Archive for December, 2007
It has come to my attention that my book has run into some supply problems. Amazon can’t keep it in stock and Barnes and Noble has started to have some issues. At my local store, the clerk would only tell me, “it’s on backorder.” I believe this loosely translates to, “we don’t have a copy, but it’s not my fault.”
Let me assure you, I have talked to my publisher and more are on the way. Both Books-A-Million and Powell’s still list it as in stock. Also, you can buy the book directly from Penguin. Thanks to all of you who have already purchased the book. I appreciate your support. 🙂
I’m still reading the Mitchell Report and following the surrounding commentary. These are some of the things that pop into my head, in no particular order.
— Players are in a prisonner’s dilemma game, from which they cannot unilaterally remove themselves. Players would prefer not to use steroids, but incentives may compel them to do so. “If I don’t use, but other players do, I will look bad. If I use, but other players don’t, then I look good. Therefore, no matter what the other players do, it is in my interest to use.” This unfortunate payoff structure results in a sub-optimal outcome. Players want out.
— Owner interest in drug testing has been about recreational drugs, not performance-enhancing drugs. League actions in the 1970s and 1980s were purely a response to the “Just Say No” paranoia.
— There is strong scientific evident that anabolic steroids improve performance.
— There is no scientific evidence that demonstrates that human growth hormone improves athletic performance.
— Many performance-enhancing drugs are expensive. There is a high probability that adolescents who use these drugs get them from parents.
— The Helen Lovejoy objection—“Will someone please think if the children”—to steroid use in baseball is a poor one. Athletes and entertainers make horrible role models. This is not because this class of individuals are inherently bad, but that they are in the public spotlight for something other than their upstanding behavior. Therefore, it should not be surprising when they let us down in a way that many people around us do. Thus, suggesting that we govern performance-enhancing drugs to protect children is a horrible justification for wanting drugs out of baseball.
— The offensive surge of the present baseball era is probably not the result of performance-enhancing drugs, though steroids may have contributed in some individual cases. Offense improved with a jolt in 1993-1994, not gradually as an invasion of steroids would cause. In addition, since MLB began to enforce testing with punishments, offense has not returned to previous levels. Expansion, new ballparks, changes to bats and balls are likely contributors that had a greater impact.
— Performance-enhancing drugs were not prohibited in baseball prior to the 2002 Joint Drug Program. Fay Vincent’s 1991 memo and other commissioner proclamations were no more binding than a bill that is passed by Congress, but vetoed by the President. Arbitrators would not uphold the memo as the law of baseball. It was not until 2002 that the players and owners agreed to a testing and enforcement program. A second positive test was a punishable offense in 2004, but there was no sanction for first-time offenses until 2005.
— That steroids use without a prescription violates federal and state laws is not sufficient to declare their use in baseball to be illicit. If it was, there there would have been no need to explicitly ban them in the official baseball rules. Arbitrators have not been willing to uphold suspensions for legal violations.
Last week, Alex Rodriguez and the New York Yankees finalized a ten-year, $275 million contract. I predicted that he would do much better than this. I wish that all of the Scott Boras shenanigans had not happened, because I would like to see what he would have gotten had he not been forced to crawl back the Steinbrenners. Yes, the deal includes up to $30 million in incentives, but I am nearly certain that A-Rod would have gotten more had he just negotiated an extension. We will probably never know exactly what went on behind the scenes, but Boras’s reputation has taken a hit.
Now that the contract is final, I want to announce the winner of the contest to predict his contract. James Canavan was the first person to suggest a $27.5 million average salary over ten years. Congratulations to James, who gives credit to his economics minor. 🙂 I will be mailing a signed copy of The Baseball Economist to James later today.
In an effort to clean up the game, it is tempting to suggest the standard solutions that strengthen old rules and increase monitoring and punishments. The problem is that the scofflaws are always one step ahead of the police. We need a deterrence system that uses incentives to limit drug use.
This is from my Op-Ed in today’s New York Times: Let Baseball Players Police Themselves. My proposal is based on analysis that I present in Chapter 9 of The Baseball Economist. I offer two main suggestions that I believe would help reduce performance-enhancing drug use in baseball by getting incentives right.
First, I suggest a system of fines and bonus. This is a Pigouvian tax and subsidy system that taxes players in accordance with the external costs that users impose on non-users—users may feel the personal benefits of a higher salary outweigh the health risks—and then transfers the financial gains to non-users who earn relatively less due to the fact that they chose to remain clean. This has the deterrence effect similar to suspensions; however, the substantial fine revenue gives players who feel they are in a use-or-lose situation an incentive not to use and to identify new cheating methods.
Second, I propose handing over all monitoring and testing to the players. It is the players who suffer the most from steroids. They are in an arms races where steroids make no individual relatively better than any other player—hence, there is no financial gain—yet, users end up suffering health consequences. This resembles a prisoner’s dilemma game.
I feel that one of the reasons that players have been reluctant to submit to a testing program, despite their desire to prevent steroid use, is that the tests contain sensitive information beyond the use of performance-enhancing drugs. For example, owners would like to know what recreational drugs players are taking that might diminish their performances. Owners have an incentive to want players to use performance-enhancing drugs if it makes the players they hire better, and thus brings in more fans. I’m not saying that owners don’t care about other things, but money is certainly important to them. Marvin Miller has gone so far as to accuse owners of providing performance-enhancing drugs to the players in the past.
“In most locker rooms, most clubhouses, amphetamines — red ones, green ones, etc., were lying out there in the open, in a bowl, as if they were jellybeans,” he said. “They were not put there by the players, so of course there was no pressure to test. They were being distributed by ownership. I can’t remember ever having a proposal from the owners, that we’re going to have random testing or testing of any kind.”
