Sports, in theory, don't matter. Anyone who likes sports has been told this by people who don't like sports. And as much as anyone who writes about sports has tried to tease out how they overflow the field and the stadium into the wider world, the theory is on some fundamental level true.

And yet. People in all variety of NFL gear have been streaming past the office, past the 32 football helmets in Pioneer Court next door, towards the center of the city, which has been largely shut down so that people can file into a lavish auditorium to… watch executives read names off a list, followed by large men putting hats on. The NFL draft has become the Oscars of the sports world (and is about as accurate in picking long-term value).

People get something out of this, despite its abstraction. For many, it's the abstraction itself. Under cover of relative insignificance, it's an arena to challenge our assumptions about the world, away from the world. Like: are people rational? Even when they have unimaginable resources and the high likelihood of being fired if they waste those resources?

The short answer: no, not really.

Awhile back, the prominent University of Chicago economist Richard Thaler and psych/econ professor Cade Massey of Penn's Wharton School (whose career description involves investigating "how behavior departs from rational models") used the NFL draft to investigate this. And for obvious reasons: It's a small, narrowly defined market with incredibly high stakes, and after it we get really good data.

Anyone really has access to that data, and anyone involved with the draft has every reason to deal with that data rationally. And that's the field Thaler and Massey are working in: Begin with the assumption that humans should and do act rationally, and then sit back and observe how they break stuff. And NFL GMs regularly do, it turns out. "Our modest claim in this paper is that the owners and managers of National Football League teams are subject to the same biased judgments found in countless other domains. Furthermore, market forces have not been strong enough to overcome these human failings."

The reasons for this are actually pretty simple. First, here's how NFL teams value picks, according to their model:

The drop in value from the 1st pick to the 10th is roughly 50%, and values fall another 50% from there to the end of the first round. As we report in the following section, compensation costs follow a very similar pattern. Although the curve is not as steep as it used to be, this flattening has slowed over time. In an efficient market the curve’s steepness would imply both that player performance falls sharply at the top of the draft, and that teams are highly skilled in their ability to identify these performance differences.

To a certain extent, player value is higher at the top of the draft; on average, it's highest at the first pick. But: "although both performance and compensation decline with draft order, compensation declines more steeply."

And teams are not necessarily highly skilled at identifying performance differences, at least as compared to other teams. As Nate Silver has written, "the smaller the variation in skill between competitors, the more opportunity for randomness to be a differentiating factor. By this reading, NFL general managers are the victims of their own obsessive pre-draft preparations—their skill level has increased so much that only the effects of chance remain."

So there's an inefficiency somewhere, and Massey and Thaler look for it using surplus value. What they find is not too surprising. If the highest picks are too expensive, and the lowest picks are cheap but much more unpredictable, the surplus value is found where quality is easier to predict but the prices are low (emphasis mine):

Using any performance measure, the players taken at the top of the draft perform better than those taken later. In fact, performance declines steadily throughout the draft. Still, performance does not decline steeply enough to be consistent with the very high prices of top picks. Indeed, we find that the expected surplus to the team declines throughout the first round. The first pick, in fact, has an expected surplus lower than any pick in the second round and is riskier as well….

The magnitude of the market discrepancy we have uncovered is strikingly large. A team blessed with the first pick could, in principle, through a series of trades, swap that pick for four or more picks in the top of the second round, each of which is worth more than the single pick they gave up.

As Thaler has said, the only team to trade down as a matter of habit is the New England Patriots—who, perhaps not coincidentally, have been the best franchise in football for over a decade. Granted, getting one of the two best quarterbacks in football over that time as a sixth-round pick was a lightning strike, but consider that when Tom Brady missed the entire 2008 season, seventh round pick Matt Cassell—a college backup, if a well-regarded one at a good program—went 11-5.

But why is the NFL draft so irrational? Perhaps an aside in an old version of their paper, written in 2005, provides some insight:

To illustrate the basic idea of the paper, consider one high-profile example from the 2004 draft. The San Diego Chargers had the rights to the first pick and used it to select a promising quarterback, Eli Manning. Much was expected of  Eli: he had a very successful collegiate career, and his father (Archie) and older brother (Peyton) were NFL stars…. The New York Giants, picking 4th, were also anxious to draft a quarterback, and it was no secret that they thought Manning was the best prospect in the draft…. They could make a trade with the Chargers in which case the Giants would select Philip Rivers, considered the second-best quarterback in the draft, and then swap players. The price for this “upgrade” was huge: the Giants would have to give up their third-round pick in 2004 (the 65th pick) and their first- and fifth-round picks in 2005. 

Alternatively, the Giants could accept an offer from the Cleveland Browns to move down to the 7th pick, where it was expected that they could select the consensus third best QB in the draft, Ben Roethlisberger.  The Browns were offering their second-round pick (the 37th) in compensation. In summary, Manning was four picks more expensive than Roethlisberger.

The Giants did the irrational thing, trading big value for Eli Manning when they could have given up nothing for Rivers, or gotten a decent pick plus Roethlisberger. And by Pro Football Reference's active approximate value leaders, Rivers turned out to be the best quarterback, with Roethlisberger in ninth and Manning tied for 14th. By other measures, Rivers and Roethlisberger are better, too: higher completion percentages, more yards per attempt, higher touchdown percentages, and lower interception percentages.

But sports are weird. If you were a business, you'd want to be Phillip Rivers or Ben Roethlisberger—the best, in aggregate, over time. But Rivers has never won a Super Bowl. Roethlisberger has won two, but he was awful in his team's win against the Seahawks in 2006 (9-21 for 123 yards, two picks, and no interceptions), and threw as many interceptions as touchdowns in the other two he played in. Fairly or not, franchises are judged on their ability to win championships, not their ability to consistently generate good returns over moderately long periods.

Manning has had some dreadful seasons, about every third year, and is a notoriously inconsistent quarterback. But he also authored two of the greatest drives in Super Bowl history, and in his second Super Bowl, he was masterful: 30-40 for 296 yards, one touchdown, and no interceptions. He won both against a far superior quarterback who was heading two of the greatest teams ever put together (by the Patriots, naturally). He's also been a better playoff quarterback than either Rivers or Roethlisberger, especially in his two Super Bowl–winning years when he threw for a combined 15 touchdowns and two interceptions.

Did the Giants do the wrong thing in selling the farm for the sole draft superstar? Well, yeah, kind of. Given the choice, I suspect most general managers would still prefer to have Roethlisberger and probably Rivers over Eli Manning. Rationally, they're better quarterbacks; certainly none has led the NFL in interceptions three times or run up a career completion percentage under 60 percent.

But Manning, in his own weird way, has been as much a surprise as Tom Brady. The latter is a sixth-round pick who is now the surest of bets on the field, the perfect example of the Patriots' rational strategy; the former was a sure thing in the draft who's been anything but over time, a decent example of market inefficiency. And since Manning's rookie season, they've each won two Super Bowls—both of Manning's victories coming over Brady. It doesn't make any sense, and NFL teams are bound to keep chasing that irrational, unpredictable dream. Much as it's useful to compare sports to the real world, it's still nothing like it.