How I Became a Baseball Economist

I meant to post this last week, while I was traveling, but computer problems wouldn’t allow it. This is a breakfast speech I presented in October. It’s mostly autobiographical.

Presented to the Rotary Club of Etowah
October 31, 2006

Good morning to everyone, and I’d like to thank the club for inviting me to visit with you this morning. I haven’t been to Cartersville in a long time, and I’m happy to be here.

So what do I have to offer this group? Well, I thought I tell you a little bit about what it is that I do, and how I ended up with this job. What I do for a living is unique: I’m a baseball economist. What does that mean, and what does economics have to do with baseball? I have to admit that I’m a bit shocked about where my career path has led me, so let me give you a brief history of how I got here.

I was your typical unmotivated high school student. Despite having good parents, I took my advantages in life for granted. I barely lifted a finger in school, satisfied with earning Bs, and purposely not challenging myself. I couldn’t get interested in anything—none of the traditional subjects in school excited me. My one success was winning the 1992 North Carolina High School Debate Championship, along with my partner. Though I was eager to learn, I didn’t know where to focus my energy.

When I arrived at Wofford College in the fall of 1992, I had little idea of what I would major in. I continued on with a mentality that was slightly improved over my high school days, but I wasn’t doing anything exciting. But fate would intervene. Wofford had a very unique registration system that would help me out. It was a mad free-for-all in the gym. The professors lined up behind tables and you ran around to sign up for the classes you wanted: first come, first served. As a freshman, I was in the last group in, and after getting three classes, everything else I had wanted was full. All that was left on my list of courses I might want to take during my college career was economics. The Clinton-Bush election was in full swing, and the economy was a big issue. Though I liked politics, I had to admit to myself that I had no understanding of the economy. I promised myself that I would take one economics class before I graduated. “Great, I guess I’ll get that over with.”

My first economics professor was Matt Stephenson. His white hair, soft voice, and attire fit the economist stereotype. But I soon found his lectures to be anything but boring. I thought the guy was hilarious, and apparently I was the only one in the class. I was often the only person laughing at his dry humor; everyone else thought he was just dry. I soon realized why: I think like an economist, and up until that time, I hadn’t been exposed to this way of thinking. But, I had always thought this way, and I was finding out that the whole discipline of economics was built off of a logical foundation that I had already bought into.

For example, take the economic notion of sunk costs. Any economist will tell you that sunk costs are irrelevant, but students have a hard time believing it. Let’s assume I had bought 2 tickets to Game 4 of the World Series for $1,800 (that was the going rate on E-bay) and a non-refundable plane fare to St. Louis for $1,200 for me and my wife. Two hours before my flight, I look on weather.com to see a 100% chance of rain—heavy rain. Even if they are able to get the game in I’m probably going to have to sit through 5-6 hours of getting soaked. I hate getting wet—so does my wife—and I can still see the game on TV if I don’t go. The question is: what am I giving up by not going? The standard student’s answer is $3,000, which is incorrect. Whether I stay or go, I am out $3,000. My choice is between seeing the game wet or seeing it dry. I can see it dry and that’s a perfectly rational decision. And it would be irrational for me to consider the $3,000 spent. It’s gone, and I can’t get it back (the ticket is non-refundable, and I don’t have time to sell and ship the tickets before the game). When I teach sunk costs to students with similar examples, it drives them mad. That’s not the way we’ve been trained to think. “You have to get on that plane or you’ll be out $3,000!” someone will say. I chuckle, because that was my first reaction. But the more I thought about it, the more I understood.

I was hooked. After a few weeks with Dr. Stephenson, I was an econ major. I would take nearly every course in the subject offered by the department. I became interested in the economics of government—a field known as Public Choice—and would go to George Mason University to study under Nobel Prize winning economist, Jim Buchanan. I wrote my dissertation on how different legislature configurations influence fiscal policy. I have published many academic papers on public economic issues, and I am still an active participant in theses fields—attending conferences, refereeing papers, and writing new papers. That’s pretty odd work for a baseball economist, so let me tell you how I moved off the standard economist track.