I feel that the early drug-testing programs pushed by the owners were more about preventing recreational use than performance-enhancing use. Players, of course, like it when their peers use drugs to dampen performance. For this reason, the players are suspicious to have the owners involved. And the seizing of supposedly-anonymous drug tests by federal authorities in 2004 made players even more suspicious of what could happen to the samples they provide. Thus, I believe giving players full control will allow the players to adopt more rigorous testing procedures. It has the further advantage of assigning responsibility to a single party.
Feel free to add your comments below. I have many family in town this weekend, so I will probably not be able to respond quickly. I will do my best to approve comments held for moderation as soon as I can.
Yesterday, I was asked to appear on television to discuss the financial ramifications of the Mitchell Report. Alas, I was bumped, but that won’t stop me from discussing the issue here. Take that TV! (I am kidding.)
Fans didn’t learn of steroid use in baseball on December 13, 2007. Though there was some talk of it in the 1990s, my recollection is that fans and the media began to express negative opinions about performance-enhancing drugs in the game following Barry Bonds‘s 2001 season, in which he hit 73 home runs. Wikipedia seems support my memory reporting that Bob Costas referred to the time in baseball as the “Steroids Era” in a June 2002 interview.
Since that time, fans have not turned away from baseball, as the table below reports.
Year Revenue % change Attendance % change 2002 $3.4 --- 67,944,392 --- 2003 $3.9 14.71% 67,630,048 -0.46% 2004 $4.3 10.26% 73,022,976 7.97% 2005 $4.7 9.30% 74,915,264 2.59% 2006 $5.2 10.64% 76,043,904 1.51% 2007 $6.1 17.31% 79,484,718 4.52% Average 12.44% 3.23% Sources: Sporting News, The Lahman Baseball Database, and Baseball-Reference.com
The table indicates that MLB has been doing quite well for itself despite the steroid accusations that have been surrounding the game during this time period. Revenue growth had averaged 12.44% a year since 2002. Attendance has grown an average of 3.23%, with MLB breaking attendance records each of the past four seasons. Now, this is not to say that steroid fears haven’t inhibited further growth; however, you know economic times in baseball are good when Bud Selig is admitting it.
“When you look at the final numbers and you see what’s happened, it’s remarkable. There are times, honestly, when I have to pinch myself to make sure all of this is happening. … Growth and revenue, growth and profitability; it’s just been really, really good.”
Despite the tough rhetoric, fans don’t turn away from the game when players and owners do things that fans don’t like. The work of Martin Schmidt and David Berri on the impact of labor stoppages on fan attendance shows that fans are quick to return to the sport despite promises not to do so. Here is my summary of the paper from several years ago, and here is a more recent discussion by Berri. They also have a chapter on the subject in The Wages of Wins. In summary, fans have demonstrated that they will talk the talk, but not walk the walk when it comes to strikes and lockouts. I think this work translates to the steroid issue, and is even more applicable. As a fan, the lack of baseball upsets me far more than steroids, so I suspect any impacts would be less than those where the games cease.
Thus, I doubt that there will be any blow-back from fans. They have long known that steroids have been in the game and don’t appear to have turned away from it. If anything, it’s given baseball more publicity. The Mitchell Report might make some fans think that if many players are using, then the overall harm from steroids is less than they had anticipated. After all, even if they think Bonds was using performance-enhancing drugs, maybe his home runs off of Denny Neagle and other pitchers occurred on equal footing.
I do think that there will be some damage to individual players. My guess is that Eric Gagne won’t be doing any more trash bag commercials. However, this will just transfer the endorsement revenue to players lacking similar allegations. And maybe some advertisers will steer clear of baseball teams and players altogether. But, given that revenues and attendance have not been suffering in the “Steroids Era”, I think the losses range from minimal to non-existent.
Addendum: I just received the following blurb in an e-mail from Sports Business Journal.
Marketers said that despite the release of the Mitchell Report detailing the use of performance-enhancing drugs in baseball, they “aren’t likely to be scared off the sport in general,” according to Thompson, Kang & Jones of the WALL STREET JOURNAL. GM’s three-year MLB sponsorship expired at the end of the ’07 season, and the company is “now in talks” with league on a new deal (WALL STREET JOURNAL 12/14).
I will never forget where I was when the Mitchell Report was released. I was sitting in a chair, staring into bright lights and a camera with a 20-year-old picture of the Atlanta skyline behind me. My laptop was stowed conveniently just off to the side for discrete access, and I was reviewing my talking points. I had been asked to comment on the economic implications of the investigation by CNBC earlier in the day, and I had barely scrambled together a collection of my nice clothes and navigate Atlanta traffic to make it to the studio on time.
I listened to Senator Mitchell’s speech intently through an ear-piece. This wasn’t going to be your standard back-and-forth on a pre-arranged topic, so I was a little nervous. Because I might have to comment on new information, I began to take notes. And then it began to hit me. I was getting hot, and my butt was starting to hurt. “How long have I been sitting here?” I thought. The producer popped on my ear-piece, “You still there J.C.? We’ll go to you first thing after he finishes.” But he just wouldn’t stop talking, and I knew what was about to happen. “J.C., I’m sorry but he’s gone to long and we don’t have time for your segment.” Filibuster. I probably wasn’t the only talking head who pulled off an ear-piece and walked out without saying a word. Deep down, I suspected that the uncertainty inherent in live news made it very likely that I would get bumped, so I just laughed.
Anyway, at least I got some good notes. I thought Mitchell did a nice job of summarizing the report. I’m still not through every word, but his summary made it easier for me to skip around the document. I was also impressed that he requested amnesty for past deeds, even though I am not sure how many reported actions would result in a punishment. I was not expecting this, and I think it is a good move.
