Monetizing Mediocrity: Meche, Marquis, and ‘Mirez

A big development on the hot stove this is year is the “over-valuing” of less-than-stellar starting pitching. Three not-so-spectacular pitchers have signed big free agent deals, so far.

Gil Meche: $55 million, 5 years
Jason Marquis: $21 million, 3 years (not finalized yet)
Ted Lilly: $40 million, 4 years

And Horacio (Ra)Mirez was swapped by the Braves for a good relief pitcher, Rafael Soriano. All of this has caused many to question the sanity of several GMs; in particular, Jim Hendry of the Cubs who signed both Marquis and Lilly. I can see why the reaction has been so strong. None of these guys are fantastic. And as a Braves fan who has had to endure Horacio Ramirez for several years, I was happy to see the guy go. However, when I look over the dollar value estimates that I have calculated for all of these players, I have found another similarity among these players: their recent performances have been worth about what the free agent labor market says they ought to be. And it’s not because of a market efficiency tautology. Here are my dollar value estimates for these players. All values are 2006, except Ramirez’s estimate is from 2005, when he pitched a full season.

Gil Meche: $10.17
Ted Lilly: $10.15
Jason Marquis: $7.6
Horacio Ramirez: $7.7

Now, I don’t wish use these numbers to say that these were good deals—I’d need a lot more time and information—but it demonstrates the deals are understandable, and that I don’t wish to commit any GMs to an asylum.

Where do my estimates come from? Well, I used the revenue generated by MLB teams to measure how much the things players do on the field translate into winning, and then estimate how much wins impact team revenue. It’s a modified version of the method Gerald Scully put forth in his classic 1974 article in the American Economic Review, “Pay and Performance in Major League Baseball.” I’m not going to go into the details of the calculations here, but I do so in my upcoming book. But anyway, one of the things that first caught my eye when I ran these numbers was how valuable some of these mediocre pitchers are. And there is a good reason for this. Though these guys are not world-beaters, they are all better than their potential replacements—it’s been a while since any of these guys have spent time in the minors for more than a rehab start. There’s a reason for this: their potential replacements are much worse—Braves fans, think Travis Smith or Jason Shiell. And all of these guys pitch many innings of work. Sure, you’d prefer better pitchers to have these innings, but that’s not the option because a lot of GMs want those same pitchers.

And then, there’s the starter versus reliever question. Why would the Mariners trade a good reliever for a mediocre starter like Horacio Ramirez? Well, the good innings that Rafael Soriano will produce are far less than what HoRam has been able to do. And though Soriano’s been better on a per inning basis, you get many more innings out of HoRam. At some point, HoRam’s quantity of inferior innings pitched must pass Soriano’s in terms of overall value. Is it after 50, 100, or 1,000 innings? Well actually, it’s a pretty low number. It just so happens that HoRam’s injury-plagued 2006 produced a dollar value of $4.73 million. Soriano, as a reliever, produced $4.03 million. Since, these are just estimates, let’s just say they were close to equivalent value with Horacio pitching about 25% more innings than Soriano.

Why not make Soriano a starter? That seems like a fine idea, but I don’t know if it’s as simple as upping a pitcher’s innings. Starters and relievers are quite defined roles, and it seems that some pitchers can’t do both for mental or mechanical reasons. It could be that teams should have more swingmen, or at least tinker with their starter/reliever designations, but I’ll leave that to them. My guess is that the M’s and Braves have their reasons for leaving these guys in their defined roles. In any event, I expect that a starting Soriano would pitch worse than he does as a reliever, which might cancel out his per-inning superiority over Ramirez.

The lesson here isn’t that these pitchers are good, or that relievers aren’t valuable. It’s that these pitchers have value. And while they might make fans curse and sweat when they hit the mound, they keep us from destroying furniture by limiting the innings of the quad-A replacements. Also, it’s important to judge these salaries in light of the increasing wealth of MLB. If fans are spending money on baseball, it’s going to increase the salaries of not just the very good. Teams might be spending too much, or they might also might be responding to the higher returns to winning. In reference to the past, $7-$10 million for a blah pitcher may have seem outrageous. But in a few years, this could be the norm.

3 Responses “Monetizing Mediocrity: Meche, Marquis, and ‘Mirez”

  1. Pablo says:

    JC,

    I may be wrong in saying this, but it appears as if you are simply looking at revenue per player as opposed to profit per player. It may be true that having X player and X additional wins due to that player leads to X additional revenue, but in the business world, additional revenue doesnt always equal additional profits.

    A lot of business owners fall into the trap of trying to increase revenues at all costs without regards to the bottom line. I recognize that teams P&L statements aren’t readily available, however, I think its a flawed analysis to base a players worth solely on revenue generating ability.

  2. JC says:

    In a competitive market, teams ought to be willing to pay players up to the additional value they generate in terms of revenue. In a competitive labor market, the profit would be zero. As a rough approximation, it’s sufficient to assume that salary = marginal revenue product.

  3. Andrew says:

    JC,

    I think your argument for more swingmen is a good one. Moneyball relies essentially on market inefficiencies where baseball has fallen into the trap of habits. College coaches use pitchers in a far different form than professional coaches (such as All-American closers pitching 2+ innings of relief at a time) and this appears to be a far better use of talent. I constantly questioned whether the Braves’ struggle this year came from inefficient use of bullpen talent (only using The Bob for one inning, rather than in crucial 7th or 8th inning situations). I recall Phil Garner using Brad Lidge in a more efficient fashion during the 2004 playoffs, but I can recall very few other instances in recent years aside from the playoffs.

    It seems that the use of Zumaya and K-Rod a few years back was a far more efficient use of talent than allowing Mariano or Hoffman to pitch only the 9th inning.