Contrary to popular belief, the NCAA has only ever truly enforced a nationwide prohibition on payments to athletes for three years—from 1948 to 1951. Prior to that, there was no NCAA-wide rule on scholarships at all, meaning that the full flowering of the popularity of college football prior to World War II was achieved without any intervention from any centralized, faux-regulatory body. Imagine it—all that sis-boom-bah and yet no national price fixing!

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In 1948 that changed. The NCAA passed what was called the “Sanity Code,” which said that any form of merit pay to an athlete in exchange for his services as an athlete was forbidden, and any school that violated that policy would be boycotted by all other members of the NCAA. To be clear, what we now think of as athletic scholarships were item number one on this list of banned payments. In the Sanity Code world, an athletic scholarship was—gasp—pay for play.

By 1951, the NCAA had identified seven schools—BC, The Citadel, Maryland, Villanova, Virginia, Virginia Tech, and VMI—that were, apparently insanely, paying football players through athletic scholarships. The full NCAA membership, when asked to enforce the Sanity Code, had a moment of “there but for the grace of God go I” and realized that because they were also providing athletic scholarships, if they knocked out Virginia Tech, the next knock on the door in the night might be to haul them in to be judged for their own insanity.

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So neither Virginia Tech nor its fellow “Seven Sinners” were punished and the Sanity Code, while it stayed on the books for a few more years, was left unenforced.

In the years since, the NCAA has never tried to prohibit athletes from receiving some form of athletic pay for their services. So while you often hear people decrying the horrors that would emerge if college athletes were to be paid, with the exception of those three years, college athletes have been paid. Often these scholarships include a monthly check that players use to pay their rent and buy food with. Sort of like everyone else does with the checks their employers give them.

Allow me a brief aside here to explain that I am not saying that this means everything is hunky-dory in the land of paid college players. The issue with the NCAA is that while they allow some pay, they do not allow the market level of pay. The economic term for what the NCAA does is either price fixing or collusion (it’s both), and so while some pay is allowed, that level is held below the market rate. I think the distinction is vital. Players ARE paid. Players AREN’T paid what they are worth.

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But I digress!

Virginia Tech and Cincinnati athletes compete in the Military Bowl; note the brand mark of Northrup Grumman, an arms-dealing concern. Photo via Getty


In 1956, the Association trotted out a new concept. Before 1956, money was pay and pay was evil. Thereafter, the line was that money was not pay if the NCAA said it was okay, and that because that money wasn’t pay, it was also not evil. Money the NCAA didn’t say was okay, though, was pay and therefore evil. So the term “grant-in-aid,” or GIA, was born, and as of its original conception in 1956, it included, among other things, cash payments to athletes to cover their living expenses. (This was sometimes called “laundry money.”) It was money provided to athletes in exchange for playing sports, which they could use to buy things they wanted for their personal lives, but because the NCAA said it was not pay—poof!—it was not pay, and thus it was not evil.

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In 1975, with universities faced with the same general economic conditions that plagued the rest of America at the time—think the oil shock, stagflation, etc.—it was decided that laundry money was too expensive. Never mind that it had not grown with inflation (it was still capped at $15 a month) or that the justification for disallowing it didn’t really make much sense (if it wasn’t evil in 1975, how did it become evil in 1976?). By a vote of the NCAA members, payment in cash for living expenses was banned. It went from not-pay to pay and, sing along with me, if money is pay and pay is evil then this money was evil.

This remained the NCAA’s official view on paying for college athletes’ living expenses until early 2015, when the rules were relaxed to allow the power five conferences to collectively re-re-define their definition of pay to re-exclude payments designed to cover living and travel expenses. This is the “cost of attendance” (COA) stipend that is in the news. So as of January of this year, money provided to athletes for living expenses in exchange for services is again no longer pay and thus again no longer evil.

So that’s where we are, with everyone involved in the production of college sports maintaining a collective cognitive dissonance. Money is being provided in exchange for services, but because a vote occurred, it’s not pay and thus it’s okay, because only pay is evil and pay means money the NCAA disallows, not money it does allow.

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This is a fairy tale. Many seem eager to believe in the fairy tale, but if you engage even a few neural pathways, it’s clear that money provided to people on the condition that they engage in certain activities is pay. In 1948, everyone understood that athletic scholarships were pay, and they are. If you come play football for me, I will give you a steep discount on education is a lot like If you give me those game-worn gold pants, I will give you a steep discount on tattoos, except football is higher-brow than used-clothes sales, and educational services are higher brow than tattooing services.

