LARRY JACOBS: I'm Larry Jacobs.

I'm a faculty here at the
University of Minnesota.

I want to welcome
you to the Humphrey

School of Public Affairs.

This is the University
of Minnesota's School

of Public Affairs.

I want to first give you a heads
up of some upcoming programs.

On March 3, we're going
to have Tim Pawlenty here

as part of a really terrific
program on health care

transformation.

We've talked a whole
lot about MNsure,

about reforms of
the insurance side.

This is going back to the agenda
that Governor Pawlenty really

pioneered of looking at
ways in which we can work

bipartisan, cross-sector
ways to transform

how health care is delivered.

There's an all-star cast of
people who are coming together,

both in the legislature but also
across Minnesota's really pretty

impressive health
care delivery system.

And then May 19,
Mayor Betsy Hodges

will be here, talking
about her equity agenda.

That will be at 6:00 PM.

And the talk will be over
here in Coles Auditorium.

A couple quick notes
about tonight's program.

Professor Sanderson will come
up and give a presentation.

He'll then be joined
by Doug Hartman.

Professor Sanderson is
a very well-known expert

on the economics of sports.

If you're cruising the internet,
you will see him everywhere.

And so we're really
quite grateful

that he's joined us here today.

More information
on our bio card.

Moderating the conversation will
be my good friend and colleague

in the sociology
department, Doug Hartman.

Doug is responsible
for tonight's program.

I'm just Doug's gopher
and putting it together.

And Doug himself is a very
highly regarded citizen

here at the
university. and looking

at the university's athletics
programs, the athletes.

He's also a noted scholar.

His book, Race, Culture, and
Revolt of the Black Athlete

was published by the
University of Chicago Press

and deservedly has received
a lot of attention.

As part of the
conversation that Doug's

going to be moderating
with professor Sanderson,

we invite you to fill
out cards for questions.

The reason we do this is it
helps us to place our programs

on Minnesota Public Radio.

Many of our programs
are rebroadcast.

And one of the
reasons is we're easy.

You just take the
program and you run it.

Whereas, if you have
people standing up,

you've got to run mics around.

And anyway, you get the idea.

This is not a way to
weed out questions.

We invite and welcome dissent.

So please submit your questions.

We'll get to as
many as possible.

And because this is
an evening program,

we do have a nice
little buffet afterwards

if you want to stop and visit
and have a little light dinner.

Without further ado, please join
me in welcoming Allen Sanderson.

[APPLAUSE]

ALLEN SANDERSON: Thank
you very much, Larry.

It's a pleasure
to be here today.

Rather be here than
Chicago's horrible weather

we've had this week.

Anyway, I hope we'll
have a good session.

You can feel free to interrupt
me if you want to, I suppose.

Just don't throw anything.

Don't want to make this look
like a Sanders or Trump rally,

as we go through these.

I actually teach more
students than anyone

at the University of Chicago and
including a undergraduate course

on the business of sports.

I got into this,
probably, 20 years ago,

along with other fields in
which I do research because

of the baseball player
strike., '94, '95

and then a lot of work
stoppages in other leagues,

as well as portable franchises
of teams switching cities.

I do a lot of work on
economic impact analysis,

whether it's work on sports,
as well as economic impact

of universities on their
communities, the Obama

Presidential Library coming
to the South side of Chicago.

Hollywood production,
film productions,

and do they really
benefit cities or states?

The answer's there,
it's pretty clear.

The same with the movement
of corporate headquarters.

And a year ago,
almost a year ago,

I worked last summer
for the mayor of Boston

and the governor
of Massachusetts.

Because Boston was the
candidate city to host--

the American candidate city to
host the 2024 Olympic games.

And the officials wanted to
know, what are we in for now

that we've been selected as?

So we worked through the summer,
submitted our report to them

on a Friday afternoon.

And on the subsequent
following Monday

morning, Boston withdrew
its bid, so smart guys.

They could have--
there are probably

only two cities in
the United States

that should ever bid
for Summer Olympics.

And Boston being one,
Los Angeles the other.

And Boston could have
been competitive in that.

But I don't think they did
a very good job with it.

Then I was trying to--

I tried to advise the mayor
of St Louis and the Board

of Aldermen what to
do about the proposed

defection of the St Louis Rams
football team to Los Angeles.

So I'm a White Sox fan, sorry,
but White Sox fan by location.

But Cubs owner, Tom
Ricketts' a good friend.

So I can be bought,
if necessary.

Clark Griffith, a
longtime resident of here,

is a good friend.

I've known Clark and family
for a number of years.

In some ways, this
is strange to talk

about the University of Chicago
in the same breath as sports

or college athletics.

And yet, there are a lot of
famous threads through this.

The University of Chicago was an
original member of the Big Ten.

And actually, I think the
way the charter reads,

anytime Chicago wants back in,
it's allowed to get back in.

And the last team
to enter the Big Ten

has to leave at that point.

But our football
team is not all that

interested in being killed
by any other Big Ten team.

We are actually 4 and 0 lifetime
against Notre Dame in football.

But that's a long time ago.

We're also, as many of you may
know, the first Heisman Trophy

winner.

Jay Berwanger was the
University of Chicago halfback.

And the trophy
itself is modeled.

Jay was the model for that.

He played on a
losing football team.

It's interesting because when
the boy wonder, Hutchins, came

in as president in
the 1929 in Chicago,

one of his educational
agendas was

that the last two years of
high school are worthless.

You ought to just skip
those and go on to college.

And I'm not sure, educationally,
maybe that's true,

maybe it's not.

But what it meant
in the mid-30s is,

we had a lot of young players.

And it may well have been
that this 14-year-old kid was

a really bright student.

He just made a
very poor lineman.

And the university was being
trounced 60 to 0 every weekend

in the late 30s and
decided to give it up.

We faced a choice.

We're either going
to have to put

a lot more money into
football, or we're

going to have to stop playing.

And we chose to stop playing.

I think, it was largely--

it wasn't a philosophical,
or ethical decision, as much

as it was an economic decision
as to which way we would go.

We also cheated on our friends
very early in paying a coach.

100 years ago or so,
coaches were not paid.

They were volunteers with
their athletic teams.

We paid someone, lured him.

Amos Alonzo Stagg, to the
University of Chicago.

