What Kevin Durant Can Teach us About Government
If you haven’t heard, NBA superstar Kevin Durant recently signed a maximum contract with the record-setting Golden State Warriors. Many in the press are predicting this year’s Warriors to be the best team of all-time. While many people don’t realize this, the NBA’s rules that tried to ensure fairness are exactly what allowed for this super team to exist.
Without going into too much detail, here are the basics of how it works. There is a maximum player contract, which means that no matter how good at basketball a player is; the NBA decides the maximum amount any player can earn (about $30 million per year currently).
There are more specifics to the salary cap and max contracts that you certainly don’t care about, but the point of these measures is to ensure fairness. The thinking of the NBA is that if teams are only allowed to spend a certain amount of money per year and per player, that it will make the league more even and create parity. As a result of this policy, there will presumably be more good players to go around since teams are capped. Due to the law of unintended consequences, however, we saw the exact opposite with the Durant move.
While the intentions were certainly good in this proposal, this has been a disaster. Since there is a maximum amount that a team can pay a player, many players are not paid what they are truly worth in the market. For example, the Warriors have two star players that could sign contracts for over $50 million per year in Steph Curry and Durant. If they had to pay these players what they are worth, they certainly would not have the money to sign both and would also lose other key role players. When you force someone who is worth $70 million to sign for $30 million, you are perverting the market and giving a huge advantage to the team that signed that player at the expense of small market teams.
Instead of creating fairness in the market, these caps on what players can make means that the best players are all going to big market teams, while the smaller teams are forced to settle for overpaying mediocre talent.
This is exactly what happens when the government tries to get involved in the market to “help.” The intent is generally good, but the result is bad. Raising the minimum wage would only hurt the very people it is trying to protect: low-wage workers. While some workers will get a raise, many will be laid off or fired, and some smaller businesses will have to shut down completely, leaving all of their workers unemployed. Another example is affordable housing, which is supposed to lower housing and rental prices, but in actuality raises the cost of living in nearly every city where it has been tried.
The Kevin Durant example can show us that not only are some rules and laws misguided, but that they actually hurt the very people they are intended to help.