NBA Draft Lottery vs Free Market

[LavaLamp]

The NBA Draft Lottery seems intended to ensure the even distribution of talent among the 30 NBA franchises. Along with the luxury tax and salary caps, the NBA strives to ensure that tickets are reasonably priced.

Just as government controls on prices of everyday goods and services such as apartment rent or the minimum wage cause problems in the supply, demand or quality of such, are we seeing the ill effects of a centrally-controlled market in the NBA? What are your thoughts regarding a more "laissez faire" approach to the distribution of rookie talent, salary caps and the luxury tax threshhold?

[Obstructed_View]

Would you be saying that if the Hawks had gotten the fourth pick instead of the third? I have to question the motives of a Suns fan that brings up such a discussion so soon after his team came out on the short end.

[LavaLamp]

Would you be saying that if the Hawks had gotten the fourth pick instead of the third? I have to question the motives of a Suns fan that brings up such a discussion so soon after his team came out on the short end.


Not talking as a Suns fan, more of a free-market advocate. Free markets are supposed to benefit everybody involved.

[Extra Stout]

The NBA Draft Lottery seems intended to ensure the even distribution of talent among the 30 NBA franchises. Along with the luxury tax and salary caps, the NBA strives to ensure that tickets are reasonably priced.

Just as government controls on prices of everyday goods and services such as apartment rent or the minimum wage cause problems in the supply, demand or quality of such, are we seeing the ill effects of a centrally-controlled market in the NBA? What are your thoughts regarding a more "laissez faire" approach to the distribution of rookie talent, salary caps and the luxury tax threshhold?
Are you nostalgic for the Gilded Age or something? Are you a Rockefeller?

[Extra Stout]

I really hate to take this thread seriously, because the premise is so stupid, but with regard to "free markets," since the barriers to entry for an NBA franchise are so high, laissez-faire capitalism would not work. The equilibrium would be a small number of franchises in large media markets, with higher revenues, paying elevated salaries to a small number of elite players.

If the league wants 30 viable teams, including many in smaller markets, it has to set up economic rules that limit the ability of high-revenue franchises to drive them out of business.

[Extra Stout]

I do enjoy the "If you like the Spurs, you're a socialist" idea, though. Suns fans are showing some creativity in their whining.

Or is it "The Spurs are winning because of the NBA's un-American practices?"

Can you delineate the nature of your whine, LavaLamp?

[dickface]

the Spurs hate America now.

[Extra Stout]

Spurs fans of the world unite!

[LavaLamp]

I do enjoy the "If you like the Spurs, you're a socialist" idea, though. Suns fans are showing some creativity in their whining.

Or is it "The Spurs are winning because of the NBA's un-American practices?"

Can you delineate the nature of your whine, LavaLamp?


Actually, this is not a creative whine. I intended it to be a discussion of how free market ideas would apply to the NBA since I have a personal interest in free market ideas in economics, politics and sports.

I am sorry if you took it to imply the idea that "If you like the Spurs, you're a socialist" :lol Not my intent at all. I just want a discussion with knowledgeable basketball fans who appreciate economics.

However, you did articulate one possible outcome of free markets, not saying that it is what would actually happen though: That small markets will not be able to afford a good basketball team.

Do you see that same thing happen with the distribution of talent and quality of play in college basketball?

[LavaLamp]

Or is it "The Spurs are winning because of the NBA's un-American practices?"



This is such a funny turn of the discussion that I just have to laugh a little. Thanks man.

Actually, I like the Spurs. They are an excellent organization and basketball team. That is independent of the fact that I am a Suns fan, and hopefully a good citizen of Spurstalk.

[Extra Stout]

Actually, this is not a creative whine. I intended it to be a discussion of how free market ideas would apply to the NBA since I have a personal interest in free markets ideas in economics, politics and sports.

I am sorry if you took it to imply the idea that "If you like the Spurs, you're a socialist" :lol Not my intent at all. I just want a discussion with knowledgeable basketball fans who appreciate economics.

However, you did articulate one possible outcome of free markets, not saying that it is what would actually happen though: That small markets will not be able to afford a good basketball team.

Do you see that same thing happen with the distribution of talent and quality of play in college basketball?
It doesn't happen as much in college basketball, because the barriers to entry are much lower.

[Saguaro]

Who cares? Stern is a dictator.

[LavaLamp]

If the league wants 30 viable teams, including many in smaller markets, it has to set up economic rules that limit the ability of high-revenue franchises to drive them out of business.


I want to challenge this idea. Don't you think that small-market franchises, in a free market environment, can still attract the top talent?