Then later, we named the
football stadium, Stagg field.

It was the place under
which Enrico Fermi

under the grandstands, that
Enrico Fermi and his colleagues

really ushered in the atomic
age and at that point,

the atomic bomb.

Then we tore down
the football stadium

to build our main library.

And I would say that there
are a number of universities,

who would be glad to
tear down their library

to build a football stadium.

We chose to go in the
other direction with that.

So homecoming at the University
of Chicago every October does

include a football game.

We are now a Division III team.

But largely, the day is
spent with parents and alumni

coming back and going
to model classes

and attending other academic
events at the institution.

Also, strange as it may be,
the first academic article ever

written on the
economics of sports

was written at the
University of Chicago

by Simon Rottenberg, who
was a postdoctoral fellow,

went on to have a decent
career at the University

of Massachusetts Amherst.

But his book was--

excuse me, the article,
which was published in one

of the leading journals,
was called "The Baseball

Player's Labor Market" and this
1956, exactly 60 years ago.

And it was at a time when the
baseball player's labor market

was quite restricted-- the
reserve clause, no free agency,

no unionization.

And he looked at the front
of the obvious things that

are going to come out under
those kind of balances.

About two years ago, a
leading journal in the field,

the editor of which is actually
in Minneapolis at Macalester

College, approached
me and say, would you

be willing to write an
article, long journal article,

academic article on the case
for paying college athletes.

And I said, sure.

And so it was published
a year ago, March.

And the journal has had
a reasonable circulation

since then.

It's interesting that
this college sports is

a uniquely American phenomenon.

I don't say that in a positive
way, or a negative way.

It's just a comment.

There's no other country that
runs this kind of a training

ground for athletes.

And there are very,
very few universities

that have in their mission
statements, or their charters,

anything to do with
providing large scale

athletic entertainment for
faculty, students, alumni,

whatever.

So it is a little bit
strange and a little bit

of an odd bedfellow, such
that, a lot of times,

terms have been coined
to give it a flavor,

or to separate it out.

One of them, as
you probably know,

the former commissioner of
the Big Ten, Walter Byers,

coined the term
"student athlete."

And it makes no bones about it.

He coined the term to
get around the fact

that these might, in
fact, be employees.

Or there are other kinds of
rules that universities have

that they might be
subject to, where

if there are
student athletes, we

can get by with lots of
things that we really

want to do anyway.

So in some ways, their student
athletes are like interns.

That may, in turn, for
a nonprofit organization

during the summer largely
means we're not being paid.

Some organizations pay interns.

Most do not.

Then also the term, we talk
about amateur athletics.

And amateur is a relic of
19th century British society.

It has nothing to
do with amateurs.

We think of amateur,
it's more of I'm

rich enough that I can
afford to have a hobby.

And so I'm an
amateur at what I do.

The other one that has always
amazed me is in the fall

during football
games, when they will

refer to a player as
a true freshman, OK.

I never think of
the students I teach

as true freshmen,
or true sophomores.

They're just freshmen,
or sophomores,

or graduate students, or
whatever but true freshmen.

In this state, in
my own state, in 47

of our 50 states in
the United States,

the highest paid public
official is either a football

coach, or a basketball coach.

Broadly defined on
the Pentagon budget,

the three highest paid
Pentagon officials

are the football coaches at
army, navy, and air force.

At least, that
may explain a lot.

And probably, we don't want to.

As the old saw goes,
I suppose that the key

to being a successful
university president

is providing sex
for the students,

parking for the faculty,
and football for the alumni.

If you can do that,
you'll have a long career.

30 years ago in
inflation-adjusted dollars,

CBS paid the National Collegiate
Athletic Association, NCAA,

30 years ago, inflation-adjusted
dollars, $12 million

to broadcast the men's
basketball tournament, March

Madness.

Though currently and
now into the future,

the price will be over
$1 billion a year.

So we've moved from 12
million to over a billion.

A, that's a lot of money
by anybody's standard.

Second is, I think
in part, it has

to do with a lot of
the unease that's

happening in college athletics.

That when there wasn't
much money on the table,

it was OK if the coach made
a reasonable amount of money,

or yeah, we're working
these kids maybe harder

than we should, or whatever.

But once the number moves to
$1 billion dollars and then

other institutional monies, it
just makes more and more people

nervous, whether they're
academics or not in terms of--

and you see coaches with
$7 million salaries,

virtually all coaches have.

And the big power conferences,
football coaches, they're

going to have seven
figure salaries.

Some of them, probably
eight figure salaries.

That just starts
making people nervous.

And also, when you start
looking at football teams

and you look at--

I didn't count, but I
think that something

like 18 of the 20 starters
in the final four basketball

tournament were Black.

That starts making
people nervous as well.

So while it's been the best
of times on the one hand

for the NCAA, it's also been,
in some ways, the worst of times

because of the academic scandals
and the non-academic scandals

that have just been pervasive.

And you can talk about
phony bogus courses.

3,100 students taking
bogus courses didn't exist

at the University
of North Carolina,

a highly respected institution.

University of Miami, maybe
not so highly regarded,

but nevertheless, the scandals
that are going on there.

Penn State, University
of Illinois, University

of Minnesota, that all of
a sudden, people, coaches,

players, administrators
are behaving

very badly and in some
cases, alumni, very badly.

In addition to this
court of public opinion

that's turning a little
bit against this notion

of amateur athletics
or student athletes

are the legal challenges.

One that was settled last year--

and there's some overhang
but it's basically settled,

and the checks are in the mail--

Ed O'Bannon, former
UCLA basketball player,

who then went on to
play in the pros, sued--

in part of a class action suit,
sued the NCAA and video makers

for the fact they were
using his likeness

without any compensation.

Because when I signed a
contract to play football

at the University of
Minnesota, or any place,

there's a line in
there, a paragraph,

that says that the university
owns my likeness forever.

So O'Bannon won that
suit, that settled.

I suspect the--

I said today at lunch,
it's interesting,

when we first started sending
professional athletes because we

got goaded into it
to the Olympics,

we sent the Dream Team
to Barcelona in 1992.

11 all-stars from the National
Basketball Association

and Christian Laettner,
who was a senior at Duke.

But the Dream Team t-shirt--

and we just mopped everybody.