Parachutists bear a flag toward the field at the Military Bowl. Photo via Getty


Allow me a momentary tangent into the nature of what is/isn’t evil about money:

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Here’s a fundamental truth I’d like to offer up: If an activity itself isn’t evil, then being paid to do it isn’t evil either. It may be frowned upon to take money for some things (e.g., blood donation), but it’s not evil. People see money as corrupting, but it’s not the money’s fault. What’s corrupt is the conduct you engage in for money than you wouldn’t do otherwise BECAUSE YOU KNOW IT’S WRONG. Taking a bribe is bad because the money gets you to do something you know is wrong. The WRONG is your conduct, not the money; the money is just the incentive. But when the money is used to incentivize good conduct, money isn’t inherently evil. Does anyone think the money given to paid firemen corrupts them relative to volunteer fire departments?

So, unless we think going to college and/or playing football is evil, then being paid to do either of those things isn’t evil either.

But I digress!

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So, back to COA. Schools are now paying their athletes a COA amount each month, and everyone is getting used to that. The people who have maintained since 1975 that covering those expenses was pay are now adjusting their fairy tale to incorporate the idea that those payments have been declared non-pay and thus are okay. A little Google work will find you dozens of people going through these mental gyrations, saying things like, “This money that used to be considered pay is not pay because we just redefined pay so it’s not pay.” I made up that quote but tell me it’s not basically what real people are really saying:

Schaus said he doesn’t see cost-of-attendance as a stipend, or additional payment of student-athletes. He said the new allowance represents a new definition of the traditional scholarship.

“What’s really happened, for the first time since 1975, is the NCAA has changed the model of what a full scholarship is. Instead of tuition, room and board, that line just got moved up a little bit at each school,” Schaus said.

The same thing has happened in the last year for various other things. Providing travel services to parents so they can see their sons and daughters play in tournaments or bowl games used to be pay, and thus evil, but as of this January, for some tournaments, it is officially non-pay to pay for parents’ travel, and because it is non-pay, it’s not evil anymore. The same thing happened with food. It was, famously, pay to provide an athlete with cream cheese on his bagel, and since pay is evil and cream cheese was pay, it appears cream cheese was evil. But now, thanks in part to Shabazz Napier’s grumbly tummy, schools can give as much food as they want, which means food, even cream cheese, is no longer pay and this no longer evil. Bon appétit!

As consumers of college sports, we are told we have to maintain a bright line between good (non-pay) and evil (pay) or else the world will collapse in fire. To do this, we have to ignore the fact that lots of what any rational human being would consider pay is lumped into non-pay simply because the NCAA says so. We’re all supposed to adopt this fiction and agree, even when the limits on what is or isn’t pay just change, so that a school can be punished for providing too many books in 2011, but in 2015, it’s okay, since those books would be part of the full cost of attendance.

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Maintaining a collective and obviously false fiction is hard. People forget to keep up the façade. This week, Virginia Tech and Cincinnati both revealed they have a system of fines in place that make the receipt of the athletes’ scholarship money or the new COA payments conditional on certain kinds of conduct—attending class, attending practices, etc. Basically, the payments are being structured as incentives for certain conduct by creating a system of deductions every time an athlete messes up.

Here is an example of what Virginia Tech assessed fines for, until the athletic department got wind of it and shut it down:

As the Richmond Times-Dispatch reported, other fines covered on-field mistakes, like an unsportsmanlike conduct penalty ($100) or for wearing improper football equipment (also $100).

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As a student of history, I think it’s great that it’s still Virginia Tech out there treating football players like any other labor force. They tried to pay them in 1951 and are trying to dock their pay in 2015. Those who fail to understand history are doomed to repeat it, etc., etc.

As an economist who believes in the efficacy of markets, using incentive (or disincentive) schemes like this seems perfectly normal. Of course if someone is paying you to play football for their university and to represent that school as a college student and as a college athlete, you might expect your pay to hinge on how well you do at those roles. There is literally nothing shocking about a paid athlete having his pay docked for conduct that his payment contract says is inappropriate and spells out a system of fines.

