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<\/a><\/p>\nThe inspiration for this month\u2019s column came from a casual conversation about college football I had with my mom.\u00a0 She remembers the heady days of the 1950s and 60s before the NCAA became a multi-billion-dollar business.\u00a0 During the course of that exchange, she expressed particular hatred for the Ohio State University because they always beat her favorite teams.\u00a0 When I asked her why the Buckeyes always won, she answered with one of the most interesting and telling responses:\u00a0 \u201cI guess they paid their guys more than we did.\u201d<\/p>\n
I reflected on that remark for some time and realized the truth in the matter.\u00a0 Despite the fig leaf of respectability that the NCAA tries to hide behind by keeping money away from college football while maintaining that the players are \u2018student-athletes\u2019, each university really does pay their players.<\/p>\n
Here I\u2019m not talking about the various recruiting scandals that have plagued the NCAA in the past.\u00a0 They are a natural outgrowth of the economics legitimately in play, and I\u2019ll discuss them later in their proper context.\u00a0 What really passes for pay is the reciprocal compensation that players receive from the university in exchange for their on-field talent and the sporting entertainment they deliver to the audience.<\/p>\n
To illustrate this point let\u2019s consider your average, high school all American linebacker being recruited for a spot on a college football team.\u00a0 To keep the argument compact and convenient, let\u2019s suppose that there are only two teams in the running for Jack\u2019s talent (the name of our linebacker is Jack for subtle reasons best left unsaid).\u00a0 The first team is that top tier football school Alabama University home of the Crimson Tide.\u00a0 The second team is Iowa University with its Hawkeye football program, which is a tier lower than Alabama\u2019s (even if its academics are clearly a tier above).<\/p>\n
| <\/td>\n | Revenue (2008)<\/td>\n | Outlays (2008)<\/td>\n | College Ranking (11\/12\/18)<\/td>\n<\/tr>\n | ||||
| Alabama:<\/td>\n | $123,769,841<\/td>\n | $123,370,004<\/td>\n | 1st<\/sup><\/td>\n<\/tr>\n| Iowa:<\/td>\n | $81,515,865<\/td>\n | $71,602,594<\/td>\n | 21st<\/sup><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n | It is in the economic interest of each school to secure Jack\u2019s attendance since the better the team the greater the revenue.\u00a0 The greater the revenue they each have the greater economic power they yield and college presidents and administrators love yielding power.<\/p>\n Given that it is a buyer\u2019s market, how does Jack decide where to go?\u00a0 It depends on Jacks\u2019 goal, aspirations, and dreams, but it is a safe bet to assume that the typical all-American like Jack is interested in the college limelight as a showcase for his talent.\u00a0 He wants to play for a team with a large national exposure; one which appears on television often; is nationally ranked in the poles; has a good chance at the national championship; and attracts the attention of NFL scouts.\u00a0 In this way, Jack maximizes his chances of receiving a lucrative professional football deal at the end of his rainbow.\u00a0 With this logic in hand, Jack examines the two programs and sees that Alabama is the place for him.<\/p>\n To the casual observer, this probably seems like a perfectly fine way of doing business.\u00a0 Jack and Alabama are a good fit for each other \u2013 Alabama has a top-flight football program always looking for great talent and Jack gets all the prestige associated with being able to yell \u2018Roll Tide\u2019.<\/p>\n But what about Iowa?\u00a0 The standard response is that they\u2019ll be able to attract better talent once they start winning more decisively, becoming a recognized national powerhouse.\u00a0 But there is an obvious catch 22, how does Iowa become a national powerhouse without being able to attract talent?<\/p>\n In a free market scenario, when business B has weaker human capital compared to business A, Business B can improve its market position by hiring equal or better talent by recruiting them with better pay and\/or benefits.\u00a0 In this scenario, Iowa could sweeten the deal for Jack, making a payout available today stand against or overshadow the possibility of a greater earnings in the distant future and serving as an insurance policy against injury.\u00a0 And since Iowa has a higher margin between revenues and outlay, it has a decisive advantage compared to Alabama.<\/p>\n |
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