Who Won The NFL Draft?

[Scott Campbell]

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_hassett&sid=aO_vKimhy.B8


Bloomberg Columnists

Who Won the NFL Draft? Economics Says Green Bay: Kevin Hassett

May 1 (Bloomberg) -- The National Football League draft was held this weekend in New York. The sports pages have been filled with analyses by seasoned football scouts of the winners and losers. The consensus among sportswriters is that the New Orleans Saints, who were able to draft the cosmically gifted running back Reggie Bush with their first pick, were the big winners.

Economics suggests something else. The Saints actually were among the bigger losers this weekend, and the draft had one obvious big winner: the Green Bay Packers.

I arrive at these conclusions using recent research by Yale University economist Cade Massey, and University of Chicago economist Richard Thaler. They studied years of draft history, and used economics to evaluate the regular practices of NFL teams.

They found that teams make systematic errors that reflect a kind of economic illiteracy. Coaches and general managers place too high a value on the top few picks, and too low a value on picks a bit further down.

Here is how the economics works. NFL teams each face a salary cap each year. Every team has to fill its roster for about the same amount of money. The trick is to get maximum value for your salary expenditures. To do that, a team has to have a number of players on its roster who play a lot better than their salaries would indicate.

Draft Importance

A key way to do that is to be good at drafting. The rookie wage structure is held low by the collective bargaining agreement between the league and players. If you can select a competent starter in a late round, you may have him for five or six years at a salary far below what he could negotiate on the free market.

If, for example, the going rate for a star running back is $9 million a year, and you find one in a later round for $750,000 a year, that frees up lots of money to spend on veteran players at other positions. In this example, your rookie running back provides you with what economists call a ``surplus'' of more than $8 million dollars a year.

The problem with the draft is that salaries of the top picks are very high. Defensive end Mario Williams, the top overall pick, has already negotiated a salary package worth $54 million over the next six years. That pay is so high that even if he is the best player at his position for years, he will provide the Texans with very little surplus. The trick in the draft is to find bargains, and there are not many at the top of the draft.

Surplus Value

Massey and Thaler combed through years of data, and estimated the surplus value available historically to teams picking at different positions in the draft. They did this by using statistics to compare performance to salaries.

They found that the surplus value was actually highest for picks in the second round, and declines rather slowly thereafter. Second-round picks tend to perform well, but they don't get paid nearly as much as first-rounders. That frees up money to spend elsewhere, which can be the difference between winning and losing once the season starts.

Massey and Thaler estimate the expected surplus for each position in the NFL draft. They find, for example, that a player chosen with the 43rd pick can be expected to provide a performance worth $750,000 more than his salary, while the top pick will outperform his salary by far less.

Using my own back-of-the-envelope version of their estimates, it's easy to provide an economist's perspective on the winners and losers in the draft that doesn't depend at all on which players were chosen.

Pack Wins

To do this, I allocated each draft slot an expected surplus value based on the Massey and Thaler work. Then I tallied the expected gains for each team given the draft picks they ended up with. A team that only had the 43rd pick, for example, would have a surplus estimate of $750,000.

And the winner? The Green Bay Packers. They pulled off a number of clever trades, shrewdly stockpiling the enormously valuable second- and third-round picks. In the end, they drafted one player in the first round, two in the second, and two in the third.

Given the history of picks in the second and third rounds, Green Bay should have a number of players locking down valuable slots on their roster for years, freeing up resources to buy veteran stars when they need them. Other teams that pursued similar strategies included the St. Louis Rams, the New York Jets, and the Minnesota Vikings.

Redskins Lose

There was a clear loser as well: the Washington Redskins. They foolishly gave up draft picks for established veteran players, leaving them (after an especially silly trade that gave the Jets a second-round pick this year, a second-round pick next year, and a sixth-round pick this year, for the Jets second-round pick this year) with only one pick in the first three rounds.

They used it on University of Miami linebacker Rocky Macintosh. While ``Rocky'' is admittedly a promising football name, this is a very unimpressive harvest compared with the Green Bay five-player bonanza.

The problem with the Redskins' approach is that veteran players often have their salaries set in the free market, making their pay appropriate for their level of performance.

But with everyone playing under the same salary cap, it takes players with big surpluses for a team to outshine the others. The draft is the only place to find those in large numbers. The Redskins need some remedial economics classes.

Other losers in the draft include Miami, Denver, Atlanta, Tennessee and New Orleans. While they may have selected good players, they didn't load up on those likely to outperform their salaries.

The best way to test any economic theory is to use it to make predictions, and then evaluate those predictions after the fact. So here goes. The economics of the draft suggests that Green Bay, St. Louis, Minnesota and the New York Jets will improve the most in the coming seasons. Washington, Miami, Denver, Atlanta, Tennessee and New Orleans, the losers in this draft, are headed south.


To contact the writer of this column:
Kevin Hassett at khassett@aei.org

[RashanGary]

Here is how the economics works. NFL teams each face a salary cap each year. Every team has to fill its roster for about the same amount of money. The trick is to get maximum value for your salary expenditures. To do that, a team has to have a number of players on its roster who play a lot better than their salaries would indicate.



TANK.....This is exactly what I've been saying just about word for word and you've consistantly argued with me. It is simple budgent management or economics if you will. It's not a hard concept to grasp.

[Scott Campbell]

This guy is the Anti-Tank. He says the Pack win, and the Redskins lose.

[RashanGary]

I don't know if people listen when I type but this is the exact word for word shit I've been saying for a long time.....