But the Dream Team
t-shirt only has 11 faces.

It doesn't have 12.

And I say, who's not there?

It's not Christian Laettner.

He's there.

It's Michael Jordan.

Because Michael Jordan and
Nike said, we own that image.

And if you want to pay us, then
yeah, we'll put Michael's face.

You can put Michael's
face on the t-shirt.

But otherwise, no, OK.

None of the other athletes
had any problem with it.

Jordan did, OK.

There are a couple wage fixing
suits that are out there.

I don't think the Northwestern
case is really resolved yet

in terms of, are these
going to be considered

employees, or students.

The NCAA will survive
those lawsuits.

It'll take a chunk out of their
wallets, but they will survive.

The one the NCAA cannot survive
is a suit that's being brought

by Jeff Kessler, a very
well-known labor lawyer

in a class action suit, arguing
that the NCAA is price fixing,

in this case, wage
fixing on the value,

or the economic worth of a
grant and aid of room and board,

tuition fees, and
incidental expenses.

And that if he wins
and he may well win,

it's over for the NCAA.

And then what happens next?

One, plausible, as
well as possible,

and perhaps even
likely outcome, is

that the NCAA will
cease to exist other

than a record keeping
organization and providing

histories.

But the power
conferences, of which

Minnesota is one
part of the Big Ten,

the power conferences will split
off and have their own units.

It will be the Pac
12, or the Big Ten,

or the Southeast
Conference, or whatever.

And they can make decisions
within that conference

that would probably pass
institutional muster--

excuse me, constitutional
muster if there were in fact

viable six conferences.

The Supreme Court would
probably let that go.

It's not being a violation
of antitrust laws,

as long as the Big Ten
didn't talk to the Pac 12

about compensation
or anything else.

The other, which, I
think, is interesting.

In 1994, 1995, during the
baseball strike, a lot of people

were unhappy.

There was no World Series.

That's totally un-American.

And so they started legislation
moving through Congress.

And one piece of
legislation would

have stripped baseball
of its remaining pieces

of antitrust exemption it has.

So if I say, how are senators
lining up on that vote?

Let me give you one example,
and that's California.

The two senators from
California at the time,

who are still the same two
senators from California,

are Barbara Boxer
and Dianne Feinstein.

One would, in terms
of politics, think

of Barbara Boxer as a liberal
Democrat, sort of Bernie Sanders

like.

Dianne Feinstein's sort
of moderate Democrat.

Their voting records
suggest that they're

going to be on the
side of the little guy

and against whether it's Wall
Street, or anything else.

But the larger, powerful
institutions, that's

their voting record.

How did they vote in
1994, 1995 to retain

baseball's antitrust exemption?

Why?

Because I think California
has five baseball teams.

And somebody got to them and
said, don't mess around here.

You don't know
what you're doing.

How does that
relate to the NCAA?

Alabama has two senators.

If there's a bill
in Congress to strip

the NCAA from any
antitrust exemption

and force it to be subject
to Sherman Antitrust Act,

I know how the two Alabama
senators are going to vote,

or they're going to
be called ex-senators.

And so you may well
have a situation

where the politics will
trump the economics of that.

The other possible outcome
is that, at some point,

colleges and
universities collectively

are just going to have to
make some tough decisions.

In true accounting basis, all
but about 20 football programs

in the country lose
money, a lot of money.

And those are monies that are
being provided by student fees,

or being forced by
mandated student fees.

They're also, in
some ways, revenues

that could go to the non-revenue
sports that are being used

to prop up football programs.

It may, at some point,
universities just decide,

enough is enough.

We just can't do this.

And I suspect a
possibility of the five,

or six power conferences
stayed in business.

OK, that's still a
lot of football teams

to be more than twice
the number of in the NFL.

And everybody else would decide,
we really can't afford this.

Let's scale down and have our
athletes actually be students.

And we're just going to play
this at a much smaller scale.

So I think, that's a
possibility, so OK.

What I would object
to specifically,

or economists, in
general, is just

the NCAA has enormous
monopoly power but not

unlimited because
they have to compete

with the NFL and the
NBA, both of whom

benefit enormously from this
current arrangement in college

athletics by not having
to pay for the training

of their future players.

So anyway, the pro league
has benefit from that.

But I think, their stronger
power that the NCAA has is not

monopoly power in terms of
selling because they have

to compete with all other forms
of entertainment on television,

or in venues, but it's
on the monopsony side,

the input side of the market,
where they have virtually total

control over 18-year-old kids,
in terms of what they can do

or cannot.

And 18-year-old kids cannot
go on because of the cozy

arrangement, can't go on and
play in the NFL at age 18,

or 19, or 20 and nor can
football, basketball players.

The NBA commissioner,
Adam Silver,

is a graduate of the University
of Chicago Law School and very

much in favor of increasing
that limit before you

could go into the pros.

If you're an 18-year-old and you
want to go to Hollywood and try

to be an actor or actress, or
you want to go to Nashville

and do country music, there's
nothing that says you can't do

this.

But if I wanted to
play in the NBA,

or I want to play in the NFL,
yes, I'm not allowed to do that.

So the input side
power that the NCAA has

is probably much
more valuable to them

than is the monopoly power
on the other side, so OK.

Well.

I think, you want me
to stop at this point?

OK, the boss says
stop, so thank you.

Thank you.

[APPLAUSE]

Let me just reiterate,
too, that we're

going to talk about
calling, I think, in terms

of questions, college athletes.

But if you want to go
off on some other sports

economics issues, fine with me.

Talk about the Olympic
games, does this help?

Does this not help?

Do stadiums help?

Do they not help?

Anyway, I'm willing to
take other kinds of things

broadly defined as that, OK?

Will the Cubs win the
World Series in 2016?

Probably not, thank you.

DOUG HARTMAN: Thanks, Allen.

So we're going to do--

I'm going to start it off
with a couple of questions.

But we invite other people.

The cards are in the back
and those can come forward.

And as professor
Sanderson said, we'll

focus on the college
athlete payment issue first.

But we'll take some, as we go
in if people have other issues

to raise.

I wanted to mention
and frame what

we've been hearing about here.

Larry and I have been hoping
to do something on economics

in sport for a
while in this venue,

thinking of its broad public
significance and interest.