One thing I was disappointed with in the press conference was his emphasis on players switching to human growth hormone from steroids. I kind of have a thing about this. But, when I got home and read the report, I was surprised to find the document stated the following.
A number of studies have shown that use of human growth hormone does not increase muscle strength in healthy subjects or well-trained athletes. Athletes who have tried human growth hormone as a training aid have reached the same conclusion. The author of one book targeted at steroid abusers observed that “[t]he most curious aspect of the whole situation is that I’ve never encountered any athlete using HGH to benefit from it, and all the athletes who admit to having used it will usually agree: it didn’t/doesn’t work for them.”
Can we get plaques that say this and hang them all clubhouses and press boxes?
I’m not sure that Mitchell’s plan makes any structural changes that will meaningfully alter performance-enhancing drug use in baseball. His independent Department of Investigations doesn’t look all that independent to me. I think as a politician, he considers it his duty to propose a new committee or department as part of a solution to any problem.
I am sure I will have more comments as a read, but I wanted to go ahead and post my initial thoughts…and tell my silly story.
Today, Maury Brown has posted Andrew Zimbalist’s review essay of The Baseball Economist along with Vince Gennaro’s Diamond Dollars. This essay is to be featured in the next issue of the Journal of Economic Literature.
I am open to criticism, and I feel that my book is subject to many reasonable objections. After all, if I thought everyone would agree with the entire content, there would have been little reason to write it. I have had many meaningful conversations with readers about the content of my book. Even I have some concerns about things that I have previously written. However, Zimbalist’s critique is lacking and borderline dishonest in several places. Believe me, I take no joy in dismantling a negative review, but several of Zimbalist’s incorrect claims force me to respond.
Below, I detail several parts of Zimbalist’s review of my book (Vince can defend his own work) and add my responses. In many cases it is clear that Zimbalist failed to even read the book. In other criticisms, he is just wrong. I follow the order of his review, and though I do not respond to everything, I cover enough to show most of his concerns are without merit.
On umpire rent-seeking, Zimbalist writes:
Bradbury’s chapter on whether it pays for a manager to argue with the umpire is provocative, but unsatisfying….It is rent seeking because there is no net gain, no output increase, just a transfer of marginal calls from one team to another. Meanwhile, the fans, according to Bradbury, have their utility lowered because they have to spend a few extra minutes at the game due to these fits of managerial distemper. Well maybe, but it is also possible that the fans enjoy managerial protests both because they are amusing and because it vicariously vents their own frustration at bad umpire calls.
Fair enough, it’s not my favorite chapter, either. The point of the chapter was to teach the concept of rent-seeking using baseball instead of typical boring classroom examples. I don’t think it’s a policy issue of great importance, and there is no doubt that it is my own preference that arguing be removed from the game.
On the big-city-versus-small-city discussion, Zimbalist writes:
Bradbury’s simple regression finds that variance in city size accounts for 40 percent of the variance in win percentage over a period of years. This seems to indicate a rather substantial impact of city size. Further, the author fails to consider the interactive effect of city size and a team owning its own regional sports channel (RSN), the number of large corporations in the market, or the size of MLB’s assigned team television market – three factors that would have reinforced the effect of city size.
The regression I report is simple because of the numerous potential control variables that I included, did not show any effect. And with only 30 teams, my degrees of freedom were approaching/surpassing the minimum. I looked at income, split the markets with multiple teams in two, and included multiple team dummies. For this reason, I did not report the results. I admit to not including a dummy variable or interactive term for whether or not a team owned its own RSN. This is endogenous—having an RSN to generate money that leads to wins is something that any team could do, regardless of its size. Better-managed teams won out over those that did not. I have no doubt that TBS helped the Braves improve their financial standing beyond what Atlanta ticket-holders produced, but that is the point: population wasn’t the cause. I’m not sure how this cripples the regression estimates or affects the supporting material in the chapter that doesn’t rely on the regression estimates to support the point that big-market advantage is overblown.
Along the way, Bradbury misapprehends the functioning of the amateur draft and overlooks the unequalizing effect of the posting system with Japanese baseball.
I’m not sure what I missed with the draft, nor how the posting system drastically alters what I reported. But, as you will soon see, Zimbalist likes to drop these bombs and run.
Zimbalist doesn’t like my application of the prisoner’s dilemma to explain the incentives for steroid use in baseball.
His chapter on steroids in baseball employs game theory to model the choice that a player makes whether or not to indulge. He argues that when every player chooses to use steroids it is a Nash equilibrium. This result, however, appears to depend on his arbitrarily chosen values for the supposed productivity gain and the health costs (only $500,000) from indulgence. Bradbury’s analysis ignores the enormous uncertainty that surrounds this choice for players.
As it happened with the rent-seeking chapter, Zimbalist forgets that I am using an issue in baseball to introduce readers to an important economic concept. The example I use includes hypothetical, not actual, payoffs to help elucidate the incentives faced by players. Of course the payoffs affect the choice. I designed the matrix to explain how a prisoner’s dilemma operates. This is very clear in the text. If he has an argument as to why this is inappropriate to model this decision as a prisoner’s dilemma game, I would like to hear it.
I ignore uncertainty? How does this affect the outcome in a relevant way? As Zimbalist ought to know, any game theory model can be tweaked with numerous assumptions that drastically alter the results. I’m not sure what type of uncertainty here is going to allow players to unilaterally decide to quit using steroids. I’m all for seeing alternate models, but I think the standard PD model works well.
On the invention of new statistical methods for scouting baseball players, Zimbalist writes:
On page 147, for instance, Bradbury writes: “Old ways and old scouting methods may disappear, but the end result is a good one for the fan: better and cheaper baseball.” No team is contemplating the elimination of traditional scouting methods, nor is one likely to in the future. New statistical methods have been employed to supplement, not supplant, traditional scouting.
