Literature Review #4

Lawrence Kahn

Citation: 

 Kahn, Lawrence M. "Markets: Cartel Behavior And Amateurism In College Sports." Journal Of Economic Perspectives 21.1 (2007): 209-226. Business Source Premier. Web. 10 Mar. 2015.

Summary:

This article discusses the idea that the NCAA operates like a cartel. According to Kahn, the many restrictions that the NCAA imposes on players and schools act to repress these people and fix costs, as a cartel does. They have enacted restrictions which include player compensation and recruiting expenses and have defeated any potential rival groups. Restricting player compensation is the main way the NCAA can restrict competition and control players. The article continues to say that the NCAA attempts to put limits output by limiting the amount of games that can be televised before the schools sued them to get the rights to televised games.

About the Author:

Lawrence M. Kahn is the Braunstein Family Professor and Professor of Economics. He was Chair of the Labor Economics Department at Cornell during 1998-99 and 2000-2005, is Editor of the Industrial & Labor Relations Review, is on the editorial board of the Journal of Sports Economics, served as Associate Editor of the Industrial & Labor Relations Review and Specialized Co-Editor (for Sports Economics) of Economic Inquiry and was on the Board of Editors of Industrial Relations. As an economics professor, he can give unique insight into the practices of the NCAA and help determine if the practices they employ are fair from an economic standpoint. 

Key Terms:

Cartel: an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.

Regulation: a rule or directive made and maintained by an authority.

Quotes:

"According to proponents of the cartel theory of the NCAA, the organization has enforced collusive restrictions on payments for factors of production, including player compensation, recruiting expenses, and assistant coaches’ salaries; it has restricted output; and it has defeated potential rival groups." Page 211

"Today, restrictions on payments to players are probably the most important way in which the NCAA acts to restrict competition. But historically, the NCAA has sought other ways to reduce input payments and to restrict output." Page 211

"...from a redistributionist point of view, for at least some college athletes who make it to the National Football League (NFL) or NBA and likely generate a disproportionate share of the revenues in college sports, lifetime permanent income may be high. Thus, the redistribution caused by monopsony over these athletes may in fact be progressive. On the other hand, college athletes rarely make it to the professional ranks: only 1.3 percent of NCAA football players and 1.7 percent of NCAA basketball players make it to the pros..."

Value:

This article is valuable because it gives economic insight into the issues which players face when playing for the NCAA. It describes the many ways which players are exploited and controlled by the NCAA be it through controlling wages or using sanctions and penalties to restrict the players from using their likeness to create revenue. This article gives me an economic prospective where before only legal perspectives were available.