It's not the greatness of the player but the greatness of the player in relation to his salary.

I said the UFA or more appropriately labeled in this artical FREE MARKET drives prices up and ultimatly hurts your ability to gain value on your roster...You have to draft well is the short story becuase you can keep those players off the FREE market and you ulimately have more money to spend else where when your expiring stars need to get paid.


This artical was a better written, exact interpritation of my opinion on how to build a team. It is amazing how everything this person wrote was word for word and thought for thought what I believe and have been preaching. [/quote]

[Murphy37]

Great thread. The only move I questioned was passing up Jackson, and I'm not real pissed about that either. We won't know for quite awhile if it was a good move or not. But I said all along that TT was going to be a "trade down" machine.

[Iron Mike]

The national media giving the Packers some respect..........just, WOW!!!!!

That's a very strong paradigmatic shift...... :roll:

[RashanGary]

http://www2.jsonline.com/idealbb/view.asp?topicID=27807&forumID=35&catID=7&search=1&searchstring=&sessionID={E6C6579E-313B-4567-B071-7B42B330647C}

This is my post on how the economics of the salary cap related to the economics of a families budget. I believe so strongly in this and I've been trying to show everyone why I believe so strongly in Ted Thompson as a GM and I think sometimes people just think I'm stupid because I havn't even given him a couple years yet and I'm already on his wagon...

The biggest reason I like Thompson is that I listen to him speak and everything he says fits into this puzzle. I strongly believe this is how a team is built and when Thompson speaks he says exactly what I believe. In turn, I believe in him.

The second reason is that he is highly regarded as one of the leagues top scouts. First you have to understand basic budget management but if you're a piss poor talent evaluator it will still come back to bite you in the ass.

There are a lot of people here who understand the game of football better than me. The part of the NFL I truely love is part that involves building the team within the cap. I think of all the players and members of the Packers who I can be a fan of, I am the biggest fan of Ted Thompson. Things might not look great right now but I am fairly certain he is going to build a great team. I listen to his concepts and ideas and I really believe in what he's doing.

[mraynrand]

Couple of questions:

1) When was the last time you saw an economist make a good tackle?

2) "Yale University economist Cade Massey"? Cade Massey? Mossy Cade? Is there a little similarity there? Oooooo, I think there is!

[RashanGary]

Thats why I threw in the point that Thompson is regarded as one of the NFL's top scouts by Wolf and Homgren. First he has to have the vision of how to maximize the cap and then he has to have the ability to evaluate which players will do that. One needs the other and I believe Thompson has both...

[RashanGary]

Some like to watch grown men rip each others heads off and execute complicated plays and strategies with incredible precisiveness yet ruthless, controlled intensity.

Some enjoy studying economics. They enjoy the vision and strategy involved in maximizing their budget and developing their own strategies and methods of meeting their goals.

I enjoy both and that is why football is a 12 month per year intrest of mine. It is esspecially enjoyable as of late because Ted Thompson believes and conducts his buisness in a way that I believe in and enjoy watching.

[Joemailman]

Couple of questions:

1) When was the last time you saw an economist make a good tackle?

2) "Yale University economist Cade Massey"? Cade Massey? Mossy Cade? Is there a little similarity there? Oooooo, I think there is!

I'll bet most economists can tackle better than John Clayton. :lol:

[MJZiggy]

I wish most economists WOULD tackle John Clayton.

[Fritz]

"I am the biggest fan of Ted Thompson. Things might not look great right now but I am fairly certain he is going to build a great team. I listen to his concepts and ideas and I really believe in what he's doing."

I agree, Nick. I really like his philosophy, and while there are many people here who are dubious I am confident that his method works.

[jack's smirking revenge]

Protecting the cap and the Packer financials will help us in the long run. Blowing the wad on risky free agents is...well..risky and nets a low rate of return. With 12 picks in this draft, the odds of getting some starters (and bargain players) out of the mix is far better than most teams.

Tank's an economist from what I remember. I wonder what he thinks about this assessment.

I cheered a bit when I read this article--not because the Packers did something right and are getting praised for it, but because, like you Nick, I believe you HAVE TO be economically thrifty to be successful in the NFL. A good balance of moderately-priced/decently-skilled FAs and an influx of bargain players are what will build your SB team in this era. You just can't buy yourself into the SB in one year--you HAVE TO have a plan, HAVE TO be patient and HAVE TO execute your plan.

We'll see in a year or two if this is a genius draft. I'm still being patient with TT, but I do like what he did with this draft. Like the article said, he made shrewd moves and stockpiled picks in the rounds that count most (2nd & 3rd) with regard to depth.

tyler

[packrulz]

TT has had good drafts before but this time he was in a zone, he had the balls to trade down & the guys they wanted were stll there. He was like a high roller in Vegas. He ended up with 5 picks from the Walker trade. That could be talked about for years to come. I never dreamed TT would end up with 12 picks, let alone both Hawk & Hodge. We'll see how it works out but I'm optimistic.

[Fritz]

I agree, Packrulz. TT was on fire. I wonder if it all slowed down for him, like the great athletes say it does when they're in the zone? Maybe all the other GM's were freaking and sweating, the clock ticking like a bomb, the pressure on, and for Ted it was all slow motion, even the phone ringing s-l-o-w-l-y. Or maybe he was just stoned. Whatever it was, it worked. It worked.

[MJZiggy]

Did you see the picture of him on Packers.com? He was completely relaxed (must have been right after the Hawk pick) and smiling. Best pic of him in a long time.

