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Wednesday, July 05, 2017

Taxation (and Regulatory Schemes) Affect Behavior

No,  I am not a policy wonk, and, similarly, this is not a policy post or rant or anything political, except insofar as to offer  that if you put a luxury tax in place or a salary cap,  well, you are trying to affect behavior.  History is full of stories about unintended consequences of tax and regulatory schemes, and, of course, advocates for both side of an argument will debate even whether the consequences are even the consequences.  This result, of course, derives from an era where compromise is considered to be akin to graphic pornography.  Winning isn't the only thing, apparently, it is the only possibility to remain relevant.  (I'll put aside erudite and articulate arguments to trust the Philadelphia 76ers' process for a moment). 

So that's my introduction for an essay on the NBA's salary cap and luxury tax, which has had the following consequences -- an arms'  race in the Western Conference, stars trying to align with one another literally to create a dynasty on one team, certain key players over the years who take less to perpetuate excellence (and, pray tell, they even let themselves be coached), other teams depleting their rosters in order to re-build through the draft, and a competitive landscape that is worse that conforms to Pareto -- 80% of the teams are not relevant, and about 20% of the teams are.  There are, of course, teams that will approach either end of the continuum, but by and large there are about two teams in the East and say 6 in the West that could contend for the title, and you have to reduce the West's number because of the brutal attrition that the playoffs enforce.  The question then becomes -- is this what the NBA wanted when it put this system in place and does it get to the parity that the NFL has (which, depending on who you are, has created excitement or mediocrity generally in the NFL).

The behavior is worth watching and interesting and, quite frankly, creates a compelling off-season as the league approaches July 1 each year.  Sadly, though, this drama frequently eclipses the drama that should occur two thirds of the way into the season, but usually does not, as the teams that make the playoffs usually consist of those who would have made the playoffs had the season ended,  say, on March 15.  Which means that the NBA isn't always selling elite competition -- it is selling a form of entertainment.  And that form of entertainment get diluted when the good teams start to rest their stars and the up-and-coming if a few years away teams don't rush their injured youngsters back from injuries for two good reasons -- 1) they don't want to see those folks exacerbate their injuries and 2) there is no point in winning at some point in the season when winning means you'll get a worse draft pick than you would if you were to lose games.  Does that mean that teams intentionally lose games?  Hardly, but it does mean that they can suit up teams that do not have the talent to compete.  Let's face it, for much of the past three or so years the 76ers were suiting up players who wouldn't have cracked the rotation on most teams and who were barely a few steps ahead of returning to the D-League.

What's worse is that the NBA rewards the top teams (they have the talent and depth to make a deep run into the playoffs) and the bottom ones (who, if crafty, can rebuild through the draft and become elite).  Those  who make a game of it, so to speak, who try to field the best team better but are stuck in the vortex that is the middle of the draft every year, can face a fate of finishing annually a few games above or below .500.  And what is the fun in that? e

I happen to like the NBA -- it has great players, it offers a great atmosphere and the best teams are truly great.  But for the rest of the fans who commit to a team and even to paying for tickets, well, the league has to do a better job of creating parity and giving each team a decent chance of winning a championship.  True, some teams have been grossly mismanaged.  But many have not been.  Sure, they might have missed on drafting Kawhi Leonard or Isaiah Thomas when they had the chance, and that sometimes happened.  But they do their homework and scouting and aren't just bad enough to draft a league-changing player or good enough to draw a free agent who can make a real difference.  Until that changes, the NBA will be an oligarchy of sorts, and that will not be sustainable. 


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