Microeconomics

Posted by Ian Levy on February 18, 2013 under Commentary, Roster Moves | Read the First Comment

A Pocket Full of Change

On Friday, at Hickory-High, Ming Wang put together a really interesting piece sharing an interesting new strategy for examining the tradeoff between production and cost for the contracts of NBA players. Here’s the rationale and method in his own words:

A few weeks ago, Kevin Pelton of ESPN looked at the best contracts in the NBA by multiplying a player’s WARP (wins above replacement level) by the average amount that teams pay for each WARP. I’d like to approach this same problem from a different angle: namely, how much value are teams getting out of the salaries they pay their players? Instead of looking at WARP, I’ll focus on win shares, another metric of player value. While Pelton’s methodology assumes that the overall NBA salary market is priced correctly (therefore attaching a value to each WARP a team pays for), my method makes no assumptions about overall pricing accuracy and instead seeks to evaluate relative player salary and performance.

At a basic level, my goal is to quantitatively evaluate the best and worst contracts in the NBA. To do so, I construct a simple metric that I call the “value ratio.” This is defined as: (Player Salary/Median Salary)/(Player Win Share/Median Win Share). In effect, I am comparing the amount over (or under) which a player is being paid vs. the median NBA player with that player’s production over (or under) that of a median player. Comparing salaries and win shares with median values serves as a way of normalizing these metrics and making them more readily comparable to each other. A simple way to think about this metric is the following: if the ratio is less than 1, the player is undervalued; if the ratio is greater than one, the player is overvalued; if the ratio equals one, the player is properly valued. In short, the most valuable players will be those with the smallest value ratios.

To get a more full picture of player production, Wang used a three-year average of a player’s Win Shares. To compensate for the fact that salary is not consistent in every year of a contract he averaged the per year salary commitments of this year and each remaining year on a player’s contract. There are several holes in his method, which he acknowledges at the end of his post, but if you know the context for specific players and specific teams, the stories told by his numbers become much richer.

Several Mavericks showed up in different places in Wang’s results. With a value ratio of 0.131, Elton Brand’s contract provided the 7th greatest value of any player who has played at least 500 minutes this season. At a value ratio of 0.259, Darren Collison’s contract provided the 10th most value of any player who had played at least 1,150 minutes this season. Driven by curiosity, I pulled together his results for all of the Mavericks to see how the team’s current crop of contracts rated in value.

Mavericks Value Ratio

PlayerMinutes3-Yr. WS Average
Per Year Average of Remaining Salary Commitment3-Yr. WS vs. League MedianPer Yr. Salary Average vs. League MedianValue Ratio
O.J. Mayo18333.2$4,110,4502.911.370.471
Darren Collison15574.0$2,830,7593.640.940.259
Shawn Marion13154.1$8,981,5803.762.990.797
Vince Carter12553.3$3,135,0002.971.050.352
Elton Brand10305.9$2,100,5005.360.700.131
Chris Kaman9950.9$8,000,0000.822.673.259
Jae Crowder8030.9$871,4880.820.290.355
Dirk Nowitzki6626.6$21,814,2546.007.271.212
Dahntay Jones6211.2$2,900,0001.090.970.886
Brandan Wright5292.1$992,6801.880.330.176

Amazingly, nearly every Maverick has a contract paying them less than the value of their production, often by a healthy margin. The median Win Share from Wang’s sample is 1.1, which also means every player on this list will have a three-year Win Share average above that mark. Despite all their struggles this season, the Mavericks are still giving the vast majority of their minutes to above-average players. A few other details:

  • By these numbers, Dirk Nowitzki is slightly overvalued, but since they’re based on his three-year Win Share average, the measure of his production is depressed by the amount of games he’s missed this season. If Nowitkzi reaches just 4.5 Win Shares this season (half-of his average from the past two seasons) the value ratio of his contract would move from overvalued to undervalued.
  • It was more than a little surprising to see that Shawn Marion’s contract actually presented a good value. At a very superficial level, $9 million seems like a lot to pay for someone who’s contributions come almost exclusively in a supporting role. However, while his salary is nearly three times the league median, his level of production is nearly four times the league median.
  • Jae Crowder’s production has leveled off after a hot start to the season, but he still represents one of the best deals in this rookie class. Having produced 0.9 Win Shares at a cost of just $871,489, only seven other rookies (Kyle Singler, P.J. Tucker, Jeff Taylor, Andre Drummond, Jared Sullinger, Pablo Prigioni, and Brian Roberts) have a better value ratio.
  • Only seven shooting guards have produced more Win Shares than O.J. Mayo this season: James Harden, Kobe Bryant, Dwyane Wade, Kevin Martin, Manu Ginobili, Thabo Sefolosha, and Joe Johnson. Of that group, only Sefolosha has a better value ratio. As frustrating as Mayo’s inconsistency has been this season, Mavericks fans can’t argue with his price tag.
  • In hindsight, the Elton Brand contract looks was a very smart one. Even though Brand’s 2.2 Win Shares this season are less than a third of what he averaged the previous two seasons, they’re twice the league median production at a cost less than the league median salary.
  • While signing Brand has turned out to be a shrewd move, evaluation of the Chris Kaman contract is not quite so rosy. The Mavericks offered him $8 million for this single season, 2.67 times the league median salary. For his production to have matched that cost, Kaman would have needed to produce 2.94 Win Shares this season. That’s a mark Kaman has surpassed just twice in his career and not since the 2007-2008 season. Kaman has actually been more productive this season than in the past few, averaging 0.061 Win Shares per 48 minutes. But even at that pace, Kaman would need to play 2,313 minutes this season to reach 2.94 Win Shares. Hitting that minute total seems unlikely at this point, given that he’s played just 995 minutes and is still out indefinitely with a concussion. When the Mavericks signed Kaman they were gambling — both on improved production and his ability to stay healthy and on the floor. To a certain degree they’ve gotten a return on the production front, but his inability to stay on the floor (both due to injury and shaky play) means this will end up being a fairly significant loss — albeit one without long-term implications, in that Kaman is on a one-year deal.
  • The failure to land Dwight Howard or Deron Williams puts a certain historical shading on the decision not to re-sign Tyson Chandler two years ago. It was a calculated risk that didn’t pan out the way the Mavericks front office had hoped, a point that doesn’t really need to belaboring. However, I did think it was worth pointing out that Chandler has posted more Win Shares than Williams or Howard, both this season and last, and at a price nearly $5 million cheaper per season. In fact, with a value ratio of 0.581, Chandler has the 4th most valuable contract of any player making at least $12 million a season, trailing only LeBron James, Kevin Durant and Chris Paul.

*These numbers come from Ming Wang’s original post.

The current state of the team and impending trade deadline means there could very well be some changes made to the Mavericks roster over the next week. Despite the pressure to improve and to improve quickly, the Mavericks enter this final stretch of the trade season from a position of strength. They have a large number of productive players on reasonable contracts, both big and small — the perfect caulk to fill in the gaps on any big trades.