[packrulz]

If a someone told me before the draft that TT would trade Walker, turn it into 5 picks, & still get Hawk & Hodge I'd think they were nuts. No way. Wow!

[Tarlam!]

Did you see the picture of him on Packers.com? He was completely relaxed (must have been right after the Hawk pick) and smiling. Best pic of him in a long time.

Also, what Fritz said about slow-mo.

M3 quipped about how hectic it got just as the Walker trade went down, how organized the chaos was, and how he thought that was par for the course. TT remarked he'd never seen a situation go down like that in any previous draft.

Let's also give credit to the phone guys TT had at his side. They must have been just as incredible in that space of 5 minutes. What this tells me is that TT briefed his TEAM so well, that they flew in under the radar, they were on night-sight auto-pilot and just dropped the bombs and flew home.

The whole episode is beautiful for me to fantasise about. Makes me awfully proud to be a fan.

[RashanGary]

bump for tank

[RashanGary]

See how it talks about the salary cap as a set budget and that the cost of each player effects the ability to sign other players....It talks of UFA as a free market and by nature will drive the price up...

These have been my main points for quite some time. This is why I believe Thompson is such a good GM. I've listened to him speak and everything he says fits this puzzle...Thompson will be a great GM Tank..Wait and find out.

[RashanGary]

bump for tank

[RashanGary]

bump for tank

[Anti-Polar Bear]

For Collins:

This theory of “surplusâ € seems to only take into consideration the surplus of cap room made available through cheap rookie contracts. It fails to consider essential elements such as the odds of success for rookies, compared to proven veterans still in their prime, holdouts and experience.

Bloomberg writes, “Given the history of picks in the second and third rounds, Green Bay should have a number of players locking down valuable slots on their roster for years…ââ� �€šÂ¬Ã‚ If Bloomberg is going to use historical data as a fact for his argument, he should have analysis the Packers’ draft success for picks in the top 3 rounds before making a conclusion. According to a Washington Post study, the Packers' picks in the top 3 rds in the past 10 years only averaged only 11.44 starts per season, second worst in the NFL behind only the woeful Lions. That study contradicts Bloomberg’s assertion that the Packers should be successful with picks in the top 3 rds. The odds of a rookie becoming a success for the team that drafted him are less than that of a proven veteran, especially one who is in his prime or has yet to reach it. For example, suppose the Packers can trade for Hutchison by giving up a 2nd rd pick, which is used on Colledge. Hutchinson’s chances of success with the Packers are better than the rookie Colledge because Hutchison has proven to be successful in the NFL. On the other hand, Colledge’s chances of turning a success are just as good as his chances of turning into bust. Put it another way, because Hutchinson is more predictable than Colledge, and despite the high price in the free agent market, signing Hutchinson is less risky that drafting Colledge.

Bloomberge writes, ‘If you can select a competent starter in a late round, you may have him for five or six years at a salary far below what he could negotiate on the free market” and “going rate for a star running back is $9 million a year, and you find one in a later round for $750,000 a year, that frees up lots of money to spend on veteran players at other positions.” Bloomberge fails to take into consideration the consequences of holdouts and competitions. Would a player who is effective and productive play for $750K a year when his value is $9 M a year? Initially, you gain a surplus for hitting on a late round player who turns out to be a Pro Bowler. But that surplus is usually only temporary, unlikely to last up to “5 or 6 years” since the Pro Bowl caliber player would eventually threaten to holdout for a market value contract. The team either would have to honor his contract demand or trade him. The Walker dilemma is an example. Furthermore, “lateâ� �‚¬Â round picks usually become restricted free agents after only 3 years of service. There are 32 teams in the NFL so competition for the player’s service is plentiful when he becomes a restricted free agent. Other teams are going to offer market rates for the player and you either have to match their offers or lose him.

As the saying goes, nothing can be substitute for experience but experience itself. If you depend so much on rookies, then you have an inexperienced team. Inexperienced teams usually aren’t very successful. By the time your pro bowl caliber rookies have gained enough experience they would likely be demanding bigger contracts. Sure, if you use the temporal surplus money you gained from hitting on drafts picks efficiently on other teams’ free agents, you could have a pretty good team. But the GM the Packers have isn’t using surplus money efficiently, as is evident by Thompson’s inability to land multiple top tier free agents with $35M.

[Anti-Polar Bear]

The bottom line is this: efficent free agent expenditures+effective drafting = competitive team.

Thus far thompson has shown he sucks at both area, free agent and the draft. Thompson 1st FA class produced players Little, Freeman, Klemm, ODwyer, Thompson and Navies; all but Klemm is not on the team anymore. THompson's first draft class produced only 1 contributor, 1 contributor out of 11 picks.

THe result: 4-12.

[RashanGary]

The main point of the story if you missed it is that because of the set cap used in NFL each team has to strive to get the most out of the $$ they are allowed.

They stressed how rookie contracts are smaller than FA contracts so if you draft well you have extra money to afford your star players.

They explained how UFA is a free market. Even those with basic understandings of economics could deduct that a free market drives the price up because of the competition.

But who is a Prestigious university economist to argue cap management with you tank...Obviously you have a firmer grasp on it than the rest of the eductated world.

The whole point of the artical was that when dealing with a set salary cap you're goal is to get the most out of the money you have. It is just like a family who makes 100,000 per year or a buisness who has revenue of 1,000,000 per year. It is a simple concept, but you'll argue your view untill the end of time...

I just thought I'd show you an artical with insight from university economists that basically backs up everything I and half of this forum have been saying.

