September 15, 2010

Campus Notes

Rules Matter

by Charles Dahan

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The NCAA’s hammer of sweet, sweet justice will soon fall in towns that cloak themselves in respectability and ‘honor,’ or, more likely, delusion. While Miami, Southern California, Georgia, and any institution John Calipari touches (though even his shenanigans aren’t as impressive as Kentucky’s 1989 probation for an assistant coach sending 20 $50 bills to a prospect), each experienced significant NCAA sanctions over the past quarter century. Connecticut, North Carolina and Harvard are new to the party—or, more aptly, hangover. These violations stem not from greed or a lack of character, but instead the draft and recruitment process established by the NBA, NFL, MLB, and NCAA.

When comparing the incentive structures for basketball or football players to break the rules to those for baseball players, the primary difference is the option a baseball player has to opt out of college and the significant costs of attending a university. A player may enter the Major League Baseball draft at a few points—immediately before college, after each year of junior college, or after his junior year at a four-year university. Moreover, he knows his value before he signs, thereby making the ‘bribe’ boosters or a college coach must offer explicit. In addition, his personal cost of attending college is up to three years of lost MLB revenue, thereby dramatically increasing the personal cost of taking a bribe or cheating prior to coming to campus or during his freshman season. Unlike in the cases of O.J. Mayo or the fine young men at Memphis, a baseball player can’t take the monetary spoils potentially offered during his first year and then immediately bolt to the draft if he attends a four-year. The option to forego college raises the explicit cost of attendance, while the three-year requirement forces the player to stay on their best behavior or be sent into a Maurice Clarett-esque no-man’s land.

The rational calculation of a college player can be modeled very simply—if the perceived utility of going to college is outweighed by that of going pro, the player enters the draft. The benefits are so significant of going into the draft that if money is a concern, there is no way 20 wadded up $50 bills (a la Kentucky’s 1989 shenanigan) would effectively persuade a player to spend three years in college. Instead, as shown by recent investigations at UNC and a number of SEC schools, the biggest sources of potential NCAA violations can come from external hanky-panky, in particular the efforts of agents in signing players and providing what admittedly sound like some pretty fantastic parties, and internal shenanigans, in particular academic fraud. Yet the ability of players to choose to attend a four-year college inherently shrinks pool of athletes to those more likely to be risk averse than the athletes who go pro directly out of high school. First, they will have a college degree, and second, they view the money they will make from a higher signing bonus by improving their stock in college to be a better deal than playing the odds by going pro and quickly working their way up an organizational hierarchy.

For a college football player, the required three years of college attendance exclusively benefits the leagues. The NFL receives a laboratory in which teams have more information about players thereby decreasing the potential for a draft pick to be a bust, and the NCAA is provided with the most insanely profitable labor in the world. College baseball is, of course, in a different universe than basketball or football.

The money involved is less substantial by at least an order of magnitude (with the exception of benefit to the state of Nebraska, which earns over $25 million from the College World Series). Yet the amount of money involved in the college industry itself should only impact the money available to players during their college experience. This money would be coming from two potential sources—boosters and coaches. The lack of fervor regarding college baseball certainly would have an impact on the unscrupulous activities of the former, yet the salaries of the latter—while not as grand as those available to college football or basketball coaches—are, as Augie Garrido’s salary from the University of Texas in excess of $1 million demonstrates, substantial. Yet one thing the NCAA seems to have gotten right over the past two decades is limiting the frequency of money coming directly from athletic coaches to players.

The two most significant NCAA baseball scandals over the past two seasons have come at Georgetown and Arizona State. At Georgetown, a total of $61,000 was paid to 26 players in unearned work-study funds after the work study program moved to business off campus, where the number of assigned hours was unsupervised. The players were not ‘overpaid,’ they simply were not assigned the number of hours an assistant coach reported (which they had previously been when the program was run by the university itself). Perhaps getting more directly at the issue of incentives for coaches to skirt rules due to the significant potential salaries, Arizona State fired coach Pat Murphy last November after the NCAA threatened ASU with a, “lack of institutional control,” as well as self-imposing a sanction of relinquishing two scholarships, abdicating 44 of 49 wins from 2007, and limiting recruiting in July for 2010 and 2011. Murphy’s violations included over 500 impermissible phone calls by the baseball staff to recruits—a problem that can only be limited by increasing the penalties for coaches thereby diminishing opportunity costs.

 By making the decision to attend college a costly one, MLB forces players to actually value their time on campus—unlike the NFL and NBA that require indentured servitude of their future employees. Further, by not allowing four-year college players to bolt to the big leagues after only a season, MLB increases the cost to players for cheating early during their collegiate career, as they will lose their scholarship and valuable playing time that will translate into future signing bonus riches.