The “So-Called” Sports Economists Strike Back
It Appears Parity Has Come to College Football
For more than a century, the following recent headline from Sports Illustrated would never have been heard:
REPORT: Michigan presents $5 million NIL offer to 5-star QB Bryce Underwood
Historically, the NCAA did not allow universities to pay college athletes anything beyond the cost of attending the institution. In 2021, though, this was all changed by the Supreme Court. In the NCAA vs. Alston, the Supreme Court ruled – in a very rare unanimous decision – that the NCAA had violated antitrust laws with its rules limiting the compensation of the athletes the NCAA schools employed.
This decision was quite consistent with the arguments of sports economists for decades. And it is not surprising that the plaintiffs in this case hired economists who have studied sports extensively to make their case.
Unfortunately for the NCAA, no one who truly understood sports economics would likely wish to defend their practices publicly. That didn’t mean the NCAA, though, couldn’t find an “expert” to help them out. In fact, the NCAA was able to hire a Nobel Laureate.
Before I get to this person and their arguments, let me just offer a comment on the Nobel Prize. Six years ago – when I wrote at Forbes – I argued that “Few Would Take The Nobel Prize Selection Process Seriously If Applied To Sports.” In sports, something like baseball’s Hall of Fame involves hundreds of voters and statistics objectively detailing everything an athlete did across their entire career. And even with all that information, one can argue the voters for baseball’s Hall of Fame make mistakes.
In contrast to what we see in sports, the Nobel Prize is essentially decided by a very small number of people in Sweden. These people also have very little objective information to truly rank which academic is “better” than another. In fact, I would argue there is no way to objectively argue that a specific academic’s research is “better” than somebody else’s research. That is because I don’t believe one can argue one valid study is really better than another.
In my career, I have published 69 papers in academic journals, 24 more studies in academic collections, and six books. In sum, I have done a bit of research. Some of this research has been published in “top” outlets. Other studies have not. Are the studies in the “better” journals really my best work? I certainly don’t think so. My subjective ranking – and yes, all these rankings are ultimately subjective – just doesn’t match the subjective rankings of other people.
Of course, that is the nature of subjective rankings.
And all that means, I tend to think the Nobel Prize is essentially nonsense (that being said, I do not judge anyone who takes a million dollars from a group that wants to celebrate their life’s work!).
My opinion of the Nobel Prize, though, isn’t shared by everyone. At least, the NCAA probably hoped in 2021 that James Heckman – who some people in Sweden gave a Nobel Prize to in 2000 – would convince the courts the NCAA’s labor market restriction were not illegal. Heckman’s help wasn’t cheap. It was reported at one point the NCAA was paying Heckman $2,300 per hour!
For all that money, Heckman provided the argument the NCAA wanted. In an opinion piece published at The Hill, Heckman offered this statement:
Are these student-athletes exploited, or do they benefit? This question is better settled by hard empirical evidence than by anecdotes and polemics. Our empirical research on student-athletes, based on extensive data collected by the Department of Education, finds that athletes receive substantial benefits from the current amateur sports model. Our team analyzed datasets tracking over 20,000 students from high school until their early 20s and found that student-athletes finished high school at higher rates, attended college at higher rates, graduated college at the same or higher rates, and were earning as much or more than otherwise comparable non-athletes.
So, Heckman argues that college athletics benefits the athletes. And therefore, college athletes are not exploited.
Unfortunately, Heckman couldn’t find a judge to agree that this analysis was correct. Again – as noted – the entire Supreme Court disagreed. Heckman, though, was not persuaded by his string of legal losses. As he told Sportico:
“College is not an athletic market, and Wilken was irresponsible, and Kavanaugh was just insane in thinking this was an athletic market, and they were squeezing salaries down,” Heckman said. He says Kavanaugh was taken in by a handful of heart-tugging anecdotes about ill-treated college athletes, stories propagated by “yellow journalists” and “so-called sports economists.”