But it took us a while
to find the right topic

and the right economist.

So last spring, when
professor Sanderson's piece

on paying college
athletes came out,

it seemed like a great fit,
both that he was willing

and it's a topic that
we thought was timely

and a great conversation
starter on campus.

We had him this afternoon
actually speak with the faculty

coach luncheon series to
stimulate conversation

among our leadership here about
issues with college athletics.

And I wanted to say,
as I think about this,

I'm less worried about
the specific question of,

do we pay college
athletes or not?

Which, in the paper, the authors
are very clear that it's really

not-- that's not the right
question because they're already

compensated.

It's how much they get and
how that's distributed.

But even that, for me, is
less significant and important

than the issues that are raised
in the work about the value

of college athletics, why
we do this crazy thing

that nobody else
in the world does.

Does that match up with
our mission or not?

And then especially,
the transformative

changes that have happened
in the landscape of athletics

in the last 25 or 50 years,
especially on the revenue side.

And I want to start to
wrap this up and turn it

into a question, Allen.

So to me, the really
important point

that comes through in your
work is that the point

is change is coming.

These revenues are unbelievable.

It's hard to manage.

It doesn't necessarily fit the
mission of many institutions.

Change is coming.

The issue is, how
we deal with that?

And I guess, the first question
I wanted to throw at you,

and it's just to maybe
flesh out a little bit more,

why then focus on payment
of college athletes?

ALLEN SANDERSON:
Yeah, let me just add

a footnote, maybe, to
your first comments,

or paragraphs there
of what you said.

I agree.

For us, I mean, for the
University of Chicago,

or for universities
in general, one

of the things that
bothers me about it

is, potentially,
it's the corruption.

And I don't mean corruption in
a sense, corruption of values.

That it cheapens
what universities do.

It taints what universities do.

And it's hard to not be
sullied by these things that

are going on in campus.

And again, you name
your university,

I can tell you the scandal.

And I think, that corruption
of values is a big issue.

I was telling Doug earlier,
you may have heard it,

there was an old
line by Bobby Knight.

He was the long time basketball
coach at Indiana University.

And this goes way back,
back in the Watergate days.

And he had sort of
a throwaway line.

He said, I'll bet when they
get to the bottom of Watergate,

they find a football coach.

DOUG HARTMAN: By the way,
that didn't get those laughs

in the afternoon event earlier.

[LAUGHTER]

ALLEN SANDERSON:
It's hard not to just

be sullied by this stuff
that goes on, on campus.

DOUG HARTMAN: But
could we-- so let

me rephrase my question
on this a little bit.

Because I think a
lot of the problems

are driven by this unbelievable
obscene amounts of revenue that

are getting generated.

And what to do with that?

Should we be part of that?

And so I guess I'm throwing
it to you in terms of so, why

focus on the payment
of student athletes

as a vehicle for talking
about this, or maybe

as our institutional response?

And maybe to even
put a point on it,

does that just-- isn't that
just part of the problem?

I mean, so just redistributing
the money doesn't get rid of it.

So what's the kind of rationale,
even, for taking the opportunity

to write about college
student athlete payment?

And how does that address
these larger macro issues?

ALLEN SANDERSON: Yeah, again,
any institution, or any firm,

whether it's General Motors,
or the University of Chicago,

or University of Minnesota,
faces constraints.

We've got certain
revenues coming in and how

do we allocate this across
various institutions,

or things within an institution?

But, I think, it taints
higher education as a whole.

And just, again, I
wish universities--

I suppose in my
ideal world, it would

be that we moved
to, in some ways,

a Major League
Baseball model, where

there are minor leagues
and players, who

want to be in the NBA or NFL
can play in minor leagues.

And also, that the--

one of the sources
of revenue that's

not coming in to college,
on college athletes

is, in fact, from
the NBA and NFL

that are benefiting
enormously from having

these kids go through two
or three years of training.

They're just getting
free-- they're free

riding off of this stuff.

So I wish that they would be--

we'd acknowledge the
complicity there.

DOUG HARTMAN: Great.

And if people have
questions, we'll

start to collect those in a bit.

I've got a couple, but I don't
want to monopolize it too much.

Let me follow them--

ALLEN SANDERSON: Yes, I'll
just make one other comment.

Your point, people say, we
shouldn't pay college athletes.

And as Doug said, they're
already being paid.

It's just a matter of how much.

Because at one
point, it was zero.

Now, it's room and
board, tuition and fees.

And depending on which
conference you're in,

it could be a little
bit above that.

But zero is not the
lower bound, OK.

You could have situations,
where, in fact, athletes

have to pay to come to
college like everybody else.

But there would be a
pot of money set aside

that they could use for later
on after their pro careers are

over.

And very few of them
go into the pros.

But to graduate from college,
or to get a graduate degree

in something, or start a small
business, that's a possibility.

Or given this unequal
distribution because some--

I don't know the numbers at
the University of Minnesota,

somebody may in the room,
or you all do in the room,

as to how many players--

say, next week, the
NFL draft in Chicago,

how many players from the
University of Minnesota

football team are going to
be drafted by an NFL team

and actually make the squad.

Number is going to
be pretty small.

But for three, or four years,
they may make a lot of money.

Maybe that universities
would provide

the education in exchange for
some fraction of their income

later on--

so sort of equity
kind of notions.

In a totally other realm,
the governor of Indiana

has suggested this as a way
to finance higher education.

I should also say
another, where I

think it stays away
from college athletes

but affects institutions, if
I look at the consumer price

index, or how we
track inflation,

or the various parts of
the consumer price index,

there's one product
that has increased over

the last 20 years more
than any other product--

tobacco.

And it's not because it costs
more to produce cigarettes,

it's just that we've
chosen to tax it.

And we tax it immensely.

So if you look at the
change in the price

of a pack of cigarettes,
that's the highest rate

of price increase
in the country.

Now, you can guess
what number two is.

College tuition.

And whether it's public or
private, it's college tuition.

And at some point,
maybe somebody

wants to connect the dots
by running this mega million

dollar entertainment
complex on the side,

while college tuitions are
going through the roof.

So at some point, even
college students may say,

how much of my tuition
is going to support

something of which I'm just
not at all interested in?

