Last month Yoni referenced my law & economics study entitled "Illegal Defense: The Irrational Economics of Banning High School Players from the NBA Draft." This study was featured in the Spring 2004 issue of the Virginia Sports and Entertainment Law Journal, which is a law review published by the University of Virginia School of Law. I hope you all have read or will get a chance to read it.
Yoni has asked me to write a guest post on the study, so here goes. In short, Illegal Defense argues that it would be irrational for the NBA to ban high school players, since 1) high school players statistically do better than any other group of players in the league; and 2) only extraordinarily talented high school players have incentives to declare after high school. It should thus come as no surprise that of the 36 high school players who were eligible to be picked from 1995 to 2004, 72 percent were drafted in the first round and 11 percent were drafted in the second round. In other words, 83 percent of high school players that were eligible to be picked in the last 9 years were drafted, the vast majority of whom received guaranteed, first round money. In stark contrast, during this same time period, only about 45 percent of those college underclassmen eligible for the Draft were selected, many in the second round, often signing non-guaranteed deals.
Now, a number of skeptics say, "But couldn't this change? Couldn't we see floods of kids declaring that have no business declaring, and they'll forfeit their education, and ruin their lives?" The answer is no. Unless the NBA and NCAA radically alter their systems of incentive and deterrence, there is no reason to anticipate deviation. In essence, the NBA and NCAA have created a draft formula that dictates success for high school players in the NBA Draft and later in the NBA, while simultaneously encouraging those high school players better off going to college to go to college. Let me briefly canvass this duel incentive scheme.
As you know, the NCAA removes the Division I eligibility of any amateur who declares for the Draft and then signs with an agent. Naturally, that should deter the ill-prepared high school senior who intends to sign with an agent. Alternatively, if a high school senior contemplates declaring, but not signing with an agent, the NBA’s economic system should then discourage him unless he is certain that he will be drafted and that he is prepared to skip college immediately. Here’s why: Whenever a player is drafted, his rights to play in the NBA are held by whatever team drafts him, and that team will continue to hold his rights for as long as he is an amateur player. So, hypothetically, if a player declares for the Draft, does not sign with an agent, and is then selected by an NBA team with the last pick in the first round, he cannot hope to attend college for a year, become a better player, and participate in the Draft again.
Why is this important? Because the NBA features a steep sliding pay scale for draft picks, with the first pick guaranteed $13.5 million during his first three seasons, while the last pick is guaranteed about $11 million less. In other words, a drafted player would receive no “improved pay” for his “improved play” by attending college for year, and he may actually forfeit millions of dollars. It is also important because a typical basketball player can only earn income between the ages of 18 and 31. Put differently, for every year that he is not earning income during that time, it is the equivalent of most of us not working for five years. Alternatively, consider that if a drafted high school player attends college, but then plays poorly or gets hurt, the NBA team that selected him can opt not to sign him. In other words, he absorbed all the risk. And thus a high school player will not likely declare for the Draft unless 1) he knows that he will do well in the Draft; and 2) he is fully committed to going to the NBA immediately. I suspect this is why Los Angeles Clippers' lottery pick Shaun Livingston said that he would only participate in the 2004 Draft if he was assured a top 5 selection.
Perhaps the NBA and NCAA did not seek this formula, but they created it nevertheless.
And in truth, we will likely observe an even more refined group of high schoolers drafted in the future, as NBA general managers and prospective draft picks have increasingly turned to "promises", whereby an NBA general manager pledges to select a player at a certain draft number if he is still on the board. Indeed, the increased prevalence of promises partly explains why of the 9 high schoolers eligible to picked in last month's Draft, 8 were first round picks -- in other words, even before the Draft, they had assurances of guaranteed 3-year contracts worth at least $2.5 million, thus transferring the risk of failure or injury from the amateur player to the professional team. This is also why the Draft should not be considered a mysterious or random process. In fact, it is strikingly predictable, as most amateurs know in advance whether and when they will be picked. And if they don't like their projection, then provided they have not signed with an agent, they can opt instead to go to college -- just like LeMarcus Aldridge after he was not guaranteed a first round promise in last month's Draft. So only the best of the premiere high school players tend to participate in the Draft, which helps to explain why, as a group, high school players have done so well in the NBA.
