Just catching up with Diana Nyad's commentary on the NFL draft from last Thursday, and I am wondering if I have ever heard a dumber statement on Marketplace. (Despite its name, this is a program that is not immune to stupidity about markets.)
Nyad is outraged by Jake Long's new $57.5 million contract with the Miami Dolphins because it approximates the terms of Tom Brady's contract. Nyad is not criticizing the Dolphins for being bad negotiators. She is criticizing the NFL for not imposing salary caps: "Maybe a two-year rookie cap would make sense. Everyone would benefit." Really? Jake Long would benefit from a cap? How about all of the other linemen, who can use Long's new contract as a base in their next negotiation?
Kai Ryssdal asked the obvious question: "What about letting the market work. The team owners are willing to pay. Why shouldn't the players take advantage?"
Nyad: "I just think it's an unfair market value.... It creates a false market value. Tom Brady is setting the market value. Now you've got a rookie ... he's the highest paid lineman in the league and he hasn't played a down yet! It's wrong!"
Someone help me out here: what is a "false market value" in this context? Is there any information failure that would cause us to want to protect the Dolphins from their obvious mistake?
By the way, if you follow the link to the audio, you will be treated to a baffling comparison to the market for newly minted lawyers.
I wonder how much Diana Nyad is paid to be the Marketplace "Business-of-sports analyst." Whatever the amount, I smell "false market value."
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1. Posted by William DeVasher on May 5, 2008 @ 9:42 | Permalink
Tom Brady is a bad example. A few seasons ago, he notoriously accepted less than he would have been worth in the open market to re-sign with New England. He didn't want to 'break the bank' but instead wanted the Patriots to have enough money left under the cap to go out and acquire other talent that could help win a Super Bowl (see, for example, Randy Moss, Adalius Thomas, etc.). Brady is perhaps the worst example in the league of someone who has established fair market value....
2. Posted by FE on May 5, 2008 @ 12:28 | Permalink
Isn't it a little more complicated? This is not an ordinary market. First of all, the draft system locks the parties into negotiating with each other. Post-draft, if the team who picked #1 thinks the draftee wants too much money, the team can't just walk away and make an offer to pick #2. Arguably, the draftee acquires excessive bargaining power as a result. Second, the teams are subject to team-wide salary caps, so any money they spend on draft picks will necessarily mean less money to be spent on veterans. So a rookie salary cap would be a wash for players as a group - rookies would make less, but veterans would make more. That's why NBA players are comfortable with a rookie salary cap.
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