Earned run average records the amount of runs that a pitcher allows per nine innings pitched. It's a standard we've all referenced since childhood. It's also a very ineffective way to analyze a pitchers performance, both as an assessment tool and as a predictive one. A few reasons why.

ERA has too much white noise. The following can effect an ERA through no fault of a hurler: Good or bad defense, defensive alignments, ballpark, random luck etc.

An easy example. Did Edinson Volquez (3.04 ERA) pitch better than Hisashi Iwakuma (3.52) last year? Nope. Iwakuma had a better WHIP (1.05 to 1.23), had a better K/9 rate (7.74 to 6.54), had a better K/BB ratio (7.33 to 1.97), had a better OPS against (.642 to .674) etc. ERA is a poor indicator of performance. 

Think of the invention of DIPS ERA by Voros McCracken. DIPS, says that a pitcher’s skill level has little to no bearing on whether or not a batted ball becomes a hit. This means the batting average a pitcher allows on balls put in play is random and the outcome of the batted ball is not in the control of the pitcher no matter how talented he is. Therefore measures such as ERA and WHIP, which depend on defense dependent events (a single, double or triple, a ball put in play that results in an error or a ball put in play resulting in an out of some type), are really fairly useless when it comes to predicting the performance of a pitcher. The reason for this is that those measures are tracking randomly occurring events that have nothing to do with a pitcher’s skill level. The effect of DIPS is basically not to “blame” a pitcher for events that are out of his control by focusing on the events which are in his control, namely, Defense Independent events. ERA doesn't do this at all. It just throws everybody in the pool and hopes they don't drown. Not everyone believes in all aspects of DIPS, but the general theory is certainly broadly accepted.

Some other measures, of the many, that are better to use than ERA follow.

xFIP or Expected Fielding Independent Pitching. This mark is recorded the same way as FIP with one variation – it normalizes the pitchers homer rate to what it should have been. FIP only takes into account the events that are directly in the control of the pitcher (K, BB, HR, HBP)

SIERA. Operates within the same world as FIP and xFIP in that it attempts to report on a pitchers performance based upon the events that are in his control. SIERA takes this line of thought even further as it attempts to ascertain why some hurlers or more effective than others. SIERA is park adjusted for ballpark and defense, while focusing on walk/strikeout/ground ball rates. 

ERC or Component ERA. Represents the expected ERA of a pitcher based upon an overall reading of all performance. ERC represents the expected ERA of a pitcher based upon a reading of his entire pitching performance