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Free Agent Compensation
Over the last few weeks, we’ve heard a lot of talk about free agent compensation draft picks, especially as they pertain to Raul Ibanez. The Mariners (correctly) decided that they wouldn’t take less than two good prospects for him at the deadline, since they’ll receive two high compensation picks if he leaves as a free agent this winter. They could get two good prospects by not trading him, so there’s no reason to trade him for less than that. By in large, the media has caught on, and we rarely see any more references to a player being traded or “lost for nothing” during the winter. Most people get it - free agent compensation picks are valuable.
However, they don’t make any sense. Seriously, when you stop and think about how the system works and the results it provides, everyone loses. They’re bad for everyone, and it’s pretty remarkable that they still exist. Let’s look at what they’re supposed to do and what they actually do.
Goal #1: Promote parity by allowing teams to recoup talent lost when big market teams steal their players
This clearly doesn’t happen. Go through the list of who gets compensation picks every year, and it’s not the Marlins, Rays, and Royals. It’s the Yankees, Red Sox, and Dodgers, plus other similar big payroll teams. There’s a couple of reasons for this:
1. Type A and Type B free agents are generally good players. Good players make a lot of money, so they are more likely to be on teams with big payrolls. When their contracts expire and they sign with a new team, they’re generally just going from one big payroll team to another, and so the big boys who certainly don’t need extra picks for competitive balance reasons end up with an advantage in the draft anyway.
2. The system requires you to take a financial risk in order to get the draft pick. Teams on strict budgets can’t always afford to take the risk that a player will accept arbitration and eat up a big chunk of their payroll, but it’s just not a big deal to the Yankees if Damaso Marte makes a couple million more than they were counting on. The big payroll teams are more able to take the risk, and thus, more likely to get the reward.
Goal #2: Provide a disincentive for teams to sign free agents away from other clubs, making it more likely for players to stay with their original franchise.
Again, it clearly doesn’t work this way. If you lose a Type A free agent (and you offer them arbitration), you get two high draft picks. If you sign a Type A free agent that another team had offered arbitration to, you lose one high draft pick. In many cases, you actually get rewarded for letting your player leave and bringing in someone else’s exact equal. For instance, if the Mariners were to have to decide between re-signing Raul Ibanez this winter or offering the exact same contract to say, Pat Burrell, then they’d gain an extra pick from signing Burrell and letting Ibanez leave. In fact, we’ve seen teams essentially swap free agents at the same position and both teams have come out with +1 draft picks - the Orioles and Rangers did this in 1994 with Rafael Palmeiro and Will Clark.
Those are basically the two overriding goals of free agent compensation, at least in theory. The current system fails spectacularly at both, and just for good measure, has even more flaws as a byproduct of the system.
Some players are less marketable, and have to sign for less money, after being classified as Type A free agents when they shouldn’t really have been. This is especially true of relief pitchers - rack up the saves and you’ll climb the Elias rankings pretty quickly, even if you’re not particularly good. Most teams have figured out that surrendering a draft pick to sign a mediocre reliever who just happened to notch a lot of 9th inning finishes isn’t a good idea, and they’ll shy away from signing undeserving Type A players who get offered arbitration. For a subset of major league players, they’d be better off getting a worse ranking in the Elias system, because if they become Type As, it will cost them money.
It also, as we saw with Ibanez, keeps non-contending teams from trading quality players at the deadline, making the stretch run and post-season less interesting. Instead of playing for a winning team and potentially getting to play in October, Ibanez has to play out the string for a horrible team because it was in the best interests of the organization not to trade him because they’ll get more for him if he leaves as a free agent.
Overall, it’s hard to find a redeeming quality about the system as currently structured. It doesn’t help small market teams - it does just the opposite, in fact. It doesn’t convince teams to keep their home grown stars, but again, rewards a team for letting their guys walk and replacing them with an equal player from another franchise. It dissuades teams from making deadline trades to help contenders strengthen their clubs, and in some cases, it costs players a chance at a better contract.
If this system does anything right, I have yet to find it. It fails on so many levels and helps no one, but because it has to be collectively bargained (due to how it affects player salaries, which is a big union issue), it’s unlikely to go away anytime soon. So we’re stuck with a failing system that does the opposite of what it’s supposed to do and adds a few lemons on top of that.
Owners, Players Union, I know this isn’t a sexy issue, but when you guys sit down to renegotiate the CBA, can you do us a favor and just rip up the current free agent compensation system? Thanks.
