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Competition

Posted By Russ Roberts On August 30, 2012 @ 5:42 pm In Prices,Sports | Comments Disabled

One of the things that is obvious to anyone who is over 50 with children is how different life is for a child today vs. a child growing up 40 years ago. Everything is more serious. Getting ready for college is more serious. Kids take courses to improve their SAT score. They spend more time on their application. They diligently pursue outside activities to make their application more appealing.

In this conversation with Roger Noll [1], we talked about how much more purposive and less relaxed sports are for kids these days. There are travel teams. Coaching is much more intense and serious. Training and conditioning is much more intense and serious. All of it starts young. Roger and I chalked this up to the increased amount of money coursing through the sports pipeline. That money makes professional sports more competitive which in turn makes the stakes higher for college sports (which has its own cash pipeline) which in turn make high school and middle school more intense.

I think Roger and I were onto something. But I think there is something else going on.

Here are the numbers [2] (measured in millions) of school-age children, 5-17 in America in recent years:

1970        1980        1990        2000        2008

52.5          47.4         45.2         53.2          52.9

So between 1970 and 1990, there was about a 10% decline in the school-age population. But between 1990 and 2000, a mere decade, there was an increase of 18%. That’s a big increase in a decade and since then, the population has stayed large.

In response to those changes, there have been a lot of changes. But one thing that hasn’t changed is the number of schools in the Ivy League. Or the number of schools of Ivy League caliber and prestige. Another thing that hasn’t changed is the number of colleges that compete for the national championship in football or basketball. The demand for spots in these institutions has gone up dramatically, but most of the impact is going to be on price rather than an increase in the quantity that is supplied.

There are a lot more soccer shoes sold in America, I’d guess, because of the increase in the population. But it’s relatively easy to increase the amount of shoes you produce or the number of pencils or the number of iPods–all the things that school-age kids want. All of these things have had an increase in demand. But they haven’t gotten more expensive–the quantity response negates the price increase. But it’s very hard to expand the number of first-rate colleges and even the number of spots available at existing first-rate colleges. That’s why you can earn a 1600 on your SATs and still not get into Stanford. There’s a lot more competition and the supply side simply isn’t very responsive. So these things get more expensive or at least scarcer and the competition to get access to those scarce slots gets a lot more intense.

It is possible that this is no big deal–after all, the numbers of kids is back to what it was in 1970. But fewer kids went to college then. And here’s where the numbers effect I’m discussing interacts with the money effect Roger Noll and I discussed. Sports has gotten a lot more lucrative as an industry. Combine that with a lot more people trying to get into something close to the same number of slots and you see people spending a lot more effort to gain one of those scarce slots.

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[1] In this conversation with Roger Noll: http://www.econtalk.org/archives/2012/08/roger_noll_on_t.html

[2] Here are the numbers: http://nces.ed.gov/programs/digest/d09/tables/dt09_017.asp

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