Microeconomics, in a nutshell, is the study of how people try to maximize their utility given their budget constraints. If you earn $5,000 a month you will try to spend that money in such a way as to make your life as enjoyable as you can. It can be used for a nicer place, a better car, call girls, or even invested taking future happiness into consideration.
Microeconomics always assumes people will act in their own self interest and make decisions that will benefit them the most. But you know what happens when you assume. You make an ass out of Adam Smith and Milton Friedman.
People routinely make decisions that are decidedly not in their own best interest. If I gave you the choice of $100 today or $110 six months from now, almost everyone would take $100 today even though they'd be better off taking $110 six months from now. Conversely, I might blanch at the idea of throwing down $1,000 cash for a new computer, especially if I already have one that's halfway decent, but I might be more willing to buy the new computer if it's simply a promise to pay $1,000 in the future, hence the large appeal and dangers of credit cards.
Of course this is a site for football, not economics, so what do peoples bad economic decisions have to do with the NFL? Simple, teams are run by people and just as people often make decisions that aren't in their best interest, they also make decisions that aren't in their team's best interest and they do it for the same reasons. People aren't computers and will make decisions for no other reason than instant gratification or it feels like the right thing to do.
The French novelist and playwright Henry De Montherlant said it best when you wrote:
Stupidity does not consist in being without ideas - that would be the sweet, blissful stupidity of animals, mollusks, and gods. Human stupidity consists in having lost of ideas, but stupid ones.
More after the jump...
Nowhere is this more on display than in free agency and trades. History tells us that signing or trading for veteran players then locking them into a large contract based on past performance generally doesn't pan out. And the fact that it does pan out on occasion only makes the problem worse.
Drew Brees was a great signing for the Saints but what about the trade and signing of Kevin Kolb (Cardinals), Matt Cassel (Chiefs), and Carson Palmer (Raiders)? Not only did those teams sign those quarterbacks to deals way above what their performance on the field would dictate, but they gave up future players in the form of draft picks (I'm not even going to pretend to know what the Raiders were thinking).
In fact, all any fan has to do to see just how effective it is to build a team through free agency and trades is look at the Washington Redskins. Team owner Daniel Snyder, who has a net worth of $1.1 billion, has been using large chunks of his cap space and trading away picks for veteran players for years and all it's gotten him is 3 winning seasons in 13 years. You know things are bad when even the Bengals have been to the playoffs more times this century than you.
So if everyone knows the large number of high priced free agents that have not met expectations, why do teams keep trying to do it? It's because people generally feel
their they're smarter than everyone around them. They're not going to make a mistake like signing Albert Haynesworth to $100 million contract because they know which players will continue to perform and which ones won't. They would never have traded 2 first round picks for Carson Palmer. Actually, I think everyone but the Raiders knew not to do that.
Then again, no one really thought Haynesworth would flame out as horribly as he did. One SI writer said of the deal, "Unlike most of his free-agent predecessors Haynesworth is in the prime of his career and arguably the best defensive tackle in football."
Sometimes the situation also dictates how a player will perform. Haynesworth wasn't a bust signing because he forgot how to play football. When he was playing for the Titans he played in a 4-3 defense on a line that also featured Kyle Vanden Bosch and Jevon Kearse. In Washington he ended up playing in a 3-4 defense and he didn't have the same caliber of players around him. He was unhappy and it completely affected his approach to the game.
Conversely Carlos Rogers never really lived up to his draft expectations in Washington but when he signed with the 49ers he had his best season ever with 6 interceptions and was named to the Pro Bowl. Being in the right situation is almost as important as having the talent. Just ask the mercurial Randy Moss.
But while NFL teams will occasionally overspend on a trade or free agent, they still aren't quite as bad as MLB. That's because NFL teams have to live on a fixed budget while some MLB teams are like a millionaire on a shopping spree buying whatever they want.
So while the Yankees are able to field a competitive team by throwing $200 million on a roster filled with whatever free agent player catches their fancy, the Devil Rays are able to field a competitive team by making the most of their $65 million payroll by being judicious in their free agent signings and building through the draft. It seems like there should be a lesson in
their there somewhere.