Spectators enjoy pre-game activities at the Military Bowl. Photo via Getty


Allow me another tangent into the fact that these sorts of fines are great examples why athletes should be recognized as having the right to a bargaining representative, whether it’s as a union or as individuals with agents.

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First, it’s not clear there is a contract that spells these arrangements out (although apparently for Cincinnati, there is). If not, then an arbitrary fine from your boss is probably a labor law violation. Which would be great except, of course, the labor enforcement folks just took the first train to Shirkville and so labor law isn’t a current option. But this is a great example of why unions would be good at individual schools. Cincinnati and Virginia Tech don’t need to collude with their peers to assess these sorts of fines, and a union could easily help the athletes collectively bargain a fair system rather than having it buried in the fine print and sprung on them after they show up for school.

Individual athletes can also negotiate to lessen these fines as part of the recruitment process, but it’s a pretty difficult thing to expect a 17-year old to be savvy enough to make sure he has a no-fines clause, or that the fine schedule is spelled out. So if the athlete can’t have a union to give him collective bargaining power, he should have someone to help him to use his individual bargaining power. Except, of course, the rules also ban him from having an agent. Worse, in the case of agents, many states also prohibit by actual law having someone help you negotiate a contract to play in college.

So basically, the system is set up to make sure the people who most need help to parse a contract and push back against less-than-favorable contractual terms cannot have that representation, which is pretty funny (well, funny in the sense of horrible) because these are the same athletes who are being treated like fully-functioning adult lawyers when it comes time to sign a contract without the right to bring an agent are the same people who are being fined $50 for not cleaning their rooms or their lockers. I know military academies engage in this sort of dehumanizing conduct, but that’s ostensibly in the interests of national defense, as opposed to competing in the ACC. This list actually speaks to general attitude that this is not a system where all participants are adults with rights. Instead, one group is treated like small children. So it’s not too surprising Cincinnati slipped those fines into the scholarship contract and expected no one to say a peep, especially after making sure no one could be paid to represent them. I suspect few of the athletes even knew about it.

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But I digress!

Leaving that aside, we have the whole “this isn’t pay” thing, which seems to be what’s causing the public stir. Again, in a services or labor market where people give their services for pay, being docked pay for poor conduct is pretty normal. But for the people who are devoting a lot of their mental energy to telling themselves over and over that this isn’t pay, being slapped upside the head with the very clear evidence that this is walking like pay and quacking like pay has come as a bit of a shock. HOW CAN THEY DO THIS? THIS IS NOT PAY!

That’s what’s happening this week. People are seeing glitches in the matrix and it’s troubling to them. Some people are saying this is unwise because it creates legal liability. Some people are saying it’s unwise because it creates a recruiting disadvantage. I’m just saying it only seems unwise because it forces us to see, even for just a split second, that there is a man behind the curtain and that things are not quite as the rhetoric tells us it should be. Something like this forces people (especially those who aren’t already thinking about it) to have a micro-moment of clarity. Of course this is payment for services; why wouldn’t it be? Perhaps some of those who have that mini-epiphany will take the next step, which is to ask, “Why is pay bad again?” If we like football played by college students who are paid by their universities to attend those schools, is that wrong? Is money evil if it’s given to induce good conduct, like being educated or playing a sport? If not, why have we been so uptight about preventing it? If we’re okay with pay, why do we let the schools collude to tamp down that pay?

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You can see why this train of thought might not be what the powers-that-be really want. Hence, Virginia Tech has already shut down their fine scheme.

The minority of people who think about sports through the lens of economics probably aren’t realizing this for the first time today. But for people who are engaged in the draining mental task of maintaining a non-stop fiction, a cognitively dissonant barrier against reality 24 hours per day, this feels like an outrage. Why? Not because money is evil or because COA should be charity, but because they are working so hard to help maintain this fiction, the least they can expect from the colleges themselves is not to rub it in their faces that it’s not true. They seem to be begging schools to please at least act like they don’t pay athletes. But they do pay, and so they do act like they’re paying. They just want you to work harder at blocking all of that out.

So get at it, people. You’ve got some hard mental calisthenics to do before the season starts. Forget those nagging doubts about whether our collective fictions really hold water. After all, FBS games resume Sept 3. Let the wild rumpus start!

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Andy Schwarz is an antitrust economist and partner at OSKR, an economic consulting firm specializing in expert witness testimony. Follow him on Twitter, @andyhre. Top photo via Getty