Economists vs. tanking: Justin Trogdon

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I was asked how I would end tanking in the NBA. We could get radical and do away with the draft altogether, screw parity and let the free market determine what each player is worth right out of college and which teams are willing and able to pay for him. That’s the libertarian answer that you might expect from an economist.

But I’m a bleeding heart liberal economist, one that’s concerned about equity. And in the NBA, equity means parity -- every team having a fighting chance.

The NBA draft tries to equal out the playing field by trying to direct the best talent to the teams that need it most. However, by doing so, we’re forced to risk tanking to improve parity. (Or at least the chance for parity, assuming management and owners know what to do with their draft picks.) How should the league manage this balancing act between parity and tanking in the draft?

Here’s the thing, they already have a great tool to tip the scales away from tanking, all within the current system of amateur drafts, luxury taxes and limited first contracts. But first, a history lesson.

Go back with me to 1985. New Coke. “Back to the Future.” Stallone at his apex.

And Patrick Ewing.

If ever there was a reason for teams to tank to get a chance at the first pick, Ewing was it. But, my colleague Beck Taylor and I have crunched the data, and we found no evidence that teams tanked that year (Taylor and Trogdon, 2002). Why? In 1985, the first year of the draft lottery, every non-playoff team had an equal shot at Ewing (at least in principle).[1] Once a team was eliminated from the playoffs, there was no benefit from additional losing. In fact, the lottery was instituted to avoid tanking, which we showed was happening even in the prior season. So if the lottery was supposed to end tanking, why is it still a problem?

Jump ahead to 1989. New Coke is gone. Milli Vanilli. Shoulder pads. And the NBA switched to the current weighted lottery system, which gives teams with worse records more opportunity for higher picks (i.e., more pingpong balls). Eliminated teams don’t guarantee higher picks by losing, but they increase their chances. Here’s the key point from our analysis of this system -- teams were likely to tank again, but not as much as in the pre-lottery days.

That means the league already has a tool to address tanking -- lottery weights. The lottery weights are a control dial that can be set to tweak the parity/tanking tradeoff. On one end of the dial, the weights are the same for all teams (e.g., 1985). This would eliminate tanking but there’s a chance a “good” non-playoff team gets the top pick (less parity). On the other end of the dial, the weights just sort the non-playoff teams from worst to best to determine the draft order (e.g., pre-1985). The teams most in need of talent get the best options (more parity), but lots of tanking. You could even use the lottery weights to reward the winningest teams post-elimination.

If Adam Silver, the next NBA commissioner, is serious about ending tanking, he doesn’t need to reinvent the entire draft process to do it. He’s already got the right pingpong ball machine for the job.

Justin G. Trogdon is a senior research economist at RTI International.