[MJZiggy]

Hey, Tank--do you have a link to that Post study? Thanks.

[Tarlam!]

Hey, Tank--do you have a link to that Post study? Thanks.

I was thinking th same thing. Only three small spelling mistakes on a page cannot be Tank...

[RashanGary]

Tank is a very skillfull writer. He deserves that much credit.

[Harlan Huckleby]

ESPN is the big winner. They fill-up about 30 hours of programming, get good ratings, and just sit around and replay some clips. Best sports gig of the year.

[Tarlam!]

Tank is a very skillfull writer. He deserves that much credit.

:shock: :shock: :shock: :shock: :shock: :shock: :shock: :shock: :shock: :arrow: :arrow: :arrow: :shock: :shock: :shock: :shock: :shock:

[RashanGary]

The bottom line is this: efficent free agent expenditures+effective drafting = competitive team.

I agree Tank....This is pretty much what I've been saying. Where we disagree is that you think it is possible to consistantly and efficiantly build a team through the "free market" known as UFA.

We're very close, but you've been tainted by living in Washington so all you known is the homer vision of their consistantly average team.

[Harlan Huckleby]

Tank is a very skillfull writer. He deserves that much credit.

He deserves more credit than that. His opinions are well thought out. His line that Huff was best defensive player in draft was angle that may prove true.

[MJZiggy]

Tank is a very skillfull writer. He deserves that much credit.

:shock: :shock: :shock: :shock: :shock: :shock: :shock: :shock: :shock: :arrow: :arrow: :arrow: :shock: :shock: :shock: :shock: :shock:

...I say again, :shock:

(Snotmare will live on in my mind always for that line)

[RashanGary]

Tank is a very skillfull writer. He deserves that much credit.

He deserves more credit than that. His opinions are well thought out. His line that Huff was best defensive player in draft was angle that may prove true.

I think Thompson's success is going to have a far bigger impact on the long term credibility of the poster known as Tank....

[RashanGary]

I've always respected Tank but not for his well thought opinions. I like his openmindedness and the security he has with his unique thinking process. He can get bashed pretty hard and he doesn't take offense.

[Sparkey]

The bottom line is this: efficent free agent expenditures+effective drafting = competitive team.

Thus far thompson has shown he sucks at both area, free agent and the draft. Thompson 1st FA class produced players Little, Freeman, Klemm, ODwyer, Thompson and Navies; all but Klemm is not on the team anymore. THompson's first draft class produced only 1 contributor, 1 contributor out of 11 picks.

THe result: 4-12.

TANK!!

Dont forget the rest of the 2005 Free Agents:

Chris White - C
Roy Manning - LB
Noah Herron - RB
Patrick Dendy - DB
Samkon Gado - RB
Donald Lee - TE

If your going to use stats and data as reasoning, try not to be so selective next time.

[mraynrand]

Economics is all supply and demand. As supply increases, demand drops. Two clear examples of this are Mike Sherman and Grady Jackson.

[Scott Campbell]

The bottom line is this: efficent free agent expenditures+effective drafting = competitive team.

Thus far thompson has shown he sucks at both area, free agent and the draft. Thompson 1st FA class produced players Little, Freeman, Klemm, ODwyer, Thompson and Navies; all but Klemm is not on the team anymore. THompson's first draft class produced only 1 contributor, 1 contributor out of 11 picks.

THe result: 4-12.

TANK!!

Dont forget the rest of the 2005 Free Agents:

Chris White - C
Roy Manning - LB
Noah Herron - RB
Patrick Dendy - DB
Samkon Gado - RB
Donald Lee - TE

If your going to use stats and data as reasoning, try not to be so selective next time.

Tank got his facts wrong??? Impossible.

[Anti-Polar Bear]

Collins, I haven’t read Thalar and Massey’s report yet (have you?) but from the way Bloomberg uses is it in the article, the theory is effective only if “all things are equal.” The Packers drafted a player in the 2nd round, who is destined to play like a star; whose performance makes his value $9 M but he is getting paid $750 K; hence the surplus of almost $8; in the free agency period that precedes the draft, there isn’t a veteran player who is better than the draft pick; the player will be able to make the transition from college to pro right away; the player will honor his contract. In short, that is like saying that price will increase if demand increases and supply decreases, all things equal.

Any economics will tell you with a salary cap as complex as the NFL, not all things are equal. Changes in taste, income, government regulation, etc. can drive the supply and demand curves to the left or to the right; hence making things unequal. Factors such as holdouts, competition, and experience and talent level can make the theory explained by Bloomberg ineffective. That is what I was telling you with my last post.

Everybody in the NFL knows damn well that rookies are cheaper than top-tier free agents. But will having an excess surplus make your team a winner if you don’t efficiently use that surplus in the free agency market?

[Anti-Polar Bear]

The bottom line is this: efficent free agent expenditures+effective drafting = competitive team.

Thus far thompson has shown he sucks at both area, free agent and the draft. Thompson 1st FA class produced players Little, Freeman, Klemm, ODwyer, Thompson and Navies; all but Klemm is not on the team anymore. THompson's first draft class produced only 1 contributor, 1 contributor out of 11 picks.

THe result: 4-12.

TANK!!

Dont forget the rest of the 2005 Free Agents:

Chris White - C
Roy Manning - LB
Noah Herron - RB
Patrick Dendy - DB
Samkon Gado - RB
Donald Lee - TE

If your going to use stats and data as reasoning, try not to be so selective next time.

