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The 2011 NBA Draft and the Economics of High School Eligibility

In a few hours, the 2011 NBA Draft begins. To be eligible, players must be 19 and one year removed from high school. But it wasn’t always this way. In fact, high school players were allowed in the draft through 2005; it was only beginning in the 2006 draft that the new eligibility rules took place. At the time, advocates for the change argued that high school students are often physically and emotionally unready for the NBA. This argument was seemingly borne out by tale after woeful tale of a high school phenomenon who made it big just a little too quickly and crashed–either by making it to the NBA and disappointing, or worse, by failing to make the draft, losing college eligibility, and turning bright prospects into frustrated what-ifs. But are these sob stories the norm, or just the exception?

According to a 2004 paper by Vermont Law School’s Michael McCann, they are very much the exception. McCann examined the fate of high school draftees and found that “from 1995 to 2003, over 80 percent of drafted high school players became”–or were on track to become–“multi-millionaires by the age of 21.” In other words, from an economic perspective, allowing high school players into the draft is a no-brainer. This is especially true because of the short window NBA players have to play in their prime: Generally, by the time players are 31, McCann notes, it is thought that their “glory days are behind them.” Young age, then, is a scarce and precious attribute for NBA players, so they have every incentive to enter the league sooner—both to increase their overall career earnings and to benefit from being relatively young when they negotiate a new contract. Over the course of a career, entrance into the NBA four years earlier can translate into perhaps $100 million more in career earnings. And, while there have been some highly-publicized disappointments among high school stars, McCann finds that, overall, “while high school draft picks typically struggle during their rookie season, they tend to excel two or three years later.”

To be sure, there are many other factors at play in this controversy besides mere earning potential. But from the particular viewpoint of basketball economics, it seems that if the NBA ever decides to reverse its stance and allow high school players back in the draft, the young stars will surely face some risk—but possibly in exchange for quite a reward.