Or is that causing my tuition
to be going up at 5% or 6%

a year when, virtually,
everything else is

so much below that-- so sorry.

DOUG HARTMAN: So I've got
a couple questions here

that line up with one of
the things that I wanted

to ask about because it came
up in some different ways

this afternoon when we were
talking with coaches and student

athletes.

The general question
is about, who

stands to benefit, or
not benefit from this?

I think it came up this--

ALLEN SANDERSON: This
being paying the athletes?

DOUG HARTMAN: Yeah,
paying the athletes.

We're still focus on that.

A lot of the argument that
you've made in publication

has been about
basketball and football.

But what about other college
sports and student athletes?

I had one person, who put
it specifically about,

what's it mean to
pay quarterbacks

versus the swimmers?

And another person put it maybe
even a little more pointedly.

It's an interesting
idea, but how

do we implement this without
blowing up, or dismantling all

the other sports teams,
men's and women's, that we

have at a place here, like
the University of Minnesota?

ALLEN SANDERSON: Yeah,
a couple of things.

One, as I said in my
introductory comments,

there are only 20
institutions in the country

that make money off football.

The rest of them all lose
money and lose a lot.

And they're just propped up by
student fees and other things

that are coming in.

Rutgers leads the pack with
something like $47 million

being transferred
from the student body

to the athletic program.

That keeps it afloat.

If I take that as a
general rule, what's

happening at the
moment is, it really

is the football
and, in some cases,

the basketball
team that's costing

non-revenue sports money.

Because money is being
transferred from students

in general to the
football team, it's

also being transferred from
non-revenue sports, male

and female, into
the football team.

And so in some ways, I say,
what if you paid the players?

A couple of things can happen.

One is that the university
just decides we're not

going to do this anymore.

We're not going to
play at that level.

At which point,
there would be then

those revenues
that could go back

to other men's non-revenue
sports, women's sports.

That's a distinct possibility,
or a potential outcome

that a university
would decide to do.

The other, it probably seems
unseemly that the quarterback

in the classroom is
making $3 million,

while the teacher whose
teaching is making $50,000.

That's a little bit of
a perverse situation.

But across universities, there's
just an enormous variation

in what faculty members make.

Even within a department, some
are going to be paid a lot,

some little.

And certainly
across departments,

people in the physical sciences,
or in the business school,

law school, medical school
are going to be paid a lot.

People who teach
French and philosophy

are probably not going
to be paid very much.

So there are
enormous variations.

So the fact that the
quarterback makes more

than the tight end,
that just happens.

DOUG HARTMAN: So
I want to return

to the first part of your
answer because it's not

the typical answer,
counterintuitive for some folks,

about basketball and
football, for example,

costing the other sports.

Because I think, typically,
we think of that the other way

around in a big
institution like this,

that those sports are generating
a large amount of revenue that's

being redistributed to other
sports, other student athletes,

and especially women's sports.

So how do you respond
to that, or how

do you work with that in the
context of the inverse argument

you gave just a minute ago?

ALLEN SANDERSON: Yeah, so
first of all, I mean, I think,

I am correct in terms of
how many institutions lose

money as opposed to make money.

But let's set that aside.

Let's suppose the football team
is making money, or a basketball

team.

Why are they making money?

The primary reason
they're making money

is, they're not paying
their chief input.

That's the player.

As I said today at noon, if
the NBA got together, owners

on one side of the
table and the players

and their union and
their agents on the other

and said, why don't we
increase the-- by the way,

the Minnesota Timberwolves
just got Tom Thibodeau today

as a coach.

He's a very good
guy, good coach.

So good decision on your part.

Bad decision on the Bulls
part to let him go a year ago.

But it was just a power
struggle within the organization

and personality conflicts.

What was I-- oh, what
did I start to say?

DOUG HARTMAN: I think we were
on the kind of redistribution

of resources point.

ALLEN SANDERSON: So if it turns
out that the football team was--

oh, I know what I
was going to say.

Which is back in the
heyday when I was really

thinking about college--

I could have played college
ball, I just couldn't start.

And that was a big
time commitment.

But say, in the heyday
of the 60s and 70s UCLA,

if I go back to that, such
a dominant basketball power,

they were playing
25 games a year.

UNC and Villanova played for
the National championship

a couple Monday nights ago.

That was their 40th game.

The NBA would be glad
to move, and players

would be glad to move from
82 to 100 game season.

It's just the owners
would get half the money

and the players would
get half the money.

I'd say, OK, let's do it.

Or let's compromise.

How about 91, or
something like that?

You pick some number.

But in college, if I--
should we play another game?

Sure.

Why?

Because we don't have
to pay the players.

So it becomes advantageous.

I was one of the few,
I suppose, adamantly

opposed to the playoff
system in football.

I can sleep reasonably
well at night

not knowing who's
number one in football.

That's not something
I care as much.

I can sleep well
with the ambiguity.

But why am I opposed to it?

Because you're just
taking athletes

and going through two or
three more weeks for nothing.

Do they benefit?

DOUG HARTMAN: You mean
nothing for the athletes?

ALLEN SANDERSON: Nothing
for the athlete, no money.

The coach gets more money.

The institution gets more money.

The athlete runs a
bigger risk of getting

injured in that
three week period

and there goes his pro career.

So you expand the season.

Football used to be 10 games.

There's nothing
magical about 10 games.

Yeah, we have 10 fingers,
but they are 10 games.

It's 15 now for the teams that
survived to the end of the--

you have conference tournaments
and then the playoff system.

Do they benefit
from playing games?

Sure, they're not being
drafted and they're not slaves.

They do have some right.

I want to play.

I don't want to play.

But the benefits of a player
playing 11th, 12th, 13th, 14th,

15th game, or the
38th, 39th, 40th.

game of basketball
are pretty marginal.

And they're not for
the institution.

And they're not for the coach.

They're the ones making
off like bandits in here.

Oh, so let me--

now the real, or the
original question, which is,

if you want to assume that the
football team was making money

and it's supporting
non-revenue sports--

I don't think it's true in
virtually very few cases--

but it supports the tennis team,
it supports the volleyball team,

it supports the
wrestling team, I

think there's one other equity
question you have to ask.

