Coyote Blog

It is incredible to me that we still fetishize amateurism, which in a large sense is just a holdover from British and other European aristocracies.  Historically, the mark of the true aristocrat was one who was completely unproductive.  I am not exaggerating -- doing any paid work of any sort made one a tradesman, and at best lowered ones status (in England) or essentially caused your aristocratic credentials to be revoked (France).

The whole notion of amateurism was originally tied up in this aristocratic nonsense.  It's fine to play cricket or serve in Parliament unpaid, but take money for doing so and you are out.  This had the benefit of essentially clearing the pitch in both politics and sports (and even fields like science, for a time) for the aristocracy, since no one else could afford to dedicate time to these pursuits and not get paid.  These attitudes carried over into things like the Olympics and even early American baseball, though both eventually gave up on the concept as outdated.

But the one last bastion of support of these old British aristocratic privileges is the NCAA, which still dedicates enormous resources, with an assist from the FBI, to track down anyone who gets a dollar when they are a college athlete.  Jason Gay has a great column on this today in the WSJ:

This is where we are now, like it or not. College basketball—and college football—are not the sepia-toned postcards of nostalgia from generations past. They’re a multibillion dollar market economy in which almost everyone benefits, and only one valve—to the players—is shut off, because of some creaky, indefensible adherence to amateurism. Of course some money finds its way to the players. That’s what the details of this case show. Not a scandal. A market.

Don’t look for the NCAA to acknowledge this, however. “These allegations, if true, point to systematic failures that must be fixed and fixed now if we want college sports in America. Simply put, people who engage in this kind of behavior have no place in college sports,” NCAA president Mark Emmert said in a statement that deserved confetti and a laughing donkey noise at the end of it.

I am not necessarily advocating that schools should or should have to pay student athletes, though that may (as Gay predicts) be coming some day.  But as a minimum the ban on athletes accepting any outside money for any reason is just insane.   As I wrote before, athletes are the only  students at a University that are not allowed to earn money in what they are good at.  Ever hear of an amateurism requirement for student poets?  For engineers?

When I was a senior at Princeton, Brooke Shields was a freshman.  At the time of her matriculation, she was already a highly paid professional model and actress (Blue Lagoon).  No one ever suggested that she not be allowed to participate in the amateur Princeton Triangle Club shows because she was already a professional.

When I was a sophomore at Princeton, I used to sit in my small dining hall (the now-defunct Madison Society) and listen to a guy named Stanley Jordan play guitar in a really odd way.  Jordan was already a professional musician (a few years after he graduated he would release an album that was #1 on the jazz charts for nearly a year).  Despite the fact that Jordan was a professional and already earned a lot of money from his music, no one ever suggested that he not be allowed to participate in a number of amateur Princeton music groups and shows.

My daughter is an art major at a school called Art Center in Pasadena (where she upsets my preconceived notions of art school by working way harder than I did in college).  She and many, if not most of her fellow students have sold their art for money already, but no one as ever suggested that they not be allowed to participate in school art shows and competitions.

I actually first wrote about this in Forbes way back in 2011.  Jason Gay makes the exact same points in his editorial today.  Good.  Finally someone who actually has an audience is stating the obvious:

In the shorter term, I like the proposals out there to eliminate the amateurism requirement—allow a college athlete in any sport (not just football or basketball) to accept sponsor dollars, outside jobs, agents, any side income they can get. The Olympics did this long ago, and somehow survived. I also think we’ll see, in basketball, the NBA stepping up and widening its developmental league—junking the dreadful one-and-one policy, lowering its age minimum, but simultaneously creating a more attractive alternative to the college game. If a player still opts to go to college, they’ll need to stay on at least a couple of seasons.

If you still think the scholarship is sufficient payment for an athlete in a high-revenue sport, ask yourself this question. There are all kinds of scholarships—academic, artistic, etc. Why are athletic scholarship recipients the only ones held to an amateurism standard? A sophomore on a creative writing scholarship gets a short story accepted to the New Yorker. Is he or she prohibited from collecting on the money? Heck no! As the Hamilton Place Strategies founder and former U.S. treasury secretary Tony Fratto succinctly put it on Twitter: “No one cares about a music scholarship student getting paid to play gigs.”

