It appears that Commissioner David Stern is pushing to ban under-20s from NBA play. And surprise, the player’s union — whose median member is older than 20 — is not screaming about this proposal. But what are the economics? If a team drafts an under-20 player, are there negative external costs placed on the rest of the league? I can see a few scenarios:
1. Drafting younger players makes it harder for bad teams to improve. The lower-ranked teams pick first, but now they are no longer assured of getting real value. The draft becomes more like a true lottery, which hurts the long-run competitive balance of the league. And if teen players do pan out in a few years time, they can become free agents and move to winning teams.
2. Drafting younger players forces teams to spend more on scouting to predict player quality. College ball in essence provides free training and free information.
3. Drafting younger players gives the league as a whole a bad reputation. Furthermore the overall quality of play is lower. Teams invest in future stars and future wins, not caring enough about the bricks they shoot up in the meantime. But hey, other people are watching, or at least we hope so.
4. Forcing young athletes to play in college induces college ball fans (blecch, I hate college basketball) to take greater interest in the NBA.
5. Young phenoms, such as LeBron James, now have more years in the league since they are drafted earlier. This boosts interest and attendance for everybody. If you think that the NBA is superstar-driven, arguably teams do not draft young enough.
6. Perhaps later drafting would produce more stars. Many players rush to the NBA and lose the chance to learn the game. They are overconfident, while a commons problem plagues the drafting teams. Waiting would make almost everyone better off, yet no single party can be induced to wait.
I’ll side with #5. I suspect that Stern and the player’s union are either a) making a simple mistake in the name of misguided moralism, or b) crafting some broader Faustian and Coasian bargain where Stern offers this as one chip.