WSJ - Economists' Letter to Fed re: BCS
WSJ Article: DOJ Asked to Probe BCS Under Antitrust Law
I came across this article on Doc Saturday. Having a couple econ degrees, I'm always interested in how professional economists view the BCS. This basically outlines how 20 of them signed a letter to the Fed detailing their issues with the BCS and antitrust law.
The thing I took from this article is that economists, politicians, and writers like Dan Wetzel live in a hypothetical fantasy-world.
I find they want equality but not fairness. As economists, I would think they would stand along the lines of fair free-market principles - that it's most economically fair for schools more people follow (via tv ratings, tickets, bowl attendance) to be compensated more, and those followed less should be compensated less; for-profit bowls allowed to invite the candidates best for their business; etc. - and that, in my opinion, would only further separate the haves and have-nots. Dissolving the BCS doesn't mean a playoff is imminent; If bowls can invite whomever they wish, I believe we'll see even less opportunity for the Boises and Utahs (pre-Pac-12) of the world.
Thoughts? (I hope this doesn't end as a playoff vs. bcs argument, instead as a discussion of economic merit for BCS vs. dissolution)
April 13th, 2011 at 12:29 PM ^
Just commenting before I read the article, you could also make an egalitarian argument (can't believe I'm making it, but whatever) that the schools who currently produce less are compensated more based on being able to see a 6-6 team claim a bowl "championship".
I doubt many people in small conferences derive the same utility from seeing their basketball team get slaughtered in a 16-1 game than they do seeing their team go to a bowl, which has much more equity of competition.
April 13th, 2011 at 12:35 PM ^
I'm always trying to get utils in the conversation, and I totally agree with your reasoning for higher utility through competitive bowls as opposed to a slaughter.
Opponents may argue that a college football playoff won't involve more than 8 or 16 ranked teams that are much closer in competition than March Madness....but I digress...
Just curious, what do you do with your economics degrees? I'll have a minor in the spring of 2012, but I couldn't fit in a double major because I switched my primary major halfway through.
What will I be missing out on?
In a nutshell, I work as an analyst for a bank doing pricing forecasts for interest rates and securities. I think it's interesting work and have learned a lot over the past couple years (it was nice having an understanding of what was happening during the 2008/2009 crisis), although I'm tiring of the culture at my company.
If you like thinking about how econ/finance/current events affect pricing of securities and interest rates, it's cool. It's not for everyone, though. What are you doing for your major and what do you want to do afterward?
Finance isn't where my interest really lies. For me to get into econ professionally it would probably have to be as a professor, since nobody cares about paying people to generate economic theory other than schools/think tanks, and theory and economic history are my interests.
I'm not planning on working in anything I'm actually studying (I'm hoping to punch a ticket to Marine OCS) but I'm studying Public Policy Analysis. Basically taking a look at macro level policy decisions and applying them in micro cases. The best example is the Congressional Budget Office, where they get tasked with determining the impact of say, the recent healthcare bills on individuals, the tax base implications, AMA ramifications, ect. Stuff like that, in a nutshell.
April 13th, 2011 at 12:31 PM ^
So why do they not have a problem with the Liberty Bowl, which automatically takes the CUSA champion just as the Orange Bowl automatically takes the ACC champion?
The natural extension of this is not a playoff, it's dissolution of the BCS and a return to the bowls coming to deals with conferences in competition with one another. I don't know where the Mountain West would land on the pecking order in a situation like that, but it sure as hell would never be in the Rose Bowl again. The "cartel" opens their participation in these bowls. Capitalistic competition would close it down.
April 13th, 2011 at 12:42 PM ^
Well, assuming the BCS caved to market pressures, and not antitrust lawyers (a big leap of faith, but stick with it for a second), including TCU in the Rose Bowl was a result of capitalistic competition. Nitpicking, but oh well.
I agree that the only thing shutting the BCS completely down will do is guarantee a Pac/B1G Rose Bowl, a SEC/? Sugar Bowl and a BXII/? Cotton Bowl.
Edited to add that I completely agree with your point below. To me it's a little like demanding equity of pay in a hospital. Doctors make bank because they can negotiate high salaries, orderlies make less because they cannot sign the same deal. In principle, this is what happens with the bowl system apart from the BCS. TCU and Boise can break off and do their own system and crown a playoff national champion if they choose.
April 13th, 2011 at 12:48 PM ^
stated Justingoblue. +1 to you, good sir. I say scrap the BCS and allow the bowls to bid on teams/conferences. This will bring market forces back. Then maybe the bowls will not rape smaller schools and bully them into huge losses.
While I'm OK with scrapping the BCS, I don't believe it would help smaller schools. In fact, I think it would be severely detrimental to those schools chances at exposure and money.
The higher-payout, higher-exposure bowls (BCS bowls, Capital One, Cotton, Peach, etc.) will sign contracts with the conferences that are guaranteed to have good teams and rabid fanbases. In turn, they sell their bowl as a safe and high-return investment to corporate bowl sponsors as well as increasing the value of television rights. These are the Big Ten, SEC, Big 12, and Pac-12.