Once again, Heckman was looking at whether or not college athletes are exploited. As one of those “so-called sports economists”, I would like to point out that Heckman’s analysis was really, really wrong. His approach is most definitely not how one addresses this issue.
First of all, it is very possible for a person to receive benefits from a job and still be exploited. In other words, how Heckman framed the question is entirely incorrect.
As I note in my textbook (yes, this is just a simple textbook problem), a worker is exploited when the revenue they generate for their employer exceeds the wage they are paid. And by that definition, I have published research indicated that men’s college basketball players, women’s college basketball players, and softball players are all exploited. Were many of these athletes happy with their college experience? Perhaps they were. But exploitation is about wages and revenue generated. Whether you are happy with your job or not, if your wages are less than the revenue you generate you are exploited.
And yes, all of this research telling this story involved “hard evidence”. Sports economists are not publishing anecdotes!
Heckman, though, didn’t stop at just failing to measure rates of exploitation. He also made a bold prediction. According to Heckman, if players in college sports were paid…
… the dominant football and basketball programs with current money to spend will become even more entrenched, leading to reduced competitive balance and fan support — the opposite of what antitrust policy is designed to target.
Back in 2013, I argued the opposite would happen if players were paid. As I noted in an op-ed at Time.com (this argument is also in my textbook), if the labor market for college players were no longer restricted, competitive balance would improve. Historically – as the economist Jim Peach noted – college sports had not had competitive balance (and this essentially true regardless of which sport you examine).
In college sports, the best teams tend to recruit the best athletes. This is because if all athletes are paid the same, the athletes tend to go to the school where they are likely to win. The result was that for top programs, their starting lineup could easily beat most of their opponents. And the same was true for their second string. So even injuries couldn’t derail the giants of college sports in most sports.
Did this lack of competitive balance in college sports lead to less fan support as Heckman contends? It did not. And that is because competitive balance is not a primary driver of fan interest in sports (again, that’s in my textbook!).
Heckman did more than just erroneously argue that competitive balance drives attendance. He also made a prediction that paying college players would reduce competitive balance. Again, I argued the opposite.
So, what are we seeing now? Well, it looks like the “so-called” sports economists have struck back again!
Well, at least that is the story we are seeing during the 2024 college football season. In the past 25 years, only 12 college football teams have won national championships. Among this list are schools like Michigan, Florida State, Florida, Oklahoma, USC, and Auburn. Each of these schools have ranked among the dominant teams in college football in the 20th century.
In 2019 – before COVID and before the Supreme Court decision – these six schools were collectively 55-24. Not surprisingly, these schools won 70% of their games; much like they always had.
We are now three years removed from the Supreme Court decision. The market for college football players is such that players are both being paid different amounts and allowed to transfer if they are not happy with their financial offer and other conditions of employment. In sum, labor market freedom has come to college football.
Heckman argued that such a result would harm competitive balance. Once again, college sports didn’t have competitive balance before 2021. But has this bad situation become worse?
As of the last week of October in 2024, it certainly doesn’t look like it has. Those six perennial powers this year have already lost 26 games this year (i.e. two more than those six schools lost in all of 2019). And their combined winning percentage is just 45%.
Yes, looking at six historically dominant schools across just half a season is very much anecdotal. But it does appear college football is much more balanced. Even Nick Saban – who benefitted tremendously in his life from the old system – has noticed that the new labor market in college football has created more parity.
Once again, this outcome is something that seemed quite predictable. In the same way, it seemed obvious that the labor market Nick Saban benefitted from led to worker exploitation. All of this would seem obvious to anyone who had studied sports economics.
Of course, it doesn’t look like Heckman ever bothered to do this. It appears he assumed that his prize from some people in Sweden made him an “expert” on anything he chose to think about. Unfortunately, knowledge doesn’t work this way. The failure to study led Heckman to get the exploitation of college athletes wrong, the link between competitive balance and consumer demand wrong, and how paying athletes would impact competitive balance wrong!
Yes, that’s three strikes!! Or as I said, the expertise of the “so-called” sports economists seems to be striking back!