[LavaLamp]

Who cares? Stern is a dictator.


If he is, it is only because he is at the head of a multi-billion dollar organization that we fund and patronize.

Are we happy with what this organization has become? Maybe I should restate that... Can we imagine an organization that would be better for the sport we love, and athletes and coaches we admire?

[Extra Stout]

I want to challenge this idea. Don't you think that small-market franchises, in a free market environment, can still attract the top talent?
No, because they don't have access to the same revenue streams.

First of all, there are only so many seats one can have at a basketball arena before the value of the seats is worth less than the additional cost of a larger facility. So supply is inherently limited. In a larger market, there are more potential fans, i.e. demand, chasing the same number of seats (roughly), which would tend to command higher prices.

Secondly, another major source of revenue is local broadcast media rights. The value of media rights is determined by the ad revenue that can be generated from viewership. The ad revenue is determined by the size of the audience. A larger market is inherently capable of drawing a larger audience, making the media rights of the team more valuable.

Thus, teams in larger markets have an inherent advantage in revenue, which would allow them to spend more for labor. This gives them a competitive advantage in attracting top talent, since they can simply outbid small-market teams.

Since talent correlates to winning, and since fans are more likely to attend or watch the games of a local team that is winning, the competitive advantage of the large-market team is compounded over time. Its ability to generate revenue increases, while the ability of the small-market team to generate revenue decreases.

Eventually, unsuccessful teams in smaller markets would not be able to generate enough revenue to cover the costs of doing business, and either would relocate to a market where the revenue situation might be better, of if that is not possible, would simply fold.

[dickface]

Maybe I should restate that... Can we imagine an organization that would allow the gimmicky offense our team runs to be successful enough to actually win something?
fixed

[Obstructed_View]

In a truly free market, pro sports would be illegal.

[LavaLamp]

In a truly free market, pro sports would be illegal.


What do you mean? Can you give an example or as close to it as possible (since there is rarely a truly free market accroding to most)?

[LavaLamp]

No, because they don't have access to the same revenue streams.


Well articulated Extra Stout.

Here are my counter-arguments:

1. Talented players do not always make their decisions based only on $$$. They have to also consider whether a team's philosophy and style of play suits their particular strengths. In addition, they have to consider if they would be happy living and raising a family where they work. So, the large markets with a better revenue stream does not always get the top talent. The point here is that if players had the freedom to choose, rather than being tradeable property of the franchise, we might have higher satisfaction and better quality of play among all players overall.

2. We recognize that the size of a market is really what determines the revenue stream of a franchise. A city with a smaller population can actually be a larger market and revenue stream if that city has fans that spend more on their team per capita or if that franchise has fewer competitors from teams in other sports within the city. Also, a franchise's revenue stream is not limited to ticket sales to locals and broadcast rights. To use the Spurs as an example, their fanbase goes beyond the borders of San Antonio. All these fans spend on Spurs merchandise, tune-in to broadcasts, and give their "eyeballs" to Spurs related-news. The point here is that an exciting, talented team is no longer limited in its revenue base to the population of the city it happens to reside in.

[ChumpDumper]

1. Talented players do not always make their decisions based only on $$$. They have to also consider whether a team's philosophy and style of play suits their particular strengths. In addition, they have to consider if they would be happy living and raising a family where they work. So, the large markets with a better revenue stream does not always get the top talent. The point here is that if players had the freedom to choose, rather than being tradeable property of the franchise, we might have higher satisfaction and better quality of play among all players overall.Younger players almost always go for the money. There are very few exceptions.
2. We recognize that the size of a market is really what determines the revenue stream of a franchise. A city with a smaller population can actually be a larger market and revenue stream if that city has fans that spend more on their team per capita or if that franchise has fewer competitors from teams in other sports within the city. Also, a franchise's revenue stream is not limited to ticket sales to locals and broadcast rights. To use the Spurs as an example, their fanbase goes beyond the borders of San Antonio. All these fans spend on Spurs merchandise, tune-in to broadcasts, and give their "eyeballs" to Spurs related-news.:lol Sorry, that's pretty pie-in-the-sky. The Spurs stayed here because the local government gave them an extremely attractive arena deal, quite possibly the best one in professional sports. That kind of enormous subsidy makes it possible for the Spurs to operate in a small market long-term WITH the salary cap, luxury tax and revenue sharing. Without it, the Spurs would be the third team in the LA market.

