The NFL’s labor issues have been hot topics in recent months, and the skyrocketing salaries given to top draft picks every year is one aspect that gets its share of attention.
Last year, top pick Matthew Stafford received a six-year, $78 million deal from the Lions that included $41.7 million in guaranteed money — more guaranteed dollars than any player had received before, and Stafford got it without ever playing a down in the league.
That’s about $10 million more than JaMarcus Russell received in guaranteed money from the Raiders just two years earlier. In 2005, top pick Alex Smith got $24 million guaranteed from the 49ers.
It’s still early for Stafford, but given the way Russell and Smith have performed, perhaps it’s not surprising that two economics professors have found that picking first doesn’t often provide the results you’d expect for NFL teams and that a rookie wage scale is in the best interest of owners and players.
In an article in today’s New York Times, University of Chicago professor Richard Thaler highlights a paper he wrote with Yale professor Cade Massey about the value NFL teams get when choosing (and paying) high first-round draft picks.
Thaler and Massey titled their paper “The Loser’s Curse” because, Thaler writes, “we discovered that the first pick in the draft is, on average, the least valuable in the entire first round.”
The pair found that there’s only a 52 percent chance that a player picked ahead of another in the first round will turn out to be better — in other words, there’s barely a 50-50 chance that the No. 3 pick will be better than the fourth overall selection.
“This means that although the value of players declines throughout the draft, quality declines more slowly than compensation — players picked early are very highly paid,” Thaler writes. “As a result, the first pick in the draft has often provided less value to his team, in performance per dollar, than the last pick in the first round. In other words, the rich get richer.”
He continues that since the rookie salary cap is specific to each team and teams selecting higher get more money to spend (unlike the overall salary cap that is the same for every club), agents push for the maximum amount a team can provide.
Thaler asserts that “the owners and players should find common ground on this [rookie wage scale] issue, because it makes absolutely no sense to be giving so much money to unproven rookies, many of whom turn out to be busts. By reducing the premium paid to the highest draft choices, the league could restore the redistributive goal that the draft was created to achieve. And veteran players would probably agree with the principal that eight-figure salaries should be reserved for players who have already proved themselves on the field.”
So if he’s chosen first overall by the Rams, quarterback Sam Bradford should consider himself lucky in more ways than one: he could be the last rookie to bank a megabucks contract, if NFL owners and the Players’ Association agree to a wage scale.