If the bowls are allowed to pick and choose, the smaller conferences will struggle to guarantee ratings/attendance, lowering sponsorship and tv rights, lowering payout. The BCS payout that non-BCS schools receive, while small in comparison to the BCS schools, is huge. This is what Jim Delany was referring to when he said the non-BCS schools have pushed and there's only so much the BCS schools can give to them before they'd rather go back to the old system.
Based on Orange Bowl and ACC Championship attendance and ratings, I wouldn't be surprised if the Big East and ACC get screwed by a BCS dissolution. They might get one slot each in the bowls I mention above, but the big bowls will take a fourth place Wiscy/Iowa/MSU/Ark/Tenn/TexasA&M over a first place Wake/NCState/BC/UConn almost anytime.
/on a side note, I do agree the NCAA should make it illegal for bowls to force schools to buy ticket allotments for a variety of reasons, although I wouldn't hold my breath.
April 13th, 2011 at 12:55 PM ^
Under the old system, the Rose Bowl would have gotten Wisconsin/Oregon instead of Wisconsin/TCU.
My guess is that the Rose Bowl would see TCU as the thing they got stuck with because the BCS stole Oregon.
Possibly, but they could have also concluded that TCU (i.e. the best available team) would draw more interest and thus dollars.
I do believe that the second this hypothetical dissolution took place there would never be a TCU-like team in the Rose again. The Pac and B1G would have a contract written up until 2099 or whenever. That's why I think that TCU has more to do with antitrust lawyers and less to do with economics, just making a point that they could have come to that decision a different way.
I agree, while it's possible TCU could have brought the most value to the table (most likely due to the fact that they hadn't been since the 40s and the whole BCS vs. Non-BCS matchup), adding the Rose Bowl exception for non-AQ schools was almost assuredly a political concession, not an economic force.
The risk-averse (econ term FTW!) Rose Bowl will take the safety of a local Pac-12 school and a rabid Big Ten football school over a riskier non-AQ every year, in my opinion.
Although, in all fairness, doctors also make "bank" (which is extremely relative, depending on specialty) because it's a ridiculously specialized degree. 4 years of undergrad, 4 years of medical school, and then a residency lasting anywhere from 3-7 years (and not actually making a physician-level salary until that residency is completed). Most people don't want to go through all that, which is why there are so few doctors, and why they can command higher salaries. Not to mention the fact that medical school alone costs at least 200k (at in-state tuition rates) added to whatever undergraduate debt the physician might owe, which basically means that even at higher salaries, they actually make like no money until that debt is paid off.
All of that is extremely irrelevant to your point, excepting maybe the first part on why they can negotiate higher salaries. Sure, they have clout, but there are also far fewer physicians than their are orderlies (and it takes far less time/money to train up an orderly than a physician).
Yes, just as there are fewer M/OSU/USC/ND/Texas schools than there are Boise State/TCU's. Those schools can only get that way by going through a long process, which is why there are fewer.
My point was that doctors (B1G/SEC) are more in-demand than orderlies (MWC/WAC); you illustrated this perfectly.
April 13th, 2011 at 12:31 PM ^
Try working on the economy first. Have you noticed how it's been doing? Please leave college football alone.
April 13th, 2011 at 12:32 PM ^
WHy don't the feds fix the National economy first, before worrying about issues that are not illegal but potentiall violate some interpretations of free market principles?
That said, I am starting to wonder why the NCAA operates entirely tax free.
That is the discussion I would rather be having here. Tough to make a good case for the NCAA IMO.
Whenever the government takes a look at athletics, someone always brings out the tired, trite "they have more important things to do" argument. The government doesn't get a lot done because there isn't enough agreement, not because they don't spend enough time.
The feds have plenty of time to look at a multi-billion dollar cartel and its restraints on fair trade.
April 13th, 2011 at 12:34 PM ^
Also: the basketball NCAAs and the NIT are required attendance if invited. No other tournament may take precedence. The NCAA bought out the NIT and now owns a near-monopoly on postseason tournaments. How is that less monopolistic than the BCS and the bowl system, to which conferences and teams are free to sort out their own affiliations?
I agree that the BCSis a cartel acting in the interest of its own members subject to the constraint that acting too monopolistically will attract unwelcome political attention. However, I agree with the sentiment above that if one opened it up to competition that the big boys would crush the minnows. Fine. Let's go back to the 70s when U of M could offer way more than 85 scholarships. Let's have the bowls compete for who they want. Notre Dame and Michigan will be in a BCS every year. Hooray! /s
I think we'd be worse off. I'm sure the Boise States of the world would definitely be worse off. Be careful what you wish for.
April 13th, 2011 at 10:05 PM ^
I agree that, if anything, this "cartel" acts in the interests of the Boise's of the world. If it weren't for the BCS, Boise would have absolutely nothing to show for their run. Instead they've gotten the payout and some glory. OTOH if they throw away the BCS they could easily be left with nothing.