7.10.09

THE CASE FOR LAW AND ECONOMICS. New York lawyer Benjamin Rosenberg asks Christian Science Monitor readers a question. Why should Notre Dame's football coach make more than tenured professors? The sub-headline proposes his answer. "Coaches' salaries are outrageous. If universities won't cap them and return to their mission of higher learning, then Congress should step in."

His column raises a number of points, which I will take in an order different from his.
The purpose of a university education is to gain professional skills and to cultivate a love for learning – tools that will ultimately help carry us through life. In a world that has become increasingly dependent on technology, information, and clear communication, American universities cannot afford to falter on this.
I concur in part and dissent in part. It's a non sequitur, however, to argue that the sports programs necessarily interfere with those goals, although administrative complicity in the form of hospitality tents at the tailgating zone and football on school nights reinforce his point. But let's restore a core curriculum and require calculus and go out of the remediation business and then talk about the universities faltering.

He'd like to enlist Congress in taming the salaries of the coaches.

Congress is already involved in college athletics. The Senate subcommittee on antitrust oversight has held hearings on the selection process for the Bowl Championship Series. The academic fate of our universities is more important than who is crowned national college football champion, so perhaps Congress can spare some time for academics.

Here's how: Most colleges and universities receive federal research grants or subsidies that help them to advance academic and intellectual interests, and to achieve socially beneficial goals. But if the institutions themselves do not value those goals, they should not receive taxpayers' money to advance the goals.

And thus Congress should prevent federal research grants or subsidies from being awarded to any educational institution that pays greater compensation on average to its football or basketball coaches than it does on average to its tenured faculty members.

If memory serves, that's the lever Congress used to bring ROTC back to universities, particularly the Ivies, that were pleased to receive National Science Foundation and the various National Endowments monies, but less pleased that the military did not share the universities' attitudes toward homosexual conduct. Perhaps, one of these days, people in the universities will come to understand that the very existence of government funding for research and artistry are respectively limitations which trammel inquiry and censorship per se.

It is the columnist's peculiar economics, however, to which I wish to speak.

At schools with big-time programs, the head coaches' salaries far exceed the pay of any other university employee, even the school president.

A quick Internet search reveals that around 21 colleges pay their head football coach more than $2 million per year. One assistant football coach at the University of Tennessee makes more than $1 million per year. Coaches at many large public universities make more than the presidents of the universities, and many times the salary of any faculty members.

What does this say about the schools' values?

The money paid to athletic coaches could have gone to scholars, teachers, or facilities that advance the universities' broad educational goals.

Instead it went to coaches of what are, in many cases, semiprofessional football and basketball teams. And these teams' relationships with the schools is merely nominal because so many team members enroll in the schools for the purpose of playing on the teams, not, as other students do, to graduate and participate in a broad array of school activities.

Advocates of high pay to coaches might argue that pay is not a matter of concern because it is determined by the market. They might also argue that prospective students are attracted to schools with good sports teams and in order to attract students you need to attract good coaches.

But university policies should not be dictated by the market, because universities protect goods that are not valued by the market. There may not be a great market demand for scholars of philosophy, history, linguistics, or poetry, but that does not mean that those areas should not be developed by universities.

Defenders also insist that coaches – unlike the professors of philosophy, linguistics, and poetry – make money for the university by running successful programs that generate income from fans and alumni.

He correctly notes that a careful accounting for all the hidden subsidies turns almost all athletic programs into revenue sinks.

He is incorrect to assert the absence of demand for philosophy, history, linguistics, or poetry. We've just seen the issuance of the various rankings of the selective colleges and universities (a few deign to mention the mid-majors and the regional publics) and, recession or no, the agony over finding the right collegiate fit is undoubtedly in progress in the affluent quarters of the country. There is a market for scholars of philosophy, history, linguistics, or poetry: derived from the demand for prestige or the opportunity to study with other similarly motivated young people or the right job market signal, but a market all the same.

The market for university faculty generally works differently from that for athletic coaches. The economics is straightforward. I learned it from Alchian and Allen, Exchange and Production: Theory in Use (Belmont, Cal.: Wadsworth 1969 at 476) The header for this paragraph is "Risk-bearing differentials".
We note that wage differences within many occupations are greater than among averages of occupations. The spread of actors' incomes is much greater than the differences between the averages of doctors' and actors' incomes. Better a fine actor than an average doctor. Better a fine ball player than an average lawyer.
I submit that on average, athletic coaches cannot do better than economics professors. Harvard, in all likelihood, has fine economics professors and better-than-average athletic coaches. Oklahoma has better-than-average economics professors and fine football coaches. Wisconsin-Oshkosh has average economics professors and football coaches about whom I know nothing.

Therefore, the differences in pay are not necessarily statements about misplaced priorities in our society.

The differences in compensation reflect in part the tenure system for professors, which reduces risk, and the zero-sum nature of sport, which is not present in academic research. In economics, the modal number of faculty publications is zero, aggregating among all institutions of higher learning, and a professor with two or more articles in the best twenty economics journals (I don't care what that list looks like beyond American Economic Review, Econometrica, Journal of Political Economy, and Quarterly Journal of Economics: pick any other sixteen) is above average for lifetime research. (Thus I might have characterized the Oshkosh faculty too harshly.) Furthermore, the University of Chicago's success in rational choice modelling or the University of Minnesota's work in macroeconomics or San Diego's econometrics doesn't invalidate the work done by other economists in other, less trendy (if you want to say less challenging, that doesn't change my point) fields. Taken together, the job market for economists is one in which the success of a Clark Medalist does not imply the failure of a researcher somewhere in the mid-majors or a teaching-only professor at a regional public. Tenure notwithstanding, professors have some opportunities for lateral or upward or downward moves in the prestige hierarchy with relatively small effects on salary.

On the other hand, the University of Chicago's success in football means neighboring teams have to write their fight songs in such a way as to recognize their relatively rare upsets. (Yes, Chicago famously discontinued that football, but check the history of Hail to the Victors and On! Wisconsin!) A Minnesota coach that fails to recapture the Axe will soon be a former Minnesota coach, suffering a downward move in the prestige hierarchy with a large effect on salary. Zero-sum ladder tournaments work that way.

So where are the below-average coaches? Possibly at Oshkosh? Or possibly not: somebody assists at Oshkosh to earn the opportunity to assist at Miami of Ohio to earn the opportunity to assist at Penn State to earn the opportunity to be head coach at Nicholls State to earn the opportunity to be head coach at Alabama. Or somebody is head coach at New Holstein and walks into the Oshkosh athletic director's office when there's a line coach job open. More upside potential, more downside risk, no tenure.

No comments: