Sean Deveney of The Sporting News wrote a column a few days ago listing the ten most overpaid players in the NBA. His list – which I reproduced below — focused on 2007-08 and excluded players who were bought out or are scheduled to make less than $7 million.
1. Kenyon Martin
2. Stephon Marbury
3. Andrei Kirilenko
4. Theo Ratliff
5. Antoine Walker
6. Raef LaFrentz
7. Malik Rose
8. Wally Szczerbiak
9. Ben Wallace
10. Kwame Brown
There is not much to quibble about Deveney’s choices. The average player on this list made $11.6 million last year. And these players only averaged 2.3 Wins Produced — and a 0.089 WP48 (Wins Produced per 48 minutes) – in 2006-07. An average WP48 is 0.100, so in general these players were both extremely well paid and below average performers.
Measuring the Economic Value of an NBA Player
Still, there are a few players that might have been better choices (in other words, for the purpose of my column I shall quibble). To see this, we need to establish a method for assessing whether a player is overpaid or not.
One might argue that all NBA players are overpaid. After all, these players are extremely well paid to play a game.
Economists, though, consider a worker overpaid if the wage the worker receives exceeds the revenue the worker generates for his employer. USA Today provides us information on each player’s wage (well, most players). All we need to do is determine how much revenue each player has generated.
Back in 1974, Gerald Scully published a study in The American Economic Review (perhaps the top journal in economics) outlining how a baseball player’s economic value could be measured. Scully’s method involved two steps. First he figured out the baseball player’s level of productivity. Then he figured out how much this production was worth in terms of revenue.
For basketball we can look at Wins Produced to measure productivity. So all we need to know is how much each win is worth to an NBA team.
The standard approach is to simply regress team revenue on wins (and other stuff). But I think there’s a problem with this approach for the NBA (a problem I wish to avoid getting in to for a blog entry), so I am going to estimate the value of a win differently. According to USA Today, NBA teams paid their players $1.818 billion in 2006-07. We know from our research on revenue and attendance [mentioned in The Wages of Wins, which is soon to be published as a paperback :) ] that players primarily generate value in the NBA via their ability to generate wins. And we also know that a player’s wage is only for the regular season. Consequently, we could say that the value of one win in the NBA is simply the amount of money the league paid its players divided by how many wins these players produced in the regular season.
Such an approach makes three assumptions. I am assuming that all players in the NBA are collectively paid what they are worth (which may be true if the union bargained effectively), players are only paid to produce wins (which is a reasonable assumption given the research cited above), and the value of a win is the same for all teams (okay, not true, but two out of three ain’t too bad).
According to the USA Today, players were paid $1.818 billion in 2006-07. And these players must have produced 1,230 wins (41 wins multiplied by 30 teams). So each win must be worth about $1.478 million (I would note that this is just a crude estimate, and if I were writing an academic article – which I am not – I would try harder to measure the value of a win).
Okay, we have all the numbers we need to figure out how much each player was overpaid (or underpaid). All we need is some criteria for who gets considered for the list.
Like Deveney, I am going to ignore players who made less than $7 million. I am also going to ignore people who received a buy-out last year (see Jalen Rose, Chris Webber, and Eddie Jones), but I will include those who got a buy-out this summer (hello Steve Francis). And although Deveney included players like Kenyon Martin and Theo Ratliff, who were each hurt last year, I am only going to include players who actually played. Well, at least those who played at least 1,000 minutes.
The Most Overpaid
Given all these requirements, there is a surprising name at the top of the list. Shaquille O’Neal was paid $20 million (only Kevin Garnett was paid more). He also only played 1,135 minutes (okay, Shaq was hurt, so maybe he should be skipped for this list). If each win is worth close to $1.5 million, Shaq would have had to produce 13.5 wins to justify his wage. With only 1,135 minutes played, O’Neal would have had to post a 0.572 WP48 to get to 13.5 wins. Shaq has been very good in his career, but he has never been this good.
What if Shaq hadn’t been hurt? He only played 40 games last year. Had he played 82 games, and his minutes per game was unchanged (28.4), his WP48 would have only had to be 0.279. This mark is below his career average of 0.331, but actually better than what he has done each of the past two seasons.
Two years ago his WP48 was 0.225. Last year his mark was only 0.128. Given his 1,135 minutes played, his WP48 mark in 2006-07 translates into only 3.0 wins. And given the value of a win, Shaq only produced $4.48 million in value. With a salary of $20 million, he was overpaid to a tune of $15.5 million. Such a mark does lead all overpaid players, which means that Shaq was the most overpaid player in 2006-07 (if we ignore some stuff that I will talk about tomorrow).
Now for Shaq’s career… wait, that story will have to wait until tomorrow as well.
Let’s talk about who else appears on the list of most overpaid players. Here is the top ten.
Table One: The Most Overpaid in 2006-07
Walker and Marbury appear on Deveney’s list as well as mine. And if we removed the 1,000 minutes played criteria, K-Mart, Ratliff, LaFrentz, and Szczerbiak would appear on my list as well (although I think Deveney, given his criteria, missed on Peja Stojakovic).