Roy Manning was an undrafted fa; he was basically a rookie. So are Herron and Samkon. White (who?), Dendy and lee weren't spectacular; they were simply fill-ins for a desperate team. They were either on the street or on other team's practice squads when they were acquired. Nobody wouldve heard anything about them if it werent for injuries, except maybe for Lee.

Thompson's first class of FA was terrible. One need to look no further than the WK 1 lost to Detroit to see it. Thompson's 1st draft class was terrible. One need to look no further than 4-12 to see it.

[Scott Campbell]

Finding Gado improved Thompson's first year free agent grade from a D to a B-. It's not Thompson's fault that Shermy spent all his money.

The man responsible for the 4-12 season was fired for being incompetent.

[mraynrand]

"The man responsible for the 4-12 season was fired for being incompetent."

---

Wow, that's brilliant. I guess Sherman now gets blamed for injuries to Walker, Green, Davenport, Murphy, Bubba, Flanagan, etc. etc.

I hope you're not suffering from short term memory loss. Sherman was fired in 2005 for being a poor GM. He was fired in 2006 for ..... being a bad coach? Do you really think Sherman was incompetent as a coach? If so, I'd hate to hear what you thnk about Les Steckle, Joe Bugle, June Jones, Dan Devine, Butch Davis, etc. etc.

[Anti-Polar Bear]

"The man responsible for the 4-12 season was fired for being incompetent."

---

Wow, that's brilliant. I guess Sherman now gets blamed for injuries to Walker, Green, Davenport, Murphy, Bubba, Flanagan, etc. etc.

I hope you're not suffering from short term memory loss. Sherman was fired in 2005 for being a poor GM. He was fired in 2006 for ..... being a bad coach? Do you really think Sherman was incompetent as a coach? If so, I'd hate to hear what you thnk about Les Steckle, Joe Bugle, June Jones, Dan Devine, Butch Davis, etc. etc.

Mraynrand, you sound just like Greenday. I think the GeorgeWBush bits by Greenday is pretty funny. Are you Greenday?

[RashanGary]

TANK

I read through Massy and Thaler's study on the NFL draft and salary cap. I copy and pasted mostly the conclusion portions as there was much data and research material that is not worth browseing.





We find that surplus value increases throughout the first round,
i.e., late-first-round picks generate more value than early-first-round picks.



Massey and Thayler on the psychological tendencies involved in the NFL draft selection process...This also translates to the UFA market

Competitive bidding introduces another set of issues. It is well known that in situations in which
many bidders compete for an item with a common but uncertain value then the winner of the auction
8
often overpays (for a review see Thaler, 1988). The winner’s curse can occur even if bidders have
unbiased but noisy estimates of the object’s true worth, because the winning bidder is very likely to be
someone who has overestimated the actual value of the object. Rational bidders should recognize this
adverse-selection problem and reduce their bids, especially as the number of other bidders increases.
Instead, increasing the number of bidders results in more aggressive bidding (Kagel & Levin, 1986). The
winners curse was first documented in research on oil-lease bids (Capen, Clapp, & Campbell, 1971), and
has since been observed in numerous field (cf. Dessauer, 1981; Roll, 1986) and experimental settings (cf.
Samuelson & Bazerman, 1985).




Another psychological tendency

A final consideration is the false consensus effect (Ross, Greene, & House, 1977). This effect
refers to a person’s tendency to believe that others are more similar to them in beliefs, preferences and
9
behavior than they actually are. For example, Ross et al asked their student participants to estimate the
percentage of students who believed a woman would be named to the Supreme Court within a decade.
Students who themselves believed this was likely, gave an average estimate of 63%, while those who did
not believe it was likely gave an average estimate of 35%. This effect does not suggest that everybody
believes they are in the majority on all issues, but rather that they believe others are more like them than
they actually are. In the NFL draft, the presence of a false concensus effect would mean that teams
overestimate the extent to which other teams value players in the same way that they do. This has
significant consequences for draft-day trades. As we discuss below, most trades are of a relatively small
“distance� �€ for the purpose of drafting a particular player. An alternative to making such a trade is to
simply wait and hope that other teams do not draft the player with the intervening picks. False consensus
suggests that teams will overestimate the extent to which other teams covet the same player, and therefore
overestimate the importance of trading-up to acquire a particular player. Such a bias will increase the
value placed on the right to choose.



An overview of the tendencies that take place
We hypothesize that, in spite of the corrective mechanisms discussed above, teams will overvalue
the right to choose early in the draft. For the reasons detailed above, we believe teams will systematically
pay too much for the rights to draft one player over another. This will be reflected in the relative price for
draft picks as observed in draft-day trades. Specifically, we predict

MV(i)/MV(i+k) > E(SVi)/ E(SVi+k)....

This formula shows that the market value on early picks is higher than the actual value of the player

i.e., that the market value of draft picks will decline more steeply than the surplus value of players drafted
with those picks.1 Furthermore, we expect this bias to be most acute at the top of the draft.