Here, Zimbalist takes my words out of context and ignores my direct commentary on the issue.
TBE, p. 144.
Am I predicting an end to traditional scouting? I sincerely doubt that any baseball team, including any team run by Billy Beane, will ever abandon personal scouting. No matter how far the knowledge of scouting progresses, there will always be things that the stats will miss. No matter how far the knowledge of predicting talent progresses, there will always be things that the stats will miss. Teams can learn from statistics what information they really need from scouts, and statistics can make scouts more effective…. [Skipping over a detailed example of how pure stats scouting will fail]…Statistical analysis does not eliminate the need for on-site scouting, but the role of the scout may be reduced and modified to focus on different things.
I then go on to discuss that the development of new statistics is just one area where some teams innovated, and I point out that scouting-centric organizations like the Twins, Marlins, and White Sox have also experienced success on small budgets.
The quote that Zimbalist plucks from the end of the chapter is in reference to a discussion of “creative destruction”—the replacement of old and inefficient methods with new technology. I am explaining why the change is a good thing, and that if and when some scouting methods become obsolete that this is all part of a positive process.
On clutch hitting, Zimbalist asserts that I am not backing up my claims and that my arguments are inconsistent:
“The problem is that hitting with RISP is not a skill … but a statistical anomaly.” (p. 155) “If hitting with RISP is something a hitter can purposely alter, I have a hard time believing he is holding something back in non-RISP situations” (p. 156). There you have it – there is no such thing as clutch hitting.
Yep, “there you have it.” That is it, I just state this and keep on moving…What? Oh wait, there is an endnote (67) listed at the end of the sentence quoted on page 155? Why, whatever could it say?
TBE, p. 320.
67. Statisticians Jim Albert and James Bennett find minimal evidence for clutch ability in these situations, and any observed effect is very weak (Curve Ball, 2001).
There you have it! Though I didn’t go into great detail on the existence of clutch play in athletics—I decided against diverting the chapter from its main goal to discuss “clutch” play—the endnote that I provide is sufficient.
This is an awfully linear, materialist view of the world where a player’s emotions and his state of physical depletion over a 162-game season play no role.
Linear? Maybe. Materialist? This doesn’t even make sense. Are we referring economics or metaphysics? As best as I can figure, I think he’s referring to the kind that is opposed to idealism. Still, I can don’t see how being a materialist denies clutch hitting.
Further, Bradbury is being inconsistent. In his chapter about the on-deck batter, he asserted that a pitcher can ramp it up and pitch more carefully and effectively to the current batter when a strong batter is on deck. So, in Bradbury’s world, pitchers can focus and pitch in the clutch, but hitters can’t turn the same trick.
There is nothing inconsistent about this position, which I do hold. In fact, I have discussed it many times with many people. Pitching and hitting are very different skills. Pitchings requires a player to regulate his effort to remain in the game. A batter swings the bat then sits down for a while.
Zimbalist doesn’t like my analysis of a curious finding in Moneyball.
Later in the chapter, Bradbury endorses the proposition from Moneyball that on-base percentage (OBP) is three times as important as slugging percentage (SLG). He arrives at this outcome by running a multiple regression of runs on batting average, OBP and SLG. The coefficient on OBP is almost three times that on SLG. The problem here is not only that the arguments are collinear and the coefficients are less reliable, but that SLG (it counts a homerun as four hits, a triple as three, etc.) is a much higher number than OBP. The coefficient, therefore, will necessarily be smaller on SLG. If elasticity is used instead of the estimated coefficient, OBP is 1.8 times greater than SLG.
The argument is the relationship between each “point” of OBP is worth nearly three-times as much as a “point” of SLG. The elasticity, which I report, is irrelevant to this sidebar to the main discussion. I understand that SLG is greater than OBP for most players, but the debate is how much different is the ratio than 1.5–1.8.
And please, no lecture on econometrics here. What does collinearity affect? The standard errors. Because both coefficient estimates are statistically significant it is important to keep both in the model. And even if this was inappropriate, I am merely trying to replicate something done by someone else. There are cases where collinearity is so extreme that two variables should not be included in the same regression: this is not one of those cases.
Also, let’s view this in light of his critiques of my econometric methods elsewhere. When I exclude something, I am creating omitted variable bias. But, when I include something I have multicollinearity. It’s hard for me to win here.
On my measurement of pitching skill, Zimbalist isn’t a believer in DIPS:
Bradbury also discusses the assessment of pitching skills in this chapter. The main argument here is that a pitcher’s ERA from one year to the next is highly variable, but that a pitcher’s walks, strikes and home runs allowed are more stable over time. The inference is that ERA depends more on outside factors, such as a team’s fielding prowess, and, hence, is a poor measure of the inherent skills of a pitcher. While there is something compelling to this logic, it seems caution is in order. First, a pitcher’s skills may actually vary from year to year, along with his ERA, as other factors change, such as, his ballpark, his pitching coach, his bullpen, his team’s offense, the angle of his arm slot, his confidence level, etc. This variability does not mean that the skill is spurious.
I disagree. It most certainly does indicate a lack of skill, especially since the other metrics do not exhibit this same variability. If he believes this, I suggest that he write up a response to my paper in this month’s Journal of Sports Economics in which I go into the full details. On page 170, endnote 71 points to the citation of this paper on p. 321. Though the paper was not published until recently, I would have been happy to provide a copy if asked. I presented the paper at the Southern Economic Association Meeting a few years back and no one there mentioned this particular objection. Neither did an anonymous referee at JSE. I’m going to see more than this “does not mean the skill is spurious.”