My second job out of graduate school was at Sewanee: The University of the South. I was eager to continue my dissertation research, and related projects, when I arrived. Because the department was small, I didn’t have any colleagues working in my fields, and I found my research engines cooling. I had been used to graduate school where I was overloaded with ideas. I began having lunch with a colleague of mine in the math department, Doug Drinen. Though Doug was a mathematician, he had majored in economics as an undergraduate, so he liked talking about economics. But also, we were both huge sports fans. I had known about the field of sports economics in graduate school, but I had steered away from it. One of my former professors, Bob Tollison (now at Clemson), had done a lot of research using sports as a testing ground for economic theories in a field he dubbed sportometrics. Traditionally, economists had only concentrated on the business aspects of the games, but sportometrics used the in-game data. For example, Dr. Tollison was interested in testing how much influence police had on deterring crime. So, he looked at the fouling behavior of players in the ACC basketball tournament after the league added a third referee. He found that the added referee deterred fouling and that it improved the play of the game.

Doug and I would often have lunch to discuss economics questions in sports. Doug was interested, but Doug didn’t let on knew much more about sports than I did. Doug had grown up reading the Baseball Abstracts of Bill James—he owned every single one from 1982 on. Bill James, as many of you probably know, is the founder of sabermetrics, which involves and analytical approach to studying baseball. When arguing who was the best hitter, sabermetricians don’t just look at hits, RBIs, and homers (traditional measures of hitting), but instead first evaluate what metrics tell us about scoring runs, and evaluate them according to objective benchmarks. I had never heard of sabermetrics. Now, when we talked about baseball, Doug could have simply said, “you should really read some of Bill James.” But he didn’t. Instead, he’d roll out James’s and other sabermetricians’ arguments when they applied. It was great fun, and as I enquired further he finally introduced me to James, and let me borrow all of his abstracts. I was jealous.

Remember I mentioned my academic struggles as an adolescent? One day I said to Doug, “If I had known about Bill James when I was 12, it would have changed my life.” As I read through Bill James, I saw we spoke the same language. He’s an economist, despite not having the official title, and I wasn’t surprised to learn that he was an econ major as an undergraduate. When I was twelve, baseball was one of the most important things in my life. My playing days wouldn’t last much past Little League, but I followed the game. Had I known of Bill James, I would have gotten that dose of economics that I wouldn’t get until I was 19. We all reminisce about our wasted youths, and things that might have changes our fortunes, but I honestly think sabermetrics would have made a huge difference in my life.

One of the discussions that Doug and I had was about the designated hitter. He liked it, I didn’t; however, that wasn’t what we were interested in. Some economist friends of mine had published a paper arguing that hit batters were higher in the AL than in the NL, because AL pitchers didn’t bat. What does this have to do with economics? It fits with the law of demand—the higher (lower) the price, the lower (greater) quantity consumed. Pitchers in the NL faced a higher price for plunking opposing hitters, because they faced retaliation when they bat. AL pitchers didn’t have to bat; therefore, they faced a lower price and thus consumed more hit batters. In fact, the evidence fits with the theory. Since the introduction of the DH in 1973, the AL hit batter rate has been 15% higher than the NL’s. However, there is an empirical problem here, one that a few other economists had noticed (including Freakonomics author Steven Levitt). A higher hit batter rate isn’t necessarily caused by a law of demand response. Because pitchers are typically exceptionally poor hitters, the last thing the opposing pitcher wants to do is hit a pitcher when he’s batting. Therefore, the lower hit batter rates in the NL might reflect pitchers being careful not to hit the pitcher when he bats, because he represents an easy out.