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The Mariners wouldn’t necessarily have to get back two good prospects for Ibanez, would they? Wouldn’t it also make sense for them to get two players of lesser quality who are closer to the majors than the draft picks presumably would be?
Do you think free agent compensation should be dropped or changed? Would there be a better way to do it?
I’ll make two really weak points: 1. It’s a failed system, but any system with rules can give smart teams the opportunity to take advantage of dumb teams, regardless of money. 2. The system helps undeserving type A relief pitchers an advantage when the do accept arbitration, giving more money on a one year basis than they are worth. If they really think they’ll get two+ years, which they’d have to be real good as teams are probably realizing multi-year relief deals are usually bad, they can take that chance and get screwed by the system, but again, how many relief pitchers are there who are actually worth multi-year deals but won’t be able to find a team to sign them?
Interesting post, Dave… I never looked at it this way.
Does this mean you support a Pat Burrell signing?
I disagree - Free Agent Compensation does benefit the smaller market teams by encouraging them to develop young talent, and aids them when they cannot afford to re-sign their players. When teams like Boston/New York are spending excess dollars on marginal wins in the free agent market (late 90’s/early 00’s Yankees, anyone) to improve their team (often a necessity, since value is not linear), they are punished as a result. Yes, teams with large payrolls AND smart management come out ahead - but baseball is the one sport where capitalism still has a pretty good grasp on reality. Should we really take it away in favor of a communist system like the NBA?
Also, RE: Ibanez:
Trading him for two good prospects alone doesn’t necessarily make sense. Getting prospects who are closer to the majors and have a lower beta might make sense for many organizations, and it also saves millions of dollars in salary.
Free agency and the draft are both screwed. I’m not counting on baseball to fix these issues anytime soon.
Might as well take advantage of the system (get draft picks for Ibanez, pay over slot for good prospects) while you can.
How is free agent compensation capitalist? Wouldn’t all teams be free to spend as they will, when they want, on the commodities of their choice, without having to factor in external costs imposed from without by a unconcerned agency?
Great post. Interesting perspective.
Do you mind if I post this on another message board to bring up discussion about this on that message board?
baseball is the one sport where capitalism still has a pretty good grasp on reality. Should we really take it away in favor of a communist system like the NBA?
Er, MLB and the NBA both have guaranteed contracts and revenue sharing (along with municipalities building multi-million dollar arenas for teams at taxpayer expense). I do not think these words “capitalist” and “communist” mean what you think they mean in the context of a professional sports league. Care to elaborate?
“I disagree - Free Agent Compensation does benefit the smaller market teams by encouraging them to develop young talent…”
Do they need encouragement? If they do, they should probably pack it in.
“…and aids them when they cannot afford to re-sign their players.”
Yes, that was supposed to be the idea. But Dave’s post was refuting that.
Draft picks don’t get awarded in a vacuum. Say you are Small Team and you lose Billie Hero to Big Team - you get two picks, sure. And BT loses one. But BT has tons of Type-A guys… and they are getting two picks every time, too.
So what good does a system do if it rewards Small Team two extra picks that year, but gives Big Team six? Isn’t Sally worse off than she was without the system?
It’s more complex than that, but you get the idea.
“When teams like Boston/New York are spending excess dollars on marginal wins in the free agent market (late 90’s/early 00’s Yankees, anyone) to improve their team (often a necessity, since value is not linear), they are punished as a result.”
Sure, but punished with one step back, two steps forward.
How else do you explain the big teams getting both the big name free agents AND the compensation picks consistently?
The free agent compensation system never made a whole lot of sense. The classification of free agents into Types, which Marvin Miller stated he didn’t negotiate because he didn’t care about it (and thought the more absurd Elias’s system, the sooner everyone would drop the whole thing), is nonsensical. Draft picks themselves are rather stupidly priced (what exactly is the leverage a college graduate who doesn’t play another sport have? The Atlantic League?).
The sandwich round also makes the upper second round picks less valuable.
To illustrate some of the points in Dave’s post, consider the 2005 draft. The Red Sox received the 23rd and 26th picks and lost the 28th pick in the first round. In the sandwich round they picked up the 42nd, 45th and 47th picks. In the 2nd round, they picked up the 57th pick and lost the 76th. In the third round they forfeited the 108th pick.