 

This week, the NLRB agreed to allow the players on the Northwestern University football team to unionize.   This is one of those issues that is simple and straightforward in a free society and a total mess in our less-than-free society.  Here are a few thoughts:

1. In a free society, this is a no-brainer.  The Northwestern players are welcome to create an association among themselves and call it anything they like, including "union".  That association is free to try to negotiate with the university for better terms  (they are also free to fail at this and make no progress).
2. However, it is clear that we are not a free society because the players had to go to the government and ask permission to form this particular type of association.  The reason is that associations called "unions" have been granted special powers and privileges under the law not available to other associations.  There are also a large body of very particular rules for how such associations may conduct business and how other groups (in this case the University) can or cannot interact with it.  It is a very tricky legal and philosophical question whether this package of benefits and privileges should be accorded to a group of college football players
3. In a free society, the fact that the players don't get paid cash and that their universities make millions off the football program would be irrelevant.  The players freely agreed to the deal (in most cases, playing in exchange for free tuition and perhaps a chance to land an NFL job) so there is nothing inherently unfair about it.
4. However, in our society, we have all sorts of government interventions.  I consider many of these interventions to be counter-productive, even occasionally insane.  But if one is to navigate such a society (rather than, say, go off and live in Galt's Gulch), I think the principle of equal protection is critical.  Arbitrary government interventions in free exchange are FAR worse when applied unevenly.  From an equal protection standpoint, I think the players may have a good case.
   • The law generally does not allow profit-making businesses (and the NCAA and college footfall are certainly those) to accept unpaid labor.  Many folks who don't deal with the Fair Labor Standards Act every day will say: "players are paid, they get free tuition."  But this is not how the FLSA works.  It counts non-cash wages only in very specific circumstances that are enumerated in the law (e.g. lodging).  Think of it this way -- McDonald's could not legally just pay all its employees in french fries and claim to be compliant with the law.  Also, large numbers of Division 1 football and basketball players never graduate, which shows a fair amount of contempt by players for this supposedly valuable "free tuition" compensation.
   • On the other hand, most college athletics are not profit-making.  My son plays baseball at Amherst College -- it would be laughable to call this a profit center.  I am not sure there are but a handful of women's teams in any sport that generate profits for their school, and even on the men's side money-making is limited to a few score men's football and basketball teams.   But the few that do make money make a LOT.  University of Texas has its own TV network, as do most major conferences.
   • The law generally does not allow any group of enterprises to enter into agreements that restrict employment options.  Google et. al. are getting flamed right now, and likely face criminal anti-trust charges and lawsuits, for agreements to restrict hiring employees from each other's firms.  The NCAA cuts such deals all the time, both severely restricting moves between schools (transfer provisions in Division I are quite onerous) and preventing poaching at least of younger players by professional leagues like the NBA and NFL.   The notion that top players in the NCAA are playing for their education is a joke -- they are playing in college because that is what they have to do in order to eventually be allowed in a league where they can get paid for their skills.
   • Actually trying to pay players would be a real mess.  In a free society, one might just pay the ones who play the most profitable sports and contribute the most value.   But with Title IX, for example, that is impossible.  Paying only the most financially valuable players and teams would lead to 99% of the pay going to men, which would lead to Title IX gender discrimination suits before the first paycheck was even delivered.  And 99% of college athletes probably don't even want to be paid
   • Part of the pay problem is that the NCAA is so moronic in its rules.  Even if the university does not pay players, many outsider would if allowed.  Boosters love to pay football and basketball players under the table in cash and cars and such, and top athletes could easily get endorsement money or paid for autographs by third parties.  But NCAA rules are so strict that athletes can be in violation of the rules for accepting a free plane ticket from a friend to go to his mother's funeral.  When I interview students for Princeton admissions, I never buy them even a coffee in case they are a recruited athlete, because doing so would violate the rules.
   • Much of this is based on an outdated fetish for amateurism, that somehow money taints athletic achievement.  It is hilarious to see good progressive college presidents spout this kind of thing, because in fact this notion of amateurism was actually an aristocratic invention to keep the commoners out of sports (since commoners would not have the means to dedicate much of their life to training without a source of income).  The amateur ideal is actually an exclusionist aristocratic tool that has for some reason now been adopted as a progressive ideal.   Note that nowhere else in college do we require that students not earn money with their skills -- business majors can make money in business over the summer, artists can sell their art, musicians can be paid to perform.  When Brooke Shields was at Princeton, she appeared in the school amateur play despite making millions simultaneously as a professional actress.  Only athletes can't trade their skill for money in their free time.

