Joe Johnson is a good contract- NBA Economics 101

[GilmoreFan]

I've been skimming these boards and I notice alot of really knee-jerk reactions about certain players contracts, like Joe Johnson, which are trashed for being "bad contracts" or "millstones". I'm going to address some of these misunderstandings so hopefully people stop doing this as much.

Market value is this; what teams are willing to pay for you in an open market. Of course in the one sense, people here will consider every NBA player to be overpaid, because they feel that they don't deserve to make more than a doctor or factory worker down the road. But that nebulous and anti-capitalist sentiment aside, value is what people are willing to pay for your skills. I'll get back to this.

The NBA is an imperfect market however, many players would be paid above the maximum, but can't be because there is a limit on their ability to earn more money. So people look at Joe Johnson earning the same as another max player, and get indignant. What they don't understand is that's a product of the other max player being unable to earn even more money, not of Joe Johnson being paid too much. Gasol and prime Duncan are both max players, the fact Duncan is much better doesn't negate the fact Gasol is worth the max.

Joe Johnson would have received multiple max offers, both in the 2010 offseason, and back in the 2005 offseason when he signed. He was worth the max on the open market. Now of course, there are several important qualifiers to this to note.

1) Yes, of course bad contracts do happen, just because a team pays someone it doesn't mean that was their true market value. The litmus test is to see if multiple teams were willing to offer that much. So Allan Houston was a bad contract, because the Knicks paid $30mill more than anyone else was even able to pay, let alone likely to, whereas Elton Brand was a good contract, because multiple teams would have paid it (or more). This leads nicely to:

2) "Player X got injured... they'll be old at the end of their deal!" Yes, that is true, but unless there was good evidence the injury was likely it doesn't make the contract bad. K-Mart's big contract with the Nuggets was a sound one to offer given his market value, and value to the Nuggets in particular. Teams also factor in old age and declining play. Teams knew when they offered Jason Kidd a max deal in 2003 that he would not be the same player by the end of the deal... but they didn't care, because if they had won a title or two in the next few years, his contract would have paid off, even if his play declined later. They were willing to take that gamble, because that was his market value.

Joe Johnson had an injury this year, and the Hawks aren't a championship team... but none of this makes the decision to resign Joe a bad one, nor his contract bad. It's not like the Hawks were going to be able to do something else with the money, and it's not like it's our money that's being spent on him either. Joe gives the Hawks a valuable player, and I hope he'll get his jersey retired there one day. End rant.

[tiderulz]

keep thinking that. It will hamstring them for years.

[OFWGKTA]

Joe Johnson is on a bad contract because the Hawks will never get further than the second round of the playoffs with him as their best player and taking up max salary money on the cap.

[Hops]

Still a bad contract.

[SaveOurBullets]

I was kind of in that boat after the signing happened. The Hawks didn't have championship potential and with Joe Johnson and a nice core, they could put together some nice seasons and milk the talent they had for all it was worth. I know that's the wrong mentality to have, but the Hawks were going to be trapped for a long time regardless.

I don't believe that anymore. I think the Hawks would have been much better served to do some serious retooling to hopefully build a title contender one day (as unlikely as that may be) and, with enough assets, perhaps even lure in a star player. Atlanta is a tremendous underachiever as a sports town, but so is Miami. The city of Atlanta has a lot going for it where a star may be happy to go there.

Now, with Joe Johnson, they've been set back quite a bit and Johnson himself may not have that much left in him. He's considered by many to already be the worst signing of all time. He just isn't worth it and isn't valuable enough to a team's success.

Also, the ASG is just a horrible ownership model.

[GilmoreFan]

Joe Johnson is on a bad contract because the Hawks will never get further than the second round of the playoffs with him as their best player and taking up max salary money on the cap.

But they'd never get anywhere without him either, it's not like there is a cue of players wanting to come to Atlanta, or that good space could be made just by removing Joe Johnson... their team is too balanced to have enough cap space to sign stars to turn it around (even were stars keen to come).