The free agents lost: Pedro Martinez, Orlando Cabrera, Derek Lowe. Free agents signed: Edgar Renteria, David Wells, and Matt Clement.
Now the free agents signed by Boston all turned out to be poor replacements for the players lost. By doing this swapping, however, they saved a ton of money and netted 3 extra picks.
The draft picks selected by Boston (in order): Jacoby Ellsbury, Craig Hansen, Clay Buchholz, Jed Lowrie, Michael Bowden, and Jonathan Egan.
Incidently the players picked with the picks Boston gave up: Colby Rasmus (nice one, St. Louis), Joshua Wilson, and Michael Bellek
There’s a reason the Red Sox are where they are and the Mariners are where they are.
I say make compensation one draft pick for one free agent. No sandwich round. Compensation picks start with no. 46, halfway through the 2nd round. This benefits the have-nots. A little compensation is fair. There is no way, however, the compensation should be worth more than the free agent, and that frankly is often the case under today’s rules.
A unique angle with strong reasoning and clear points. Well done, Dave.
Dave…good post. What is your solution to the problem?
I always got the impression that MLBPA was against free agent compensation b/c it would water down the market for that free agent’s services. Is this not the case?
Furthermore, couldn’t that notion of restricting the labor market/controlling labor costs be another reason the owners would want a compensation system in place?
I also think this system is not in the players’ interest as teams are competing less over free agent talent, so you’d think the players union would be all over shutting this system down.
Good article. I never realized the disparity between teams, but having it put down like this, it makes perfect sense.
Also, the expression is “by and large.” Its a sailing term refering to sailing by the wind and sailing large, which pretty much encompasses the ways square-rigged ship can sail.
Currently, the good ship Mariner is sailing neither by or large, but is cut adrift with two lee shores.
> Currently, the good ship Mariner is sailing neither by or large, but is cut adrift with two lee shores.
That would be neither/nor, not neither/or.
I’ll add my voice to those wondering what could be done to remedy or replace this system which is clearly not working the way it was intended. Not having the time to commit to such a frivolous intellectual exercise (car payments and house payments and utilities, oh my!), I’d be interested to hear what you have to say on the matter, Dave.
Dave’s getting married, which I think trumps your car payments and house payments and utilities.
> Dave’s getting married, which I think trumps your car payments and house payments and utilities.
Indeed it does. Goes to show how well I pay attention to what’s really going on around here. Having just celebrated my first anniversary, I can still remember the build up to the big event and I can’t even comprehend how he could have mustered the time or the concentration necessary to post something so insightful so near the day of the wedding. A better man than I (or maybe just a more dedicated baseball nut).
Just so’s this isn’t completely off topic… um… baseball… and stuff. Related to baseball that is. Yeah.
When I read this post, I took it to mean the best solution would be to end all mandated compensation and simply let the market determine compensation (e.g. it might then be in a team’s best interest to “get something” for a free agent to be).
Generally, non-market forces, often applied by governments, acting on markets sub-optimize those markets and create unintended consequences.
When is the Big Day for Dave?
The mail is terrible these days - I’m sure my invitation will show up any time now.
#21. Yes, but if you look at the necessary assumptions for a free market to work, one is that there is perfect competition. Or the equality doctrine. Obviously, there is no equality in baseball. A cap would ensure equality and allow small market teams the ability to compete in a perfectly competitive market. However, since the big teams won’t go for that, we are left with this flawed government solution.
This thought of fixing the equality in the system was the guiding principle behind Marxism (note different than Communism or Socialism). However, it disregards individual’s right to property.
It also (almost) makes sense for teams to sign big-name people for one year contracts and letting them walk. Lose one pick, get two more next year, and a very servicable player for a year. It would almost make over-paying that one year deal more attractive as you are essentially buying an extra high round draft pick.
A cap would ensure equality and allow small market teams the ability to compete in a perfectly competitive market.
No it would not.
A couple possible solutions:
1) Tie FA compensation to the quality of the team, rather than the quality of the player. For example, a first-place team losing a FA would receive a single compensation pick, perhaps a second-round pick or one in a second supplemental round between the normal second and third rounds. On the other hand, a last-place team would receive the customary first-rounder and supplemental picks. This does away with the silly Elias rankings and addresses, at least partially, Dave’s point that the value of some players is unfairly deflated as they hit FA.
2) Allow the trading of draft picks. This makes sense on many levels, especially with the ridiculous MLB slotting “suggestions” that cause some teams to make selections based less on the quality of the player and more on their bonus demands.