Second, if all we consider is strikeouts, walks and home runs, what are we saying about sinkerball pitchers who induce groundballs or pitchers who throw fastballs with movement or offspeed pitches that induce weak swings and popups?
I am saying that pitchers have almost no effect on hits on balls in play, and that sinkerball and offspeed pitchers are good because of their strikeouts, walks, and home runs, not because of any effect they have on balls in play.
TBE, p. 167–170.
“Everyone knows that Greg Maddux is so good because his pitches produce easily fielded balls.” …[Insert lengthy rebuttal of this argument]…It turns out that the real reason Greg Maddux is so good is that, though he is not an overpowering strikeout pitcher, he rarely walks batters or gives up home runs.
That is why DIPS is so controversial. Of course, then I argue that pitcher do appear to have some effect on balls in play, but this impact is captured in those stats. DIPS has been widely debated in the sabermetrics community since the late-1990s. I make numerous references to this in the chapter, including a variant of the argument introduced by Bill James in 1987. Again, Zimbalist seems to have glossed over my explanation.
Zimbalist feels my marginal revenue product estimates are fatally flawed.
Next, Bradbury offers a chapter on the worth of a ballplayer. He gets off to a bad start here by misrepresenting the functioning of the players’ market and the terms of the collective bargaining agreement. He then misspecifies his team revenue function, leaving out RSN ownership, the number of large corporations in the host market, the size of the team’s assigned television territory, among other factors.
I’m not sure where I’ve erred in my understanding of the CBA. I laid it out there pretty simply, so maybe I sacrificed some precision for expediency in getting to the argument. But, since Zimbalist doesn’t say, I can’t really respond.
All revenue estimates come from the Forbes Business of Baseball Report. Are these estimates perfect? No. The best option would be to have detailed financial data provided by all 30 teams, but teams are a more than a little reluctant to provide this stuff. Do they tell us something about the earnings teams take in? That is an open question, to which I believe the answer is “yes.” I think, though I am not sure, that he is suggesting that I need some more control variables for RSN ownership, but this is just weird. If winning leads to more revenue as it comes through RSNs, the the coefficient estimates ought to reflect this impact. Are omitted-variable distortions possible? They always are, and I see no obvious reason that the absence of RSNs—especially, since most teams now have them—will bias the estimates.
In the end, this is a simple model, necessitated by the availability of the data. The test of any model is how well it predicts, relative to alternative models. Recently, Zimbalist told a local Atlanta writer that it was “utterly preposterous” for Scott Boras to expect Andruw Jones to get $20 million/year. Well, he got $18.1 million, even after tanking in 2007—Boras’s $20-million/year request was made before the 2007 season. I think I did pretty well with Forbes data and a few assumptions.
But the fatal problem is that Bradbury’s methodology unwittingly identifies a player’s average revenue product, not his marginal revenue product. By his reckoning, all of a team’s revenue is attributed to the players, leaving nothing left over for front offices expenses, stadium expenses, minor league operations, or profits. Given this misstep, it is not surprising that Bradbury finds players at all levels (under reserve, arbitration eligible and free agents) are paid less than what he estimates they are worth.
This is just incorrect. My estimates most certainly are marginal. Those multiple-regression coefficients are partial derivatives, so I’m not sure how to respond to the statement that these are not MRP estimates.
I clearly acknowledge that there are other inputs to winning—after all, I did write the Mazzone chapter. How should we solve the fact that OBP and SLG contain contributions by coaches and players? There is no simple answer, but it is one that I address in the text. Given that players earn far more than coaches, I don’t think it’s too much of a simplifying assumption to initially give all of the credit to the players, then extrapolate from the estimates. At the end of the chapter, I state that these gross MRP estimates do not account for resource costs, which include these other factors.
TBE, p. 197.
If teams are willing to pay player salaries equal to the value produced on the field minus other training costs, then our gross MRP estimates should be above actual player salaries.
In conclusion to this particular argument, I will put my estimates up against Zimbalist’s method in his book Baseball and Billions (1992) any day of the week. These are the ones where he takes Gerald Scully to task for using the strikeout-to-walk ratio to measure pitchers—I show that Scully is right and Zimbalist is wrong in Chapter 12.
These estimates also measure hitter value using a measure known as “PROD”. PROD is the sum of OBP and SLG—yes, that is OPS—yet Thorn and Palmer (1984) are not credited. [Zimbalist disputes this last point, see this post below and the comments section.]
Now onto the monopoly section.
Zimbalist feels that I have mis-stated the history of the jurisprudence regarding the origin of the antitrust exemption. I do not have time to investigate this at the moment. Without going into all of the detail, I think it is pretty clear that any mistakes that I did make (I’m not saying he’s right, either) are not relevant to the main argument. There is an exemption that arises from legal precedents, and I think its effect is minimal.
Bradbury then distorts the record further by asserting (p. 205): “At the heart of the argument that MLB acts like a monopolist is the existence of the antitrust exemption.” He cites no sources for this claim, because there are none.
He wants a source for this? Watch any news report discussing the business aspects of baseball. And several sports economists strongly advocate removing the exemption, so it is clearly an issue.
Each team sport league is a monopolist because it is the sole producer of its product and has no close substitutes.
Chapters 15 and 16 of TBE are devoted to rebutting this claim. Chapter 15 is not discussed and I address his problems with Chapter 16 below.
While the value of baseball’s exemption today is not what it used to be, there is still a good case to be made that MLB’s minor leagues and perhaps its amateur draft could not exist in their present form were it not for the exemption.
The NBA, NFL, and NHL all have amateur drafts, yet lack the antitrust exemption.