[LavaLamp]

The Spurs stayed here because the local government gave them an extremely attractive arena deal, quite possibly the best one in professional sports. That kind of enormous subsidy makes it possible for the Spurs to operate in a small market long-term WITH the salary cap, luxury tax and revenue sharing. Without it, the Spurs would be the third team in the LA market.


Hey man. Good point. However, the San Antonio local goverment did not make that subsidy out of the kindness of their hearts. They made it as an investment. The idea is that the effects of having a succesful basketball franchise in SA would more than make up for that investment. And quite possibly it has over the many years the Spurs have been in business.

Now, governments, local, municipal or federal, do not always make the best investment decisions with public money. However, what is the financial windfall of having a team located in your city? What more if the team wins championships? My point here is that franshises in non-large markets can afford to build and nurture top basketball teams. The government subsidy as well as private investments of the entreprenuers who risked their capital to build the team combine to create value which is rewarded. In a free market for basketball talent, all these things would occur and lead to more dynamic teams throughout all the franchises.

[Extra Stout]

Well articulated Extra Stout.

Here are my counter-arguments:

1. Talented players do not always make their decisions based only on $$$. They have to also consider whether a team's philosophy and style of play suits their particular strengths. In addition, they have to consider if they would be happy living and raising a family where they work. So, the large markets with a better revenue stream does not always get the top talent. The point here is that if players had the freedom to choose, rather than being tradeable property of the franchise, we might have higher satisfaction and better quality of play among all players overall.
Very few players are willing to accept less money in favor of other considerations. Professional athletes are young people, and their priorities tend to those of other young people, where social life outweighs things like raising a family. Opportunities for things like nightlife typically are more abundant in larger markets.

It would not be impossible for an elite player to choose to play in a small market for less money, but it would be so rare as to have negligible effect on the equilibrium.


2. We recognize that the size of a market is really what determines the revenue stream of a franchise. A city with a smaller population can actually be a larger market and revenue stream if that city has fans that spend more on their team per capita or if that franchise has fewer competitors from teams in other sports within the city. Also, a franchise's revenue stream is not limited to ticket sales to locals and broadcast rights. To use the Spurs as an example, their fanbase goes beyond the borders of San Antonio. All these fans spend on Spurs merchandise, tune-in to broadcasts, and give their "eyeballs" to Spurs related-news. The point here is that an exciting, talented team is no longer limited in its revenue base to the population of the city it happens to reside in.
There is no basis to assume that fans in a smaller market would spend more per capita than fans in a larger market. It would border on absurd to argue they would spend the multiples of money it would take to balance out the ratio of large markets to small, which can exceed 10:1. In fact, larger markets tend to have larger concentrations of great wealth, since the size of the market is usually indicative of its ability to generate jobs, which indicates economic vitality.

Likewise, there is no basis to assume that fans of one sport are equally fans of another sport, such that the two compete equally for disposable income.

[Extra Stout]

Hey man. Good point. However, the San Antonio local goverment did not make that subsidy out of the kindness of their hearts. They made it as an investment. The idea is that the effects of having a succesful basketball franchise in SA would more than make up for that investment. And quite possibly it has over the many years the Spurs have been in business.

Now, governments, local, municipal or federal, do not always make the best investment decisions with public money. However, what is the financial windfall of having a team located in your city? What more if the team wins championships? My point here is that franshises in non-large markets can afford to build and nurture top basketball teams. The government subsidy as well as private investments of the entreprenuers who risked their capital to build the team combine to create value which is rewarded. In a free market for basketball talent, all these things would occur and lead to more dynamic teams throughout all the franchises.
Government subsidies go against free market principles.

[picnroll]

Large market teams already have advantages inspite of the structure in place to level the playing field. Back in 2003 when the Spurs had cap space, after failing to attract Kidd, they went after Elton Brand who was a restricted free agent at the time. They put together a creativee front loaded package to try to scare the Clippers off. Brand was interested and ready to sign when Miami and Nike stepped in. Miami offered the same package but Nike said if Brand would sign with the large market Heat instead of San Antonio Nike would offer a large endorsement package. Brand took the Heat and the endorsement offers. Ultimately the Clippers matched.

If the playing field wasn't leveled there would be about 10 teams in the league. Phoenix, if the existed, would be a bottom dweller for all eternity.

[Extra Stout]

The whole reason leagues have drafts and salary cap systems is so that they can have more than 9 or 10 teams. The big market teams get a smaller share of a bigger pie, but make more money overall.

[LavaLamp]

Government subsidies go against free market principles.