Well, to help out Dave with his impending nuptuals, I’ll propose a replacment system. First, the reason to have a draft and a compensation system instead of going pure free market is to prevent the league(s) from diverging into two strata - the farm teams and the big spenders. If it was a pure free market system, we would end up with a handful of teams per league, mostly in New York and Southern California, but occasionally in some mad billionaire’s home town, that signed all the best players, and the rest of the teams would become farm clubs feeding new talent into the FA mill.
The plan:
Extend the draft to cover international players as well. Set official signing bonuses for each draft slot (teams aren’t allowed to deviate above or below). If a player signs on with a team, he is agreeing to “work” a number of years for the ML club at a discount in exchange for the team’s investment in his development through the minor leagues.
Ditch the arbitration system. Instead, salary during the club control period is based purely on service time. The first year on the 40-man is at $250k/yr, The second is at $500k, the third is at $1M, and the fouth is at $2M. After four years, the player is a FA, unless the team releases him earlier.
If a player isn’t on the 40-man any time after his 23rd birthday, he may declare himself a FA. If the team declines to pay him the scale for his upcoming year of service, they must release him.
If, after four years of ML service, a player becomes a FA and is signed by another team, the team that loses him receives a compensation sandwich pick between the first and second rounds (the team that signs him does not lose a pick). This only applies the very first time the player signs a FA contract. It’s only meant to reward the team that developed the player. It also only applies to a player with four years of service time, so the team will have been paying him $2M/year.
#5 -
Should we really take it away in favor of a communist system like the NBA?
I’m curious to know why you think the NBA’s system is communist… if anything, it’s far more capitalist in nature than MLB’s.
#25 -
A cap would ensure equality and allow small market teams the ability to compete in a perfectly competitive market.
No it would not.
I agree, but it’d be damn funny watching the Yanks scramble to get under the cap…
#26 -
2) Allow the trading of draft picks. This makes sense on many levels, especially with the ridiculous MLB slotting “suggestions” that cause some teams to make selections based less on the quality of the player and more on their bonus demands.
I’ve talked about this before, and as the system is right now, that simply wouldn’t work. You’d have teams like the Pirates, Rays, and Royals simply selling their high draft picks for pennies on the dollar to teams like the Yankees, Red Sox, and Mets because they don’t want to spend the money on the higher picks. Unless a salary cap is in place, which as Derek said and I agree with won’t work as things stand, the ability to trade picks is simply a horrible idea.
A cap would ensure equality and allow small market teams the ability to compete in a perfectly competitive market. However, since the big teams won’t go for that, we are left with this flawed government solution.
Small teams can compete *now*. Draft better. Manage your roster more intelligently. Sign young players to reasonable deals before they gain leverage. Use FA for 2 purposes - inexpensive flyers at the back of your roster, and a big-ticket position player once or twice a decade to build around. Don’t spend big FA money on pitchers. Rinse and repeat.
DMZ you say it would not. I am curious why? No is not a good answer. If everyone can only spend five dollars, the market is then perfectly competitive. If one can spend 2 dollars and one can spend 5 it is no longer perfectly competitive. Does that mean every team will compete every year? No, of course not! You must spend your money (the same amount that everyone else has) better then everyone else.
Bmore Dan, I was using compete to mean in the market, not on the field. A small market team with a small payroll cannot compete with a large market team with a much larger payroll in the market.
Uh, for WHO?
You’re being rather one sided in your analysis.
Absolutely wrong.
Think about it. Remember who’s been the most successful–teams with home grown talent. How expensive is home grown talent?
A small market team with a small payroll cannot compete with a large market team with a much larger payroll in the market.
Every year this is proven inaccurate and untrue.
If I remember correctly, scrapping the free agent compensation system was seriously discussed during the last round of CBA negotiations. The compensation system stayed, but the number of players subject to the compensation was reduced. Under the old system, the top 60% of players qualified for compensation (top 30% = Type A, next 20% = Type B, next 10% = Type C). Under the new CBA, only the top 40% qualify for compensation (top 20% = Type A, next 20% = Type B, Type C was eliminated). As part of the change, teams no longer lost their own draft pick for signing Type B free agents.
