The NFL draft and bad economics


S.M. Silva has an interesting post on the Ludwig von Mises Institute’s blog about the curiosity that is the National Football League draft.

In the recently concluded draft, the Detroit Lions selected former University of Georgia quarterback Matt Stafford with the first pick. The Lions and Stafford quickly announced an agreement that guarantees him at least $41.7 million in compensation before he plays a single game.

That means Stafford will have more money guaranteed to him then any other current NFL player, and represents a 20 percent premium over compensation guaranteed to Matt Ryan of the Atlanta Falcons, who was the first quarterback taken in last year’s draft.

As Silva points writes, “It’s a peculiar business model that guarantees eight-figure incomes to new hires who have yet to demonstrate any ability to perform in their positions. It’s even more peculiar when you examine the relationship between draft position and quarterback performance.”

Of quarterbacks selected in the draft’s first round, the recent evidence suggests at least a 50 percent failure rate, Silva writes.

“Taking the 16 quarterbacks selected between 2002 and 2006 – that is, quarterbacks with three full playing seasons since the NFL expanded to 32 teams – only eight are still with the team that selected them, and only seven are considered starters today. (And two of these seven may lose their starting jobs before the season begins.)”

Stafford’s fat payday, and the risky gamble that the Lions are making, is a product of the draft itself, Silva writes:

“By voluntarily restricting intra-club bidding for incoming players, owners simply drive up the price they have to pay for top selections like Stafford. In theory, Detroit could have selected Stafford and refused to sign him to a contract, keeping him out of the league entirely. But from a customer-relations standpoint, this would have been intolerable. Fans expect teams to sign top draft choices. Nor could Detroit change its mind and pursue another top-caliber rookie if post-draft negotiations with Stafford failed. The draft produces scarcity where none need exist.”

Of course, given the pathetic nature of the Lions, who completed the NFL’s first 0-16 season last year, Stafford is likely going to be earning a good bit of that $41.7 million the hard way. Still, it’s not a bad salary for someone just out of college.

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