As an approximation, who are the
football and basketball players,

who are providing this revenue
that's being transferred

to other parts of
the institution

and they're being paid
far less than what they're

worth to the institution?

To not put a real fine
point on it, they're Black.

So you've got Black
football players.

And you've Black
basketball players,

who are generating
revenue so the coach can

have his $10 million salary.

And some money gets transferred
to the non-revenue sports, male

and female.

Let me ask the second question.

What's the demographic profile
of non-revenue sport athletes?

They're white.

And they're middle class.

So we've got a system where
we're taking students--

if I allow that word to
go-- we're taking students,

putting them on a football
team, and they're Black,

and they're generating
revenues that

are supporting lots
of other things

within the athletic department.

And they're maybe supporting, in
that case, non-revenue sports.

The non-revenue
sports kids, I mean,

95% of college basketball
players are white.

Virtually all the volleyball
players are swimmers,

or others are white.

And they're middle and
upper income class kids.

So it's a reverse Robin Hood.

And we shouldn't be
very happy about it.

DOUG HARTMAN:
Yeah, I would guess

some of the reports that came
out a few weeks ago around March

Madness about the graduation
rates of Black student athletes

at the Big Five conferences
feed into your sense--

and I don't usually
think of economists

using this term--
but an exploitation

kind of an argument, maybe a
different kind of exploitation.

ALLEN SANDERSON: Yeah.

Well, and it's certainly
an equity issue.

Whether you like
him or not, Bernie

wants to transfer some money
from rich people to poor people.

And NCAA transfers money from
poor people to rich people.

It's the anti-Bernie
in this case.

DOUG HARTMAN: Some of
the sociologists on this

have called it a hidden form of
affirmative action for middle

class white kids.

Got two different questions
here, I'll just do one of them.

But asks about your views about
student athlete unionization.

You kind of alluded to
it before but didn't get

into your own views on that.

ALLEN SANDERSON: Yeah, look,
I'm a Chicago economist.

And so in an ideal Adam
Smith world or something,

I'm not a big unionization fan.

I'm not a big unionization
fan of my TAs being unionized.

But I would say in the
pro ranks in the NBA,

say, or the NFL, as
we said in that piece,

on one side of the table is
the league, the league owners,

the commissioner, and the league
owners, the league lawyers.

On the other side
of the table are

the athletes, their
agents, and their lawyers.

That's not perfect
competition by any means.

But at least, it's a fair fight.

What you have in
the NCAA on one side

is the university president,
the lawyers, the NCAA,

and the coaches,
athletic department.

What have you got on the
other side of the table?

A 17-year-old kid and his mom.

OK, that's not a fair fight.

And so in that sense of a second
best solution, or something,

I think, one thing that
may have evolved, in fact,

is unionization of
college athletes.

That's not all bad, in
that it would offer them

some protections that
they don't have now.

And again, there
are too many numbers

out there, too many cases.

A big time football player
or basketball player

at a big time university,
that's a full time job.

And it's tending to be a
full time job for 10 months

a year, if not longer.

And the height of
whatever, a few years ago,

when the NCAA said, we're going
to relax the rules to allow

the students to have room
and board and tuition

and fees and all that,
we're going to allow

them to hold part time jobs.

Are you crazy?

These guys can't hold part time
jobs because their coach owns

them from 6:00 in the morning
until 10:00 o'clock at night.

When are they going to
have their part time job?

So there are some potential
benefits in that way,

just because it levels
the playing field in terms

of the power from the athletic
department of the institution

and the power of the players.

DOUG HARTMAN: By the way, the
time to-- the NCAA itself just

did a time demand study
of Division I athletes--

I think, this is what
Allen is referring to--

that shows student
athletes lives

are pretty deeply scheduled.

And one of the things that
was interesting in that study,

though, is that the different
ways that student athletes think

about that from coaches,
where even within the NCAA,

student athletes, who accept
a lot of the responsibilities

and demands are hoping to
limit that in certain respects,

like one or two days a week
off, some additional weeks

at the end of the season.

But their opinions are
different from the coaches.

I guess, that's more of
a-- to back up what Allen

was kind of speaking to there.

ALLEN SANDERSON: I talked
to Doug about it earlier,

so I won't mention names
of institutions, or names,

whatever.

But a few years ago at
dinner with someone,

a well-known person,
his son played baseball

at one of the Big
Ten universities.

It's not here.

Played baseball.

So this is baseball
at a Big Ten school.

We're not talking
football at Auburn.

But the coach at that
institution-- and it

is, I would say, academically
in the top half or higher

of the Big Ten.

The coach had a rule
for road trips--

no books.

They could not take a book.

He didn't want them
to be distracted.

I mean, that strikes
me as outrageous, OK.

DOUG HARTMAN: That seems
like the kind of institution

where unionization
might have a chance.

ALLEN SANDERSON: Yes.

DOUG HARTMAN: OK, so we
touched on this before.

You were talking about
the racial exploitation.

And we touched on
the gender issue.

But I've got a couple
more questions on that.

So let me just throw
it back at you here.

Would it be a violation of Title
IX to pay only male athletes?

Because you're talking mostly
about football and basketball,

men's basketball, and
not female athletes.

And what would be the
consequences of this?

ALLEN SANDERSON: Yeah,
and I don't really know.

It's a very good question.

It's a complicated one.

If it turns out that players
get defined as employees,

that actually helps
the situation.

And I don't mean
helps in terms of that

just keeps beating women down.

I mean, Title IX would
not apply in those cases.

It doesn't apply to employees.

And it applies to students,
as it were, in those programs.

So in some ways,
an institution that

had unionization and had their
football, or basketball team,

or all their athletes
defined as employees

wouldn't hurt Title IX.

DOUG HARTMAN: Oh, I see.

ALLEN SANDERSON: If they
are, in fact, students, then

there is, yes, a
potential problem.

But again, it's how the
institution does this.

My own sense coming
back to the--

look, I think, it's
really a good thing

that, say, a university
has a volleyball team

and has a fencing team and has
a swim team and a diving team.

I just don't think
that should be

paid for on the backs of the
football and men's basketball

programs.

That if you want to have
the football-- excuse me,

if you want to have the fencing,
or volleyball, or gymnastics,

terrific.

But then the institution
should pay for it.

That's a decision
that it should make.