Zimbalist on contestable markets:
Bradbury’s last essay argues that the market for top-level professional baseball in the United States is contestable. If this were true, then the earlier question about whether or not MLB is a monopoly might be moot. Here Bradbury makes two points. First, if there is an aspect of the industry that is not a natural monopoly and, hence, constitutes an artificial barrier to entry, it is the subsidies from local governments that teams receive for the construction of their stadiums. But, he avers, this is not really an issue because (p. 220) “the public does not seem averse to subsidizing major sports teams from leagues other than the dominant existing league.” It is clear that Bradbury has never been involved in starting a new or non-dominant league.
He’s got me there, I have never been involved with starting up a new sports league. Maybe by the time I am 60 it will happen. I’m not sure why this is relevant except that maybe Zimbalist fondly remembers his own involvement in the United Baseball League in the mid-1990s. This was a league that tried to start up at the time MLB was half-way to expanding the league by four teams. I admit that it is difficult to start a new league when the old one is expanding: that is the gist of my argument. In this chapter, I argue that MLB must expand to meet the needs of fans or another league will rise up, and that after years of responding to entry the league now acts to prevent entry. This seems to prove my point. I guess I should thank Zimbalist for reminding me of this, I’ll be sure to include the example in the next edition.
His notion that politicians are not averse to providing subsidies to teams from these upstart leagues is just plain wrong.
Let’s look at the text surrounding the quote that Zimbalist offers, in which I am responding to the potential objection that citizens will be less willing to subsidize major league teams in a rival league.
From TBE, p. 219–220.
First, [the argument] does not apply to cities without current MLB teams. Teams in competing leagues may be just as successful at extracting public subsidies as MLB if they promise to bring major-league-level baseball to town. Plus, even if the costs of operating a team are higher in a city without an MLB team, the new team doesn’t have to worry about its fans migrating to a crosstown MLB rival. A slightly inferior product my still yield sufficient revenue for the owner to purchase major-league talent. This puts these teams in a rival league on competitive footing with MLB.
Second, the history of competing leagues does not reveal any public bias toward the public funding of stadiums of stadiums for new leagues. Many of the teams in the United States Football League (USFL), which competed with the NFL in the mid-1980s, played in publicly financed stadiums. In fact, many USFL teams shared stadiums with NFL teams. History shows that the public’s willingness to subsidize teams extends beyond the dominant league brand. The point is not that MLB teams could share stadiums with rival leagues—I think this would be highly unlikely—but that the public does not seem averse to subsidizing major sports teams from leagues other than the dominant existing league. It seems that as long as a new league promises to pursue top-level talent, as the USFL did in football, citizens will subsidize new teams. So public subsidization of stadiums doesn’t appear to be much of a barrier to entry in the baseball market.
I have highlighted the one sentence of two paragraphs in which I justified the quoted statement with theory and history. It is fine to disagree with me, but at least offer an explanation. Furthermore, Zimbalist also makes no mention that I offered any explanation. Previously, Zimbalist has picked nits, misunderstood my argument, or was too lazy to find my rebuttal; this is a deliberate misrepresentation of my argument.
Zimbalist also finds fault with my use of history as evidence of competitive pressure.
Second, Bradbury goes on to argue that MLB’s market is contestable. He does this by discussing the emergence of the American Association in 1882 and the American League in 1901. He further adduces what he erroneously calls the “Central League” (real name: the Continental League) forcing baseball to expand the number of its teams in 1961. Leaving details aside, the difficulty with Bradbury’s claim is that the industry’s economic structure today is very different from what it was 57 or 120 years ago.
In regard to the Central League gaffe, mea culpa. This is quite embarrassing, and it was one of the first mistakes I noticed after publication. I’m not sure how this happened, since I know the correct name, and I noted this error in the errata (link on the right sidebar) many months ago.
I hypothesize that baseball hasn’t faced any actual competition since the Continental League threat because it has chosen to expand before such threats arise. That is what constestable market theory says ought to happen. The mere threat that someone might enter is sufficient to force a single firm to behave. It is quite difficult to miss this point, especially given the title of the chapter, “Expansion and the Invisible Hand.”
It’s fine to disagree with me, but I did not ignore the difficulty using historical examples to shed light on the present. Once again, I addressed this argument in the text when Zimbalist insinuates that I did not.
TBE, p. 227.
Has the competitive pressure that fueled interleague baseball competition in the past evaporated, or does that competitive pressure lurk in the minds of owners, who fear the entry of a new outlaw league? The fear probably still lurks. We have plenty of rich men and women looking to be loved by baseball fans across the continent. I doubt that our current stock of eccentric wealthy egomaniacs could leave large quantities of money and public adoration alone. And I have a feeling that the current stock of owners who are members of this crowd are far more familiar with this than the average baseball fan realizes.
In conclusion, I have to say that I am disappointed in Andrew Zimbalist. His demeanor and thoroughness is out of step of what is normally expected in academic discourse. It is hard for me to learn anything from critiques that are largely based on misunderstanding or flat out ignorance of my arguments. The arrogant tone is unnecessary and inhibits constructive discussion of these issues.
One of my goals in writing this book was to push economic theory to extremes within the sports economics community. At the time I began writing, I felt we were settling for too many old truisms (e.g., MLB is a monopoly) that might not be completely correct. It is not that these claims are necessarily wrong, but I wanted to raise some possible objections. It was my hope that others might respond to my ideas with new insights that might confirm or reject my hypotheses. And in the end, I might feel more comfortable holding certain beliefs.
I would like to reiterate that I am fine with criticism, and I encourage it. As I wrote in the Epilogue,
Applying my professional training to the game that I love has taught me new, unexpected lessons. Notions that I held about the game turned out to be false. I thought Leo Mazzone was overrated as a pitching coach and that batters protected one another in the lineup. I’m happy to have eliminated some of my ignorance. …
Unsatisfying answers provide opportunities to expand knowledge. I hope that if you find any of my conclusions to be unsatisfying, this will motivate you to search for better ones.
