Why So Many Draft Trades This Year?
NFL Draft - Guest column by Alex Olbrecht
Two things became very clear as we look back at the opening round of the 2022 NFL draft. First, NFL general managers agreed with the assessment of the QBASE 2.0 model (as seen on footballoutsiders.com) that this year’s quarterback class was weak and not worthy of being drafted very highly. Second, general managers were willing to trade first-round picks at a much higher rate than the past. Eleven first-round picks were traded before the draft, with another nine traded during the draft itself.
The question is why? In short, economic theory can be used to help explain why we observed so many trades in this year’s first round of the NFL draft.
The Coase Theorem states that when conflicting property rights occur, “bargaining between parties involved will lead to an efficient economic outcome regardless of which party is ultimately awarded the initial property rights, as long as the transaction costs associated with bargaining are negligible.” Put into more simple terms: regardless of the initial allocation and order of draft picks, each pick will eventually, through trades, be allocated to the team which values that particular pick the highest. Teams that place a higher value on a pick than the team holding the pick will be willing to offer more for that pick than the value of the pick to the team holding the pick. So we would expect a trade to occur since the team holding pick prefers the compensation to the value of the players available at that pick. A key point to understand is that for trades to occur, teams need to value a pick differently, and of course value the quality of the player the team can draft with that pick differently.
Analytical models might lead to more consistency with how players are valued by the 32 NFL teams. But evaluating collegiate talent with analytical models is a relatively new technique, compared to the long history of the NFL. The reason why mathematical models haven’t particularly penetrated effectively into the NFL’s player evaluation process is that it hasn’t been until the last 4 to 5 years that data has been available for many positions. In recent years, companies like Pro Football Focus and Sports Info Solutions have created stats and grades for college players at positions such as offensive line and defensive back and thus tried to do some sort of projection and evaluation. Otherwise, analytical models have been limited to players who are tracked with conventional stats. In addition to our quarterback prediction model, Football Outsiders' SackSEER and Playmaker Score systems have attempted to evaluate edge rushers and wide receivers. Fantasy football analysts have been trying to project player performances for years, especially those who are trying to get a leg up on drafting the best rookies.
Measuring player performance in college is very difficult when performance statistics are highly correlated with the play of teammates and the wide variability of the quality of opponents from week to week. Thus teams are largely left to evaluating various positions based on scouts’ opinions, which we know can be highly inaccurate and biased. Ultimately why this is important for the application of the Coase Theorem is that there is a great deal of variation between the assessment of each team for each player and how valuable that player would be for a particular team. For example, consider offensive left tackle Bob Smith, who most teams view as the best left tackle in the draft. If your team already has an All-Pro left tackle, your team will place less value on that player than another team in desperate need for that position to protect their quarterback while passing.
In some ways, one can think of the quarterback position in the draft as anchoring the value of each pick because the quarterback position is largely viewed as the single most important determinant of winning in the NFL, and thus the price of a draft choice poised to select a premium quarterback prospect is likely to be high. General managers are very clear in their knowledge that trading up in the draft to select a quarterback is going to be very expensive and if that player doesn’t play well, it is likely to be the type of decision to be the cause for a general manager to be fired—both because of the high profile nature of selecting a bust at quarterback and because the amount of draft capital used to acquire that pick will have further weakened the team, making winning more difficult. However, in a draft with few first-round quality quarterbacks, the issue of variation in the valuation of the picks becomes amplified, the cost of moving up in the draft decreases, and the risk to personal job security of selecting a bust goes down (because the pick won’t be used on a quarterback). In other words, it is a much easier proposition for a general manager to make a trade.
In addition to the valuation of a player that can be picked at a particular position, teams also have financial considerations. A clear example this past offseason was the explosion in salaries for wide receivers (Gallup, $62.5M; Williams, $60M; Robinson, $46.4M; Godwin, $60M; Adams, $141.5M; and Hill, $120M) which provided a strong incentive for teams with wide receivers with expiring contracts to trade away those players to select wide receivers in this year’s draft. Since players selected in the draft have artificially lower salaries than they would on the free market, teams have a strong incentive to replace expensive veteran players with cheaper drafted players. If a team evaluates talent well, this can provide significant savings without a corresponding decrease in productivity on the field. Two examples of this type of behavior in this year’s draft were the Tennessee Titans trading away A.J. Brown and the Baltimore Ravens trading away Marquise Brown.
Ultimately evaluating the many positions of players entering the NFL is still very much a judgment-type evaluation by scouts and once financial incentives are considered, the value of each draft pick will differ for each team. The Coase Theorem is pretty clear that once assets are valued differently in a market with low transaction costs, one can expect a reallocation of the assets in question. For the NFL, in a draft with few good quarterback prospects, the risk and costs associated with making a trade in the first round became lower, making trades more likely to occur since the trades are unlikely to be for quarterbacks. Once you combine that with the imperfect evaluation of talent, general managers were more than willing to deal, guided by the invisible hand of Adam Smith.
Alexandre Olbrecht is a professor of economics at Ramapo College of New Jersey and the Executive Director of the Eastern Economic Association.