And that's true
for men and women.

DOUG HARTMAN: That sounds like
a rational economics argument.

Which transitions me to one
of my favorite questions

from you guys.

Because it's saying,
so you're an economist.

Economists usually think about
people as rational actors.

Why is it that colleges
and universities, in spite

of the costs that
you've talked about,

keep, not only
investing in sport,

but wanting to do
it more and more?

And I'd give-- like
how many schools

want to move from
Division II to Division I.

ALLEN SANDERSON: Yeah.

There is now a wing
of economics, which

is called behavioral economics.

Which I'm not a
big behavioral guy.

I'm more of the rational
actor kind of guys.

I would answer it in
the following way.

I believe that universities,
given the current setup,

are acting rationally.

What do I mean by
the current setup?

DOUG HARTMAN: I was
going to say that,

but I thought you'd answer it.

ALLEN SANDERSON: Not
paying the players.

You just got this enorm--

I'll give you an example.

We believe that
economists, or anybody,

firms in the same industry,
should have about the same cost

structure, OK.

So I would expect the New
York Times and the Wall Street

Journal to have about the
same cost structure in terms

of how much of their total
costs, or revenue are allocated

to paper, to labor, to
utilities, or whatever.

I would suspect that
Wendy's and Burger King,

McDonald's have approximately
the same cost structure

in how much are we
spending for meat and buns

and other kinds of things.

That doesn't mean that
Wendy's and the New York Times

should have the
same cost structure.

But if I say, give me two firms
that are in the same industry.

Let's call it the Detroit
Lions football team.

And let's call it the University
of Michigan Wolverines.

They're football team.

They're in the same industry.

Half of the Detroit
Lions' revenue or cost

for Detroit Lions is player
salaries, player compensation.

It's about half.

It's a little over half.

What is it that the
University of Michigan?

10%.

That gives you some idea
of how much exploitation

is going on here.

Because you would expect
the University of Michigan

to have about half of
its costs be allocated

to players, or personnel labor.

And so it gives you some idea
of just how much exploitation.

So I think, they
are rational actors.

Another thing that
happens, and it's also

within the realm
of economics, it's

called the theory
of public choice.

It's in the role of government.

We have one role
of government is

the government exists because
it helps to correct market

imperfections, whether those
be maldistributions of income,

or externalities in
terms of somebody

imposing costs on somebody else.

So there's the rationale.

But the public
choice view of this

is that a lot of
government actions

is basically under the heading
of special interest effects,

small cohesive groups, OK.

Now, give you an example.

In the United States because
of we don't like Cuba,

Americans pay about twice
the world price for sugar.

We pay about $2
for a 5 pounds bag.

The rest of the world pays
about $1 for a 5 pounds bag.

The typical American
cakes and pies and coffees

and everything like that eats
about 12 bags of sugar a year--

I mean, not directly
but indirectly.

OK, so that means that
the average American

is spending $12 more for sugar
than he or she would be spending

if they were in Canada, or
Mexico, or any other country

that doesn't prohibit
these importations.

So how mad can you get for $12?

About $12 mad.

It doesn't make sense
to buy any more than $12

worth of post
office-- or postcards

and mail dirty things to your
senators, or the president.

Don't sign it if you do.

But we have 11,000 sugar
growers in the United States--

beet sugar in the Utah.

Idaho, Colorado areas, cane
sugar, Louisiana, Florida.

How mad could they get
if we changed our policy?

About $300,000 per grower.

OK, you can get $12 mad.

They can get $300,000 mad.

They're going to
spend a lot more time

talking to their
representatives and having

the sugar lobby on K Street in
Washington, DC, and so forth.

Now, there are winners
and there are losers.

The winners from our current
policy are sugar growers.

The losers are
American consumers

that lose the same amount
as the sugar growers get.

It's a very small
per person amount.

So how does this apply
to college athletics?

And it does.

Which is, there
are-- the same thing

is true of sports stadiums.

Do sports stadiums stimulate
economic development,

or do they provide a good
rate of return for a city?

No.

But they do benefit some people.

They benefit the developers.

They benefit the guys
doing the bond deals.

They benefit the construction
unions and construction firms.

Which, it costs the
taxpayers $25 or $50 a piece

or something for
that inefficiency.

And I think, the same
thing is going on here.

That there are just some--

in George Orwell's terms, some
animals, or whatever he said,

are created more equal
than others, or something.

That they're just in terms
of access to a mayor,

or to a governor, or to
a university president,

you get this kind of special
interest effects here.

That there's something
they want and they're

willing to keep at
it until they get it.

DOUG HARTMAN: We do have
a couple of big picture

economic sports questions
I want to get to

because we said we'd do that.

But before I do that, so
is it fair to say, though,

that the benefits of college
athletics at a university,

especially like a big public
land grant institution,

though, are not only economic?

I know that it's hard
to put numbers on that.

But I'm thinking,
especially here,

how a lot of people that
are athletic supporters

think of the sports
teams as the front porch,

the public visibility
face of the university.

How do you--

I don't know if you can
quantify that in economic terms,

but in terms of the relation to
the value and intangible value,

maybe, of the enterprise.

ALLEN SANDERSON: No, no,
it's a good question.

And certainly, if I say,
how does a university--

what does the evidence suggest?

Does a University with a big
athletic program, or something

get more money from
the state legislature?

A little bit more,
not that much.

Do they get more applicants?

Yeah, but not that many more.

And the numbers tend
to be reasonably small.

They're in that direction.

But yeah, it's this sort of
Go Gophers, or something value

that people place.

It's hard to do contingent
valuation studies.

It's not impossible.

But you can get some
kind of measure.

The people who say, oh, the
benefits are just incalculable.

Well, if you say incalculable,
then the game is over.

Because you could
pick any number

you want to justify
anything you want to do.

But yeah, do I--

it depends.

Again, do I think the
Green Bay Packers have

a significant economic impact,
or something on the Green Bay

economy and the
people in the area?

Yes, approximately.

And I hope it's not your home
because there's nothing else

to do there.

But in a major Metropolitan
area, which is this is one,

Chicago's there, is another--

there are lots of
other things to do.

And people are pretty good
at finding alternative things

to do.

DOUG HARTMAN: So getting
into the bigger picture,

I got a couple of questions.