It is too bad that Andrew Zimbalist did not heed my advice.
Update: Zimbalist offers a response, of sorts. On the whole it is more of a general overview of his opinion of the book than a response. I do want to acknowledge that Zimbalist asserts that he did cite Thorn and Palmer (1984). I no longer have a copy of his book, so I cannot verify this. My assertion that he did not was based on a recollection of mine. If I am incorrect, I will retract my statement.
With the Mitchell Report supposedly being released this Thursday, I wanted to post some links to more studies of the performance-enhancing effects human growth hormone (HGH). You can read more here and here.
Short-Term Administration of Supraphysiological Recombinant Human Growth Hormone (GH) Does Not Increase Maximum Endurance Exercise Capacity in Healthy, Active Young Men and Women with Normal GH-Insulin-Like Growth Factor I Axes
Annika Berggren, Christer Ehrnborg, Thord Rosén, Lars Ellegård, Bengt-Åke Bengtsson and Kenneth Caidahl
The Journal of Clinical Endocrinology & Metabolism Vol. 90, No. 6 3268-3273
CONTEXT: Despite the fact that the use of GH as a doping agent in sports is widespread, little is known about its short-term effects. OBJECTIVE: The objective was to study the effects of GH on exercise capacity. DESIGN: A double-blind, placebo-controlled study was used, with a treatment period of 28 d. SETTING: Subjects from general community studied ambulatory at a university hospital. PARTICIPANTS: Thirty healthy active young normal volunteers (15 women and 15 men) were recruited by local announcement, and all completed the study. INTERVENTION: All subjects were randomized to receive a low GH dose (0.033 mg/kg.d or 0.1 IU/kg.d), a high GH dose (0.067 mg/kg.d or 0.2 IU/kg.d), or placebo. MAIN OUTCOME MEASURES: Power output and oxygen uptake on bicycle exercise were the main outcome measures. Results: We found no effect of the low or high dosages of GH on maximum oxygen uptake during exercise (mean +/- se for placebo, 45.2 +/- 1.6 to 45.2 +/- 2.1 ml/kg.min; GH low dose, 42.8 +/- 1.6 to 42.8 +/- 1.6 ml/kg.min; GH high dose, 44.8 +/- 3.4 to 44.8 +/- 2.2 ml/kg.min; not significant by two-way ANOVA). Neither was there any effect on maximum achieved power output during exercise or on blood pressure, heart rate, or the electrocardiographic ST level at rest or during exercise. GH significantly increased total body weight (P = 0.028), an effect predominantly ascribed to fluid retention (increased extracellular water volume), whereas muscle mass (as indicated by intracellular water volume) did not change. However, changes in the latter correlated to changes in physical performance, possibly due to different training efforts. CONCLUSION: Administration of supraphysiological recombinant human GH during a period of 4 wk does not improve power output or oxygen uptake.
Ehrnborg C, Ellegård L, Bosaeus I, Bengtsson BA, and Rosén T.
Clinical Endocrinology, Volume 62 Issue 4 Page 449-457, April 2005
OBJECTIVES: To study the effects on body composition after 1 month’s administration of supraphysiological doses of growth hormone (GH) in healthy, active young adults with normal GH-IGF-I axis. SUBJECTS AND METHODS: Thirty healthy, physically active volunteers (15 men and 15 women), mean age 25.9 years (range 18-35), participated in this study, designed as a randomized, double-blind, placebo-controlled, parallel study with three groups (n = 10: five men and five women in each group). The groups comprised the following: placebo (P), GH 0.1 IU/kg/day [0.033 mg/kg/day] (GH 0.1) and GH 0.2 IU/kg/day [0.067 mg/kg/day] (GH 0.2). RESULTS: In the pooled group with active GH treatment (n = 20) the results showed significant increases: IGF-I increased by 134% (baseline vs. after 1 month), body weight by 2.7%, fat free mass by 5.3%, total body water by 6.5% and extracellular water (ECW) by 9.6%. Body fat decreased significantly by 6.6%. No significant change in intracellular water was detected. The observed increase in fat free mass by 5.3% was explained by the ECW increase, indicating limited anabolic effects of the supraphysiological GH doses. Changes were noticeable in both genders, although more prominent in the male subjects. Fluid retention symptoms occurred in the majority of individuals. CONCLUSIONS: This is, to our knowledge, the first placebo-controlled trial to show the effects of supraphysiological GH doses on body composition and IGF-I levels in physically active and healthy individuals of both genders; the results indicate limited anabolic effects of GH with these supraphysiological doses. The role of GH as an effective anabolic doping agent is questioned.
This paper summarizes the findings of several studies.
Ergogenic aids: human growth hormone.
Stacy JJ, Terrell TR, and Armsey TD.
Current Sports Medicine Reports 2004 Aug;3(4):229-33.
Human growth hormone (GH) has a number of accepted medical uses, but has quickly become a popular ergogenic aid among athletes. The issue of performance-enhancing substances such as anabolic steroids and GH has drawn the attention of athletes, their parents, and politicians. On almost a daily basis, headlines about the status of doping in professional, international, and amateur sports seem to be more pervasive. The supraphysiologic effects of GH lead to lipolysis, with increased muscle volume. Due to the ethical limitations of studying the use of high doses of GH in isolation or combined with anabolic steroids, the scientific literature has not produced compelling results on its efficacy. GH has potential as an anti-aging drug and does lead to some improved athletic performance in isolated studies. Despite the lack of compelling data, GH seems to have developed a reputation among athletes for enhancing performance. The detection of illegal doping with GH has been the focus of a concerted international effort by the International Olympic Committee. A number of promising detection techniques may allow the detection of illicit GH use. This review on GH as an ergogenic aid includes a discussion of the basic physiology of GH and its actions, the accepted medical indications for its use, the results of scientific studies that assess whether it improves exercise performance or work capacity, and the scientific techniques under development to detect ergogenics with strong abuse potential.
