Successful coaches are grotesquely overpaid

A column in this morning's Post-Gazette by the sports guy Ron Cook is headlined "Successful coaches deserve high-end salaries," and Cook makes a case that the extraordinary amounts of money that NCAA football and basketball coaches are paid at Pitt (and Penn State, and UConn, where this story first got legs) are not just acceptable, but affirmatively good things.

This is old news, and it's tired argument. Cook's version is so chock full of economic ignorance, however, that he could have had a job on Wall Street. And that makes it ripe for deconstruction. It is easy (and right) to point fingers over our current markets meltdown at greedy Wall Street bond traders and real estate speculators. But a little bit of the fault, dear Brutus, lies in ourselves: What's your basic economic IQ?

Cook writes, in the section of the column that really made my head explode (virtually, anyway):
Anyway, a coach's salary is a direct reflection of what he gives back to his
university. Chancellors and presidents don't hand over the big money because
they like a coach. They do it because they believe that coach will be worth
every cent....

No, no, no, no. (Not just one "no," but four, for emphasis.)

First, coaching salaries start with the fact that a lot of colleges and universities insist on maintaining big-time athletic programs. Football and basketball are fun to watch and to follow, but they aren't inherent parts of higher education. Most of the world's great universities either have thoroughly mediocre football and basketball teams or have none at all.

Second, the idea that big-time football and basketball programs are big money-makers for their hosts is a myth. Add up the real, true costs of running these programs: the capital costs of building and maintaining training and performance facilities. Foregone tuition to fund athletic scholarships. Lost productivity associated with faculty and staff time dedicated to supporting athletes admitted under special standards. The marching band. (If there was no football team, there would be no marching band. In fact, the NCAA won't let a university compete in Div. 1 football unless it has a marching band.) At the end of the day, a successful big-time program breaks even.

Of course, it might do better than break even if the coaches (plural) weren't making high six-figure and often seven-figure salaries. Which leads me to:

Three, even if these programs are big money-makers for their institutions (let's stipulate that Joe Paterno's presence is a net positive for Penn State), there is no reason to suppose that the coach himself should get to keep some of that money. This, of course, is the attitude that Wall Streeters are still using to defend their bonuses: I sold lots of CDOs and make tons of short-term profits for the i-bank, so I'm should get to keep a big chunk of that value. Bonuses have their place in compensation schemes, but only if the bonus structure is aligned properly with the real interests of the organization. On Wall Street, that means that long-term profits and deferred compensation should be the baseline of a bonus scheme. On campus, that means that playing and graduating players who are part and parcel of the ordinary campus community should be the baseline, since the mission of the university is (or should be!) education, not winning ball games. Joe Paterno, Jamie Dixon, and Dave Wannstedt may have done a spectacular job of graduating players over the last year, which is a good thing. They should be compensated for that. And so should the chairs of the History Department and the Biology Department.

Fourth and finally, that brings us back to Cook's statement about salaries reflecting what coaches give back. That history professor gives back just as much value to the university as the football coach does, and my bet is that the history professor gives back more. The difference between them isn't the satisfaction of the Chancellor. The difference between them is that there is a market for football coaches out there in the USA. If Pitt isn't willing to pay Dave Wannstedt some fabulous amount of money to coach football, then Dave Wannstedt won't work for Pitt. Dave Wannstedt is a rational guy and a talented coach, and he'll go to some school that, like Pitt, made the decision to have a big-time football program, that's willing to pay him what he wants.

In other words, coaches aren't paid big money because they're inherently worth a lot to their schools. They are paid big money because a bunch of schools have gotten together and bid each other's price up to the point where they all just pay big money.

Price, in other words, doesn't reflect "merit" or "just desserts." Price reflects supply and demand and the willingness to pay. (This is Economics 101, of course; in Economics 201 we'll talk about market defects and problems with the basic model.) It's the economy, stupid, to paraphrase James Carville. If every Div. 1 football school decided collectively to pay each head coach $100,000, then all head coaches would make $100,000. The world would continue to rotate on its axis. Games would be played; championships would be contested. No one would wonder or worry that athletics is warping the priorities of the American educational system. And we would say, simply, that coaches are being paid precisely the right amount of money.

Comments

4 Responses to "Successful coaches are grotesquely overpaid"

Chad said... 2/24/2009 9:27 AM

I'm not going to argue with you, Mike. In fact, I agree with much of your argument. But I'd be interested to know if you're willing to apply this same argument to faculty and administrators too.

Would the world continue to rotate on its axis if every top 25 school decided to pay each president only $100,000? Is Mark Nordenberg really worth $460,000 a year, plus that $75,000 a year retention bonus? Is Jared Cohon really worth $591,000 a year to CMU? Do those prices reflect merit and just desserts, or are they, too, just willingness to pay? Could these schools not get equivalent performance from someone willing to settle for only $300,000 a year? For $200,000?

And what about, say, an economics professor who pulls down $450,000 while teaching the equivalent of three full-time classes, overseeing a boutique masters program, and rarely getting his grades in on time? Is he really contributing ten times more to the educational mission of the university than an English professor who makes $45,000 a year while teaching five courses a year, advising the literary magazine, and regularly mentoring students during her office hours?

How, exactly, do we quantify the value that anyone gives back to a university? Much like you're willing to bet that the history professor gives back more than the football coach, I'd be willing to bet that the English professor gives back a hell of a lot more than the economics professor. But how can we be sure? How do we keep score?

I don't know that there's an answer. But I do know, from plenty of first-hand experience, that for every overpaid coach on a university's payroll, there are at least a half-dozen overpaid professors and administrators whose compensation is set by equally inflated senses of worth and market value.

Mike Madison said... 2/24/2009 9:51 AM

Word.

The problem, of course, is that money is often how we keep score simply because we can't think of any better way. In academia, the second-best alternatives seem to be prizes and honors (but only a few of them; the limited supply exaggerates their worth) and departmental combat. As the old joke goes, academic politics are so bitter because there is so little at stake.

Brady said... 2/25/2009 4:52 PM

For those interested in some accessible reading about the phenomenon of high-profile sports in universities, see "The Sports Imperative in America's Research Universities", a report from 2003 by the The Center for Measuring University Performance:
http://mup.asu.edu/TheSportsImperative.pdf

The report is not trying to take a stand on whether sports are "good" in a university, but it is looking at whether prioritizing top athletic programs is valuable for the research mission of the university. They basically come to the conclusion that large investments in athletic activities are likely to inhibit the research mission of the university. The lead author is a former president of the University of Florida.

Note that The Center's own definition of research universities and their perceived mission of research universities may not completely agree with what many faculty or students would like, either. But that's a separate issue.

Incidentally, Pitt is mentioned a couple of times in the report in minor ways, such as for having one of the largest football stadiums prior to 1930.

Vannevar said... 2/25/2009 8:55 PM

I wonder if the title might extend to:
•All the highly paid people are overpaid?
•All the people NOT facing Global Competition are overpaid?
•All the Air Traffic Controllers are overpaid.
•All the Surgeons are overpaid.
•All the CEOs of companies that don't make their numbers are overpaid.
•All the baseball and football players are overpaid.

And yet, the pay is the result of market forces and perceived value. Would a controlled economy do a better job of setting prices?

May I respectfully offer alternative themes?
•Corporate profit is grotesque.
•The pay gap between the CEO and the janitor is grotesque.

It's an interesting discussion.

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