An NPR
segment went around this morning on why LeBron James makes less than he
should. To this I say “what
took
so
long?”
The NBA has had an individual salary cap in place since
the 1999
collective bargaining agreement between the players and owners. By
definition this provided top players with less than they “deserved” because
otherwise it would be unnecessary.
Given a relatively normal distribution of talent (or at
least the right-most part of it) there are a few superstars who are far and away
better than all other players in the league. In competitive bidding they would
exceed even the lofty value they provide due to the Winner’s
Curse which results in auctions going to the bidder most optimistic about
the value of the asset.
As an example, Michael Jordan earned in excess of $33
million for the 1997-98 season when the league average was $1.4 million. In
2012-13 the average is up to roughly $5 million while the highest in the league
is Kobe Bryant at almost $28 million. The ratio has gone from 20x to just over
5x since the introduction of the individual salary cap and Jordan never really
faced competitive bidding for his services so the real ratio may have been
higher.
Maybe the real story is that NPR is now covering
basketball. I blame the Brooklyn Nets.
Stupid Brooklyn Nets, bringing hipsters into the NBA...
ReplyDeleteSeriously though, this has been well known for a while and I am at a loss as to why they decided on now to report it. The individual salary cap, in combination with the overall team salary cap, pushes marginally elite players to elite salaries and punishes the few truly elite players by reducing them to the same level.