I am not sure where this is all going, but as a minimum I think the NCAA is going to be forced to allow athletes to earn outside income and accept outside benefits without losing their eligibility.

Back in 2011 I wrote an article in Forbes on this topic

My kids and I were watching Zoolander the other day, and one joke I don't think they fully "got" was the ongoing gag where many of the characters had really tiny cell phones.  The movie, made in 2001, was mocking a trend at the time where people were paying premium prices to get the smallest phone possible.

It is amazing how things change.  If you made that movie today, it would likely be written mocking the opposite effect, with people trying to talk on smart phones the size of salad plates.  Here for example is a new 6.3 inch diagonal phone.  Only NBA players who can palm a basketball need apply.

(image source)

Not to say there is anything illogical about this.  We now read our phone much more than we listen to it.  I am not sure either of my kids has ever made a phone call on their cell phones except to my wife and me.

A group of employers agree not to compete with each other on job offer timing, basically by making all students wait until a certain date to find out if they have a job.  Students, who for a variety of reasons may value an early decision / clarity on their job plans are denied this opportunity by the cartel.  Who is this?

Well, it could be the NBA, which operates this way, because historically Congress and the courts have cut sports leagues slack on such anti-trust issues.  But in this case we are referring to an agreement among Federal judges to restrain competition for law clerks.

As with most all cartels that are not backed up by force of law, the cartel has broken up because there was too much incentive to "cheat".  Which is exactly why anti-trust laws are not required, because such cartels always go kaput in a free market.  In fact, the only stable cartels in the US have tended to be those that are backed by the force of law and guns.

NY Times has a great interactive graphic of Miami and OKC shooting by location on the court (roll over the face pictures to get the actual graphics).

It provides some insight as to why the NBA game seems to be all threes or points in the paint -- the mid-range jump shot just does not have the same return on investment (ie points per shot).  Which begs the question, I suppose, as to why anyone shoots the mid-range jump shot at all  (look at Battier's and Hardin's maps - they are almost all threes and layups/dunks).  I suppose the answer likely takes the form of "you have to shoot mid-range to open up the other two zones", a sort of run to set up the pass in football strategy.  Don't know enough about basketball to say if this is true.

Update:  Also, the shot clock probably has a lot to do with it.  Given infinite time, teams would be able to get the shot they want, but in 24 seconds sometimes you just have to loft one up  as time runs out from wherever you are.

Here are the stats:  Close range -- 1.19 points per shot, 3-point -- 1.08 pps, mid-range --  0.80 pps

I have argued many times that publicly-funded stadiums are a huge part of sports profits and team valuations.  For example, here in Glendale AZ, the town's stadium subsidies represent over a third of the value of the Cardinals and almost 200% of the value of the Coyotes.

As some of you may know, the NBA is heading into a protracted labor negotiation, with both parties acknowledging that the economics of the game have turned against owners.  Henry Abbot at ESPN argues that a large part of that economic change has been increasing taxpayer reluctance to subsidize sweetheart stadium deals for teams

Public money for stadiums has become scarce, and I have to believe that's part of the owners' pleas for financial relief from players. Huge moneymaking buildings for free or cheap have been no small part of what makes owning a team a no-brainer. Now teams in need of stadiums -- like the Kings and whatever team may one day relocate to Seattle -- face tough economics. Getting either deal done requires some kind of miracle. And in that context, if you ever fantasized about a world where taxpayers didn't contribute so much to buildings -- even if it meant players earned a little less -- well, your time is now.

To his latter point, I hope he is right.

My column is up this week at Forbes, and discusses the role of taxpayer money in professional sports.

A  critical battle is underway challenging the very heart of the professional sports economics model — and it is not the NFL labor negotiations.  The unlikely fight is between a struggling league (the NHL), a suburb with delusions of grandeur (Glendale, Arizona), and a small, regional think tank (the Goldwater Institute).   At stake is an important source of value for nearly every professional sports team:  taxpayer subsidies....

