NCAA Rules Gone Wild
In any association or community of individuals there is a need for guidelines and basic rules of conduct. Such norms of behavior are indispensible if we are to live together in social relationships.
Normally the rules governing an association start out as simple and commonsensical. In a community of individuals it is easy to understand the logic embedded in prohibitions against the natural law violations of the individual’s right to life, liberty, and property. However, with the passage of time there is a tendency to layer on more and more regulations and red tape. The expanding regulatory code becomes cumbersome, contradictory, and chaotic. Eventually what started out as a useful voluntary association often evolves into an overbearing bureaucracy that is detested by its own members.
The tendency of an association’s rules to grow over time into an incomprehensible muddle plays out in organizations both large and small. The pattern is most evident in large organizations such as the federal government. For example, taxpayers are acutely aware of the IRS and the unintelligible tax code that grows annually in an expansion process that appears to be irreversible. Excessive rules and rule enforcement occurs in small groups as well; consider the case of a neighborhood homeowners’ association with an overzealous president.
Paralysis by Compliance
As documented in a recent article appearing in the Huffington Post, presently the NCAA is under fire from a variety of directions. Much of the criticism centers on the NCAA’s attempt to maintain a “clear line of demarcation between intercollegiate athletics and professional sports.” (NCAA Manual 2013-2014, page 1). The NCAA’s basic idea is that student-athletes are first and foremost students, and the NCAA works feverishly to ensure that the student-athletes are not receiving any “extra benefit” as a result of their participation in intercollegiate sports. To this end, the Association forms numerous rules outlawing various sorts of benefits that might be provided to an athlete.
Meanwhile coaches and high-level athletic department administrators are making very generous salaries (some would say off the backs of the student-athletes who are doing the work on the field). Current and former student-athletes are increasingly expressing their dissatisfaction with the system, leading to lawsuits and a well-documented push to unionize on the part of football players at Northwestern University.
In its attempt to define and legislate against “extra benefit” accruing to student athletes the NCAA annually updates its burgeoning rules manual. As with the federal tax code, there are frequent cries for rules simplification. But despite the discord the manual grows ever larger and the rules more complicated.
Ultimately attempts to make enough rules so as to prevent a star athlete from receiving an “extra benefit” from his participation in athletics won’t work. The problem is similar to the corporate governance problem considered by Edward Stringham and Peter Boettke in a 2006 article in Politicka Ekonomie. In a corporate environment it is rather easy for unethical corporate insiders to find ways to direct resources to themselves, a predicament known as the “agency problem” in the finance literature.
Could a government ever enact enough laws to ensure corporate insiders are working in the best interest of shareholders, and not using company funds to feather their own nests? Stringham and Boettke argue that a legalistic approach to eliminate the agency problem is unlikely to be successful: “Imagine trying to keep the water in a flooding bathtub by holding up a bunch of tiny plastic bags. The bags might prevent water from flowing in any particular area but they will not prevent the water from getting around them.”
Likewise, the benefits that flow to an outstanding football or basketball player will not be removed by making ever more rules prohibiting particular types of behaviors. Plugging one hole with a little plastic bag will only move the benefit somewhere else.
Despite the futility of the effort, attempts by the NCAA to define and outlaw any and all forms of extra benefit have led to some truly laughable bylaws. Take for example NCAA bylaw #16.5.2(h): “An institution may provide fruit, nuts and bagels to a student-athlete at any time.”
Creation of the bagel bylaw led to an impassioned debate among bureaucrats and compliance officers as to whether or not cream cheese was allowable on the bagel. Last week the NCAA eliminated the controversy once and for all with the approval of new legislation that allows universities to give student athletes meals at any time, with no restrictions on cream cheese whatsoever.
NCAA Enforcement Landscape Mirrors Over-Regulated Economy
The NCAA is a large and important institution, and an examination of its many rules and policies is interesting in and of itself. But, more importantly, it can be viewed as a microcosm of the over-monitored and over-regulated economy. NCAA regulations that allow the provision of bagels, while prohibiting spreads, are obviously preposterous. But how different is the trend for the U.S. economy?
In February 2012 the Fox News channel aired correspondent John Stossel’s special report titled “Illegal Everything.” The show focused on the myriad of rules and regulations promulgated by federal, state, and local governments, and how the vast array of rules affected specific individuals. Among others, examples were provided where children and adults were charged with crimes for operating lemonade stands, planting a disallowed type of tree in their yard, and holding a meeting in a location where it was disallowed—specifically holding a bible study session in a house instead of a church.
The minute individuals form an association there seems to be an almost insurmountable gravitational pull in the direction of more rules and greater regulation. There are a variety of causes. Possibly some well-intended but misguided individuals believe things can always be improved by layering on just a few more regulations. Rent seeking behavior is also a significant factor—often rules arise as a means to ensure economic benefits flow in the direction of specific individuals (i.e. the rule-makers). And there are some people who like a lot of red tape simply because they enjoy being able to tell others what to do.
Time to Trim the Fat?
Will the NCAA survive the weight of the enormous regulatory overload? Probably not without some rather dramatic changes. To avoid a complete collapse, coaches and administrators are now exploring ways to modify the Association’s rules to allow for some cash payments to be made to players.
Kentucky coach John Calipari is one of the coaches leading the charge for changes within the NCAA. Calipari demonstrates a solid understanding of economics as well as basketball by drawing on history in a foreboding comparison of the NCAA and the last years of the former Soviet Union.
"The situation reminds me a little of the Soviet Union in its last years," Calipari wrote in his recently released book, “Players First: Coaching From the Inside Out.” "It was still powerful. It could still hurt you. But you could see it crumbling, and it was just a matter of time before it either changed or ceased to exist."
L. Dwayne Barney is currently a professor of finance at Boise State University, where he has taught courses in both economics and finance. His Ph.D. in economics was received from Texas A&M University in 1984. Together with Brian McGrath he is coauthor of Capital as Money, a book which argues for a new system of privately-created money.
Paul A. Cleveland is a professor of finance and economics at Birmingham-Southern College in Birmingham, Alabama. His principal area of scholarship is political economy where he draws heavily upon the disciplines of economics, history, philosophy and theology.
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