What does Adam Smith have to do with basketball? You will not find the word in either The Theory of Moral Sentiments or The Wealth of Nations. Yet Smith has much to say about the game played with the round ball on a hardwood court. Consider the following quote from The Theory of Moral Sentiments:

The man of system, on the contrary, is apt to be very wise in his own conceit.... He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously.... If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

Chess is not basketball, you mutter, and you are correct. And yet, and yet. Consider the National Collegiate Athletic Association, the NCAA, the governing body of college sports. The NCAA rule book governs how universities treat their athletes and how athletes must behave if they wish to retain their eligibility. The main function of the NCAA is to prevent people from doing what comes naturally. But of course Adam Smith understood that those chess pieces want to move in the ways that they want to move. Trying to place them where they do not want to go is ultimately going to lead to disorder.

Having a successful college basketball team is very lucrative. It leads to attendance at the NCAA Championship tournament held every March. That in turn leads to money. And glory. Publicity. So a 18-year-old high school graduate who excels at basketball is a highly valuable and highly scarce commodity. Scarce valuable resources usually get paid for the employment of their services. In a normal competitive environment, talented basketball players would receive a salary in return for their work at the University. And Universities would be happy to pay to get those students just as they pay to attract high-quality coaches and high-quality chemistry professors. Competition among universities would determine the market price for such students.

But universities are even happier getting those resources for free. That way, the university can capture the profits from athletic success rather than having to share them with so-called student/athletes. So the NCAA bans all payments to students other than tuition and room and board, books, fees and a very modest stipend often referred to as laundry money.

That might seem generous enough, but alas, you have not reckoned with those chess pieces. Evidently, it is not generous enough. We know that tuition and room and board are less than the market clearing price because every once in a while, a scandal emerges that highlights the competition that is going on underneath the placid waters of universities complying with NCAA rules.

Such a scandal is unfolding at the University of Michigan. A fan of Michigan basketball was caught "lending" some of the players some money. A large sum of money. A very large sum of money. Eddie Martin has pleaded guilty to giving four University of Michigan players $616,000.

The scandal was uncovered after a car accident—a basketball player on the Michigan team crashed his new $35,000 Ford Explorer after a party for a new recruit.

Cars, cash and "loans" are ways that wealthy fans and sometimes coaches compete to get the best players. The NCAA may try to stop such behavior, but it's very hard to get those chess players from moving in the directions that come naturally. And of course even "clean" athletic programs compete in non-monetary ways. They build luxurious training facilities for their students. They hire talented coaches and trainers.

The University of Michigan has announced a self-punishment in hopes of averting more serious sanctions from the NCAA. Five years of victories have been wiped off the books. Championship banners have been removed. The basketball team will refrain from post-season competition for two years. And they have returned $450,000 in tournament money form previous NCAA Tournament experiences.

That's a lot of disorder, to use Adam Smith's phrase.

After scandals like the one at Michigan, there always are calls from the sports pages for colleges to clean up their act and play by the rules.

Yet the rules imposed by the NCAA are not natural. They are designed to inhibit the movement of the chess players. And the real source of the problem isn't the players who take the money. The real source of the problem is you and me, the fans. The people who care about how our schools perform. The people who fill the stadiums and crowd in front of the TV set on those March nights. It is that enthusiasm that creates the pot of money at the end of the NCAA Tournament, driven by TV revenue and advertising revenue. All driven by fan interest.

As long as fans care intensely about how their teams do in March in the NCAA Tournament, there are going to be scandals.

But the real scandal is the exploitation of players who would normally receive some of the largesse that such fan interest generates. Only the NCAA keeps that largesse largely in the hands of its member institutions rather than in the hands of the players.

There's an interesting footnote to the University of Michigan story which also relates to Adam Smith and those chess pieces. The story broke after a grand jury indictment of Eddie Martin, who was bankrolling those basketball players with hundreds of thousands of dollars. Martin is a former worker at a Ford automotive plant. What was a grand jury doing investigating NCAA violations? How did a Ford worker have $616,000 dollars to spend on players?

Martin ran a illegal gambling operation out of the Ford plant—a lottery, a numbers game. The money he gave those players came out of those illegal winnings. He was indicted for gambling and money laundering. He probably has a few tax problems too.

So all of this really began with illegal gambling—an attempt on the part of the state to keep people from engaging in behavior that is harmless to the gamblers. Behavior that the state bans because it competes with the government's take in its lottery monopoly. Oh, those chess pieces. So hard to keep them from moving the ways they want to move on their own.