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NorthCoast
05-23-2009, 08:45 AM
Apr 23, 2009
Draft Picks: Bricklayers or Gladiators?

With the draft upon us, there is a lot of chatter about ballooning rookie salaries for top picks. The consensus seems to be that top picks are not worth the cost, and salaries should be capped. But thereís a good reason why the top playersí salaries are so high, and the explanation can be found in economic Ďtournament theory.í A short example by economics professor Robert Schenk explains it nicely:

Say youíre a contractor and your company builds brick walls. Most of your bricklayers lay about 3 bricks per minute and make about $8 per hour. (You can think of this as the replacement level.) But along comes a guy who lays bricks twice as fast--6 bricks per minute. How much would you be willing to pay him? Simple fairness suggests $16 per hour. Certainly no more than that because you could just replace him by hiring two replacement-level guys and get the same production. So in this example rewards are based on absolute differences in productivity. Large differences in productivity result in large differences in rewards. Similarly, small differences in bricklaying ability would result in small differences in hourly pay.

Now consider two ancient gladiators entertaining the emperor in combat. Even if one gladiator is only slightly better than the other, heíll very likely win, and the differences in rewards could be extreme. Here, in a winner-take-all system, absolute differences in ability do not matter, only relative differences.

What about sports like football? First, in many ways the NFL is a winner-take-all system. Whoever wins the game earns 100% of the win while the loser eats all of the loss, and there is only one champion left standing at the end of the season.

Second, football players are not like bricklayers. You cannot replace an All-Pro QB by sending two average QBs out on the field and expect the same productivity. When there is a constraint on the number of people that can be employed at one time, the value of the most productive people rapidly increases.

And when there is a constraint on the number of contributors combined with a winner-take-all reward structure, the value of the top performers will skyrocket. This is why the top NFL draft picks make so much more than the lower picks. Even if the abilities of the top picks are only marginally better than those of the picks in later rounds, there will be very large differences in pay.

Itís not much different than CEO compensation. If a company is in competition with other companies for market share, the shareholders should want the best CEO they can get--especially because a competitor with a slightly more visionary CEO will likely steal market share, even if your guy is still top-notch. And since you canít replace a single chief executive with two average guys or a whole mob of slackers, the CEOís pay is going to end up being wildly disproportionate to his actual ability. There can be only one guy at the top, only one winner of the tournament.

Note that Iím not claming that rookie salaries should be this high, just trying to understand why theyíre so high. And Iím not comparing rookie pay to veteran pay.

This article has some interesting perspective in an attempt to explain free agency and rookie salaries. The thing is the "productivity" factor is very subjective in my opinion, especially when you are talking about a CEO commanding an organization of thousands of people. As the organization shrinks to the size of a football team, then the productivity factor rises dramatically.

http://www.advancednflstats.com/2009/04/draft-picks-bricklayers-or-gladiators.html

steelcityrules!!
05-25-2009, 09:21 AM
I completely understand the point and rationale of this mode of thinking. Problem is, un-regulated and wildly expensive rookie salaries directly impact the status of veteran pay. The salary cap for a team down on their luck who makes routine top-5 picks in the draft year in and year out is constantly under the strain of outrageous signing bonuses and rookie pay scales. This almost forces them to shed vets who are good role players and valuable talents for opposing ends of the spectrum. These teams are constantly overpaying hyped-up kids with no experience and retaining bargain basement vets to try and field somewhat of a competitive team.

I think a rookie cap would be a good thing and would allow for more pay to vets who have put their time in.

but, on the other hand... we constantly pick in the high 20's to low 30's and refuse to overpay costly FA's... so we are generally not affected by this phenomenon as much as the rest of the losers.

:Clap

TallyStiller
05-25-2009, 10:58 PM
I believe that there is actually a window of opportunity for creating a rookie cap right now... Gene Upshaw's passing means that the agents don't have the NFLPAs top dog in their hip pocket any more... and the agents are who really win under the current system. They have an easier time manipulating a system in which ridiculous dollars are being thrown at 22 year old kids straight out of college than they would a system in which the bulk of the pay was going to more world wise 30 year old men with 8 or 9 productive professional seasons under their belts... you know, the guys who have actually EARNED it!

stlrz d
05-25-2009, 11:16 PM
I believe that there is actually a window of opportunity for creating a rookie cap right now... Gene Upshaw's passing means that the agents don't have the NFLPAs top dog in their hip pocket any more... and the agents are who really win under the current system. They have an easier time manipulating a system in which ridiculous dollars are being thrown at 22 year old kids straight out of college than they would a system in which the bulk of the pay was going to more world wise 30 year old men with 8 or 9 productive professional seasons under their belts... you know, the guys who have actually EARNED it!

NFLPA Executive Director DeMaurice Smith said on draft day that he is against a rookie cap.

NorthCoast
05-25-2009, 11:48 PM
If the current system is retained, then the solution is what Belichick and Mangina did during the draft.....trade down. Find your role players later in the draft and avoid overpaying for unproven talent. What is more amazing is that most rookies do not even contribute until Yr 2 or 3 on their contracts.

RuthlessBurgher
05-26-2009, 09:19 AM
I believe that there is actually a window of opportunity for creating a rookie cap right now... Gene Upshaw's passing means that the agents don't have the NFLPAs top dog in their hip pocket any more... and the agents are who really win under the current system. They have an easier time manipulating a system in which ridiculous dollars are being thrown at 22 year old kids straight out of college than they would a system in which the bulk of the pay was going to more world wise 30 year old men with 8 or 9 productive professional seasons under their belts... you know, the guys who have actually EARNED it!

NFLPA Executive Director DeMaurice Smith said on draft day that he is against a rookie cap.

Of course, because that is another bargaining chip that he won't just willingly give up for nothing. But I think that is the next logical emphasis that should make it into the new CBA, though.

TallyStiller
05-26-2009, 04:50 PM
If the current system is retained, then the solution is what Belichick and Mangina did during the draft.....trade down. Find your role players later in the draft and avoid overpaying for unproven talent. What is more amazing is that most rookies do not even contribute until Yr 2 or 3 on their contracts.

Smart teams get that this has, with a few exceptions every year, ALWAYS been the truth. Dumb teams draft to fill immediate needs and end up playing rookies who inevitably make rookie mistakes, which cost their teams games, destroy the confidence of the rookies, and get the same teams MORE overpriced, flashy rookies, who make MORE rookie mistakes... and then a couple get arrested, and you're the Bungles :lol:

MeetJoeGreene
05-27-2009, 03:34 PM
If you are comparing NFL rookie pay to a business context with CEO's then there is a breakdown in the logice.

CEO's have usually proven their worth or founded the company.

Companies don't take a Harvard MBA and make them CEO with CEO pay directly out of school.

There should be a rookie salary cap.