Unit 8: Amateurism and College Sports Economics of Sports Unit 8: Amateurism and College Sports

Amateurism and the Olympic Ideal Ancient Olympians were not amateurs Winners were well rewarded by home cities Origin of Modern Olympics Created by Pierre de Coubertin, a French aristocrat He felt humiliated by France’s loss of Franco-Prussian War in 1871 He wanted to show France how to restore its honor (and beat the Prussians) According to the definition issued by the Amateur Athletic Club of England in 1866, an amateur was ‘any gentlemen who has never competed in an open competition, or for any public money, or for admission money, or with professionals for a prize, public money, or admission money, and who has never in any period of his life taught or assisted in the pursuit of athletic exercises as a means of livelihood; nor as a mechanic, artisan, or labourer.’

De Coubertin and the Olympic Ideal De Coubertin was a great Anglophile, He found his solution in British “public” schools Mens sana in corpore sano (A sound mind in a sound body) “The Battle of Waterloo was won on the playing fields of Eton” (Attributed to the Duke of Wellington) Amateurism reflects British class snobbery Aristocrats refused to compete with “lower classes” They restricted competition Any manual laborer was not considered an amateur

Amateurism and the United States More combative than British Commercialism and corruption were ever-present The first intercollegiate competition had corporate ties Harvard v. Yale in crew (1852) Was sponsored by a railroad promoting a nearby resort The rematch brought the first eligibility scandal Harvard’s coxswain had already graduated The first football game and the first scandal Rutgers v. Princeton November 6, 1869 Four of Rutgers’ players were flunking math

The NCAA and Monopsony Power Does it defend academic ideals? Restricted movement prevents “tramp athletes” In early 20th century athletes were hired guns Transferred from school to school for best deal Does it just drive down pay? Players have highly limited mobility Players have no say over compensation Star players are worth millions to schools But all they receive is tuition and some fees In the movie Horsefeathers Groucho Marx goes to a speakeasy find football players for Huxley University.

Athletic Scholarships Now source of great excitement Not always the case NCAA forbade them until 1956 NCAA rules often ignored They were the cause of the “Seven Sinners” fiasco The NCAA’s justification of scholarships They would be easier to police if out in the open Analogous to drugs or prostitution Prevented workman’s compensation claims

The “Student Athlete” Scholarships created a problem Students were effectively employees They began to seek workmen’s compensation for injuries “on the job” Student athlete is a legal term Players must disavow any desire for pay As a result, colleges do not have to provide workmen’s compensation

The NCAA as a Cartel Controls access to desirable broadcasts Bowl games Basketball tournament Has to figure out how to divide profits An efficient cartel will base rewards on efficiency

The NCAA as an Efficient Cartel Allocates greatest share of profit to colleges that are “most efficient” Schools that progress farthest in tournaments Schools that belong to “major” conferences Football divided into Divisions Smallest are Division III and Division II Largest schools are subdivided Football Championship Subdivision Football Bowl Subdivision

The Bowl Championship Series The BCS is not an NCAA organization It was created by TV networks and the “major” football conferences Its goal is to generate revenue for these two groups Schools from non-BCS conferences make far less University of Utah has begun an antitrust suit against the BCS

College Athletics as an Investment Very few college athletes make it to the professional ranks It might still pay Long and Caudill (1991) show that athletes make more in later life than non-athletes Study does not separate athletes by college or sport A Swarthmore squash player counts as much as an Ohio State football player

Athletic Success and Academic Success Most successful men’s programs often have poor graduation rates Graduation rates of players at top 25 football programs in 2008 On average they were 10% below other student-athletes Only one school (Cincinnati) had a higher graduation rate The same pattern holds for men’s basketball in 2008-2009 Women’s programs did not show the same trade-off Students at the top programs generally had higher graduation rates than the typical student athlete

Why do Some Sports Do Worse? Some athletes less prepared for college SATs, class rank, and gpa lower True for “money sports’ like basketball and football Not true for softball or golf Dropping out might be a rational investment Do football players go to Florida to get to NFL? Do football players go to Harvard to become physicists?

Academic Standards Preserve academic integrity Don’t recruit unqualified students Create a barrier to entry Established powers keep out new entrants Competitors cannot pay athletes more Now cannot take weaker students either

History of Standards No uniform rules until 1965 1.600 Rule – a complex formula projected gpa To play needed projected 1.600 gpa 1973: Replaced 1.600 with 2.00 rule Ostensibly created higher standards Actually needed C+ average in high school Could take any courses Worst abuses came under this rule

Proposition 48 Provisions Was Prop 48 Racist? Needed SAT=700 & GPA=2.00 in 11 core courses If not: no scholarship in 1st year & cannot play Was Prop 48 Racist? Disproportionately affected black athletes SATs for blacks average 200 points lower Are SATs a valid predictor of college performance? Still – graduation rates rose for whites and blacks A concession: Partial Qualifiers Could receive aid if pass one criterion

Proposition 42 Meant to eliminate partial qualifiers Again accused of racist impact Partial qualifier restored – and widened Under Prop 48 scholarship “counted” against college’s athletic limit Under 42 it did not count

Proposition 16 Created a sliding scale Lower gpa permitted if SATs higher & vice versa Clearinghouse evaluated individual courses Understaffing caused embarrassing errors Honors classes with unusual names got flagged Allows partial qualifiers to practice Challenged in court Students claimed disparate racial impact Won initial case Verdict overturned on technicality NCAA does not disburse federal funds

Latest Revision Eases initial restrictions 14 core courses (up from 13) Sliding scale 2.0 core GPA requires 1010 SAT 3.55 core GPA requires 400 SAT No Partial Qualifier status Stiffens progress requirements Need 40% of degree requirement by 3rd year Need 60% of degree requirement by 4th year Need 80 % of degree requirement by 5th year

Academic Progress Rates (APR) School scored for student progress 1 point if athlete stays enrolled 1 point for staying academically eligible Computes % of total possible points Consider a typical big-time basketball team 52 possible points (13 players *2 points*2 semesters) If one player is ineligible in spring – it loses 1 point APR=100*(51/52)=981 If its score falls below 925, the school could lose scholarships

Are Athletics Profitable? Most men’s sports are not Only football and basketball make money Only for Division I & IA Most FBS schools and almost all FCS schools lose money on athletics Almost all women’s sports lose money Women’s basketball is most profitable women’s sport But almost all of them lose money

Then Why Bother? Some say the benefits are understated Athletics provide a sense of identity at large schools Athletic success raises a school’s profile Improves state schools’ chances for state funding Attracts more and better students Some say the costs overstated What does a scholarship really cost? The tuition of a displaced student If no one is displaced there is no opportunity cost Expenditure is endogenous Athletic Directors do not maximize profit As revenues go up – they simply spend more