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The NFL is now in the grip of a perverse incentive

NFL stands for National Football League, and the football in question is of the American sort. British TV has been showing American football games for the last three decades or so, games which I sometimes watch, either as they happen (during the small and not-so-small hours of the morning), or (which never seems nearly such fun) from a recording I have made the night before, the following evening, or even later than that.

There are quite a few American football fans on this side of the Atlantic, as a result of this TV coverage, and also because Europe has contained quite a few Americans during the last few decades, doing this and that, and also playing and spreading enthusiasm for their version of football. Not so long ago there was even an American Football European League. They couldn’t make it stick, but it has all helped to spread the word.

Last weekend, many of the more devoted of these fans descended on London, to attend a Fan Rally in Trafalgar Square last Saturday, and then on the Sunday to watch the Chicago Bears play the Tampa Bay Buccaneers, at Wembley Stadium, no less. Part of the point of this posting is to provide me with an excuse to link to these fan shirt photos which I took last Saturday in Trafalgar Square. Further snaps of this event that I took, which show what the event looked like as a whole, here.

The better to excuse this blatant ego-linkage, what I really wanted next was a Samizdata-friendly hook on which to hang an NFL-related posting, and right on cue, the NFL has recently been obliging. For the NFL is, right now, offering the world a truly exquisite example of that all too familiar circumstance, the unintended consequence that results from a perverse incentive. You didn’t intend to incentivise this or that bad thing. But, perversely, you did. Unintended consequences and perverse incentives feature here at Samizdata quite a lot, on acount of them being a characteristic perpetration of politicians, a tribe notorious the world over for their eagerness to be seen to be doing something about whatever is the crisis of the moment, but for being far less concerned about how the various measures they impose, so hastily and so thoughtlessly, work out in practise, and especially how they work in the longer run rather than just immediately. Throwing laws, regulations and above all money at whatever politicians decide is a problem, rather than the politicians just letting people solve the problem or problems in question as best they can, being characteristic politician (and voter) reflexes of our era. You have only to consider the recent turmoil in the banking business.

Or consider welfare spending. Earlier this week, BBC2 TV featured one of those investigation-with-argument “documentary” shows, in which British political reporter and interviewer John Humphrys was lamenting how the British Welfare State, founded to help a few people temporarily down on their luck who needed tiding over, has degenerated over the decades into a vastly expensive machine for encouraging – in fact downright purchasing – mass unemployment, destroying the inclination to work amongst a truly enormous swathe of Britain’s population. This perverse outcome, said Humphrys, was absolutely not what was intended by the people who started the British Welfare State in its modern form, just after World War 2. But it is what has happened.

So anyway, back to the NFL. The NFL doesn’t have promotion and relegation, from or to a lower league, in the manner of England’s soccer Premier League. What it has is a fixed set of franchises, and the ups and downs of American life register on these franchises when one of them gets moved from one American city to another.

The NFL also tries to make the contests between the different teams reasonably even, by jigging the rules in favour of weaker teams,so that weaker teams can bounce back up from failure. And as soon as I put that, you can already feel those unintended consequences resulting from perverse incentives creeping towards you, can’t you?

What the NFL is trying to avoid is a circumstance of the sort that prevails in the English soccer Premier League, where a small handful of teams (for the last decade or so it’s been Manchester United, Liverpool, Aresenal and Chelsea) have tended to dominate, year after year. True, if super-rich owners buy up a hitherto lesser club, the dominant handful can alter somewhat. Arsenal and Liverpool (particularly Liverpool) now appear to be slipping, and Tottenham and Manchester City (particularly Manchester City) are on the up-and-up. But, the NFL does have a point. It is rather boring the way the same old English soccer teams always seem to be up at the top of the League come the end of the season, scrapping with each other for the title. A lowly team sometimes makes a brilliant start to the season, but with seeming inevitability it falls back to mid-table or worse by the time the title is being decided.

One of the ways that the NFL tries to even things up between the strong teams and the weaker teams is to have a “salary cap”, which places an upper limit on the total wage bill for each team, assuming I understand that rule approximately right. That way, super-rich owners willing to turn their large fortunes into small fortunes by buying sporting success, can’t.

Another NFL contrivance is to give weaker teams the first pick from amongst the new players, come the start of the following season. This “draft” doesn’t sound good to a European soccer fan, because it sounds like these drafted players get no say about which city they are going to ply their trade. And, if I understand things right, that is indeed the case, at least to start with, yes? But, I believe I’m correct in thinking that players can be traded, and that in fact a player can have a decisive influence over where he ends up playing for the bulk of his career, assuming he manages to achieve a career. This whiff of highly paid serfdom aside, the draft system works okay and achieves the outcome it is intended to achieve, a competitive and unpredictable NFL each year.

All goes well enough, if the new players coming up from the schools and colleges are all much of a muchness in terms of quality, to the point where it is a matter of opinion who is the best, and definitely a matter of individual preference which sort of player (quarterback, running back, offensive line, etc.) each team needs to fill its biggest biggest gaps. Everyone then gets their share of the new talent.

But, what if one individual new player is truly outstanding, way ahead of all the rest? What if, in other words, this outstanding individual is so outstanding that there will be a huge reward for whichever team finishes bottom of the league this year? Then what?

Well, we will soon see, because next season’s draft now looks like posing exactly this question to the NFL teams towards the bottom end of the race this season. Andrew Luck is a once-in-a-generation quarterback talent, of the sort that every team in the NFL is now itching to get its hands on, regardless of how good its current quarterback might be.

To give you an idea (bear with me please, Americans) of just how important a good quarterback can be to an NFL team, one of the very best of this breed now operating is a certain Peyton Manning of the Indianapolis Colts. With Manning at the helm, the Indianapolis Colts are a huge force. But, Manning is now out injured, and the Colts, having pretty much built their entire team and their entire way of playing around Manning and his particular ways of doing things, are now an embarrassing shadow of their usual selves. To the point where they might well finish bottom. And get their hands on Andrew Luck.

All of which was explained by expat NFL expert in Britain Mike Carlson, early last Tuesday morning British time, when Channel 4 TV showed the game between the Indianapolis Colts and the New Orleans Saints. The Colts lost this game 62-7, which is a truly horrible margin.

Would the Colts really want Luck, given that they already have Manning? Well, maybe, yes. First, Luck really is that good, or so everyone says. Second, Manning is not as young as he was, and can only last a few more years. What if his recent injury is the start of a pattern? That can often happen with the more elderly sort of sportsmen, in all sorts of sports. A decade of injury free accomplishment is, time and again, followed by a half decade of frustration, during which injury after injury strikes our former hero down, before eventually he gives in and gives up. What if something like that now happens to Peyton Manning?

Second, even if Manning stays fit, the Colts might still want to pick Luck. I admit, however, that I am confused about this. Mike Carlson was saying last Tuesday morning that the Colts might still draft Luck, but then immediately trade him and use the proceeds to beef up the rest of their team. Others seem to be saying that, given that they have Manning, they wouldn’t pick Luck, with no mention of immediately trading Luck. No doubt American commenters can help me out on that.

Meanwhile, for other teams there is no such dilemma. Well, not so much for the teams, more for some of the fans. Here is a report of how Miami Dolphins tight end Anthony Fasano feels about all this Suck for Luck talk:

Fasano, in an interview with WFAN in New York, ripped Dolphins fans who are rooting for the team to lose and nab Andrew Luck, calling them “sick.”

“It’s sick actually,” Fasano said, via SportsRadioInterviews.com. “I can’t even fathom those thoughts of those people that conjure up that stuff. They have never played sports and pretty much aren’t really our loyal fans. I can’t really put any weight into that and I know the players don’t listen to it. It’s a shame, but people are going to talk and we just have to block that out.”

Fasano’s right – real fans don’t root for a team to lose just in the hopes of getting a particular player in the draft. The upside of a terrible season might be a good pick, but hoping the team fails to produce week after week isn’t being a fan.

Well, maybe not, but it all leaves a rather nasty stink around the place, doesn’t it? Even the slightest suggestion that a team might, shall we say, not be busting its guts quite as gut-bustingly as normal, on account of the ignominy of yet another defeat being counterbalanced by that little stroke of Luck (sorry) that beckons come next season, is … not what you want. An incentive which even hints are turning American footballers into deliberate losers, like so many British welfare addicts, is about as perverse as an incentive can get.

I freely admit that, as catastrophes go, the perverse incentive unleashed upon NFL football teams and their fans by Andrew Luck doesn’t register very high on the catastrophe scale, and certainly not compared to something like the British Welfare State. But, this Luck story does have the virtue of illustrating the general principle, of how rules that look good when you decide on them but then turn around and bite you, very nicely, to a very wide potential audience. The Luck story gives libertarians like me, always on the look-out for perverse incentives and the harm they can do, something else to talk about.

