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Let the Market Solve the College Sports Problem

Harry How/Getty

Theodore Ross’s “Cracking the Cartel: Don’t Pay NCAA Football and Basketball Players” is a seemingly deep dive into the economics and policy of college sports. After diagnosing many of the perceived ills of college sports, Ross presents his solution. Junk the whole thing:

No more TV contracts and cable deals, endorsement revenue and ticket income, video games and sweat suits. […] Money is a blight on college sports. We must remove it from the equation and leave the good things: sports and schools.

Left to the imagination is whether each school should just opt out of the lucrative system on its own, whether schools should collude to reach this outcome, or whether Congress should intervene. Details be damned—just get the money out!

To be fair, Ross gets some of it right. As practiced today, college sports are “billion-dollar business ventures.” Compensating athletes for their role in this business is “considered the ethical norm by the majority of reporters, academics, and sports professionals—basically everyone but the NCAA—having supplanted the earlier prevailing belief in the nebulous virtues of amateurism.” Ross explains that the NCAA is a cartel, where economic competitors agree not to compete on the basis of athlete pay. This extracts surplus from athletes—many of whom, Ross tells us, will never be worth more to a team than as collegians—and much of the largesse flows to the coaches, athletic directors, conference commissioners, and NCAA executives who run these programs.

While Ross sees the system for what it is—economic injustice—he also fears the market solution. He is suspicious that a market might give more pay to some than to others. He implies that schools today knowingly overpay some athletes but that in the market-future they will wise up. He argues that schools are also knowingly recruiting more athletes than is optimal, and that in the future they will hire fewer. We will end up with fewer big-time programs, fewer paid coaches, and fewer athletes paid at their current scholarship levels. Okay, but didn’t Ross also tell us he wants schools to exit the crazy world of big-time money sports?


Fortunately for big-time football and basketball, Ross’s economics are highly flawed, and the scary world he envisions will not emerge. (An inquisitive undergrad at the schools in question could learn about why this is so in an economics course.) Ross has committed a fundamental error: confusing a supply effect with a demand effect. When economists say there is excess demand (as is the case in college football) that means more buyers (in this case, schools) want more product (in this case, athlete services).

Because the NCAA puts a cap on both collegiate athlete pay and on the number of athletes that can be paid, and because many schools push up against both caps, we know there is excess demand. Over time, the NCAA has imposed and then repeatedly tightened those caps. Before 1973, there was no cap on how many scholarships a school could offer.  From 1973 - 1978, schools were allowed to grant 105 scholarships. From 1978 until 1992, the cap was 95, then it dropped to 92, then 88, and finally, since 1994 has been set at 85. If there hadn’t been excess demand, there would have been no need to impose increasingly stricter player caps to force down team roster sizes—rosters would have shrunk on their own.

Opening the market allows that excess demand to be satisfied and causes prices to rise. This is a good kind of price increase, because it goes hand-in-hand with increases in the quality and quantity the market supplies. People are paying more to get more and better products, and they are happy to do so.

Contrast this with a supply shock, where lack of supply forces up prices. There, because price increases are not driven by increased demand, some market participants may exit the market if faced with price exceeding their willingness to pay.

The price increase from ending the NCAA cartel is a demand effect, not a supply shock, and analyzing it like a supply effect yields the wrong answer. Schools today, for all of their claimed poverty, find it rational to pay about 85 men to play football for their school at current (fixed) prices equal to a scholarship. There are thousands of men who, absent a better offer, are willing to accept that level of pay for their services. If the bottom half of Division I simply does not have the means to pay more, that is if they lack additional demand, those athletes aren’t going to vanish. They will still play for the current going rate. The market will not collapse.

Ross acknowledges that “[e]ven the most marginal team member would still likely merit a scholarship,” but misses how this simple economic truth disproves much of his thesis. Schools won’t exit the NCAA. If they are willing to pay scholarships today, everyone will still be worth that much tomorrow. Rosters won’t shrink.  If the last guy brought on today is worth at least as much as he is paid, schools will still make that profitable acquisition tomorrow. Demand cannot push up prices so high that no one can afford it.

There is more that is wrong here, including the misperception that any talent below the NFL level is fungible (yet schools fight tooth and nail for those athletes), that complying with Title IX in a market economy would be more difficult than basic algebra, and that students and employees are mutually exclusive concepts. (Tell that to the “over 12,000 Academic Student Employees” of the University of California system who are members of the United Auto Workers local 2865.)

But the biggest flaw of all is Ross’s premise that big-money sports mean true education or “genuine student athletes” are somehow crowded out of the American higher education market. There are over three thousand four-year colleges and universities in America. That 129 have large football programs has not caused higher education to wither away. Ross’s “genuine student athletes” are all around our campuses, even at USC, where over 9,600 Trojans participate in the USC Intramural Sports Program each year.

Today, schools that don’t value big-time football don’t have big-time football teams; some have no football at all. The minority of schools that want their football big pay for it, and also use their programs to make money. Even the most football-crazy school still spends far more on education than on football, and most offer intramurals for everyone else interested in playing at a more “genuine” student level.

College and sports exist both with and without money. America has room for Smith College and USC. Leaving aside the deep flaws in his economics, what is most off base about Ross’s prescription is that it addresses an illness—Unwanted Football Syndrome—that no school seems to have.