"Speaking of Inequality"
The basic nuttiness of NBA contracts is well known in a general sense, but scrolling through Sports Illustrated‘s list of the fifty highest players is still an amusing exercise. It’s pretty incredibly how frequently people on this list aren’t the best players on their team. I’m not exactly crying for Agent Zero and his $11 million, but Antawn Jamison (and, for that matter, Rafe LaFrentz) makes more. Eddie Jones gets more than Pau Gasol.
Indeed, these salaries are so clearly out of line with player quality that I think it undermines the argument that the lack of payroll-wins correlation counts as evidence that conventional player evaluations are badly wrong. Simply put, nobody thinks Shaq is the third-best player in the league and certainly nobody thinks Michael Finley is fourth-best. All kinds of factors go into determining salaries beyond straightforward evaluation of player-quality.
UPDATE: Let me spell some thoughts out below the fold.
Obviously, it does happen that GMs over- or under-estimate the objective quality of basketball players and that plays a role in the lack of a payroll-wins correlation. There are, however, other factors in play.
Most crudely, there’s the rookie contract business. Everybody thinks LeBron James and Dwyane Wade are two of the top players in the league, but LeBron is only making $5.8 million this year, less than teammates Hughes, Ilgauskas, and Gooden and only slightly more than Donyell Marshall. That’s not because James is “underpaid” through some market screw-up, it’s simply the most he’s eligible for. At a conservative estimate, over ten percent of the top fifty players in the league( James, Wade, Bosh, Dwight Howard, Chris Paul, Carmelo Anthony) are on rookie deals. Not only are rookie contracts stingy, but they’re determined by draft position. James only gets $5.8 million, but Wade is only making $3.8 million.
Conversely, the max contract rule not only distorts the market, but the rule changed during the careers of several current players. It’s no longer possible for players to get the kind of deal Kevin Garnett has.
The max contract rules are also a bit odd. The rule doesn’t simply say, “nobody can earn more than $X.” Indeed, I don’t totally understand what the rule does say. But the way it works is that LeBron will earn $12,455,000 next year. That’s not because during negotiations GMs stupidly failed to realize that King James is a better player than Ben Wallace ($16,000,000) or Michael Redd ($13,260,000), it’s because $12,455,000 is the most the rules allowed LeBron to make. There are, in other words, a sizable numbers of players not on rookie deals and earning “max money” but still earning millions of dollars less than are inferior players, not because of errors in player-evaluation, but simply because that’s the way the CBA rules work.
On top of that you have liquidity issues. When Larry Hughes was negotiating with the Cavs, it would have been all well and good for Danny Ferry to say “why should I give you $13 million when your teammate Gilbert Arenas only gets $11 million and everyone knows he’s better?” The problem, however, is that Ferry couldn’t hire Arenas for $11 million or $13 million or, for that matter, $17 million. Arenas wasn’t on the market. The Cavs had the ability to offer a big contract to a free agent, and they felt they had to demonstrate to LeBron James that they were committed to winning and Hughes was the best player on the market at the time, so he got a windfall. Conversely, when Bonzi Wells found himself on the market there weren’t any teams with the ability to offer him a big contract so he wound up with a small one.