The False Economy of Trading James Harden

A blog about business and economics.
Oct. 29 2012 1:36 PM

The False Economy of Trading James Harden

150212886
James Harden celebrates winning the men's basketball gold medal game between the United States during the London Olympics Games

Photo by Pascal Le Segretain/Getty Images.

The Oklahoma City Thunder agreeing to trade sixth man James Harden to the Houston Rockets for pennies on the dollar strikes me as a classic case of false economy in pro sports. The basic issue is that the secret got out about Harden over the course of the last season—even though he comes off the bench and doesn't shoot that much, he's really good—so his market value soared even as the team had already committed a lot of money to Kevin Durant, Russell Westbrook, and Serge Ibaka. So the Thunder being a "small market" team didn't want to take the luxury tax hit that would have come from resigning Ibaka.

One point about this is that though teams are always pleading poverty, I don't think we genuinely ever see an elite level NBA team losing money simply because its salary overhead is too high.

Advertisement

OKC is a relatively small market, though bigger than New Orleans or Salt Lake City and unlike Milwaukee or Indianapolis or some of the other smaller markets, there's no pro sports competition. The Thunder don't have trouble selling out games, and when I was in Tulsa, I saw people wearing Thunder gear even though it wasn't NBA season, so the team clearly has the ability to draw from outside the OKC metropolitan area.

But my real critique is that the Thunder don't seem to be considering the optionality involved in resigning Harden. Having the guy under contract for a multiyear deal doesn't just carry with it the right to employ Harden's basketball services; it carries the right to trade the right to employ him at any time. So if it did come to pass that the Thunder were a championship-caliber team and nonetheless running some kind of intolerable operating loss, they could always trade him then (or, better, they could trade Westbrook). The existence of the luxury tax can lead to a kind of overthinking and irrational sequencing about these things. When considering whether or not to sign a player for $X million, the question to focus on is whether he produces more than $X million worth of basketball services. If he does, then he's a valuable trade asset at any time. And the luxury tax should be understood as being assessed on the entire team payroll rather than having the entire hit arbitrarily assigned to whomever happens to be the last player you signed.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Doublex

Crying Rape

False rape accusations exist, and they are a serious problem.

Scotland Votes to Remain in U.K.

There’s a Way to Keep Ex-Cons Out of Prison That Pays for Itself. Why Don’t More States Use It?

The Music Industry Is Ignoring Some of the Best Black Women Singing R&B

Can Democrats Keep Counting on Republicans to Offend Women as a Campaign Strategy?

Culturebox

Theo’s Joint and Vanessa’s Whiskey

No sitcom did the “Very Special Episode” as well as The Cosby Show.

Television

The Other Huxtable Effect

Thirty years ago, The Cosby Show gave us one of TV’s great feminists.

Cliff Huxtable Explains the World: Five Lessons From TV’s Greatest Dad

Why Television Needs a New Cosby Show Right Now

  News & Politics
The World
Sept. 19 2014 11:36 AM Breaking Up Countries Is Still Hard to Do
  Business
Business Insider
Sept. 19 2014 11:37 AM Why Urban Outfitters and Other Brands Troll Their Customers
  Life
Lexicon Valley
Sept. 19 2014 11:32 AM Why Do Pirates Talk Like That?
  Double X
The XX Factor
Sept. 19 2014 11:33 AM Planned Parenthood Is About to Make It a Lot Easier to Get Birth Control
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Every Day That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
  Arts
Behold
Sept. 19 2014 11:51 AM This Is All That’s Left of New York’s Once-Thriving Borscht Belt 
  Technology
Future Tense
Sept. 19 2014 11:40 AM Apple Invented the Perfect Way to Handle Your Giant New Phone
  Health & Science
Bad Astronomy
Sept. 19 2014 11:33 AM The Curious Incident of the Supernova in the Nighttime
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.