I agree with you but it is a fact of life. My point is that even government subsidies are made with the hope of generating some kind of return for the public money invested. Then I asked what kind of windfall a city can expect from hosting a successful franchise.

[ChumpDumper]

I agree with you but it is a fact of life.So is revenue sharing and the salary cap and the lottery.
My point is that even government subsidies are made with the hope of generating some kind of return for the public money invested.Not always, not by a long shot.
Then I asked what kind of windfall a city can expect from hosting a successful franchise.That's a good question. Books have been wirtten arguing both windfall and inevitable loss.

[LavaLamp]

Phoenix, if the existed, would be a bottom dweller for all eternity.


And how would that be different from the situation today? :lol




If the playing field wasn't leveled there would be about 10 teams in the league.

Or maybe there would be 60 teams.

[ChumpDumper]

There's barely enough talent to spread over 30 teams.

[Obstructed_View]

What do you mean? Can you give an example or as close to it as possible (since there is rarely a truly free market accroding to most)?
Pro sports have a non-statutory labor exemption.

[Extra Stout]

Or maybe there would be 60 teams.
Oh, did the NBA decide to let anybody who feels like it start an NBA franchise? Are they waiving the expansion fee too? :lol

The league controls entry, and erects significant barriers.

[LavaLamp]

The league controls entry, and erects significant barriers.


Yes, that is a common business practice to maintain monopoly power. The bad thing is that it leads to sub-optimal results for the consumer.

[greyforest]

laissez-faire is the most efficient way for companies to make money. this actually rarely coincides with the most efficient way to do something.

[Extra Stout]

Yes, that is a common business practice to maintain monopoly power. The bad thing is that it leads to sub-optimal results for the consumer.
Their motive is profit, not optimal results for the consumer.

[lordswing]

A free-market system would be terrible in the NBA, as you'd see many versions of the New York Knicks/Yankees running around. Too many GMs would try to win "RIGHT NOW" and throw money away on over-priced/fading/hyped up players that don't fit.

You will then get the select few GMs that know they can't compete with the high rollas, similar to the Oakland A's. These GMs will have continuous success, but unlike the MLB, the NBA has a shitty "minor-league" system where Billy Beane can't just stockpile cheap, young talent for years as a result of their better players jumping ship to other teams, giving Beane supplementary draft picks. Such picks do NOT exist in the NBA, as there's only so much talent that can be considered on the NBA level.

I'll say this though, and I'm sure this is an absurd conclusion to come out of a free-market system, but I could see these smarter GMs making the NBA a more Global product, beyond what any promotion ideas that Stern could come up with. These GMs would have to make a HUGE investment (basketballs, basketball courts, trainers in these foreign countries, translators, etc) but they could reap these profits years later.

Those are just my thoughts, I'm interested in Economics, but I'll be the first to say I don't have much knowledge in this.

[Switchman]

George Bush hates Spurs people.

[DarkReign]

Easy explanation...

MLB
Montreal Expos
Kansas City Royals

Pre-Cap NHL
Winnipeg Jets
Quebec Nordiques
Hartford Whalers

All of these teams would have had AllStar rosters if they could hold onto their draft picks. All of these teams were sold and moved except for one (KC).

I included KC because of their track record. The team can draft, it drafts exceptionally well, yet all their picks eventually leave because larger markets are willing to pay way more $$ for their free agents. Theyre like the minor league team in MLB just grooming players to play somewhere else.

Jermaine Dye, Johnny Damon, etc

[John Kerry]

Easy explanation...

MLB
Montreal Expos
Kansas City Royals

Pre-Cap NHL
Winnipeg Jets
Quebec Nordiques
Hartford Whalers

All of these teams would have had AllStar rosters if they could hold onto their draft picks. All of these teams were sold and moved except for one (KC).

I included KC because of their track record. The team can draft, it drafts exceptionally well, yet all their picks eventually leave because larger markets are willing to pay way more $$ for their free agents. Theyre like the minor league team in MLB just grooming players to play somewhere else.

Jermaine Dye, Johnny Damon, etc

Very true. The Devil Rays are another team. They've got a tremendous amount of raw young talent right now, but all those guys are gonna sign with the Yankees, Mets, and Red Sox before the D-Rays get a chance to ever be good.

[LavaLamp]

This is interesting.

So free market principles work well in providing consumers with innovative products and services year after year but these same principles cannot be trusted to allow a competitive distribution of talent among a large number of NBA franchises.

Why is college basketball, which relies more on a free market system for distribution and development of talent, not a good example of how things could be? (I can't recall what Extra Stout said earlier).

