Economists explain the NBA lockout

Grantland, the ESPN venture spearheaded by Bill Simmons has a fantastic (and fantastically succinct) look at the NBA labor battle. Co-written by Kevin Grier and Tyler Cown, author of the indispensable  blog Marginal Revolution, the writers have a lifetime of economic education under their belt but go through all the questions you want answers to in a way that is impossible to misunderstand.

A taste:

How far apart are the two sides?
The split on BRI (Basketball Related Income) is supposedly the biggest point of contention. Players want 52.5 percent (down from 57 in the previous contract). Owners are “adamant” on 50 percent and started with an initial lowball offer of 37.

Take the NBA’s 2009-10 BRI estimate of $3.6 billion; 2.5 percent of that is $90 million. Let’s say the life of the contract is 6 years. The total value of that over six years, with reinvestment, is around $500 million.

Is it economically worthwhile for the players to hold out for $500 million?
No. Total NBA salaries last year were over $1.5 billion, about three times the amount they are fighting over. Canceling a third of the current season would wipe out the gain of winning the extra 2.5 percent of BRI over the life of the new collective bargaining agreement. Canceling the whole season over 2.5 percent of BRI is insane for the players.

Of course there are other issues relating to the salary cap, like the length of contracts, but the BRI split seems to be the sticking point.

And the grand finale:

Is the owners’ offer fair? Not really.

Should the players take it? Yes.

Will the owners give in and up the ante? Very unlikely.

Will the players be rational and take what is on the plate? We can only hope so.

Go take a look at the rest. It will take three minutes to read through but you’ll feel much more comfortable about where things stand.

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Tags: Bill Simmons Espn Grantland Kevin Grier Marginal Revolution Nba Lockout Tyler Cowen

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