Let me also address those who contend, "These high school kids are ruining the NBA -- they have no fundamentals etc." Well, for one, consider that high school players in the NBA average more points, grab more rebounds, and dish out more assists than does the average NBA player or the average player of any age group in the NBA. In other words, to the extent high school players affect the quality of play in the NBA, they appear to be helping, rather than hurting it. As to why many fans believe the NBA has become less enjoyable to watch, I would posit two alternative explanations: 1) expansion; and 2) effective, but less interesting coaching strategies:
1) Expansion. Consider this fact for a moment: With 30 teams and 15 man rosters, there are 450 players in the NBA at any one time. 20 years ago, there were 23 teams and many had fewer than 15 players under contract, meaning that the sheer number of players in the NBA has increased by about 33 percent over the last 20 years. On a practical level, this means that a player who was the 8th or 9th guy on the bench 20 years ago would likely be a starter today. No wonder why the quality of play has declined: Lesser players are expected to play greater roles.
2) Coaching. Also consider the incorporation of zone defenses and stifling, slow-down-the-pace coaching styles embraced by the likes of Jim O'Brien and the Van Gundy brothers--and embraced with impressive results. Indeed, even today's premiere players are often expected to follow constricting game plans. As a result, the NBA game has become increasingly scheme-oriented, and that can procure a less interesting style of play. To make matters worse for fans, the success of these strategies only encourages other coaches to use them.
Lastly, since this is the college basketball blog, I know that many of you are devoted college basketball fans, and perhaps some of you would prefer that the Shaun Livingstons of the world go play in college for at least 2 years, since that would improve the overall quality of play in college basketball. Well, for starters, let me state that I am also a devoted college basketball fan, although my favorite team is the Georgetown Hoyas. So, before you ask, no, I did not write Illegal Defense because I had to endure Georgetown basketball over the last 5 years. Rather, I find it significant that so few high school players make themselves eligible for the NBA Draft, despite all of the attention they attract. Keep in mind, only about 5 percent of current NBA players ascended directly from high school; the vast majority spent some time in college, and far more players came from abroad than from American high schools. In other words, contrary to public perception, there is no flood of high school players skipping college; it's typically a handful of guys each year that are good enough to be drafted, and equally important, they know they are going to be drafted. And by being drafted, most often in the first round, these high school players select the most rational option. NBA teams can also benefit because, as illustrated by Kobe Bryant's recent re-signing with the Los Angeles Lakers, "Larry Bird" rights under the Collective Bargaining Agreement enable teams to pay significantly more to keep their star players than other teams can pay to sign them as free agents. That's why high school players tend to be good, long-term picks for teams, particularly for those teams selecting in the mid to late first round, as most premiere college and international talent has already been selected by that point.
Thanks for reading, and I hope you enjoyed this. For more on Illegal Defense, please check out the study, or take a look at some other articles that discuss it: Interview with NBA Draft.net (Aran Smith, NBA Draft.net, 3/27/2004); Harvard Law School's McCann Shoots, Scores with research on high school players entering the NBA Draft (Beth Pottier, Harvard Gazette, 5/27/2004); Age Old Question (Mark Alesia, Indianapolis Star, 6/23/2004); The NBA's Youth Squad (Brian Hindo, Business Week, 6/27/2004); NBA Hopefuls Heed the Pay for Play Plan (Bud Shaw, Cleveland Plain Dealer, 6/26/2004); Talent vs. Age (Susan Vinella, Cleveland Plain Dealer, 6/20/2004); The Myth of High Schoolers Failing in the NBA (Jared Bonshire, Inside Kentucky, 6/28/04); High Schoolers and the NBA (Greg Skidmore, Sports Law Blog, 3/14/2004); NBA's Not a Teenage Wasteland (Paul Woody, Richmond Times-Gazette, 5/5/2004); Pro Balls Call, Not All Ready (Michael Lee, Atlanta Journal-Constitution, 6/19/2004); Williams Walked through the Door Clarett Opened (Steve Wilstein, Associated Press, 6/28/2004); J.R. Takes his Shot (Scott Stump, Asbury Park Press, 6/22/2004); Economic Freedom and the Draft (Professor Raymond Sauer, The Sports Economist, 3/9/2004);