Interestingly, and relatedly, there is now talk of the English Premier League switching from a promotion-relegation model to a franchise model, like the NFL. After all, where’s the sense in town after English town building a huge new stadium in the hope of future glory, but then sinking back into the lower leagues, leaving the stadium empty for every game? Old School Tottenham manager Harry Redknapp is about as pleased by that suggestion as Mr Fasano is by the idea of NFL teams throwing games to get the best draft pick player next year. But this story illustrates another significant real world principle with reverberations well beyond sport, in the form of the principle that people owning stuff actually counts, or should count. If foreigners, including in particular Americans who also own NFL teams, own England’s Premier League clubs, and if they all want a franchise system rather than a promotion and relegation system, then guess what. They are likely to get their way. “Ownership” doesn’t just mean being separated from a billion quid to pay for new players. It also means control.

In other sporting news, England and India have been playing cricket matches against each other, again. In England, over the summer, England won every game against India. But in India, the tables have been entirely turned, with India winning the recently concluded one day series with a 5-0 whitewash. It would appear that home advantage, when it comes to England India games, is everything.

Maybe the answer, for at least some of the future games between these two countries, is to seek out neutral territory. How about them playing their games in, say, New York. Or Chicago. Or Tampa Bay. It would even things out, and it would spread the word about cricket in a place not now very familiar with it. There could be cricket fan rallies in the centre of town, on the day before the games. Just a thought.

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15 comments to The NFL is now in the grip of a perverse incentive

  • Alsadius

    The best way of minimizing this problem I’ve seen comes from(I believe) the basketball league, who doesn’t simply assign draft picks in a simple bottom-up list fashion, but has a lottery. The worse you do, the better your chances of getting something high in the pick order, but the progression is gradual and even the worst team only has about a 20% chance of getting the #1 overall pick. It doesn’t eliminate the problem, of course, but it does mitigate it somewhat.

    Also, I’d love to see what happened if a coach said before the last game of the year “Yeah, we’re throwing this game. We’d have to be idiots not to”, or something of that sort. He’d likely get driven out of the sport by an angry mob, but I’d still love to see someone actually openly acknowledge what everyone already knows.

  • Jay Thomas

    The perverse incentives you speak of are somewhat tempered by the high degree of player and coaching turnover in the NFL. Coaches and players know that their future employment and level of pay are highly dependent on their current ‘production’ expressed both as statistical benchmarks like total rushing yards touchdown catches and sacks and in that most important statistic of all wins.

    With NFL rosters (and coaching staffs) being turned over at the rate that they are it absolutely isn’t in any players interest to tank down the stretch in the vague hope that their team nets a superstar for next season. Most of them have no guarantee whatsoever that they even will even be on next years.

    What stuff like he “suck for luck” phenomenon highlights is the difference in incentives between say the Miami Dolphins fans, who will almost certainly be back next year and quite possibly for decades to come and the 2011 Miami Dolphins players, who have no incentive to want to lose. The fans can afford to take the long view, the players given the unpredictability of their profession, and limited playing careers, can’t.

  • Jody

    The NBA addresses this problem, somewhat, by instituting a draft lottery wherein the worse teams have only more chances to “win” the first pick, rather than a guaranteed first pick. On the flip side, it occasionally leads to situations where not-so-bad-teams get the first pick, which tends to create mini-dynasties.

  • That’s a gamble predicated on Luck being able to play at the pro level, which is far from being a certainty.

    Many years ago, Tampa Bay, one of the teams in the game in London last week, was tied for last place with a can’t miss college QB named Vinny Testeverde available in the next draft.

    Tampa Bay tanked their final game to get the first draft choice to pick him. They drafted him. However, they soon came to curse him because he had a tendency to throw the ball to members of the other team rather than his own.

    During the 6 years they had him Tampa suffered more than twice as many defeats as wins, which is a truly awful record. Granted, there were a lot of other problems with the team, but he was a mediocre QB for them.

    He moved on and eventually worked himself into being a fair to middling QB, but he never came close to fulfilling the promise he held prior to the draft.

    That’s the problem with college players — it is hard to tell how well they’re going to transition to playing in the pros. A high percentage have trouble making the jump.