From this same study, here is what the authors conclude regarding the ergogenic properties of growth hormone.
There is no current study that has demonstrated a significant increase in workload capacity in response to human GH administration in healthy adults. The studies that have addressed the impact of GH on muscle mass and athletic performance do not show consistently favorable results. For instance, patients with acromegaly do have greater muscle volume than normal individuals, but they do not show an increase in strength or performance. No controlled study to our knowledge has shown a beneficial effect of supraphysiological doses of human GH on muscle strength in trained athletes.
Also, I would like to clarify my motivation for highlighting the evidence regarding the ergogenic impacts of growth hormone. The main reason is that I want to point out where the media has dropped the ball. And, I’m not one of those “it’s the media’s fault” conspiracy nuts. I love the media. Both my parents are former journalists, and my dad was a newspaper editor for over 30 years. I spent a lot of time in The Charlotte News and The Charlotte Observer newsroom(s) as a kid, and I have a lot of respect for what journalists do. Journalism has its share of jerks and hacks, but I suspect it’s no different than in any other profession. This isn’t meant to be a personal indictment of these people.
The reporting on performance-enhancing drugs in baseball has been as much of a black mark on journalism as the actual substances have been for the game, and not because reporters may have given players a pass many years ago. Guys like Brady Anderson and Luis Gonzalez have been accused of using performance-enhancing drugs based solely on a bump in performance, which is outrageous. This is the type of claim that columnists shouldn’t have written and editors shouldn’t have allowed, as there are many alternative explanations for sudden changes in performance.
The reporting on growth hormone has been beyond bad. There has been a grand total of two articles on the scientific evidence regarding the performance-enhancing effects of the drug in the the midst of this latest drug scandal. When home runs didn’t fall after testing started, it was too convenient to say, “well, there is still HGH, and there is no test for that yet.” Yet, few stopped to check to see if the drug had any more effect than eating chicken, pre-game dance routines, or jumping foul lines when running to and from the dugout. Steroids do improve athletic performance, HGH does not.
This isn’t a harmless mistake either. The first question I get asked when I point out the non-effect of HGH is, “why do players take it, then?” These guys read the papers, too. Members of the media who have reported on HGH being a performance enhancer are as much to blame for the use of HGH as the trainers and athletes themselves. When the first whispers of HGH in the clubhouse were heard, reporters should have been calling exercise physiologists and searching PubMed. Instead, some struggling fourth outfielder gets tired of being a spare part, goes to an online pharmacy, and before he knows it his wrists hurt and he isn’t playing any better.
Right now, MLB is paying researchers to develop a urine test for HGH. This is a colossal waste of resources. Instead, MLB should institute a campaign summarize the scientific findings and present them to the players. I would also remove the ban on HGH to take away some of the “forbidden fruit” magnetism. If it remains illegal, then some players may think that it must work. If you want carpal tunnel syndrome, a swollen head, smooshed internal organs, a dangerous blood profile, etc., then that is your business.
Consider yesterday’s announcement of performance-enhancing drug suspensions to be the elephants, acrobats, and clowns marching into town to set up a big tent with three rings where we can witness the circus that will follow release of the Mitchell Report.
Jose Guillen and Jay Gibbons were both suspended 15 games based on evidence that they purchased growth hormone and possibly steroids, sometime between 2003 and 2005. The odd length of the suspensions is based on the stated punishment for a second violation under the 2002 Joint Drug Prevention and Treatment Program (if anyone has a link to the actual document, please pass it along), which I believe did not include a suspension for a first offense.
What does this mean for all of those rumored names that are included in the report? Will the MLB season begin with a few dozen players sitting out the first-half of April? It’s hard to tell, but I think the non-suspension of four other players for whom “there was insufficient evidence of a violation” is the bigger story. It appears that Guillen and Gibbons are getting busted because of a paper trail—Gibbons has apologized and will not appeal, while Guillen plans to appeal. Unsubstantiated testimony is not going to be sufficient, and my guess is that the Mitchell Report’s individual investigation will include many accusations without confirmation. Let’s not forget the list of players accused if using PEDs over the past few years is far longer than six players. I wouldn’t think that MLB is treating these cases like they handle end-of-the-year awards—one a day for several days. I would not be surprised if Gibbons is the only player who sits out the start of the season because of a PED violation. But, we’ll just have to wait and see.
“The fans deserve better,” Vincent told West Palm Beach radio station ESPN 760. “I know that they’ve getting some money from the revenue sharing, the luxury tax and I’m very disappointed.
“Look, they let two wonderful players go and the question is, Why? I mean, Cabrera may be one of the most talented young kids in baseball. That’s very hard for the fans to accept.”
I don’t see this as a bad deal for the Marlins. No matter what size of market you play in, this is the type of move that good organizations make, and I think the Marlins are one of the best in the league (see Chapter 7 of my book). You give up two guys who are about to get very expensive, while your team is very young and you don’t plan to contend next year. Hence, you trade them to a contending team as their rights are expiring for a boatload of prospects. Isn’t this the exact type of deal you are supposed to make? One half of this blockbuster (Willis) was acquired as a prospect in a similar deal.
The Marlins continue their public belly-aching about their stadium situation, and for this I have little sympathy, but that is all it is and the media should ignore it. The team isn’t going to leave, and taxpayers are right not to build the team a new stadium.
This isn’t a fire sale, it’s a good baseball decision from a team that won the World Series just five years ago.