I don't think making the 2nd round every second year and winning a bunch of games is such a bad goal for the Hawks right now, to bring them back to respectability. They were the worst team in the NBA in 2004, they spent years as a joke... making the playoffs year in year out is a better option for them than the lottery right now, especially with young guys like Horford who will leave if the team spends several years tanking. They could do with some renewal like the Mavs when Cuban bought them. Worst case, they bring some respectability back, best case they find that last piece in the same way the Kings or Pistons did... sure, it's unlikely they're going to find a homerun like that, but it's a decent gamble given they have some young players, and need to build their fanbase.

[GilmoreFan]

I was kind of in that boat after the signing happened. The Hawks didn't have championship potential and with Joe Johnson and a nice core, they could put together some nice seasons and milk the talent they had for all it was worth. I know that's the wrong mentality to have, but the Hawks were going to be trapped for a long time regardless.

I don't believe that anymore. I think the Hawks would have been much better served to do some serious retooling to hopefully build a title contender one day (as unlikely as that may be) and, with enough assets, perhaps even lure in a star player. Atlanta is a tremendous underachiever as a sports town, but so is Miami. The city of Atlanta has a lot going for it where a star may be happy to go there.

Now, with Joe Johnson, they've been set back quite a bit and Johnson himself may not have that much left in him. He's considered by many to already be the worst signing of all time. He just isn't worth it and isn't valuable enough to a team's success.

Also, the ASG is just a horrible ownership model.

1) Explain what they could possibly have done. With details.
2) You compared Atlanta, a place some former Hawks players have described as the most boring and bland city in America, to Miami, a beach city with hot temperatures, lots of women walking around in bikini's, and a great nightlife. Miami is not only seen as the better destination, but they spent years changing the ownership and team culture by hiring Pat Riley (actually gave him a slice of the ownership too), and looking after their ex-players... the Hawks can't change that image in a hurry, it took Miami years as it was.

[cb4_89]

you just failed your own intro course.

[LGND2552]

If you try to evaluate the NBA market(let alone any market) with simple knowledge of economics and the use of basic market value and demand, then you are confused. Life is not that easy. Economics is based largely on theory anyway.

[GilmoreFan]

If you try to evaluate the NBA market(let alone any market) with simple knowledge of economics and the use of basic market value and demand, then you are confused. Life is not that easy. Economics is based largely on theory anyway.

Much better off to go with a vague notion of "good" and "bad" than something confusing like economics... that way it's totally subjective and based on hindsight, making it easy for couch critics.

[COY0607]

it wasnt a great signing, but not as bad as a lot of people make it out to be...rashard lewis was a terrible contract, john salmons was a terrible contract, joe johnson`s a decent contract (in a leauge where anyone whos not a rookie is overpaid) now, his last 2- maybe 3 years will be tough, but their are a lot worse situations in the nba where teams have to eat up 4 or 5 years of a large contracts with very little to show for

[sixerswillrule]

Contracts are called bad based on how overpaid a player is relative to everyone else. The factors at the time of the signing aren't taken into consideration because it's history. Just not relevant anymore. It doesn't matter who else would have paid Brand in 2008. His contract became terrible, period. That's how people viewed it.
Joe Johnson has a horrible contract because when looking at other comparable players around the league, Johnson was at best fairly paid with the 16 million he earned this season but will be owed 107 million over the next 5 years. So the best case scenario is that he keeps up this level of play(highly unlikely) and still is severely overpaid. The more likely scenario? He gradually regresses and his contract becomes the worst in the league.

[Agenda42]

1) Yes, of course bad contracts do happen, just because a team pays someone it doesn't mean that was their true market value. The litmus test is to see if multiple teams were willing to offer that much. So Allan Houston was a bad contract, because the Knicks paid $30mill more than anyone else was even able to pay, let alone likely to, whereas Elton Brand was a good contract, because multiple teams would have paid it (or more).

I don't like this definition of bad contract. Plenty of market value deals turn out to be bad deals to make. The owners are probably going to lock the players out because the skewed market value in the current NBA system is leading market participants to failure.