  • Sunfish

    Alsadius-

    You sometimes see exactly that, expressed a little differently. A team that’s completely out of the post-season running (either because they’re 14-1 or because they’ve achieved Denver Donkos level of suckage) will not not put it’s a-list talent into the last game of the season.

    Why risk crippling someone who you may want to have later, in a game that doesn’t matter?

    BTW, would it be possible for one of you guys over there to dress Jay Cutler as a brazilian electrician and turn him loose on the subway before the Bears fly home?

  • Dishman

    Brian,

    I think you’re basically right in your descrption of how the system works.

    As Jay Thomas noted, the players don’t really share the motivation.

  • Nigel

    The differing motives of fans and players pretty much nails it, I think.

    The fans ought to be careful who they wish for anyway. There was much debate in 1998 about whether the first draft pick would be Manning or Ryan Leaf, another QB.

    Manning holds NFL records for 4000 passing yard seasons – Leaf’s career passing yards total didn’t even reach 4000 yards.

  • This season notwithstanding, because they’re actually playing fairly well, but exhibit A against your line of thinking is my beloved Detroit Lions. They have been the worst team in the NFL for the last 20 years (not the single worst every year, but the worst over that time) and have not won, or been in, the championship since 1957.

    That’s a lot of high draft picks for not much result. There are teams that seem to do well year after year and other teams that seem to do poorly year after year even though the league is structured to prevent it. Why?

    Because of parity, management makes a great deal of difference. While players, coaches, and front-office staff are easily replaceable, ownership (Got a spare billion or so?) is not. What’s the point of owning a team if you can’t put your stamp on it? As far as I can tell, William Clay Ford, long-time owner of the Lions, does not understand the game of football.

  • Laird

    I think Jay Thomas has it about right. The players themselves have every incentive to play their best, even in losing seasons on abysmal teams, to augment their chances of winning the “free agent lottery” and getting one of those mega-million dollar contracts with another team. About the only way a team can realistically try to “throw” a game is for the coach to make a conscious decision not to field his best players, as Sunfish suggested. Which generally wouldn’t sit well with the players or the fans (most of whom want to see a win, even if it means going 2-14 instead of 1-15. That’s especially true if playing a team in post-season contention, when one can be a “spoiler”).

    And despite all the hoopla, young Mr. Luck remains very much an unknown quantity, as do all college players. History is littered with the names of “sure-thing” college stars who completely washed out at the pro level. That’s especially true for quarterbacks, if only because the expecatations for them can be so much higher than other players. Ambisinistral mentioned one such specimen, and there are innumerable other examples (Andrew Luck’s own father, Oliver, being one of them: an All-American and high draft choice who managed only 4 extremely mediocre [and losing] years in the pros, two of them as a backup to someone else).

    “Once in a generation” players seem to come along every few years, and you see this same level of excitement every time. Very few actually live up to expectations, if only because the qualitative level of play in the NFL is so much higher than in college. And that’s especially the case with “savior” quarterbacks who are thrust into the starting job in their rookie season. They crash and burn at a very high rate, because they’re never given adequate time to learn the system (especially the sophisticated pro defenses they have to play against). Talk a look at past Heisman Trophy winners, a very high percentage of whom are quarterbacks and almost all of whom are #1 draft choices. How many of those achieved superstar status?

    So while teams may be salivating to get Luck, they know that it’s still going to be a crapshoot for the “winner” of that lottery. And if he’s “un-Luck-y” enough to be drafted (and remain) with a bad team his professional career might be very short and disappointing.

  • BigFire

    re: Laird
    The flip side of that argument is that one player CAN make a whole lot of difference, if he’s that special player. With the turn-over rate of the entire coaching staff and the roster change from year to year, it is possible to go from zero to contention in 2 years, given the right staff and the right picks of players. Atlanta Falcon did it a couple of years back in the aftermath of Michael Vicks dog fighting conviction that crash and burn their season. They have an entirely new coaching staff, and drafted a right QB for their new system, and was back in the playoff within 1 year.

    Or witness what’s happening to this year’s Colts. They lost the ONLY QB they have for over a decade, Peyton Manning, and they’re winless. Given how the Colts build their system (Offense minded, defense structured to work with assumption that offense will put up a lot of points early, with Manning being literally the ONLY QB to call his own play), it wasn’t shocking how badly they sucked this year without him.

