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Tuesday
Jul242012

Law, economics and Penn State

The NCAA sanctions against Penn State, including a $60 million fine, are very much about law and economics. The law involves its transgressions, the economics involves the penalties. The aim is to utimately alter an institutional culture.

It thus seemed relevant to contact folks at the University of Chicago Law School, home of law and economics, the most potent intellectual theory in American law in the past several generations. Its impact on everything from antitrust law to government regulation has been enormous.

"You could compare it [the whole situation] to banking," said Richard Posner, a faculty member better known as arguably the most influential federal judge outside the Supreme Court. He sits on the 7th Circuit Court of Appeals in Chicago and his latest must-read ruling made it big in Tuesday's Wall Street Journal.

"If the prospective gains from unethical behavior are large enough, you need really heavy sanctions to deter the behavior. Football was everything to Penn State, as is to many other universities as well, so really stiff punishment of the sort meted out by the NCAA seems a sensible response and is likely to be effective."

If you don't know the law and economics school of thought, that's essentially it in a nutshell.

Is Posner correct?

Some interesting variations came from a young law school colleague, M. Todd Henderson.

"Will it alter the institutional culture? I don't know but I sure hope so. Not that I care that much about Penn State and football but we rely on that instrument in so many places," he said, alluding to the big financial penalties.

"We don't generally kill organizations of any kind---banks, other businesses---so we rely on fining them. When a company cooks the books, there might be a parallel proceeding of a criminal nature against certain individual but we typically fine the organization and say, 'Hey, G.E. or Worldcom, or whoever was cheating, we'll fine you.'"

What strikes Henderson most of all is that the underlying behavior---Jerry Sandusky's exploitation of kids---"had nothing to do with football in a sense. If people involved in this were, say, a Nobel laureate in physics, or some other famous professor, the cover-up nature of this would have been plausible. The institution here was protecting a valuable asset, hoping it [the problem] would go away.

By that he means, he's a bit puzzled by linking the sanctions to the football program itself.

Henderson teaches first-year torts, among other matters, with the issue of proximate causation central to that course. The Penn State matter, especially taking away many past wins, confuses him since it's not the usually way we consider liability. "There's no way that the abuse or failure to report the abuse was the proximate cause of their winning those games."

"What if Sandusky had gotten drunk, hit someone while driving his car and Paterno had known about it [and similarly done nothing]?" Henderson asked. "Would you have taken away the games?"

For Henderson, turning amateur sports observer, "the deep irony is that the culture at every NCAA school that competes in bigtime college football is horrendous at its core. The kinds of behaviors that are tolerated are a national disgrace. In that regard, I do think Penn State was way above the average," given its ethical record in all sports.

He has a hard time, as do a minority of NCAA critics, in seeing how the organization is fulfilling its core mission in the Penn State matter. Yes, what happened is disgraceful but, in his mind, it's also a distraction that the NCAA is more than happy to have all of us focus on---the distraction being the abuse of children---when the real problems in college sports are elsewhere, far closer to the activities the NCAA should be regulating.

"The NCAA is not facing a crisis of coaches engaging in extracurriuclar activities with strangers to the university that are then covered up. Its real crisis is the behavior of college athletes and the influence they have. The fact that those students aren't paid, aren't given a sincere education, that is the problem. This [Penn State] is a sideshow."

As a lawyer, he knows well that anybody who oversees an enforcement arm will have limited resources by and large. Thus, one should place a premium on placing those resources where they are needed; in the same way Garry McCarthy, Chicago's police chief, mulls moving personnel to deal with the current homicide spike. That doesn't seem to be happening.

Ultimately, when he read of the NCAA sanctions, he deemed them to be piling on but not because Penn State doesn't deserve. No, it's because "there are other things on which it could be dealing to get to the underlying problems of the influence of these guys on campuses."

Since I couldn't let the Chicago legal experts dominate the discussion, I end with a Harvard ethicist, Jeff Seglin. He's a lecturer in public policy and head of the communications program at the Kennedy School who has also written a syndicated column on ethics for the New York Times.

"Penn State deserved sanctions," he wrote.

"Will a message be sent to other schools that the NCAA takes putting the program above all else? One can hope."

"It would be good to believe that other colleges does just assume that Penn State got hit with these sanctions because there was a pedophile in their midst and they turned a blind eye. Most coaches and administrators would know that such behavior is intolerable without having to be reminded by NCAA sanctions."
 
"Will the sanctions solve the problem of how big these programs have gotten and how powerful they are? Unlikely."

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