But if 1,000 minutes played is the cut-off, a few different names appear. Desmond Mason was only paid $8 million, but since his wins production wandered in the negative range, he was overpaid by $11.5 million. The same issue exists for P.J. Brown, whose productivity is nowhere near what it was when he was a younger player. Allen Iverson, Larry Hughes, Grant Hill, Steve Francis, and Jermaine O’Neal each produced a positive quantity of wins. But the production of each was not worth the immense salaries each received.
Including these players bumps Kirilenko, Rose, Wallace, and Brown from Deveney’s list. Wallace is the strangest choice by Deveney, since he was actually underpaid by $7.3 million last year (15.8 Wins Produced, $23.3 million in revenue generated, $16 million in salary paid).
Kirilenko, Rose, and Brown, though, were overpaid. None, though, were overpaid by enough to make the top ten. Rose, who played quite badly in only 810 minutes, was still only overpaid by $8.9 million. Brown only produced 1.7 wins, but was still only overpaid by $5.7 million. And although crying in the playoffs is bad, if we only focus on regular season production we see that Kirilenko was only overpaid by $1.1 million.
As noted, tomorrow I want to return to the subject of Shaq. And hopefully soon, I can review the list of players who were underpaid last year.
– DJ
Our research on the NBA was summarized HERE.
Wins Produced and Win Score are Discussed in the Following Posts
Simple Models of Player Performance
What Wins Produced Says and What It Does Not Say
Wages of Wins Journal 
Brett
September 6, 2007
Considering people’s focus on offense (and scoring average even more), is it really that surprising someone would include Ben Wallace as an overpaid player? He only averaged 6.4 points per game, so he’s obviously of little use as a basketball player, right? At least to most observers, that is the thinking.
As a Bobcat fan, would you mind giving a prediction on what you think Emeka Okafor is going to sign for? He’s another case of a player whose offense is not the strongest part of his game, so I expect that his pay may not wind up being commensurate with his value.
MT
September 6, 2007
It’s an interesting question what the frame of reference should be here. You’ve chosen to measure salaries against measures of productivity linked to some extent to wins. You and Devaney have also chosen to analyze the question on an annual unit of measurement. But players have additonal value to owners besides wins. Shaq is far more marketable than Ben Wallace. I suspect he drives more revenue to the Miami franchise than Wallace does to the Bulls. Also there is a hedonic factor – it may be cooler to hang with Shaq than with Ben Wallace. Finally, since the norm in the league for starters is the owner has to commit to a multi year contract to buy a player’s services for a year, it seems to me there is a question whether an annual measurement is the right way to approach the overpaid/underpaid question. If Shaq’s contract was a new one, maybe it would be a legitimate approach. But if it merely the end of a long-term contract, then the overall payment to value ratio may have been wise. After all, never before, regardless of how wisely the Heat spent their money, did they win a championship, until they got Shaq and DWade. And having those two and having them buyinto the Riley approach, may have attracted other talent willing to sacrifice for a chance to get a ring (Mourning, Payton) and and may have also enabled Riley to command more respect from younger players. So there may be externalities beyond the box-score-based measures of productivity that justify some of Shaq’s payments over time.
It’s really hard to argue KMart was not the most overpaid player in the league since he signed that contract with the Nuggets! Much as I loved him as a Net, he has missed most of three seasons.
somedude
September 6, 2007
This isn’t very good. There are two holes in this:
1. A player’s value isn’t limited to income, it includes the revenue they bring in, in other ways. Players like Shaq and Iverson do a lot more than wins.
2. A single player cannot effectively control the total wins of a team. There is no great way to tell exactly how much of an effect that player has. While a player might have a below average WP48, the team without him might be significantly worse.
Ap
September 6, 2007
“There is no great way to tell exactly how much of an effect that player has. While a player might have a below average WP48, the team without him might be significantly worse.”
This is exactly what WoW tries to do. It is the best measurement of such a thing out there. And we know its a rough assumption to make that the only value a player adds to a team is wins. Otherwise David Beckham wouldn’t be making nearly as much!
Chris
September 6, 2007
Notice this list is all veterans, mostly at the tail end of their careers. I think this might be the subject of tomorrow’s post, but in sports, people are paid more as they put in more time in the league, regardless of their current level of production. A rookie who is very productive is almost surely going to be underpaid. As for Shaq, his overcompensation now is probably offset by how much he was underpaid (relative to his value) early in his career. It would be interesting to see who has been overpaid over the course of their entire careers. Iverson?
bobby
September 7, 2007
Emeka Okafor is one of the best young center’s in the NBA in my opinion. He could anchor a great team on both ends of the floor for years to come, a monster on both ends of the floor. keep him, felton, jrich and wallace no matter what. but especially okafor. Big’s like him dont come easy, especially young ones. OKAFOR IS A KEEPER!!!
Tony
September 10, 2007
Kenyon Martin was a Role Player (be it a very
good role player) and Kiki gave him $93 Million.
$100 Million Contracts should be reserved for
guys that have the potential to be the best
player on their team. K-Mart wouldn’t be the
best player on the worst team in the league.
statsprocket
September 11, 2007
I did a similar analysis, only not looking at wins but at measure of overall statistical performance – thinking in probably an overly cliched way that teams win and not players. (You can find the article at
http://www.pistonsforum.com/detroit-pistons-general-discussion/7167-hvc-paying-production-2007-season.html
)
Even with those differences, we agree on a fair number of the most over-paid, starting with Shaq.