How is the right of an individual to choose relevant in this? For example, if a rookie is drafted into an NBA franchise they don't particularly like, what options do they have?

[lordswing]

This is interesting.

So free market principles work well in providing consumers with innovative products and services year after year but these same principles cannot be trusted to allow a competitive distribution of talent among a large number of NBA franchises.

Why is college basketball, which relies more on a free market system for distribution and development of talent, not a good example of how things could be? (I can't recall what Extra Stout said earlier).

How is the right of an individual to choose relevant in this? For example, if a rookie is drafted into an NBA franchise they don't particularly like, what options do they have?

I'll let someone else comment on the free market system. For NBA rookies, their contracts are generally low, and in cases like Chris Paul and Deron Williams, they are not compensated well at all. They do know that, once their rookie contracts are up, they're allowed to finally be paid what they're worth. If the player doesn't want to play in a certain city, he can always refuse to suit up and demand a trade (Kobe, Eli Manning, J.D. Drew). I don't know how it works when players go overseas to play in foreign leagues, as it hasn't happened that often to my knowledge. For me though, I can't see how rookies could complain that they're stepping into such a "terrible" position. With parity in the league, there are few cities that I could see are truly a terrible place to play without at least some perks.

*edit*I forgot your point about colleges. They have a completely different system to choose their champions, as the one and done type games that March Madness has plays to the favor of the hot, streaking team. You have your Cinderellas, but at the beginning of the year, you see the usual top 5 schools (UNC, Douche, UConn, etc) who collect most of the All-Americans. There are few true contenders for the national championship, and if the system was replaced with a best of 3/5/7 series, this would cause the talent difference to be even more noticeable imo, as no longer can Cinderella teams rely gimmick offenses and hot streakers for that long.

[Obstructed_View]

For example, if a rookie is drafted into an NBA franchise they don't particularly like, what options do they have?
There's work at the post office.

[ChumpDumper]

How is the right of an individual to choose relevant in this? For example, if a rookie is drafted into an NBA franchise they don't particularly like, what options do they have?Sit out of professional basketball for one year.

And I have no idea how amateur sports can be described using free market principles.

[Spurminator]

Or force a trade. (See: Francis, Steve)

[ChumpDumper]

And Bryant, Kobe.

[ambchang]

I may be totally wrong, but the ultimate result of a free market is to weed out uncompetitive businesses, and retain the best of the best.
Now instead of the NBA being a self-enclosed economy that have teams compete against each other, we all know that the NBA is one entity with multiple franchises, fighting for slightly overlapping markets. The main competition is other sports (NHL, MLB, NFL, etc....), and the situation is close to say, a Starbucks taking out all the rules of franchising so that the franchises can compete against each other, rather than take on other coffee shops and fast-food restaurants.
The result would be dying of small market teams, not allowing the league to capture small market demographics, dilluting variety in offered products (Instead of having 30 teams to choose from, you have, say 8), and small revenue streams from merchandise sales and TV revenues.

[Saguaro]

This is interesting.

So free market principles work well in providing consumers with innovative products and services year after year but these same principles cannot be trusted to allow a competitive distribution of talent among a large number of NBA franchises.

Why is college basketball, which relies more on a free market system for distribution and development of talent, not a good example of how things could be? (I can't recall what Extra Stout said earlier).

How is the right of an individual to choose relevant in this? For example, if a rookie is drafted into an NBA franchise they don't particularly like, what options do they have?

[Extra Stout]

This is interesting.

So free market principles work well in providing consumers with innovative products and services year after year but these same principles cannot be trusted to allow a competitive distribution of talent among a large number of NBA franchises.

Why is college basketball, which relies more on a free market system for distribution and development of talent, not a good example of how things could be? (I can't recall what Extra Stout said earlier).

How is the right of an individual to choose relevant in this? For example, if a rookie is drafted into an NBA franchise they don't particularly like, what options do they have?
It is not possible to have a league and a free market at the same time.

[Bob Lanier]

This is primo, Grade-A troll.

Too bad you targeted the wrong end of the audience speculum.

[LavaLamp]

It is not possible to have a league and a free market at the same time.


Actually, at the franchise owner or General Manager level, there are free-market principles incorporated in the league. An owner can trade players or draft picks with any other owner, much like any one of us can barter, trade, buy or sell our property. However, for the players themselves, there is no free market unless they have become free agents. This may be oversimplified but I hope my point comes across. So, the league is not entirely a free market but a hybrid with strict rules for its "economy" and high entry barriers.

<Congrats to the Spurs for their 4th!>