Consider the Arizona Cardinals new football stadium in Glendale, for example.  In part due to the promise of a Superbowl bid, the local taxpayers paid $346 million of the total $455 million cost of the facility — a building that will be used just three hours a day on ten days a year for its primary purpose.  By contrast, in 2010 Forbes valued the Arizona Cardinals at $919 million, meaning well over a third of the franchise’s value accrues from the public subsidy of its retractable roof palace.  It can be argued that much of the increase in player salaries and team owner wealth in the NFL over the last twenty years has come at the expense of taxpayers.

If anything, this example from the NFL understates the importance of public funding of stadiums.  Why?  Because of all the major sports leagues, the NFL gets the lowest percentage of its total revenues from its stadiums.  Leagues like the NBA, and in particular the NHL, are far more dependent on stadium revenue for their well-being.

Let’s return to precocious Glendale.  In 2003, the city agreed to publicly fund $180 million of the $220 million cost of building a new arena for the Phoenix Coyotes hockey team.  Whereas Glendale’s subsidy of the Cardinals represented about a third of that franchise’s value, their $180 million subsidy of the Coyotes represents over 130% of the current $134 million value of the team.  Stuck in Arizona and losing as much as $40 million a year, the team is literally worthless without ongoing public subsidies.

The column goes on to discuss yet another bond issue proposed by Glendale to subsidize these teams.

Ties occur at the end of regulation in NBA basketball games way more frequently than one might expect from a normal distribution of scores.    The distribution of point differential at the end of regulation looks really weird:

Why this is, and the role of strategy, is here (via the sports economist).

From a reader comes this story of Arizona looking to the public trough to get funds to lure another SuperBowl.  I can say from experience now that Superbowl week is made up mostly of private corporate and celebrity parties that the unwashed locals like myself are either a) not allowed to attend at all or b) can attend only by ponying up $1000 or more.  Not being resentful or a leftist, I couldn't really care less about the parties being near by.  However, my opinion changes real fast if my tax dollars are required to pay for them:

Super Bowl organizers will try to nail down another big game for Arizona, possibly as early as 2012.

But for the state to stay competitive, taxpayers need to shoulder the
majority of game costs, organizers say. And the organizers plan to
lobby for legislation to accomplish that.

The weeklong celebration culminating with Sunday's Super Bowl XLII cost
the local Host Committee about $17 million. The private sector,
including such big contributors as the Fort McDowell Yavapai Nation and
the Thunderbirds, bankrolled more than 80 percent, while state and
local agencies chipped in the balance.

But with a slumping economy making fundraising a challenge, the Arizona
Super Bowl Host Committee, the Arizona Cardinals organization and
Valley business leaders want see that ratio reversed, with public
dollars financing the bulk of the effort.

Don't you love the last sentence?  An exactly equivalent way to state this is "people have other priorities for their own money and refuse to give it up voluntarily, particularly in difficult economic times, so we need the state to take it by force."

No one yet knows how much this year's Super Bowl will fatten state
coffers, though organizers project the game created more than $400
million in spending. An economic-impact study won't be out for at least
a couple of months.

Bullshit.  Every major economic study not conducted by the management of a professional sports team has shown nearly zero impact from such events.  Here is the Seattle NBA team admitting they have no economic impact.  Here is yet another economic study to the same effect.

Here is my challenge:  Take the Phoenix-area GDP for this Jan-Feb, take out the growth trend line (which can be found in year-over-year comparisons of previous months) and then compare it to the GDP for Jan-Feb 2007.  I bet you whatever you care to bet you cannot find an additional $400 million. 

David Stern is putting a gun to the head of Seattle taxpayers:

NBA commissioner David Stern is putting the screws to Seattle
in his attempts to get the community to provide taxpayer subsidies that
are lucrative enough to keep the team from departing the "Emerald City"
to even greener fields in Oklahoma.

Stern blasts city officials
and the overwhelming majority of voters in the city for passing a law
requiring (gasp!) that any funds used to help build an arena earn the
same rate of return as a treasury bill. "That measure simply means
there is no way city money would ever be used on an arena project,"
Stern said. Effectively, Stern has just confirmed what sports
economists have known all along: taxpayer spending on sports
infrastructure is unlikely to provide significant returns on the
investment.

