Richard Thaler, who changed thinking about the NFL draft, wins Nobel Prize in economics

AP

A professor who changed the way people think about the NFL draft has won the Nobel Prize in Economics.

Richard Thaler of the University of Chicago was awarded the prize today for his contributions to behavioral economics. But it’s one particular aspect of his contributions to behavioral economics — studying how NFL teams behave around the draft — that is of interest here.

In 2005, Thaler and colleague Cade Massey released a paper titled, “The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft.” The paper showed that the highest picks in the draft were overpaid relative to their eventual NFL performance, while second-round picks were bargains relative to their eventual NFL performance. The sweet spot, the economists found, was in the middle of the second round — that’s where the picks were most likely to be good enough NFL players to justify their contracts.

Several teams’ analytics departments took notice of Thaler’s research. Some began to use Thaler’s thinking and traded down in the first round of the draft, although others that consulted with Thaler couldn’t help themselves and still traded up when they saw a player they loved on the draft board. Thaler once described a meeting with Dan Snyder in which the Washington owner sounded enthused about his staff learning all about Thaler’s research. However, when the draft came, Washington didn’t follow his advice, and when Thaler asked a staffer why, he was told, “Mr. Snyder wanted to win now.”

Thaler’s research began under the old Collective Bargaining Agreement, when the top picks in the draft made enormous salaries. There’s been some talk that Thaler’s research helped put it in NFL teams’ minds that high draft picks were overpaid and led to the new Collective Bargaining Agreement dramatically reducing the contracts of the top picks in the draft. That’s unfortunate for all the Top 10 picks under the new CBA, but helpful to veteran players, as a reduction in the salaries of the top picks leaves more salary cap space available for the rest of the roster.

We’re not sure if the Royal Swedish Academy of Sciences, which awards the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (as the award is formally known), even knows what the NFL draft is. Thaler’s body of work goes far beyond football. But it’s good for those of us who love football to know an economist so renowned has put some serious thought into our corner of the world.

12 responses to “Richard Thaler, who changed thinking about the NFL draft, wins Nobel Prize in economics

  1. You don’t need to look too far beyond Sam Bradford to see that the old CBA was damaging to teams. Paying kids in their early twenties tens of millions of dollars and hoping they earn it in the future is a obviously a terrible business plan.

  2. There’s a reason why economists aren’t involved in football, this work is only a general study. In other words, it will always depend on the player. There are a ton of second round washouts, if you hit with a first rounder, you may have a HOF player.

  3. whybotherifeverythinggetscensored says:
    October 9, 2017 at 10:39 am
    What about players taken in the 6th round with the 199th pick? Are they worth their salary?

    Only when you have the benefit of a decade or so of hindsight. Tom Brady has become the Johnny Van Der Meer of the NFL Draft. After any MLB no-hitter, someone always brings up the back-to-back no-hitters by Van Der Meer.

    Both players are fascinating exceptions, but neither one renders the statistics invalid.

  4. What a joke of a plagiarist. A more prominent economics major named Bill Belichick built his first Super Bowl winner four years earlier with that thinking that he outlined to Kraft when he he took the job. This clown should send his Nobel prize to Belichick just like Parcells owes him his rings and HOF induction.

  5. Praise for economists.

    The only true measure of an economist is did he see the dot com, housing crisis, and the coming crisis before they occurred?

    99.999 percent didn’t, which makes the morons as they were obvious years before they actually occurred.

    So the real question is, was this nobel prize winner part of the 99.999 percent that were clueless, or did he actually see it coming?

    Nobel prizes aren’t very honorable today. Too tainted.

  6. Everyone involved on the team side that allowed those first round contracts to balloon deserves tons of blame. Such a stupid and obvious thing to let happen.

  7. Have to agree with the point about Belichick. He began building the Patriots by amassing many 2nd, 3rd, and 4th round picks at the expense of first rounders. I disagree with the plagiarist perspective. Belichick did it because he had a lot of needs and a “face of the franchise” was not going to fill the needs he had. I remember thinking his plans to use 2nd, 3rd, and 4th rounders at the expense of really good players was going to keep the Patriots solidly in last place in our division. Man, was I wrong.

Leave a Reply

You must be logged in to leave a comment. Not a member? Register now!