!” Hiro’s older brother is upset that his younger brother isn’t putting his talents to use in the field of science and technology, but as Hiro is reaping huge economic rewards for his bot-fighting, he is unwilling to stop. Likewise, in economics one learns that if the price that is offered for a good goes up, the quantity of that good or service that is supplied increases. In the context of sports, when you tell student athletes that they will be paid for playing their sport, you can bet that they are going to invest more time and effort into that supplying that service to their coaches. Were this pro-sports, rather than college athletics, that would not be a problem. Athletes would be encouraged to work harder at their job if they were offered higher salaries and would spend more time on their sport. However, this is not pro-sports, and the real impact of offering pay to young athletes is to serve to encourage them to spend more time and effort on their sports, since they are being paid, while spending less time on academics. Even under the status quo some of these problems have been observed. In part as a result of the lavish scholarships heaped on students, students are incentivized to focus on their sports and not their education. Clark Power of the Huffington Post quoted the shocking charges of Mary Willingham that, “… 60 percent of the University of North Carolina’s (UNC) football and basketball players read below the 8th grade level, and eight percent to 10 percent read at or below a third grade level...”. If this is what happens when students are offered large scholarships to play their sports, then what will happen when they are officially paid to play! Economically speaking, if the opportunity cost of focusing time and effort on school increases, due to the fact that one will be paid to commit himself to sports, we would predict that even less time will be spent on school and even worse academic standards would result. As with Hiro Hamada, if students are compensated for playing a sport, they are likely to focus on that sport and not on their education.

With the impacts of both failing to pay colleges athletes and choosing to pay college athletes examined, what system is comparatively advantageous? To get a fair answer one must first estbalish a key premise. When considering demand for the service of college athletes one must make a clear delineation between the demand for their service while they are in school, and the demand for their service in the pro-sports sector.  The NCAA presents the sobering statistics. As they explain on their website, very few students will end up going from college sports to pro level athletics.

Athletics

Based on their chart from 2017, the chance of going pro in basketball is only barely over one percent. For football the probably is virtually the same, at only a little over one percent (NCAA Research). And here we confront the dilemma. At this point we know that we if pay students to compete in sports, the quantity supplied of their effort and time will increase. Furthermore, we know this has the predictable impact of harming student’s grades and compromising their educational experience. This taken into consideration, if we allow college athletes to be paid we are encouraging them to pour their effort into their sport while they are in college, only to realize that the demand for their service in the pro sports sector is low. Thus, while there may be some short-term benefits in the way of decreasing corruption, the long-term costs to the students are astronomical. In institutions of education, the first goal must be to educate students. Rather than distort this goal by providing incentives for students to focus on sports, we ought to punish schools for their bribery and corruption. Granted, this is not an easy task as bribery and corruption are natural results of a system where certain goods or services have a set price ceiling; in this case a price ceiling that only allows athletes to receive scholarships and not pay. Still, such a response is better when we consider that allowing students to be paid will ultimately leave them with horrible job prospects after school.

To return the story of Big Hero 6, Hiro’s older brother Tadashi makes one of the best economic decisions that he could have. In order to make Hiro realize the long-term opportunity cost of spending all his time bot-fighting, he takes him to his school, which is at the cutting edge of technology. Seeing what he would miss out on, Hiro quits bot-fighting and invests himself enthusiastically into the effort to apply to his brother’s school. Now the NCAA faces a similar decision to the one Tadashi did. Will it prohibit paying athletes and continue to crack-down on corruption with the FBI’s help, thereby seeking to encourage students to focus on academics? Or will it do the opposite of what Tadashi did and allow the opportunity costs to lean in favor of athletics over academics by allowing college athletes to be paid. What is on the line is clear. If students are encouraged to pour themselves into sports and not academics, then they will have wasted their education in college, as the demand for pro-sports athletes is extremely low. The NCAA should stay its course and encourage students to look at the long-term economic implications of their behavior, and not allow this perspective to be distorted by short-term monetary rewards. ESR

Sebastian Anastasi is a published researcher with DFW Speech and Debate. © 2017 Sebastian Anastasi

 

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