The union has a strong interest in keeping some sort of draft pick compensation tied to free agency because, if I am not mistaken, it is the only part of the CBA that relates directly to the Rule 4 amateur draft. If the draft pick compensation system is eliminated, the Rule 4 draft would no longer be a subject of collective bargaining, and the owners could implement changes without the union’s approval. Thus, the union has an interest in keeping some control over the Rule 4 draft.
#30
There is a reason why being shrewd is an asset. Nothing in life is fair. It isn’t fair that some front offices are smarter than the M’s. Should they be punished as well? Your logic (and your analogy) doesn’t hold up.
I’ll echo what’s already been said, and add this:
Baseball currently has any number of teams that do little but leech off of revenue sharing. They spend much less on payroll than they should and pocket the rest.
If you capped payroll tomorrow at $60m, they wouldn’t spend $60m. They wouldn’t spend $50m.
Seriously, just spend some time thinking the effects of this stuff through given baseball’s current makeup, rule set, and the motivations of the different actors, and you’ll see how it all spirals out of control quickly.
Seattle used to be a small team.
Hm. Wonder what happened?
You’d have teams like the Pirates, Rays, and Royals simply selling their high draft picks for pennies on the dollar to teams like the Yankees, Red Sox, and Mets because they don’t want to spend the money on the higher picks.
To be clear, I’m advocating trading picks, not selling them. And look, that’s not an ideal solution either, but if MLB is going to attempt to assign a specific value to those picks, then the team ought to choose how it will extract that value, right?
A floor would do a lot more for competitive balance than a cap ever would. That way you at least force the teams that suck up all the revenue sharing to spend some that money on the on-field product.
EDIT: Damn, DMZ beat me to it.
Also, I wonder why some sports fans are so adamant on adopting such anti-capitalistic mechanisms as salary caps? It’s seems like it stems from an anti-labor viewpoint that seeks to depress wages (which is an inherently non-free market perspective).
Seattle used to be a small team.
Hm. Wonder what happened?
Yeah, I meant small *market* teams. Small market/big market is such a ludicrous delineation anyway, but… let’s not get too far afield here.
— “A small market team with a small payroll cannot compete with a large market team with a much larger payroll in the market.”
Oh, you mean like the Rockies last year?
NL West city populations as of the 2000 census:
Denver: 554,636 (Metro 2,109,282)
San Francisco 776,733 (1,731,183)
San Diego 1,223,400 (Metro 2,813,833)
Phoenix: 1,321,045 (Metro 3,251,876)
Los Angeles 3,694,820 (Metro 9,519,338)
NL West 2007 Payrolls:
Arizona: 52,067,546
Colorado: 54,424,000
San Diego: 58,235,567
San Francisco: 90,469,056
Los Angeles: 108,704,524
I’m OK with getting rid of free agent compensation as long as they change the rules AFTER we get our picks for Ibanez.
I would never support a salary cap unless there is a salary basement. There are still a few teams out there that really don’t care about winning.
NO, I am not saying the Mariners are one of them. They just blow at talent evaluation.
Salary floors make things worse. Think about it for a minute and you’ll start to see why.
There are still a few teams out there that really don’t care about winning.
You know, I just can’t believe that’s true. There isn’t a single owner or GM in baseball who doesn’t want to be in the World Series. They just refuse to spend money when and where they should to get there. It’s a lack of a plan and ability to execute it rather than a lack of desire. That a system exists to ensure at least a modicum of profitability in the absence of on-field success does make it appear that way, though.
As the league’s financial picture continues to get stronger and stronger, by the next CBA (after the 2011 season, I think?) claims of hardship by some owners will fall on deaf ears.
DMZ - I don’t think a floor would make things any worse than they are now, and I still think that it would do more for competitive balance than a cap.
But I will guess at what you’re speaking to. The big problem would be that you can’t make anyone take your money. So you could put the best offer out there for top FA A, but A wants to win so he takes a bit less money to go to Boston, NY, LA, etc. Now you’re left with having to spend $15M more to hit the floor and no one who is worthy of such money, so you throw $15M at some crappy FA like Silva. Anyway, you’re left with guys who make too much money (which is a huge problem now anyway IMO) and teams who are forced to spend money that they don’t want to and shouldn’t have to (which is the new problem). I agree it would be an issue.
I still think that the general idea has some merit. You just have to tweak it so that maybe they don’t have a hard floor, but rather some percentage of revenue that they have to spend on salary/player development (the on-field product) and if they don’t hit that percentage then they have to give back some of the revenue sharing money. Not only do you punish the leeches but maybe some fringe teams who are really trying get some benefits.
