Thursday, February 21, 2008

The Economics of the NBA

Why NBA trades are so much more common than other sports.

Since February 1, five major, blockbuster-type trades have been finalized in the NBA. Big names like Pau Gasol, Shaquille O'Neal, Shawn Marion, Mike Bibby, Jason Kidd, Devon Harris, Ben Wallace, and Wally Szczerbiak have dominated the headlines as nearly an entire conference was shaken up. (Okay, so Szczerbiak isn't just a big name. I just wanted an excuse to write the name "Szczerbiak". Heh. Szczerbiak.) Mid-season trades seem to be the norm in the NBA; last year around this time, Allen Iverson headed to Denver in the middle of a blizzard that shut the city down for a week.


So why do these trades seem to happen so much more often in the NBA than in other professional sports leagues? Trades happen in football, but aren't common. The same is true for baseball. Is there something about the format of the NBA that makes it more conducive to trades than other leagues? Or is it just something about the game itself?

Actually, there are elements of both. Let's look at the setup of the league first. While it's not the only league to have a salary cap (the NFL has one as well), the unique setup of the NBA's cap makes trades commonplace. In the NFL, teams have the ability to waive players' rights, essentially removing them (and their salaries) from the team. NBA teams can't just waive players; if they want to cut a player from their roster, they have to buy out the rest of their contract. This isn't entirely uncommon (the New Jersey Nets actually planned to do this with Jerry Stackhouse as part of the Jason Kidd trade), but it's expensive. Most teams are hesitant to buy out a player if they aren't going to get anything in return. That means the most profitable way for a team to get rid of a player and avoid salary cap trouble is to trade them. Under this system, players in the last year of their contract are especially attractive. When players' contracts expire at the end of the season, they leave room under the salary cap for teams to sign new players. Without the option of waiving players, trading for expiring contracts is the only way some teams have of shaking up personnel.

The setup of NBA teams lends to more trading as well. NBA teams have between twelve and fifteen players filling five positions on the court. Five positions don't allow for very much specialization. Major League Baseball, by contrast, has nine positions, which rises to as many as thirteen when you allow for different pitching positions. The NFL has dozens. It's much more difficult to find a good outside linebacker than to find a power forward, for the simple reason that a higher percentage of NBA players are power forwards than NFL players are outside linebackers. Even supposed franchise players can be moved relatively quickly in the NBA. Players like O'Neal and Gasol were considered untouchable at the start of the season, but were traded within a week of each other. Yet you would never see a trade for players like Peyton Manning or Tom Brady. Specialization keeps teams together in baseball and football. The relative lack of it keeps things fluid in the NBA.

The lack of continuity has actually been good for the sport. The NBA has suffered from image problems over the last decade (essentially since the retirement of Michael Jordan), and big trades do a lot to generate excitement. If you don't believe me, ask yourself this: when was the last time you heard about Tim Donaghy or Stephen Jackson's strip club confrontation? Big names moving around keep fans interested and the game exciting. Fluidity like this may be part of what makes basketball the most popular sport in America.

Photo by Alex Brandon (AP)

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