Production Efficiency: The Case of Professional Basketball

Sports, like politics and religion, is a subject to be avoided if peace and quiet are to be maximized. Asking a fan "whose team is best" is akin to speculation about whose god is best. Yet an important difference exists: Even if gods have won-lost records, the statistics are not readily available. Sport, however, results in violent disagreements despite well-documented records. Many disputes center on teams with "great potential" somehow wasted or, conversely, those teams with seemingly inferior talent that consistently "play over their heads" and compile excellent records. Does the best team always win? By estimating a production frontier, this paper considers the possibility that a team with the greatest potential may not prevail as league champion due to inefficient use of its available resources. Estimating the production function also allows us to examine the determinants of a team's performance.