King Banaian already commented on this issue, but I thought I would toss in my two cents. Myles Brand argued in a letter to Congress that the NCAA should be tax exempt because the primary purpose of college athletics is education.
Economists often argue that we should not focus on what people say, but on what people do. If education is the primary focus of the NCAA, then we should expect that people would be hired and fired on the basis of this objective. We would also expect the highest paid people in college athletics are those that do the most to advance the education of student-athletes.
Obviously this is untrue. According to College Football by Charlie (a neat website on college football, although there is no Charlie at the website), the top ten football coaches in terms of compensation all make more than $2 million per season. Why do these university employees command salaries in excess of the wages paid to university presidents (and more importantly, college professors)? One suspects that high salaries are linked to high revenues, and that high revenues are not driven by graduation rates or other education outcomes. No, revenues are driven by wins. And when those wins don’t happen, these coaches get fired — whether or not these coaches are graduating a significant percentage of their student-athletes.
For a business to make decisions on what drives its revenue is not surprising. So we should not be surprised that employees are hired and fired based on their ability to enhance the firm’s bottom line. But what is surprising is that a leader of this business would claim that what brings in the money is not the primary objective of the firm.
Clearly Brand’s behavior was motivated by a desire to avoid sharing this money with the federal government. But a simply study of the behavior of NCAA members suggests that its primary objective has more to do with money than education. And if that is true, it is hard to argue that the business of college athletics should be treated differently from any other business in the United States.
