The signing of Kevin Durant by the Golden State Warriors is an enormous issue for professional basketball, but also has wider lessons for the problems with our institutions.  It helps explain what accounts for disastrous decisions in modern institutions.

For those who are not basketball fans, Kevin Durant is one of the top basketball players in the world.  He used to play on the Oklahoma City Thunder, a title contending team.  Durant became a free agent this summer, allowing him to sign with any other team in the league that had the ability to pay him the top salary his talent demanded.  Each team is subject to a variety of rules as to how much salary they can pay, so not all teams would have been able to pay Durant that salary.

Earlier this week, Durant announced that he would be signing with the Golden State Warriors.  For nonbasketball fans, the Warriors were the defending NBA champions and the dominant team this past year, breaking the record for the best overall record (with a 73-9 season), but losing in the finals in 7 games to the Cleveland Cavaliers.

Durant going to the Golden State Warriors is a disaster for the NBA.  For many people, this means there will be no real competition for the NBA championship.  Even if that is premature, for one of the best players in basketball to join Stephen Curry and the Warriors does violence to the notion of NBA competitiveness.

The natural question to ask when faced with a disaster like this is, who is to blame?  And as usual there are numerous places to turn.  To my mind, it turns on an individual decision and on the rules governing the institution.  The individual, Kevin Durant, made a big mistake.  His decision to join the Warriors will only hurt his reputation and legacy.  If Golden State wins next year, then people will say, of course they did, they had all of the best players, and give Durant little of the credit.  If Golden State loses, Durant looks even worse, as the player who could not even win on a totally stacked team.  Durant’s explanation for his decision looks even worse, saying that he wanted to give himself “the greatest potential for . . . personal growth.”  Yeah, a lot of growth is needed to play on an all star team.

But perhaps Durant can be excused a bit.  He had never won a championship and perhaps a devalued one is better than nothing.

The problem is that the rules gave him this opportunity.  How could this happen?  How could the league rules allow Golden State to have the money to sign Kevin Durant, when they already have many all stars?  And here the culprit is unionization.  The NBA Players Union negotiated a deal where there is a cap on how much an individual player can be paid.  Durant will make the maximum amount, approximately $27 million each of the next two years.  But Durant is worth much, much more.  Studies indicate he is worth at least $50 million to a team, but the rules prevent him from being paid that much.  If he could be paid any amount, Golden State could never sign him.  They would not have enough money to pay him and their other all stars.

Why the cap on payment for star players?  It is in the interest of the bulk of the voting members of the union.  If the stars are paid less than they are worth, the other players will be paid more (since the collective bargaining agreement requires a minimum amount of money to be spent).  Thus, the majority of players both enrich themselves, but at the same time impose a rule that undermines competitiveness between the NBA teams.

In the end, then, one can view the Durant episode in two ways, as is true of many problematic episodes concerning our modern institutions.  It is in part about an unwise decision made by an individual under the rules.  But it is also about a problematic institutional environment that allowed that decision to be made.

Update: Over at National Review, Theodore Kupfer at length makes the same point about maximum contracts.  Here is an excerpt:

That is an utter corruption of the league, for both owners and players. The max-contract rule has produced these unintended, and undesirable, consequences. But the rule itself is from the CBA. The players’ union negotiated this rule on behalf of its general body. It is denying the undeniable skill of its best representatives and placating its rank and file. The owners, on the other hand, may want to avoid devoting most of their resources to such uncertain assets. Injuries lurk in the shadow of every player’s future. But they have sacrificed their holy grail of competitive balance.

The whole piece is worth reading.