We went through the exact same thing here in Phoenix, with various outsiders and city politicians chiding the voters to voting down taxpayer funded palaces for the Cardinals and Coyotes  (eventually, they found a sucker in the local city of Glendale).  In the past, I have written about sports team and corporate relocations as a prisoners dilemma game.

To see this clearer, lets take the example of Major League Baseball
(MLB).  We all know that cities and states have been massively
subsidizing new baseball stadiums for billionaire team owners.  Lets
for a minute say this never happened - that somehow, the mayors of the
50 largest cities got together in 1960 and made a no-stadium-subsidy
pledge.  First, would MLB still exist?  Sure!  Teams like the Giants
have proven that baseball can work financially in a private park, and
baseball thrived for years with private parks.  OK, would baseball be
in the same cities?  Well, without subsidies, baseball would be in the
largest cities, like New York and LA and Chicago, which is exactly
where they are now.  The odd city here or there might be different,
e.g. Tampa Bay might never have gotten a team, but that would in
retrospect have been a good thing.

The net effect in baseball is the same as it is in every other
industry:  Relocation subsidies, when everyone is playing the game, do
nothing to substantially affect the location of jobs and businesses,
but rather just transfer taxpayer money to business owners and workers.

The Sports Economist writes about this move in the context of another economic game:

Indeed this is a classic example of the time inconsistency problem for
which Finn Kydland and Ed Prescott (my graduate school macro
professor!) won the Nobel Prize in 2004. Stern would like to threaten
Seattle with the permanent loss of their NBA team in order to secure
taxpayer concessions now. But should the team move, the NBA has every
reason to want to back off its previous threats and relocate a team
back into to the area due to the size, location, and income levels of
the city. Even having lost a team, Seattle will likely remain a better
candidate for a successful franchise than smaller and poorer cities
such as New Orleans or Memphis. Certainly Seattle should not fall for
Stern's bluster.

A while back, writing about charges of discrimination by white referees against blacks in NBA foul calls, I said:

My sense is that we make snap decisions about other people based on a
wide range of physical attributes, including height, attractiveness,
clothing, tattoos, piercings as well as visible racial characteristics
(e.g. skin color) and race-related appearance choices (e.g. cornrows).
It would be interesting to see where skin color falls against these
other visible differentiators as a driver of third party decisions
(e.g. whether to call a foul).   My sense is that 60 years ago, skin
color would be factor #1 and all these others would be orders of
magnitude behind.  Today?  I don't know.  While skin color hasn't gone
away as an influencer, it may be falling into what we might call the
"background level", less than or equal to some of these other effects.
It would be interesting, for example, to make the same study on level
of visible tattooing and the effect on foul calls.  My sense is that
this might be of the same order of magnitude today as skin color in
affecting such snap decisions.

I may have been on to something:

Russell says in the last two months he's applied for over 100 jobs. In
almost half of them, he says he was denied because of his tattoos. He
says that's discrimination.

The NYT reports on what looks like a well-reasoned study on officiating bias in the NBA.  I say well-reasoned mainly because Steven Levitt, who has become famous for applying tools of economics to such problems, seems to be comfortable with their approach.  The key finding is that white refs call fouls on black players at a rate .12-.20 fouls per 48 minutes playing time higher than they do on white players  [note that most players don't play a full 48 minutes per game, so the actual rate per player per game is less].  Black refs show the same tendency to call more fouls on whites, though the article omits this rate.

That's obviously a bummer -- we'd like to think that stuff never comes into play.  However, I would like to offer this bit of perspective:  Sixty years ago, black men were not allowed in the NBA.  Today, black men in the NBA, along with folks like Tiger Woods, are among the highest salaried people in the world.   In 60 years, we have gone from  total exclusion to a measurable difference of about 1 foul called every 10 or so games played.  That's pretty good progress. 

My sense is that we make snap decisions about other people based on a wide range of physical attributes, including height, attractiveness, clothing, tattoos, piercings as well as visible racial characteristics (e.g. skin color) and race-related appearance choices (e.g. cornrows).  It would be interesting to see where skin color falls against these other visible differentiators as a driver of third party decisions (e.g. whether to call a foul).   My sense is that 60 years ago, skin color would be factor #1 and all these others would be orders of magnitude behind.  Today?  I don't know.  While skin color hasn't gone away as an influencer, it may be falling into what we might call the "background level", less than or equal to some of these other effects.  It would be interesting, for example, to make the same study on level of visible tattooing and the effect on foul calls.  My sense is that this might be of the same order of magnitude today as skin color in affecting such snap decisions.

