(Disclaimer: this post has nothing to with politics, but as you’ll see, it does connect to issues of fairness and freedom. I’m just hoping that some BHL readers are sports fans.)

In their excellent Stumbling on Wins, economists David Berri and Martin Schmidt offer the following parable:

Imagine you are completing a journalism degree at Columbia University. As graduation day approaches, it becomes clear that you are one of the top students in your class. Your lofty ranking starts you dreaming of working at places like the New York Times or the Los Angeles Times. Just before you graduate, though, you are notified that your rights have been acquired by the Lincoln Journal-Star. The notification goes on to add that if you want to work as a journalist, this will only happen in Lincoln, Nebraska.

When you hear this news, you become angry and contact your lawyer. Surely, someone cannot require that you—a top graduate of Columbia—begin your career in Lincoln. Your lawyer, though, tells you that journalists have signed a collective bargaining agreement, giving newspapers the right to assign new talent in this fashion. Furthermore, this collective bargaining agreement has been upheld numerous times in court. In essence, there is nothing for you to do if you want to work as a journalist. For your career to happen, it must start happening on the plains of Nebraska.

Outside the world of sports, the scenario we just described is unthinkable. We are accustomed to a labor market where workers are free to apply to any employer, and employers are free to hire any worker. To have the “rights” to our labor simply assigned to a firm, without our consent, runs contrary to the ideals of a free and open labor market.

In honor of the upcoming NBA draft (go Sixers!), I’ll explain why the draft system is illiberal, unfair, and inefficient.

As noted by Berri and Schmidt, by requiring players to work for the team that selects them, the draft severely constrains labor mobility. If you want to work in Philadelphia but get drafted by Cleveland, well, tough luck. We’d object to this system in any other profession, so why not sports?

The draft also has adverse effects on player salaries. The NBA has a rookie salary scale such that your salary for the first few years of your career is pretty much fixed. As a result, a lot of players earn far less than their real economic value. For instance, Anthony Davis produced nearly 12 wins last year . A win in the NBA is worth approximately 1.5 million dollars. Thus, Davis produced about 18 million dollars of basketball value last year but his salary was only $5.1 million, thanks to the fixed salary scale. (This problem is compounded by the NBA’s requirement that draft eligible players be at least 19 years old, meaning that players won’t typically hit the (semi) open market until they are 23 or so.)

Here’s another objection to the draft: it incentivizes losing! In the NBA the distribution of top picks is decided by a lottery in which teams are assigned more ping pong balls the more games they’ve lost. To increase your odds of a higher pick, you need to lose more games (i.e., “tank”). Thus, losing is a rational response to the perverse incentives created by the draft—especially if you are a small market team with little chance of convincing a star to sign with you in free agency.

So what’s the solution? Abolish the draft and all salary restrictions—except for a cap on total salaries for each team (a cap that could be adjusted for factors like differences in state taxes, etc.). Any team can sign any incoming player so long as the salary doesn’t put them over the cap. There’s no incentive to lose since doing so doesn’t increase your chances of signing your preferred players (if anything, losing probably hurts your chances of signing free agents).

Why am I in favor of a salary cap at all if I’m not an economic egalitarian? For one, the NBA and a market economy differ in a crucial respect: the NBA is a zero-sum game (in terms of the distribution of wins). When the Lakers play the Celtics, a win by the Lakers entails a loss by the Celtics. If league-wide competitiveness is our aim, then we have reason to equalize the resources each team has at their disposal to produce wins. Of course, maybe league-wide competitiveness shouldn’t be our goal. Some think that having a handful of “super teams” is best; moreover, evidence suggests that the link between payroll and wins is pretty weak (although this may be due in part to fixed rookie salaries). Even so, a uniform ceiling on total team salary would probably incentivize more competent management by eliminating the ability of rich teams to buy their way out of mistakes by simply piling hefty new contracts on top of hefty old contracts (see the Brooklyn Nets).