Doug and I reviewed these past studies, and we both agreed the data used wasn’t good enough to differentiate the between the two hypotheses. But, because of Doug’s involvement in the sabermetrics world, he knew about a gold mine of data known as the Retrosheet project. Retrosheet is a volunteer project that gathers play-by-play data from every baseball game ever played. The project is far from complete, but we were able to use some of the data to test the reasons for hit batters by controlling for several contributing factors. Also, Doug’s familiarity with sabermetrics and computer programming were integral to the project. Using some advanced econometric methods we were about to tease out the different effects, and we found that the law of demand explanation explained most of the differences in hit batters between leagues.

We presented our findings at national mathematics conference, and, to our surprise, The Wall Street Journal picked it up and wrote a story on it. The New York Times Magazine listed our work as one of its Ideas of the Year in 2004. Here I am, a guy who had planned on developing optimal fiscal policy rules to improve government and possibly aid in constitution formation for emerging nations getting calls from major media outlets about studies on baseball. But thing were about to get even more interesting.

After the 2004 season, Jaret Wright had turned his amazing season with the Braves into a fat free agent contract with the New York Yankees. Some Braves fans were disappointed, but others said not to worry, “Leo Mazzone can fix anybody.” “Pfft!” I scoffed. “There’s no way the pitching coach could be responsible for resurrecting these careers. It’s just a matter of perception. We remember guys like Jaret Wright, John Burkett, and Mike Remlinger, but forget about the guys like Albie Lopez, Odalis Perez, and Jason Marquis.” So, I decided to do something about it. I gathered up a list of every pitcher who’d pitched for Mazzone and for another pitching coach and compared their performances with and without Mazzone. I controlled for factors such as league, age, park differences in preventing runs, etc. I was shocked: Leo Mazzone was shaving about half-a-run of his pitchers’ ERAs. That’s a huge effect. I didn’t think much of it and posted the results of the study on my blog, Sabernomics. Blogs are a funny thing, because you don’t understand who is reading what you’ve written. It turns out a lot of people were reading it, and a follow up study I did for The Baseball Analysts. The New York Times, The Wall Street Journal, ESPN.com, and even Fox Saturday Baseball were talking about my results. It was at this point that I realized that while public economics is fine field for me, the market was sending me a signal: you’re a sports economist specializing in baseball.

By this time, I had already started writing my book The Baseball Economist. Initially, the book was more about the business side of the game. In particular, I was applying different models of competition to demonstrate that MLB imposed little to no monopoly harm on society. But with the success of Michael Lewis’s Moneyball, which offers a great lesson in the economics of technological innovation, I realized that a focus on topics within the game would be more interesting. Furthermore, Freakonomics would soon be published, which made economics the hippest it’s ever been as a discipline. And because most of my research focused on play within the game, I saw that this is where I had the most to offer the sports economics community.

So, the book is a collection of things I’ve been thinking about for the past few years. Some of the ideas I’ve discussed before, others are new. I hope that the book will encourage people to increase their interest in baseball and economics. And regardless of how well the book sells, it was a pleasure to write.

Here are some brief descriptions of topics that I cover in the book. I hope you’ll find them interesting enough to purchase the book.

1) Hit batters and the law of demand – expanding on my work with Doug Drinen
2) Protection – Do good on-deck hitters protect the batter at the plate? This is based off of another study I conducted with Doug Drinen, in which use economics of externalities (actions that spill over onto third parties) to examine the impact of protection.
3) Why aren’t there any left-handed catchers? How the short supply of southpaws has caused their extinction at this one position.
4) What advantage do big cities have over small cities? The advantage exists, but how big is it?
5) Is the rise is offense the result of heavy steroid use by the players? It’s not clear, but there are many potential causes that we must rule out before we settle on steroids as the only explanation.
6) What’s a ballplayer worth? Did you know that John Smoltz was more valuable than Andruw Jones in 2005?
7) What is the best managed organization in baseball? It’s not the Yankee’s or the A’s.

Thank you so much for having me. It’s been a pleasure.

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