Salary floors make things worse. Think about it for a minute and you’ll start to see why.
To put it another way: one of the reasons Bavasi spent 48 million on Carlos Silva was that he was told he had 48 million to spend on Carlos Silva.
[cough]GlassPohlad[cough]
you know, we still haven’t decided what to get Dave & Amy … candlesticks always make a nice gift.
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You’re on the right track. Middle-tier free agents would be grossly overvalued, much more so than now. And mediocre young players not yet FA-eligible would be handed contracts not based on merit or ability but because the money has to be spent somewhere. And let’s not even start with how screwed up arbitration could become.
I’m personally in favor of having fewer rules, not more. Create a structure where intelligence, savvy and any of several strategies can be employed to create a winning team regardless of payroll.
Yeah, instead of a salary floor, how about a mandatory sale clause if the team fails to post a winning record for five straight years? Or posts a sub-.450 record for three straight years? Adjust the numbers to make it work, but the idea is if the team is uncompetitive for an extended time, the league commandeers the team and auctions it off. Add some sort of home-town discount for local owners to encourage teams to stay put, but otherwise give the league an ability to cull out bad ownership.
To be clear, I’m advocating trading picks, not selling them. And look, that’s not an ideal solution either, but if MLB is going to attempt to assign a specific value to those picks, then the team ought to choose how it will extract that value, right?
I realize that’s what you were advocating… I was just saying what *would* happen. Yeah, you’d have trades and such, but you’d also have my scenario playing out a ton, too, unfortunately.
If a salary floor isn’t the answer, and it’s not, then perhaps revenue sharing payments should be capped by a team’s payroll.
Now that’s a suggestion I could get behind.
There isn’t a single owner or GM in baseball who doesn’t want to be in the World Series. They just refuse to spend money when and where they should to get there. It’s a lack of a plan and ability to execute it rather than a lack of desire.
That’s partly true. There are teams where the organization wants to win — take the Marlins, for instance — and the ownership would love to be in the World Series because it means a lot of money for them. But the ownership group would rather suck and make a ton of money than chance spending more to make more.
That’s a lack of desire to win.
A salary floor is an awful, awful idea. Don’t just think in terms of immediate effects — what happens with two, three years of that immediate effect?
It’s a lazy thought. Reforms to make baseball more competitive should be simple in mechanism, with an eye towards as few as possible, allowing teams to make their own path to success.
Would it make more sense to revamp the revenue sharing system to stop creating situations where teams can simply leech a nice profit off of revenue sharing without actually trying very hard to field a winning team?
And if so, would it be practical to do?
Yes. I actually came up with one of them, and others have offered equitable solutions as well.
It really is a beautiful thing that in baseball, a team with a $40MM payroll can be more competitive, currently and projected over the next few years, than one with a $140MM payroll. No other major professional sport can make that claim and baseball should be loath to change that.
Revenue sharing should have been a temporary, declining-scale system ($X in year 1, $X - 30% in year 2, etc.) from the start, and with much smaller disparities, i.e. payments, between “small” and “large” market teams. And it’s debatable if it’s necessary to have at all at this point.
As long as we are on the topic, isn’t it about time to allow teams to trade draft picks? Wouldn’t the Mariners accept 2 future 1st rounders for Ibanez, without prospects? Wouldn’t Washington rather trade down their top draft pick, because they don’t want to pay top dollar?
The competitive argument is bullshit. You can’t force a team to be good by making up silly rules. A team is either well-managed or not. A team is either rich, or not. You wouldn’t expect Derby County to win the Premiership but once in 100 years, and that’s the way things should be.
Amen!
Can I have a witness, brethren!
you know, we still haven’t decided what to get Dave & Amy … candlesticks always make a nice gift.
Well, they must be registered somewhere. I’m assuming it’s not the M’s team store.
I’m not an economist, so I don’t have any good answers for baseball’s current salary ‘problem’. As for the draft, I would be in favor of including international players . Not that I’m not in favor of guys getting what they can from teams, but I believe it’d cut back on some of the more nefarious activities of some scouts and execs in Central and South America.
Just for the record, the only thing I said was that a floor would be better than a cap. I agree that there would be problems if a hard cap was put into effect. I do think that the idea of making teams spend money on putting better players on the field is a good one, and if that involves holding back some revenue sharing coin and giving it to teams that spend more, fine.
