Friday, March 16, 2007

Consumer-oriented higher education

Is it possible to enjoy March Madness and despise the NCAA cartel? Is there a paradox? What's the big deal about consistency, anyway?

Lawrence M. Kahn writes about "Cartel Behavior and Amateurism in College Sports" in the Winter 2007 Journal of Economic Perspectives (gated).

He finds:

"Big-time college sports programs appear to extract rents from revenue-producing athletes by limiting their pay and requiring them to remain amateurs. These rents are spent on facilities, nonrevenues sports, and possibly head coaches' salaries. On average, the two big revenue sports of men's basketball and football run a surplus; however, college sports as a whole -- including the nonrevenue sports -- report operating losses. Some evidence suggests, although not unambiguously, that college sports have positive indirect effects on public anf private contributions. Moreover, sports success appears to generate interest by students that may lead to a modestly stronger student body. In this consumer-oriented era for higher education, universities need to maintain their appeal to future applicants, many of whom are future alumni or future voters for state legislatures, and having successful sports programs may be one way to do this. The popularity of college sports events and of schools with big-time athletic programs suggests that the idea of amateurism may have some market value. Arms race considerations suggest that society may gain from some spending limits on college athletics. From an efficiency point of view, these societal gains would have to be weighed against the losses caused by movement down the supply curve of star atheletes."

Paradox resolved. Exploitation, inefficiency, politicized anti-trust status and "consumer-oriented ... higher education"