Instead, I propose the following simple definition: a bad contract is a contract that reduces a team's chances of fielding a good team over the length of the contract.

[Amish Mafioso]

Ok, let me see if I understand this. If Lebron James got paid what he is actually worth, he'd be worth about a billion dollars. Therefore, by comparison, Joe Johnson is actually reasonably paid. Awesome.

Hell, why stop there? Let's just go ahead and say Joe is a bargain.

[tiderulz]

I was kind of in that boat after the signing happened. The Hawks didn't have championship potential and with Joe Johnson and a nice core, they could put together some nice seasons and milk the talent they had for all it was worth. I know that's the wrong mentality to have, but the Hawks were going to be trapped for a long time regardless.

I don't believe that anymore. I think the Hawks would have been much better served to do some serious retooling to hopefully build a title contender one day (as unlikely as that may be) and, with enough assets, perhaps even lure in a star player. Atlanta is a tremendous underachiever as a sports town, but so is Miami. The city of Atlanta has a lot going for it where a star may be happy to go there.

Now, with Joe Johnson, they've been set back quite a bit and Johnson himself may not have that much left in him. He's considered by many to already be the worst signing of all time. He just isn't worth it and isn't valuable enough to a team's success.

Also, the ASG is just a horrible ownership model.

1) Explain what they could possibly have done. With details.
2) You compared Atlanta, a place some former Hawks players have described as the most boring and bland city in America, to Miami, a beach city with hot temperatures, lots of women walking around in bikini's, and a great nightlife. Miami is not only seen as the better destination, but they spent years changing the ownership and team culture by hiring Pat Riley (actually gave him a slice of the ownership too), and looking after their ex-players... the Hawks can't change that image in a hurry, it took Miami years as it was.

name the former Hawks players that say that? Atlanta is the #1 city for singles. decent urban scene. Many celebrities have homes here. is it Miami, no, but it is good in its own right.

[GilmoreFan]

Ok, let me see if I understand this. If Lebron James got paid what he is actually worth, he'd be worth about a billion dollars. Therefore, by comparison, Joe Johnson is actually reasonably paid. Awesome.

Hell, why stop there? Let's just go ahead and say Joe is a bargain.

No team could afford a billion, but he'd sure get alot more. That's how a salary cap works. By the logic guys like you are putting out, only underpaid players like Lebron are good contracts. That's absurd.

[funkatron101]

Your economics work for individual demand. But contracts like this have a history of crippling teams.

[giberish]

Replace Joe Johnson with say Dorell Wright on a $4M/yr deal and the Hawks are a 7-8 seed and 1st round playoff loser this year.

However, they aren't crippled with the moves they can make for the next 5 years due to Johnson's contract getting much worse year after year (aging is predictable - a 29 year old being 34 in 5 years shouldn't be a shock). They would actually have hope moving forward.

Just because other teams were trying to be stupid last summer with Johnson (though none as stupid as the Hawks ended up being) doesn't mean it's not a horrible contract. Much like Portland wanting to stupidly overpay Hedo didn't make Toronto's contract a better idea.

[Tubal]

This is a bad contract hands down. He's making max money and he's not a max player. The owners were stupid. I lived in Phoenix when he went to Atlanta and everyone was stunned that he was offered a max deal. No one blamed the Suns for letting him go.

He's a nice role player and a good #2, but he's not a #1. He was mostly a spot up 3 point shooter on the Suns.

[GilmoreFan]

If you don't think he's a max player, you don't know what a max player is (and probably didn't read my opening post). Multiple teams would have given him a max contract (both in 2005 and 2010), ergo his market value is the max. The fact other, better players are prevented from earning their true value by a salary cap doesn't change that fact. The Hawks are no more crippled than they'd have otherwise been, since they wouldn't have had/used cap space anyway, and since he's much, much more valuable than Dorrell Wright (though this is again falling into the valuation fallacy... because Dorrell is underpaid for the moment because he exceeded his contract, Joe is overpaid... that makes no sense).