What are the economic lessons involved in the University of Minnesota’s varsity sports restructuring? If you want to talk about a question that opens a can of worms, this is one.
But economics is the study of how people make decisions to allocate scarce resources, and varsity athletics at many universities in the United States use up a lot of resources, so there must be some economics involved.
Purists might insist on the contrary. Colleges and universities are educational institutions — nonprofit entities dedicated to the education of our nation’s youth. Since they are not for-profit institutions, the usual assumptions of economic analysis do not apply. The classic mens sana in corpore sano (a sound mind in a sound body) still stands as an ideal of liberal education. Varsity athletics are just an effective way of ensuring young bodies are sound.
Yes, and I have a very nice used bridge in very good shape that you might be interested in buying. It is currently on the east side of Manhattan, but we could move it to wherever you want.
Seriously, sports are good for mental and physical health. Participation in individual or team sports teaches lessons and builds habits that are valuable throughout life. Sports have a necessary and valid place on college campuses.
But that is not the same as saying that there is a valid educational purpose to programs so large that they can run $21 million deficits, let alone have $21 million budgets. Multimillion-dollar intercollegiate sports are pretty much unique to the United States. No other country in the world has similar sports programs as part of its higher education system.
Moreover, the huge sports empires that have become commonplace are a feature of the post-World War II period. Yes, there were famous college coaches and teams before that time — Knute Rockne and “the Gipper” come to mind. But their salaries — and the fraction of university budgets that their programs represented — were only a small fraction of what is now common.
So why would a university spend millions on intercollegiate athletics? Should one subsidize programs that involve only a few dozen students but cost hundreds of thousands of dollars? And should funds from “profitable” sports such as basketball or hockey be used to subsidize ones with substantial costs but few revenues?
The standard answer to the first question is that collegiate athletics have become deeply embedded in U.S. culture. Many students, and/or their parents, expect a prominent athletics program when they come to a school. Not that most will participate, but they expect athletics as part of the total educational “package” that they buy.
People go to college to get an education and also to get a degree. The two are not the same. Education is knowledge and skills. A degree is a mark of status and an entry into certain economic and social networks. A diploma from Texas A&M University or the University of Nebraska means one is an “Aggie” or a “Cornhusker.” In Omaha or Houston business circles, that may mean as much as graduating from Tokyo University does in Japan or from Cambridge in England.
The underlying education may not be any better than that at Podunk State or a struggling Bible college, but the reputation is.
If colleges have a full-blown and winning sports program, it is easier for them to attract students. Full enrollments keep average costs per student down at institutions with high fixed costs, and thus athletics keep per-student expenses lower than they would be otherwise.
Subsidizing minor sports, such as golf, which attract few participants or spectators, is viewed as part of the same package. To be an attractive school, a university must offer a broad range of sports, not just one or two.
Another argument for spending money on sports is that athletic programs help maintain lifelong relationships with graduates who may one day contribute financially. People who make a lot of money in the business world are not likely to remember their western civilization teacher with great fondness. But they do value their association with institutions that have a winning sports team.
The cost of subsidizing an athletics program, they say, is merely a fund-raising expenditure. The $1 million or $21 million a year is bread, cast upon the water, that will return some day — 20-fold or even a 100-fold.
These are some common arguments for spending public or tuition funds on varsity athletics. Do I find them convincing? Not really, but sports have never been important for me. I think it is a travesty that Minnesota spends a net $21 million or more each year on sports at the university alone. But in addition to the economic arguments for or against varsity sports, there are political and cultural ones. And on those, an economist has little to contribute.
© 2002 Edward Lotterman
Chanarambie Consulting, Inc.