Incredibly, out of 32 initial NCAA championship games, there were only two real upsets (I don't count 9 beating 8 as a real upset).  Maybe my memory is faulty, but that seems like a really low number by historical standards.   Conventional wisdom would hold that we should probably see more rather than less upsets, as early flight to the NBA of the top players has tended to level the playing field out.

If you were to make a list of 10 people in the 20th Century who had the ability to rethink whole industries, you might come up with names like Sam Walton or Herb Kelleher.  One guy you might not think of, but who should make the list, is Bill James.  James has helped to single-handedly rethink the game of baseball, one of the great bastions of not-invented-here thinking.  Here is an interview of James that is pretty interesting.  Hat Tip to Cafe Hayek, who also has some thoughts on James the economist.

James sounds a lot like Hayek, and more recent authors like Virginia Postrel, when he says things like this:

If I were in politics and presented myself as a Republican, I would be
admired by Democrats by despised by my fellow Republicans. If I
presented myself as a Democrat, I would popular with Republicans but
jeered and hooted by the Democrats.
        I believe in a universe that is too complex for any of us to
really understand. Each of us has an organized way of thinking about
the world"”a paradigm, if you will"”and we need those, of course; you
can't get through the day unless you have some organized way of
thinking about the world. But the problem is that the real world is
vastly more complicated than the image of it that we carry around in
our heads. Many things are real and important that are not explained by
our theories"”no matter who we are, no matter how intelligent we are.
        As in politics we have left and right"”neither of which explains
the world or explains how to live successfully in the world"”in baseball
we have the analytical camp and the traditional camp, or the
sabermetricians against the scouts, however you want to characterize
it. I created a good part of the analytical paradigm that the
statistical analysts advocate, and certainly I believe in that paradigm
and I advocate it within the Red Sox front office. But at the same
time, the real world is too complicated to be explained by that
paradigm.

Or this, closer to the sports world:

Honestly, major league baseball"”and all sports"”would be far better off
if they would permit teams to do more to make one park distinctive from
another"”even so far as making the bases 85 feet apart in one park and
95 in another. Standardization is an evil idea. Let's pound everybody
flat, so that nobody has any unfair advantage. Diversity enriches us,
almost without exception. Who would want to live in a world in which
all women looked the same, or all restaurants were the same, or all TV
shows used the same format?
        People forget that into the 1960s, NBA basketball courts were
not all the same size--and the NBA would be a far better game today if
they had never standardized the courts. What has happened to the NBA
is, the players have gotten too large for the court. If they hadn't
standardized the courts, they would have eventually noticed that a
larger court makes a better game"”a more open, active game. And the same
in baseball. We would have a better game, ultimately, if the teams were
more free to experiment with different options.
        The only reason baseball didn't standardize its park
dimensions, honestly, is that at the time that standardization was a
dominant idea, they just couldn't. Because of Fenway and a few other
parks, baseball couldn't standardize its field dimensions in the
1960s"”and thus dodged a mistake that they would otherwise quite
certainly have made.
         Standardization destroys the ability to adapt. Take the high
mounds of the 1960s. We "standardized" that by enforcing the rules, and
I'm in favor of enforcing the rules, but suppose that the rules allowed
some reasonable variation in the height of the pitching mound? What
would have happened then would have been that, in the mid-1990s, when
the hitting numbers began to explode, teams would have begun to push
their pitching mounds up higher in order to offset the hitting
explosion. The game would have adapted naturally to prevent the home
run hitters from entirely having their own way. Standardization leads
to rigidity, and rigidity causes things to break.

I love it.  Maybe those guys who want to use baseball as a paradigm for life had something after all.

Overlawyered.com is on a roll lately, with a number of articles that want to make you beat your head on the wall:

• Another nail in the coffin of individual responsibility
• Small harm, big suit
• Signs of hope in Mississippi
• Lawsuits reducing auto safety
• NBA - the next asbestos?
• Failed to prevent suicide

I give up - too many good ones to link.  Just go and keep scrolling - you don't want to miss the "breastaurant" suit, do you?