Massey and Thaler explain how the value chart is set up to over value early picks
One of the most striking features of these data is how well ordered they are – it seems clear there
is a well understood market price for draft picks. Indeed, the use of this kind of “value curve” has caught
on throughout the NFL in recent years. A few years ago Jimmy Johnson, a former coach turned television
commentator, discussed such a curve during television coverage of the draft, and in 2003 ESPN.com
posted a curve it said was representative of curves that teams use.6 The ESPN curve very closely
approximates the one we estimate for the 1997-2004 period. The close fit we obtain for our model
suggests there is wide agreement among teams (or at least those who make trades) regarding the relative
value of picks. This historical consensus may lend the considerable power of inertia and precedent to the
over-valuation we suggest has psychological roots.
A second striking feature is how steep the curve is. The drop in value from the 1st pick to the 10th
is roughly 50%, and another 50% drop from there to the end of the first round. As, we report in the
following section, compensation costs follow a very similar pattern. Moreover, the prices are getting
steeper with time. In the first period, the value of the 10th pick is 60% of the 1st pick, whereas in the later
period, the 10th pick is only worth 39% of the 1st pick. Since we will argue that even the earlier curve was
too steep, the shift has been in the “wrongâà ¢â€šÂ¬Ã‚ direction, that is, it has moved further away from rational
pricing.


Trading a pick this year for a pick next year is also in the advantage of the team with long term thinking.

Massey and Thaler show that teams are only taking into consideration the likely hood of a player making the pro-bowl. It does not take into consideration the other performance measurements

The graph shows that all performance categories decline almost monotonically
with draft round. This decline is steepest for the more extreme performance measures – probability of Pro
Bowl is steeper than starts, which is steeper than games played, which is steeper than probability of roster.
Finally, we include on the graph the compensation curve we estimated in the previous section. This curve
is steeper than all the performance curves except the Pro Bowl curve, which it roughly approximates. The
fact that performance declines more slowly than compensation suggests that early picks may not be good
investments, just as we report in the next section.


There are three important features of the relationship between on-field performance and draft
order: 1) performance declines with the draft round (for all measures and almost all rounds), 2) the
decline is steeper for more extreme performance measures, and 3) only the steepest decline (Pro Bowls) is
as steep as the compensation costs of the draft picks.


Massey and Thaler show how teams and fans hype early picks which make it more likely for early players to make the popularity contest known as the pro-bowl. This further exaggerates the results of their findings


These researchers found
that draft-order predicts playing time beyond that which is justified by the player’s performance. The
explanation is that teams are loath to give up on high draft-choices because of their (very public)
investment in them. It seems likely this bias exists in the NFL as well, which has a similarly expensive,
high-profile college draft. If so, our performance statistics for high draft-choices will look better than
they “shouldâ� �¢â€šÂ¬Ã‚. This is especially true in our sample, which is disproportionately weighted by players’
24
early years. To the extent that such a bias exists in the NFL, these results suggest even more strongly that
draft-pick value declines too steeply.



The data on Pro Bowl appearances are also biased in a way that makes the performance-draftorder
curve too steep. Selections to the Pro Bowl are partly a popularity contest, and players who were
high first round picks are likely to have greater name recognition.


A position player picked is a 50/50 chance to be a probowler as is the next player chosen ie. the chances of Hawk to make the probowl are equal to the chances of the next LB Simms

The within-position analysis provides a finer-grain look at performance by draft order. Here we
see that whether a player will be better than the next player taken at his position is close to a coin-flip.



Overall, these analyses support one of the main premises of this paper, namely that predicting
performance is difficult, and that the first players taken are not reliably better than ones taken somewhat
later. Still, we have not yet addressed the question of valuation—do the early picks provide sufficient
value to justify their high market prices?



30

Massey and Thaler explain how higher picks are overpaid in relation to their worth and in relation to later picks

Let’s take stock. We have shown that the market value of draft picks declines steeply with draft
order—the last pick in the first round is worth only 25 percent of the first pick even though the last pick
will command a much smaller salary than the first pick. These simple facts are incontrovertible. In a
rational market such high prices would forecast high returns; in this context, stellar performance on the


field. And, teams do show skill in selecting players—using any performance measure, the players taken
at the top of the draft perform better than those taken later. In fact, performance declines steadily
thoughout the draft. Still, performance does not decline steeply enough to be consistent with the very
high prices of top picks. Indeed, we find that the expected surplus to the team declines throughout the
first round. The first pick, in fact, has an expected surplus lower than any pick in the second round!

[RashanGary]

