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I Guess Sports Economists Will Always Have A Job...

My favorite principles teacher used to start all of his "real world" lessons with, "I guess economists will always have a job." He would then use a modern example that economists had beaten up in earlier episodes, but the example was still there anyway.

Looks like the same is true for sports economists. Witness this article in The Tennessean about UT women's basketball coach Pat Summit cracking the $1 million mark. We start with:

"Let's say your business is barely scraping by, turning a profit of less than $30,000 last year.
But the board of directors votes to give the boss a raise to $1.125 million next year. Does this make sense? Of course not. But this is intercollegiate athletics, where dollars and sense often fail to merge."

As I've posted and discussed before, and as many sports economists have continued to reiterate, you don't look for the returns of the division of a company (women's basketball in the UT athletic department) just on that division's own bottom line. First, there is no profit incentive in the true sense of that word so all sports have the incentive to plow their revenues back into their own activity. Second, women's sports have contributions that simply are not captured by their net revenue. Not the least of these is Title IX compliance; failure to comply (even though enforcement is pretty weak) puts hundreds of millions of dollars at risk at most major universities so that the coach's MRP doesn't rest only on winning and net revenue.

Then we get the report that Summit makes more than the UT men's basketball coach even though the men's team "cleared" over $1 million. But why stop there? The article also reports that the UT football program cleared almost $20 million and that coach "only" gets about $2 million. More of the same awful accounting from the economic perspective and a complete failure to note that most of that money is earned at the expense of players that don't receive pay beyond their in-kind (and typically zero marginal cost) tuition/room and board subsidy. Sigh.

But the worst is yet to come, and I'm not picking on the author of this article because it's just an example of widespread economic illiteracy (or purposeful shenanigans to confuse sports consumers). The author speculates that the UT program is headed toward a truly thorny issue of which coach to pay the most, especially given the coaching market salary pressures:

"Problems lie ahead. Pearl (the new and highly successful men's basketball coach) is on the fast track. With his coaching style and salesman personality, he will become a hot commodity for top-level programs in upcoming years, which will force UT to up the ante to keep him.
When that time comes, will the Vols' powers-that-be feel compelled to keep Summitt's salary in line with Pearl's? It is no secret that there is an arms race in college athletics. But UT has an arms race of its own." (I added the parenthetical for clarity.)

I won't go into the reasons I've enumerated previously about this "arms race" nonsense. The truly insidious problem here is that if it is said often enough, it comes to be believed. [Remember the urban legend claiming that domestic violence increases during Super Bowl weekends?] Maybe somebody should write something from the economic perspective laying all of this bull**** to rest; Oh, that's right, I already have (Chapter 13 in my textbook Sports Economics). But I guess my ol' professor was right. We will always have a job.