Economic rents and the Longhorn economy
I didn’t have time to comment at the time, but the Statesman had a good piece on the Longhorn economy in Sunday’s paper. This year, the University of Texas athletic department will spend more than $100 million. A lot of the AD’s budget is spent on things like team travel (but chartered jets for the basketball team?), equipment, and medical care. But a lot of it gets spent sustaining the high life:
- For the football team, after its Rose Bowl victory, “a $200,000 renovation of its players lounge, a retreat with four TV projectors (screens drop from the ceiling at the push of a button embedded in a six-foot replica of the UT tower), six flat screen TVs, four X-boxes and three PlayStations.”
- Another new lounge area for the football team, with five flat-screen TVs and a three-dimensional, lighted 20-foot Longhorn on the ceiling.
- $380,000 to rehab Athletics Director DeLoss Dodds’ suite overlooking the football field.
- $9 million for the football stadium’s new high-definition video and sound system, much of that for the new scoreboard, and $3.9 million to buy out the company that owned advertising space on the old board.
A couple of UT professors predictably called the spending an “extravagance” and an “embarrassment.” I was disappointed nobody mentioned the key phrase: “economic rent.” The athletic department has these millions to spend on luxury items because it belongs to a cartel that fixes the price of labor.
Of course, some of the rents are returned to the players as soft compensation; that’s what those fancy lounges really are. But that $200,000 would almost certainly generate more utility if given to them in cash than if spent renovating a lounge to add barcaloungers and flat screen TVs.
This is a good illustration of the twin harms caused by the NCAA’s price-fixing: (1) It redistributes money from student athletes to coaches and middle-aged administrators; and (2) it ensures that much of the compensation that athletes do get is wasted through inefficient barter.