  • Mr. Micklethwait,
    Very well-written, sir !
    Please allow me to add one more leveling device to your list.
    The NFL also gives losing teams a much easier schedule each year. The Dallas Cowboys, whose stadium I can see from my roof, didn’t fare well last year. They were rewarded with non-conference weaklings like Detroit, San Francisco, Seattle, and Buffalo on this year’s schedule.
    But Detroit, Frisco and Buffalo are having great years so far, and are turning out to be tougher opponents than some of the teams did well last year.
    Therefore, we have unintended consequences of our unintended consequences.

    By the way, Jerry Jones, the Cowboys owner, is a truly evil person.

    1) He insists on remaining in place as General Manager. Therefore, we’ve had only one playoff victory in the last 14 years.

    2) He worked with the city of Arlington, Texas, to steal land and homes for his new stadium. They call it Eminent Domain. We call it theft.

    3) Coach Jimmy Johnson won two Super Bowls, but refused to kiss Jerry’s ass. Jerry Jones fired him.

    Tonight, the Cowboys will play the dreaded and feared Philadelphia Eagles. All men who love freedom and justice will be rooting for the Eagles !!!!!

  • Paul Marks

    Both Football and Baseball are full of collectivist structures, government regulations and the results of weird court cases (decided by the distorted doctrines of the government courts).

    Americans should remember that their real national sport is (and has always been) shooting.

    Shooting is at least relatively free of the absurdities that have messed up Football and Baseball.

    Learn to shoot and take your sons (and your daughter) out shooting.

    Both target shooting and hunting.

    This will be vastly better for them (and for you) than taking them to see Football or Baseball games.

    Although, of course, if they prefer playing Football or Baseball they should be supported. Although warned (if they see a future professional life in these sports) just how messed up they are.

  • Laird

    Fair enough, BigFire, but those “special players” are few and far between, and are rarely identified directly out of college. Even drafting Heisman Trophy winners, supposedly the best of the best, is a crapshoot. I’m just saying that anyone who puts his entire faith in drafting that “special player” is going to wind up sorely disappointed more often than not. And frankly, I don’t think most team owners (or head coaches) are that shallow.

    As to Andrew Luck, we’ll all just have to wait and see. Let’s check back again in 5 years or so.

  • MattP

    To go off on a tangent, this is one of the most insightful reads I’ve ever come across regarding the NFL. The fact that it’s on a British blog is simply mind blowing.

    Perhaps it shouldn’t be. After 7 years of being stationed in Japan I can honestly say that my favorite baseball team, anywhere, is the Yokohama Bay Stars.

    I was raised on a steady diet of propaganda that we were backward provincials, in part, because we didn’t play sophisticated European games.

    Which as an aside was never entirely true. But that’s neither here nor there. It’s just nice to know our vulgar contribution to the world of sport isn’t entirely being rejected.

  • phwest

    As with other commentors – the league with the seriously major incentives to finish last is the NBA – which actually had to change the draft rules to mitigate it. The reason is that the NBA combines two rules – a team salary cap and a maximum league salary – that allow teams to pay top players less than their actual value to the team. Rookies have their own salary cap, so again a top draft pick can be much more valuable than their salary, and a couple of top picks that pan out can form the foundation of a long run of success. And the value of a draft pick in the NBA drops very rapidly with order. The tempatation to lay down, not just for a season but for two seasons has been a big issue in the NBA.

    But it is the interaction of the player and team caps that cause the problem. The key in any salary cap league is to maximize the number of underpaid players and minimize the overpaid ones. In the NFL, this typically means developing players, so they get better over time, and in carefully building a team into a unit which maximizes individual strengths and covers for individual weaknesses. The cap means that even having a top QB like Peyton Manning doesn’t guaranteed anything, because somewhere else will be weaker to free up the money to pay him, and of course if he gets hurt, you pretty much toss the season away.

    To me the truly interesting thing about the NFL is how the revenue sharing process creates non-optimal (from a league perspective) team placement. NFL teams share all revenue except gate receipts. Since there are only 8 home games, gate receipts are both a limited source of revenue, and have to cover the cost of a stadium that runs in the range of $500 million or more. So individual NFL teams are highly incentivised to find a city willing to pony up as much money as possible in the form of stadium subsidies, regardless of the size of the market, since bulk of the cash flow from the larger market ends up flowing to the league in TV and merchandizing revenues rather than the team at the gate.

    Thus you have a league that has had no team in the second largest media market in the country for years (LA), while having teams move to small cities like Jacksonville and Nashville. Simply because LA is not willing to fund a stadium, and no owner has any incentive to bear the cost.