But I’m in squarely in the camp of not overhauling anything. The system is surely a bit screwy, but I don’t think I’d change much about it. The smart teams know how to work it. The dumb teams get screwed. The one thing I would change is I’d like the M’s to be one of the smart teams as opposed to one of the dumb ones. Hopefully that changes this year.
The competitive argument is bullshit. You can’t force a team to be good by making up silly rules. A team is either well-managed or not. A team is either rich, or not. You wouldn’t expect Derby County to win the Premiership but once in 100 years, and that’s the way things should be.
On the flipside of that is the NFL. Look at the parity that’s emerged there in the last decade, the Patriots’ run of excellence aside. There’s a couple of perennial contenders (Pats, Colts, Seahawks), and a couple of perennial losers (Texans, Cardinals), but other than that the rest of the league is an absolute slugging match year in and year out as teams jockey with each other for supremacy. We’ve literally seen teams win a single game one year and then make the playoffs the next.
It CAN be done if executed correctly. However, when the NFL implemented it’s salary cap and current CBA structure in ‘92, the environment in the league was ripe for it. If MLB wanted to institute a cap, they should have done it as part of solving the ‘94 strike IMO. With the way things have gotten since, creating a cap-based system would be nightmarish at best.
I do think that the idea of making teams spend money on putting better players on the field is a good one, and if that involves holding back some revenue sharing coin and giving it to teams that spend more, fine.
As long as “spend money” means investing in their baseball operations - however they see fit - then the concept of RS can work and an equitable split can be found. If “spend money” means paying major league players more salary, then it’s an awful system that will have disastrous effects for years, as Derek alluded to.
67 - Yeah absolutely. Player development, scouting, amateur signing bonuses, etc. is fine with me. If they want it to be in the form of major league salary, that’s fine too. Taking their revenue sharing money and not investing it in the team is what gets me.
You all miss the point. You all are arguing 101 ECON. You need to look beyond it. In a basic Supply and Demand Curve there are roughly 16 assumptions made such as perfect competition, perfect knowledge, perfect mobility along with a host of others.
In a baseball market (as in the real world market) these assumptions aren’t met. Some of those assumptions being made (perfect competition, knowledge, mobility) are part of the equality doctrine. Certain Economist’s such as Marx’s argued that a free market needed equality (since it was one of the main assumptions made behind the model) to operate perfectly. Otherwise, there are major distortions to the market. The answer is the destruction of capital ala the third stage of economic development per Marx (note different then communism, which wasn’t a structural advancement, it was advanced by the vanguard of the revolution; the government).
How this is applied to salary cap’s is that while it doesn’t destroy capital, it at least equalizes it. This allows for the market to be MORE NATURAL. Not less natural.
As to the points that small market teams are competitive, you are right. However, ceteris paribus, a team with more resources will do better then a team with less resources. That is kinda the point, if you equalized everyone’s capital it would allow the smart teams even more of an advantge. A small market team has built-in market disadvantages. With a salary cap, you eliminate the disadvantages allowing the smartest (and luckiest) teams to win.
Two things:
1. No matter how many (or few) rules and regulations you make, in the end the smart teams that make prudent decisions will come out on top and the ones that don’t have a clue will come out on the bottom.
2. Sometimes having 1-3 really, really, good teams can do just as much for a league as having competitive balance can do. Some teams may suffer, but overall the league would attract more fans than it might usually. For example, look what the Bulls did for the NBA in the 1990’s.
A small market team has built-in market disadvantages. With a salary cap, you eliminate the disadvantages allowing the smartest (and luckiest) teams to win.
What? How does that work? You’re tying together a cause and effect that have no relationship. A salary cap does not suddenly make small-market teams more intelligent. It just creates another artificial restraint on teams’ maneuverability.
A smart team watches with glee as the Yankees spend $16MM a year on 36-year-old free agent pitchers while it quietly stockpiles youthful arms that could provide 90% of the value at less than 5% of the cost.
re: 35
“The union has a strong interest in keeping some sort of draft pick compensation tied to free agency because, if I am not mistaken, it is the only part of the CBA that relates directly to the Rule 4 amateur draft. If the draft pick compensation system is eliminated, the Rule 4 draft would no longer be a subject of collective bargaining, and the owners could implement changes without the union’s approval. Thus, the union has an interest in keeping some control over the Rule 4 draft.”
