Coyote Blog

Name a multi-billion dollar industry where all the competitors in the industry have formed a single cartel.  This cartel performs many functions, but one of its highest profile functions is to aggressively punish any member who pays its employees more than a cartel-enforced maximum.

Believe it or not, there is such an industry in the US... college sports.  The cartel is the NCAA, and whenever the NCAA makes the news, it usually is with an enforcement action punishing a school for allowing any of its athletes to make more than the agreed maximum salary, which is generally defined as free tuition.  As folks are learning at Ohio State, even trading your autograph for a free tattoo is not too small a transaction to attract ruthless NCAA retaliation.

This ESPN page (via Phil Miller) shows 2010 athletic revenue by school.  Take the top school on the list, the University of Texas.  In 2010 its athletic program brought in over $143 million in revenues.  It paid its workers (athletes) who helped generate this revenue $8.4 million (in the form of tuition), or 5.9% of revenues.  Its hard to decide whether this is high or low, though this percentage of labor for a service business seems low.  Looking for an analog, we can turn to the NFL, which is currently negotiating a revenue split with players.  The issue is still under negotiation, but for years players have been guaranteed over 50% of total revenues.

Even the Olympics finally gave up its stupid distinction of amateur status, allowing the best athletes to compete whether or not someone has ever paid them for anything.  This only makes sense - we don't have amateur engineers who work for free before they give up their amateur status for the professional ranks.  I can still continue to earn my degree at college in programming while being paid by outside companies to do programming.   I can still participate in the school glee club if I make money in a bar singing at nights.  I can still be student council president if I make money in the summers at a policy think tank.  Of all the activities on campus, the only one I cannot pursue if someone is willing to pay me for the same skill is athletics.

Only the NCAA holds out with this dumb amateur distinction, and the purpose is obvious -- it provides cover for what otherwise would be rightly treated as worker exploitation.  And they get away with it because most of the members of this cartel are actually state governments, who are really good at exempting themselves from the same standards the rest of us have to follow.

I hate blog posts that begin this way, but I will do it anyway:  Imagine that Wal-mart, Target and a hundred other major retailers all got together and agreed to an industry plan to hold down workers's wages.  Anyone involved with even rudimentary economics training would know that there would be enormous incentives for individual retailers to "cheat", ie offer wages above the agreed to levels to try to get a particular advantage hiring the best employees.  So imagine that the cartel actually forms an enforcement body, that goes around the country levying fines and punishments against any individual participant who breaks ranks and tries to share some of the largess with their workers.

Now imagine the NY Times rooting the enforcement body on, cheering it when it adopts a new get-tough stance on organizations that pay its workers too much.  Hard to imagine, but that is exactly the case in this article, where the Times writes about the NCAA's new efforts to get tough on what it calls "recruiting violations" but in any other industry would be called "trying to pay the workers more than the cartel allows."

NCAA division I sports are made up of a 100+ mostly public institutions that make a fortune off of their athletic programs, particularly men's football and basketball.  Large institutions like the University of Texas or Ohio State reap tens of millions each year in ticket sales, TV deals, merchandising sales, and Bowl/tournament winnings.  One of the reasons this is so profitable is that they basically pay the key workers who generate this income close to zero.  Sure, they give them a scholarship, but what is the marginal cost to, say, the University of Texas for providing a few hundred free educations on top of their 40,000 paid customers?  This is roughly equivalent to McDonald's paying its employees nothing more than a couple of happy meals each day.

While many of these university's athletes will make nothing after college playing sports, the ones involved in these "violations" are typically athletes who are offered millions, even tens of millions of dollars the moment they leave college.  In effect, these colleges are getting tens of millions of dollars of labor virtually for free, and so the incentives to cheat on their cartel deal are huge, which is why the cartel enforcers have to be so aggressive in stopping under-the-table payments to the grossly underpaid workers.

It is an ugly process, and one wonders why so many folks support it when they would be appalled at such practices in any other industry.

Via TJIC:

It took decades and, at times, antagonistic battles, but Harvard's gay community says it has finally cemented its academic legitimacy at the nation's oldest university. College officials will announce today that they will establish an endowed chair in lesbian, gay, bisexual, and transgender studies, in what is believed to be the first professorship of its kind in the country.

Can the adults among us agree that a degree in LGBT studies has about zero economic value?  Even a history degree has more economic value, as history studies tend to still be accompanied by some academic rigor.  But the pathetic scholarship standards and non-existant statistical rigor with which most social sciences, and various [fill in the blank with oppressed group] studies departments in particular, are taught make the economic value of such a degree at best zero and at worst a negative.

I have no problem with anyone studying whatever they wish using their own resources.  This is one place I diverge with Ayn Rand -- she might say that pursuing non-productive activity is inherently immoral.  I would say that pursuing your own goals, whatever they be and however valuable or valueless they might be to others, is just fine as long as you don't demand that everyone else to support you.

The problem is that a degree at Harvard probably requires a $200,000 investment to complete.  Given that, beyond a few career spots in academia, a LGBT studies degree is unlikely to ever recover enough (versus having no degree)  to pay for such an investment, problems are inevitable.  Either someone (read: taxpayers) will likely foot the bill, or else some student is going to find herself with tens of thousands of dollars of student debt and no realistic way to pay it back.

In fact, this latter situation is a common leitmotif of recent media stories, the college grad unable to handle his or her shocking debt load.  Somehow, stories all seem to blame the capitalist system as a failure point.  Michelle Obama, who similarly pursued [historically oppressed group] studies at Princeton, has expressed just this point of view.

Despite their Ivy League pedigrees and good salaries, Michelle Obama often says the fact that she and her husband are out of debt is due to sheer luck, because they could not have predicted that his two books would become bestsellers. "It was like, 'Let's put all our money on red!' " she told a crowd at Ohio State University on Friday. "It wasn't a financial plan! We were lucky! And it shouldn't have been based on luck, because we worked hard."

Is this problem really so hard to diagnose, or have we gotten so politically correct we cannot state a fact out loud that everyone understands -- that is, some degrees have more economic power than others.  LGBT studies degrees likely have very little economic utility.  So it is fine to pursue such a degree, but don't be surprised when you are not offered a six-figure income at graduation, and don't come to me expecting that I pay for your choice.