Tank, I did the work to dig this shit up...Please read and respond


VI. CONCLUSION
Psychologists who study decision making are sometimes criticized for devising what are said to
be artificial, contrived, laboratory experiments in which subjects are somehow tricked into making a
mistake. In the “real world”, the critics allege, people learn over time to do pretty well. Furthermore, the
critics add, people specialize, so many difficult decisions are taken by those whose aptitude, training, and
experience make them likely to avoid the mistakes that are so prevalent in the lab. This criticism is
35
misguided on many counts. For example, we all have to decide whether to marry, choose careers, and
save for retirement, whether or not we are experts—whate ver that might mean—in the relevant domain.
More germane to the topic of this paper, even professionals who are highly skilled and knowledgeable in
their area of expertise are not necessarily experts at making good judgments and decisions. Numerous
studies find, for example, that physicians, among the most educated professionals in our society, make
diagnoses that display overconfidence and violate Bayes’ rule (cf. Christensen-Szalanski & Bushyhead,
1981; Eddy, 1982). The point, of course, is that physicians are experts at medicine, not necessarily
probabilistic reasoning. And it should not be surprising that when faced with difficult problems, such as
inferring the probability that a patient has cancer from a given test, physicians will be prone to the same
types of errors that subjects display in the laboratory. Such findings reveal only that physicians are
human.
Our modest claim in this paper is that the owners and managers of National Football League
teams are also human, and that market forces have not been strong enough to overcome these human
failings. The task of picking players, as we have described here, is an extremely difficult one, much more
difficult than the tasks psychologists typically pose to their subjects. Teams must first make predictions
about the future performance of (frequently) immature young men. Then they must make judgments
about their own abilities: how much confidence should the team have in its forecasting skills? As we
detailed in section 2, human nature conspires to make it extremely difficult to avoid overconfidence in
this task. The more information teams acquire about players, the more overconfident they will feel about
their ability to make fine distinctions. And, though it would seem that there are good opportunities for
teams to learn, true learning would require the type of systematic data collection and analysis effort that
we have undertaken here. Organizations rarely have the inclination to indulge in such time-intensive
analysis. In the absence of systematic data collection, learning will be inhibited by bad memories and
hindsight bias.
We began this study with the strong intuition that teams were putting too high a value on
choosing early in the draft. We thought it crazy for the Giants to give up so many picks for the
36
opportunity to move up from the fourth pick to the first one (regardless of which player they chose). But
we concede that we did not expect the findings to be as strong as those we report. Rather than a treasure,
the right to pick first appears to be a curse. If picks are valued by the surplus they produce, then the first
pick in the first round is the worst pick in the round, not the best! In paying a steep price to trade up,
teams seem to be getting the sign wrong! We have done numerous “reality checks” to see whether these
surprising conclusions are robust, and every analysis gives qualitatively similar results. So, suppose our
analyses are taken at face value. Can they be right? This is a big market, after all, with franchises worth
perhaps $1 billion or more.
We think that while our results are surprising, they are plausible. TANK We suspect that some teams
have not fully come to grips with the implications of the salary cap, a relatively new innovation. Buying
expensive players, even if they turn out to be great performers, imposes opportunity costs elsewhere on
the roster. Spending $10 million on a star quarterback instead of $5 million on a journeyman implies
having $5 million less to spend on offensive linemen to block or linebackers to tackle. Some of the
successful franchises seem to understand these concepts, most notably the New England Patriots, [/b]but
others do not. Whether because they are smart about these ideas or others, the Patriots have been doing
well recently, and so have not had high draft picks to use. We can only speculate about whether they
would trade down if they somehow ended up with one of the earliest and most overvalued picks. But
notice that if a few teams do learn and have winning records, there is no market action they can take to
make the implied value of draft picks rational. Indeed, the irony of our results is that the supposed benefit
bestowed on the worst team in the league, the right to pick first in the draft, is really not a benefit at all,
unless the team trades it away.17 The first pick in the draft is the loser’s curse.
The loser’s curse can persist even in competitive markets for a reason similar to why the winner’s
curse can persist: there are limits to arbitrage. If naïve oil companies bid too much for drilling rights,
then sophisticated competitors can only sit on the sidelines and hope their competitors go broke – or
17 We do note that the San Diego Chargers, the team that took Ryan Leaf with the second pick only to have him flop,
has now traded the number one pick twice. This year they are headed to the playoffs. Lesson learned?
37
eventually learn. Since there is no way to sell the oil leases short, the smart money cannot actively drive
the prices down. Similarly, since there is no way to sell the first draft pick short, there is no way for any
team other than the one that owns the pick to exploit the teams that put too high a value on it Finally,
now that the draft-pick value curve is widely used and accepted in the NFL a team that owns a top draft
pick and would like to trade it may be reluctant to make a trade at less than “full value”. So, even trading
down will be hard unless there is a buyer willing to pay the inflated but conventional price.
The implications of this study extend beyond the gridiron. Football players are surely not the
only employees whose future performance is difficult to predict. In fact, football teams almost certainly
are in a better position to predict performance than most employers choosing workers. Teams get to
watch their job candidates perform a very similar task at the college level and then get to administer
additional tests on highly diagnostic traits such as strength and speed. Finally, once hired, performance
can and is graded, with every action visible on film from multiple angles! Compare that to a company
looking to hire a new CEO (or an investment bank hiring an analyst, a law firm hiring an associate, etc.).
Candidates from outside the firm will have been performing much of their job out of view. Outside
observers see only a portion of the choices made, and options not taken are rarely visible externally. And,
even once a CEO is hired, the company’s board of directors is unlikely to be able measure his or her
performance nearly as accurately as a team can evaluate its quarterback. In our judgment, there is little
reason to think that the market for CEOs is more efficient than the market for football players. Perhaps
innovative boards of directors should start looking for the next Tom Brady as CEO rather than Eli
Manning.

[Anti-Polar Bear]

Sorry, i am too lazy and incompetent at this moment to read and analysis your source. I will do so when I feel i am ready.

[RashanGary]

TANK "I am sick of reading Collins’ crap, so I have decided to write a counter-argument.

Collins, the poster, likes to think of himself as a football expert but in truth, he is all about sparring crap. In his thread, “A salary cap analogy for those who expect big FA moves,” he fallaciously, ridiculously and illogically compared the NFL salary cap to a middle class family with an annual income of $70,000. He was basically speaking of opportunity cost, the economic notion that sacrifices pertain to decision making. In other words, you can’t have this without giving up that. But to compare the purchase a new Yukon at the expense one’s retirement fund to signing a marquee free agent at the expense of the future cap is just sheerly ridiculous. "

Massey and Thaler "We suspect that some teams
have not fully come to grips with the implications of the salary cap, a relatively new innovation. Buying
expensive players, even if they turn out to be great performers, imposes opportunity costs elsewhere on
the roster. Spending $10 million on a star quarterback instead of $5 million on a journeyman implies
having $5 million less to spend on offensive linemen to block or linebackers to tackle. Some of the
successful franchises seem to understand these concepts, most notably the New England Patriots"


Tank....Even if you won't read though my research you can at least read though this portion. You claimed that one action does not have effect on another. Based on Massey and Thaler, you are incorrect. It did not bother me, but with this finding I think my stance has far fewer holes than yours.

