Thursday, December 1, 2011

NBA Salaries: which players are underpaid and which are overpaid

I don't really watch basketball, in fact, I don't even like basketball. However, since all my attempts at statistically understanding football have been on hold (just an interesting note, I did find that there is no correlation between running the ball and winning. In fact, the correlation seems to be negative.), I wanted to look at the efficiency of many basketball contracts (my interest was perked up by the claim by many in the NBA CBA negotiations that the mid-level players were vastly overpaid. I was also interested because the Dallas Mavericks have 5 players, not including free agents Chandler and Barea, scheduled to make over 7 million dollars in the upcoming season). I was a little surprised (again, I don't pay attention to basketball) that basketball seems to have some good sabermetric statistics. These include PER (Player Efficiency Rating), VA (Value Added), and EWA (Estimated Wins Added). These, especially the latter two, work like WAR (Wins Above Replacement) in baseball, in fact VA is basically Runs Created above Replacement (instead its points in basketball), and EWA is just WAR. So we will use EWA here.

In 2010-2011, the top 10 players according to EWA (according to ESPN) was (listed with their 2011-2012 salary, in millions):

1LeBron James, MIA


2Dwight Howard, ORL


3Dwyane Wade, MIA


4Kevin Durant, OKC


5Derrick Rose, CHI


6Kobe Bryant, LAL


7Chris Paul, NO


8Russell Westbrook, OKC



Pau Gasol, LAL


10Kevin Love, MIN



Using WASP formula (check the pages above if you don't know what that is), Westbrook (284), Love (276), and Rose (368) are the best deals above. Because of the difference in EWA and WAR in baseball, one cannot simply import the Halladay Standard that we use to evaluate baseball contracts. If we did, Lebron James would be worth an absurd 77 million dollars. Lebron James is probably not the right example to hold to a standard, since it is widely understood that James took less money to join the Heat. Instead, I think Kobe Bryant (1357 WASP) is probably a better measuring stick. For convenience sake, we will round the Bryant standard to 1400. The other 9 players are all below the Bryant standard. The median EWA for NBA players is about 2 to 2.1, worth about 2.8 million. The average NBA salary is just over 5 million. So according to the Bryant Standard, the Median player is probably overvalued (this is simply fact, I am not arguing that the billionaire owners have a point in that the players are overpaid. The owners are, after all, the ones that signed the contracts, and it is pretty obvious that the new CBA really hurts the players. Because their are fewer players on basketball rosters than baseball rosters (usually about twice as much), basketball players deserve to be paid more it would seem (since their are half as many games in a basketball season, the ratio should probably be 1.5)). Along with the Bryant Standard, we also now have what I will call the Median Standard, which is 5 million dollars for 2 EWA, a 2500 WASP. Any contract that is above this standard is a bad contract for the team (again, its the teams fault if they pay a player more than he is worth, not the player).

So who are some notable undervalued players?:

Blake Griffin: 355
Dirk Nowitzki: 1266
Eric Gordon: 451
Ramon Sessions: 500
Luis Scola: 1035
JaVale McGee: 333
Greg Monroe: 412
Dorell Wright: 528

So there are plenty of good deals out there. Most of the above are what we would call upper middle class type players (excluding Dirk), but  they are (for the most part, excluding Dirk of course) making under average salary. Of course there are overpaid players as well, here are some:

Brenden Haywood: 10892
Antawn Jamison: 3015
Richard Jefferson: 3867
Brandon Roy: 6791
Marcus Camby: 3560
Carmelo Anthony: 3367
Chauncey Billups: 5462

I found this interesting, let me know what you think.

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