How to get college athletes paid

Posted by Dan Barkin on November 14, 2013 

The problem with big-time college football and basketball is one that would be familiar to any economist.

The NCAA and colleges won’t let the players get paid what they are worth. They get scholarships, lodging, meals and a few bucks more, but for exceptional athletes, that’s nothing.

So it goes like this. In the last year that they are amateurs in college, they make peanuts. The moment they turn professional, they make millions.

Presumably, then, before they turn pro, they are still worth millions; they are just not paid millions by their employer, the university.

Because they will be worth millions soon, they attract unscrupulous agents. Agents get a cut of what professionals make, so there are incentives for some agents to make under-the-table arrangements with players. We have seen examples of this described in court documents recently. The agents are betting that if they front the player cash -- in violation of NCAA rules and state laws -- then the player will sign with them and they will stand to make hundreds of thousands of dollars.

Today, I was looking at the photo of Michael Wayne Johnson Jr., a former N.C. Central quarterback who has been charged with being a go-between for Terry Watson, a Georgia sports agent alleged to have given money to Greg Little, a former UNC star who now plays in the NFL.

It struck me that Johnson was in court because the system has criminalized what would be in other circumstances a routine transaction. An agent is trying to sign up a talented performer. Happens all the time in show business. No one gets arrested.

In college sports, however, the system attempts to suspend the laws of economics. In doing so, it creates an underground economy.

I believe that this problem will persist as long as economic forces are ignored.

Here is one solution, modestly offered. Treat big-time college athletes like entrepreneurs launching a tech startup.

Startups go out and look for early investors, so-called “angel investors” to help them get going. Later on, other venture capitalists come along and provide more capital. All of these investors are getting shares in the company. The startup may fizzle, in which case the investors are out their investment. Or the startup may become Twitter or Facebook or Microsoft, and the investors get a big payday when the company makes its initial public offering of stock.

The colleges complain that they cannot afford to pay star athletes, or even pretty good athletes, what they are really worth. OK, then let investors pay them for a share of future earnings. Maybe those investors are agents. I don’t care.

If the players make it to the NBA or the NFL -- essentially their IPOs -- the investors make money. If they don’t get drafted and signed, the capitalists are out their investment.

Frankly, these investors could just as easily take their player public while they are still in college. Talk about fantasy football. What would you pay for 100 shares of South Carolina’s Jadevon Clowney or Texas A&M’s Johnny Football? Even better, what if you could package the entire Duke basketball team’s starting five as a security? Hedge funds, which are mostly made up of Dukies anyway, would love to tackle this financial engineering challenge.

With this notion, the players would get paid, the NCAA wouldn’t have to spend all its time investigating whether some kid got a FedEx with hundred dollar bills in it, and the colleges wouldn’t be going on probation after it was discovered their stars were taking money under the table.

This proposal needs some work. For one thing, the schools or the NCAA should provide attorneys and accountants to help the players negotiate and protect their interests. Trusts should be set up to ensure that 18-year-old shooting guards don’t blow all their money.

But the virtue of this idea is that maybe we can stop having to deal with the inevitable tawdry consequences of a college athletics system that tries to deny economics.

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