[Anti-Polar Bear]

Collins, I've never "claimed that one action does not have effect on another." In fact, if you re-read my previous posts, I was writing about opportunity cost himself; just from a different perspective. By choosing to draft a rookie over a proven vet, you not only is forgoing experience but also taking a bigger risk. I think the risk of signing a proven vet like Wahle is less than that of drafting Colledge, even if you have to forgo more money for Wahle.

Massey and Thaler seems to base their theory mainly on money. They did not seem to consider "other relevant factors" like any good economist would. The irony in this is that Massey and Thaler seems to be looking at things from an "accountant" point of view, instead of an "economist."

I could be wrong, though. I haven’t read their theory yet.

[RashanGary]

If you read through the material it relates the money to the performance of the player. I did not include much of their research because it was 59 pages. I can assure you they related the cost of the player to the performance of players picked at similar spots.

[Anti-Polar Bear]

If you read through the material it relates the money to the performance of the player. I did not include much of their research because it was 59 pages. I can assure you they related the cost of the player to the performance of players picked at similar spots.

Collins, if you privide me the link to their research, i will try to scan to through it trm and give you a feedback.

[RashanGary]

http://faculty.fuqua.duke.edu/~cadem/bio/massey%20&%20thaler%20-%20loser's%20curse.pdf#search='massey%20thaler%20d raft'



Just so you know all the graphs and charts are at the very bottom of the document.

[MJZiggy]

Five teams that did the best in draft
Vic Carucci
National Editor, NFL.com

(May 1, 2006) -- One man's ranking of this year's top five drafts:

1. Arizona: It's a luxury when your quarterback of the future, once projected as a top four choice, falls right to you at No. 10. Matt Leinart will get a year to watch and learn from Kurt Warner. Then, with protection from former USC teammate Deuce Lutui (second round), he'll throw passes to an already explosive receiving corps that just got better with the addition of tight end Leonard Pope (Georgia) in the third round. The Cardinals solidified themselves at defensive tackle by picking up Gabe Watson (Michigan) and Jon Lewis (Virginia Tech) in the fourth and sixth rounds, respectively.


2. New Orleans: The Saints received an incredible gift the moment the Houston Texans decided to make Mario Williams the top overall pick of the draft. Reggie Bush, the multitalented superstar from USC and by far the best player in the draft, dropped into the Saints' collective lap in the No. 2 spot. From that point on, most of what the Saints acquired could be viewed as a bonus, but they did better than that. They addressed a need by getting safety Roman Harper (Alabama) in the second round. Sixth-rounder Mike Hass, a receiver from Oregon State, is intriguing. The Saints also upgraded their offensive line depth in rounds four (tackle Jahri Evans, Bloomsburg) and seven (guard Zach Strief, Northwestern).

3. N.Y. Jets: This team reminded us that there are other ways to greatly improve your offense besides selecting a high-profile quarterback such as Leinart. One is to find a way to provide better protection to the less-than-spectacular quarterbacks you have, and the Jets did that by making tackle D'Brickashaw Ferguson (Virginia) and center Nick Mangold (Ohio State) the fourth and 29th overall picks, respectively. Ferguson will be a dominant force for many years to come, and Mangold should pick up where Kevin Mawae left off as a steady anchor in the middle. The Jets also wisely picked up a developmental quarterback in the second round (Kellen Clemens, Oregon), a highly athletic quarterback-turned-receiver in the fourth round (Brad Smith, Missouri), and Curtis Martin's eventual replacement at running back in the fourth (Leon Washington, Florida State).

A.J. Hawk will have an immediate impact on the Packers defense.
A.J. Hawk will have an immediate impact on the Packers defense.
4. Green Bay: By making A.J. Hawk the fifth overall choice, the Packers got more than a linebacker whose phenomenal playmaking skills will instantly improve their defense. They got one of the great character players to emerge from the college ranks in a long time. Hawk's off-the-charts work ethic no doubt will be contagious. The Packers made two strong additions to their offensive line in second-rounder Daryn Colledge (tackle, Boise State) and third-rounder Jason Spitz (center, Louisville). And they picked up the most polished receiver in the draft in second-rounder Greg Jennings (Western Michigan), who could end up being more productive than any of the wideouts selected before him, including Pittsburgh's first-round choice Santonio Holmes (Ohio State).


5. Philadelphia : The Eagles addressed a crying need on their defensive line by making tackle Brodrick Bunkley (Florida State) their first-round choice. Defensive coordinator Jim Johnson will make the most of Bunkley's athleticism and quickness. The offensive line should be greatly enhanced by the additions of tackle Winston Justice (USC), selected in the second round, and guard Max Jean-Gilles (Georgia), a fourth-round choice, both of whom figured to be long gone before these picks. Another nice addition to Johnson's defense is end Chris Gocong, a speedy pass rusher from Cal Poly.

Day 1 winners
Gil Brandt: New England and Green Bay, but honorable mention also goes to Arizona, Cleveland, Carolina, Baltimore, N.Y. Jets and Pittsburgh
Pat Kirwan: Arizona and Detroit
Vic Carucci: New Orleans and Arizona
Mike Mayock: Philadelphia and Denver
Adam Schefter: New Orleans and New England
Corey Chavous: Baltimore and Oakland
Nick Bakay: Houston, N.Y. Jets, San Francisco, Philadelphia, Arizona, New England and New Orleans