Tuesday, March 10, 2009
NBA trades
I was looking for something to write about and at the same time looking at some NBA news and I thought of something interesting. In the NBA unlike other major sports the most valuable player on the team may not be the All Star point guard who gets 20 pts and 7 assists a game, it may actually be 35 year old power forward who barely plays, has a bad knee, and is on the last year of his contract. You see in the NBA "expiring contracts" are a very valuable commodity to many teams looking to save money. An expiring contract is basically a contract that expires at the end of the season meaning that the team will no longer be requiered to pay that player and they will save the amount of money they paid that player on the next year's salary cap. This is very important to some teams especially bad teams that know they will not be competing for the title that year, so they want to acquiere as many expiring contracts as possible so they can get money under the cap in order to either save money or to use the money they have under the cap to sign good free agents in order to get a better team. Some teams even are willing to trade the best player on their team in order to get expiring contracts that will give them more flexibility to sign free agents. The Knicks are a great example of this, they trade their best players Al Harrington and Jamal Crawford to other teams in order to get expiring contracts in return that would give them money to go after some of the superstar players in the 2010 off season. The way economics fits in is the oppurtunity cost of trading a player with an expiring contract. An example of this is the Cleveland Cavaliers. The Cavs have Wally Szczerbiak on their team who makes 13 million dollars this season and is an expiring contract meaning the Cavs will be 13 million dollars more under the cap next season if they keep him. They also had the oppurtunity to trade him for Shaquille O'Neil who's contract does not expire at the end of the season so they would be responsible for paying his contract next season. So if the Cavs were to trade for O'Neil with Wally they would incur an oppurtunity cost of 13 million dollars at least because that is the amount of money they would've had at the end of the season had they let Wally stay on the team.
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I agree completely with this post but I find it absurd how these "expiring contracts" have become so valuable. I understand that the present state of the economy is forcing teams to save as much money as possible and others are positioning themselves to have enough cap space to sign Lebron in the summer of 2010. However, the vast majority of these "expiring contracts" are players that were paid an absurd amount of money that they were not worth. I am not suggesting that NBA GMs start colluding with one another to drop salaries, but they should do a better job of evaluating talent so that a player's expiring contract is not worth more to a team than his actual ability.
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