Couldn’t that change, though? Could MLBPA walk into the next round of negotiations and say something like, “Look, this whole FA compensation thing isn’t working out for anyone involved. We only care about it because it lets us negotiate on the Rule 4 draft. So let’s do away with that compensation and just negotiate an article on the draft.” Don’t know if if the draft is part of MLB’s Anti-Trust exemption, but I would imagine if MLB flatly refused to bargain the Rule 4 draft, they would be subject to an unfair labor practice filing.
A salary cap does not equalize capital. If you’re going to lecture everyone on how simplistic their thinking is, you might want to spend a little more time forming your thoughts.
This is like arguing that limiting the maximum cost of a car at $100,000 will allow everyone to drive better cars.
It won’t.
Teams that don’t have $100m to spend won’t spend $100m if that’s the cap.
Teams that make $20m a year putting a $30m payroll on the field and sucking at the teet of revenue sharing won’t field a $100m team either.
And so on, and so on.
The whole thing about whether a cap is a good idea or not is sort of pointless since the chances of the players accepting a salary cap are pretty close to nothing.
Even with a cap, the teams with the desire and the brains to win will always come out on top.
Well, a big reason for that is that enforced pay gap between young and old players. There are around 150 starting pitchers in the league, and Felix is better than all but a handfull of them, and yet is one of the lowest paid. Is that ultimately a good thing?
Also, far fewer teams with $40M payrolls are playoff contenders than teams with $100M+. The disparity in resources between the Yankees and the Royals is not a good thing for baseball, even if the Yankees don’t always make the playoffs.
75 -
Yes, it is a good thing, from a team-building perspective. That’s the incentive for organizations to spend millions of dollars each year drafting and developing a system full of players.
Free agency is just one of several ways for an organization to import players, and if the trend of signing top young, pre-arb players to long-term deals continues, free agency won’t be nearly as attractive an option as it is now. The $4MM to 5MM/win on the open market could jump 50% as less impact talent becomes available.
Fewer rules, fewer restraints, spend as much or as little as you wish - just build the best team you can with your unique resources and limitations. It’s not a perfect system by a longshot, but with more organizations getting smarter and smarter each year, it is proving to be a reasonably fair one.
#9, #28,
Salary caps. Mandated contracts for rookie salaries.
DMZ you are committing a fallacy in your thinking. You are right when you say a cap will not equalize capital, some teams will probably still spend more then others. However, they will be much closer in terms of capital. Just because the solution isn’t perfect (yet better then the current system) doesn’t mean you should dismiss it. Thats like saying someone created a way to reduce crime by 10 % but you claim thousands of people will still be victimized therefore we should maintain the status quo. So with the cap. We may not be able to equalize capital perfectly, but we can make it a lot better then the status quo. Perhaps there are valid reasons not to have a cap. I have yet to hear one.
That’s the problem Bmore Dan. Every team is getting smarter every year. If two teams are equally smart the one with more resources will probably prevail. This current system doesn’t benefit the Yank’s because they are stupid. However, it does benefit the Red Sox’s greatly. They can do things other smart franchise simply can’t do over the long run.
I’m committing a fallacy in my thinking?
The Twins don’t have capital to spend. A cap would reduce the amount of money the Yankees can spend.
That doesn’t give the Twins additional capital.
If you want to equalize capital, equalize capital through flat revenue sharing so each team starts with the same amount of money. Caps don’t do that.
Well, that would work. A question as to how the flat revenue sharing would work, would the Yanks still have more money because of things like YES network? If so then a flat revenue sharing in addition to the cap might be the best solution.
The cap still doesn’t help. And there’s a whole other issue around TV rights but essentially you also do have to go reform MLB’s current territorial rights situation if you want to equalize footing between teams.
There are many ways to resolve the revenue disparity. Woolner and I put out pretty sweet plans @ Prospectus a couple years back that deal with all of that quite equitably.
Cool, I’ll see if I can find them. Thanks for the argument, though it would be interesting to see how this all gels in normative economics. Is forceably creating equity the most just thing to do? But that is a discussion for another day.
79 -
Yes, more teams are getting smarter every year. Some have a lot of money to work with, some have much less. But intelligence is the great equalizer. Yes, more money gives a team a greater margin for error, but so many other factors go into on-field success that I much prefer tweaking the overall system at the margins rather than implement something as huge and constricting as a salary cap. I don’t want to see 30 teams all attempting the same path to success.
And come on - it’s Baltimore DAVE.