How good is Pat Beverley’s salary (and how bad is Amare Stoudermire’s)?

Click for a full-sized, interactive version

Click for a full-sized, interactive version

Let’s talk contracts. More specifically, let’s talk salaries. Who is overpaid? Who is underpaid? And who is the most overpaid and underpaid? To find out, I took three “overall performance” measurements, PER, WAR, and the newly unveiled RPM and correlated them with players’ salaries. The results are in the above table.  Salary is the player’s current annual salary (against the cap, not overall), predicted is what the player should make according to my model, and value is the player’s predicted salary minus his actual salary.

For the sake of disclosure, I removed from the sample anyone who didn’t have a PER, WAR, or RPM (they haven’t played at all, despite drawing a salary), and anyone who was making a minimum salary since that acts as a price floor.

You might be asking why Lebron James isn’t worth $80 million. There are quite a few reasons. Here are the most important.

1) The frame of reference for my salary model is current salaries. Therefore, the predicted value of players’ salaries, while not capped, is still calculated using those capped salaries.

2) Player’s predicted values are directly proportional to their performance as measured through PER, WAR, and RPM. Thus, in order for Lebron James to be worth $80 million, his performance in those three measures would have to be about 3x higher than the next best player (Durant). He’s good, but he’s not that good.

3) These types of models do not capture the fact that, in the NBA, having the best player is infinitely more valuable than having two or three really good ones. From the model’s perspective, if Lebron James’s PER is 30, his predicted salary is the same as two players who both have a PER of 15. In reality, we know he’s a lot more valuable than the sum of two parts.

4) Players’ predicted values are driven down by some truly horrendous contracts, and some bad circumstances. Amare Stoudemire’s contract, for instance, is so monstrously bad that it drives down everyone else’s predicted salaries. Similarly, though for different individual reasons, so do Kobe Bryant’s and Derrick Rose’s (their performance measures aren’t good because they haven’t played very much). These expensive but poorly performing salaries deflate the value of players at the top of the salary scale.

Onto the fun stuff.

1) The top of the predicted list is what you would expect.

2) The bottom of the value list has many of the same players, probably due to reason #2 above.

3) Houston boasts two of the top three values in Pat Beverley in Chandler Parsons. Not exactly a surprise, but still pleasant to see.

4) Nine out of the eleven players on the Spurs books are punching above their salary weight.

5) Houston Rockets fans might moan about Omer Asik’s and Jeremy Lin’s contracts, but check out Kendrick Perkins’s and Andris Biedrins’s value.

6) Finally, look at Royce White.

About the author: Richard Li is an independent researcher and consultant. He likes numbers and pictures.

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