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Firn '16: Losing to win - gold, silver and gold

Early March — it’s a bleak time of year for sports fans. Football and Olympic action have faded away, but baseball and March Madness haven’t yet arrived. Perhaps worst of all, the NBA season of tanking has begun.

As my fellow columnist Nate Svensson ’14 recently addressed, tanking in the NBA is a real issue that needs attention. Sports are fundamentally about winning, and teams that intentionally lose drag down the intensity of competition league-wide. The system is broken, but the teams aren’t to blame. From a rational standpoint, the chance to land a top pick in the draft is far more tantalizing than the prospect of undeservedly sneaking into the playoffs and immediately getting bounced out.

The draft is designed to restore competitive balance by distributing young, cheap talent to the league’s worst franchises. But the current lottery model sets up some troubling incentives for mediocre teams. If, by virtue of failing, the Boston Celtics “earn” a top pick in the draft, do we call its management inept or savvy? In its effort to increase equality of competition, the NBA has actually incentivized losing. At heart, this problem is one for economists — equality versus efficiency.

In response to the problem of tanking, the NBA instituted a random draft lottery in 1985 — that is, every non-playoff team had an equal chance at the number-one pick. Once eliminated from playoff contention, teams had nothing to gain from losing. Economists Justin Trogdon and Beck Taylor analyzed performance in this period and determined that tanking was virtually nonexistent.

But in 1989, the league switched to its current weighted lottery whereby a worse record yields opportunities for higher draft slots. Talent became more equitably distributed, but tanking was once again incentivized. In the period between 2004 and 2012, teams’ winning percentages dropped 5.5 percent once they were officially out of contention. Since the NBA is by far the easiest of the major sports leagues for rookies to make an immediate contribution to their teams, the prospect of drafting a franchise cornerstone is just too great to pass up. So how can the NBA fix this problem and maximize competitive intensity?

Economists have floated some interesting solutions. One camp calls for a tournament in which non-playoff teams compete for draft order. The winning team would earn first overall pick, runner-up takes the second spot and so forth. Another camp advocates for elimination of the draft in its entirety. This group sees exclusivity of each draft pick as the anti-competitive source of all tanking incentives. Exacerbating the issue, rookie contract limits artificially inflate the value of incoming college players. As an alternative to the draft, amateurs would be treated as free agents permitted to negotiate for market value with any franchise.

Both of these approaches seem to dissuade tanking but at the steep price of disparity. Under the tournament model, the worst teams aren’t afforded the opportunity to improve the most, and without a draft, top amateurs would likely choose to sign lucrative contracts with the NBA’s best teams in the glitziest markets. Either way, the haves and the have-nots drift further apart.

Clearly, there exists a tension between maximizing parity and minimizing tanking. Somehow, a balance must be struck. At the 2012 MIT Sloan Sports Analytics Conference, statistician Adam Gold proposed giving the first pick in the draft to the team that wins the most number of games after being mathematically eliminated from the postseason. In theory, the worst teams in the league will be eliminated first and thus have the most chances to stockpile wins. Taking advantage of these opportunities will yield premium draft position, and every game suddenly becomes meaningful.

But if you think teams need a stick rather than a carrot, there’s always economist David Berri’s proposal: miss the playoffs three years in a row and your general manager gets fired.

Bottom line, tanking is a real issue. It diminishes intensity and runs counter to fundamental notions about competition. Yet under the existing model, tanking is rewarded. Among all of the options, Gold’s proposal seems to strike the most encouraging balance between equality and efficiency. His model attacks the system’s flaws at their root. It’s the only solution that completely removes incentives to tank while providing at least a theoretical framework for parity to emerge. If the NBA really wants to engage its fans, the league needs to wipe out meaningless games. At the very least, it’s time to explore some new options.

Still not convinced? Imagine you’re running a 3-man race: winner receives a gold medal, runner-up earns silver, and the loser… also gets gold. What is your strategy? Go.

 

 

Mike Firn ’16 always tries his very best. Contact him at michael_firn@brown.edu.



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