The Max is Too Much

Top free agents want to get the full amount they are entitled to. Based on a formula in Article II, Section 7(a) of the Collective Bargaining Agreement, eighth-year players are entitled to a maximum salary of a bit over $17 million per year. To the extent that more than one team can create cap room to sign such a player, and the marginal revenue boost from signing a superstar is well in excess of his salary, a semi-competitive market will inevitably result in these contracts being signed.

Meanwhile, the NBA salary cap is about $58 MM for 2010-11, up very slightly from 2009-10. A team with no players under contract could afford to sign, at most, three maximum-salary players in one free-agency period. As it turned out, only Miami could do this in July 2010. A couple teams (New York, New Jersey, Chicago) had enough room, or close to it, for two maximum-salary players. But given the ceiling (which becomes an effective floor) on superstar salaries, most teams in the league had no shot at signing a Wade or James, or even a Boozer. Your typical star wants to play where other stars are playing, so two simultaneous signings seems to be required if you want just one.

There is an obvious coordination problem here: top players would behoove themselves to accept lower than the maximum allowed salary, in order to leave more salary-cap room (or if that is impossible, simply to be kind to the owner's wallet so he will be generous with Bird-exception-type or MLE-type signings) to sign good supporting teammates. But though some (like LeBron James, Dwyane Wade, and Chris Bosh in today's free agent machinations, or Kobe Bryant in 2004) speak of accepting less money for the good of the team, it rarely happens. James, Wade, and Bosh will, by accounts, get close to the max salary; why else would Miami trade a very good young player, Michael Beasley, for virtually nothing? Theory holds that wealth has diminishing marginal utility past a certain level of luxury, but athletes don't hesitate to demand their full allotment.

Obviously this system encourages building young talent through the draft, and retaining said talent, rather than cobbling together a monster through free-agent acquisitions. There are no Yankees in the NBA. But I favor either increasing the salary cap somewhat or reducing the maximum salary, to make it easier for more teams to get access to the "open" market for good players. Following a team is no fun if, like the Knicks, they are locked out of the free-agency market for years and, when finally they are allowed to deal in such market, they are structurally disadvantaged because some other team has more "max" slots.