But the one I wanted to--
that seems burning to me

is, somebody wanted to
know, what advice did

you give the city of St Louis?

ALLEN SANDERSON: I just sort
of laid out for them what--

St Louis was faced
with unless we

build Kronke, basically,
a $1 billion stadium,

he's going to leave.

And I said to them
privately, trust me,

he's going to leave anyway,
so it doesn't matter.

So offer him $1 billion
because he's never

going to take you up on it.

But tried to say--

St Louis, Pittsburgh,
these are--

the thing that's tough about
St Louis and Pittsburgh

is similar--

I have no idea about
Minneapolis St Paul--

is that the legal, the
accounting, economic entities

are like a hole in a
donut and the donut.

And the hole in the donut,
meaning the Center City,

or the city proper in
St Louis is very small,

as it is in Pittsburgh.

And the city can't
tax the suburbs.

It can only tax the city,
that they were under--

they would have been under
huge, huge cost and that

just on financial grounds.

Again, they were
going to go anyway.

But you ought to let them go.

DOUG HARTMAN: So
this is probably

a less facetious
version of this, though.

The question is, is the
trend finally moving away

from publicly funded
stadiums, or is it

just a pause until a new round
of stadiums needs to be built?

And I'll give
everybody-- this is

something we talked about
with the graduate students

this afternoon.

And I posed that, I was
really interested in the role

that economics has
played in undermining

the usual economic arguments.

It's a lot harder to
make those arguments now.

So I think the question
is, is that established,

or is that temporary?

ALLEN SANDERSON: I tend
to think it's established.

The first solid evidence
that was coming out,

does a team bene-- or excuse
me, does a city benefit

from building a new stadium?

Do they benefit from luring
a franchise, or something.

From about '95, '96 on,
so the last 20 years,

the evidence among
economists is pretty uniform.

That, no, they don't stimulate
economic development.

They have a relatively small
rate of return on that scale.

Football stadiums are the
worst, mainly because they're

closed all the time.

And the best would be
an indoor combination.

NHL-- excuse me,
NHL, NBA franchise.

So if you got a professional
basketball and hockey,

you throw in the
Taylor Swift concert,

the ice shows, the conference
for this, the circus,

the whatever,
Madison Square Garden

probably gets up to 250 nights
a year, you can make it pay.

You can't make a football
stadium pay, it's just.

When I was testifying in
City Hall in New York in 2004

because the Jets
owner, Woody Johnson,

wanted to put his
stadium on Manhattan.

Which may have been the
worst idea in the history

of human existence.

But in the end, he didn't.

I mean, they voted him down.

He didn't do it.

But they were asking me in
City Hall, well, what should we

put-- it was on the
Hudson Yards area.

What should we put on that?

And I said, look, I'm from
Chicago, what do I know?

It could be affordable housing.

It could be commercial.

It could be mixed
use kind of things.

I said, there are only
two that you do not

want to put on a valuable
piece of real estate.

And that is valuable
piece of real estate.

One is a cemetery.

And the other is a
football stadium.

And they have a
lot in common, OK.

And after that, it's negotiable.

But you do not want
to build those.

And I think, by the way, in
terms of, is it a deposit?

No.

I think, in almost
any enterprise now,

the role of the
economist, I think,

is reasonably permanent
there, which is-- yeah.

DOUG HARTMAN: I think
we're about out of time.

So I've got, I think, one
more that we haven't quite

touched on that, I think, is--

I think, trying to think the
way you're thinking, but maybe

with a different approach.

And it's, would you favor
implementing a more Olympic

model, where athletes
can accept compensation

from corporations for the use
of their likeness as a solution?

So I think, that's the
Ed O'Bannon version.

But would that
satisfy your interests

in equity and
distribution of resources?

ALLEN SANDERSON:
Yeah, anything that

moves in that direction, yes.

After the O'Bannon
decision, in fact,

you are going to
have to pay if you're

going to put an athlete, a
football player, or something,

a college football player, or
basketball player in some ad

or something, you're
going to have to be paid.

And that doesn't strike
me as unreasonable.

It's true for anybody.

That would be true for
anybody in this room.

You'd be paid to have your
likeness put on a cereal box,

or whatever else it might be.

So moving in that,
yeah, anything

that moves in that direction.

By the way, the Kessler suit--

just to make it clear
that I said if Jeff wins,

it's over for the NCAA.

What that is, is,
basically, the NCAA

is violating the
Sherman Antitrust

Act because of price fixing.

So anything that
gets around that--

and, I think, the NCAA
is reasonably nimble.

They're aware of it.

If they lose this,
they're in big trouble.

And so you see them last
year, all of a sudden,

saying with the power
conferences, well, the--

they will be room and board,
tuition fees and $5,000.

It could be room and board,
tuition fees, $5,000,

and a whole bunch of
commercials they can do.

Again, the primary, if
you start paying players

in terms of vested interest
here, if I want to say,

as a class, or as
a group, who are

the people most likely to suffer
if you paid college athletes?

Pardon?

AUDIENCE: [INAUDIBLE]

ALLEN SANDERSON: Yeah.

The guys who would lose
biggest, and they're

mostly guys, the
coaching staffs, OK.

So when a coach, college
coach, stands up and extols

the virtues of
amateur athletics,

he or she is the biggest
hypocrite on Earth, OK,

because they're the
primary beneficiary.

If you pay the players, their
salaries drop like a rock.

And so, yeah, I think, we just--

this has been a
great conversation.

I've enjoyed the day immensely.

I just want people to be
more honest about what's

really going on here and not
cooking the books or not.

And I don't mean
any of you, or me.

But in this particular
industry, it's very, very--

it is just this strange
thing that you don't

see anywhere else on Earth.

It's like going to the
Grand Canyon, I suppose.

And there's not two of those.

It's just Americans and college
sports, it is so just different.

DOUG HARTMAN: Well, I think,
whether you have opinions,

or change your mind on paying
college student athletes,

I hope the
conversation has helped

to open up ideas about
the value and problems

of college athletics on
big campuses like this.

And I'd ask you to join me in
thanking our guest for helping

us think those ideas through.

ALLEN SANDERSON:
Well, thank you.

DOUG HARTMAN: Thank you, Allen.

[APPLAUSE]