Archive for April, 2010

Collusion?

The MLBPA is making noise about filing a grievance regarding collusion in the free-agent market.

“We have concerns about the operation of the post-2009 free agent market,” new union head Michael Weiner said Tuesday in a telephone interview with The Associated Press. “We have been investigating that market. Our investigation is far along but not yet complete.”

The sides reached a standstill agreement last year giving the union additional time to decide whether to proceed with a grievance against teams alleging misconduct after the 2008 season.

Management denies any violation of the collective bargaining agreement, which states clubs may not act in concert with respect to free agents.

“The free-agent market operated in a manner that was completely consistent with the requirements of the basic agreement,” said Rob Manfred, executive vice president of labor relations in the commissioner’s officer. “I feel confident that the MLBPA will come to the same conclusion when they complete their investigation.”

Agents for players, without going into specifics, have claimed they received multiple similar offers for free-agent clients and have pushed the union to contest the practice.

First, let me comment on the notion that players receiving similar offers is evidence of collusion. If owners were conspiring to hold down wages, it is likely that any offers players received—in the 1980s free agents didn’t receive offers at all—will be similar. But what would happen in a perfectly competitive market? We would expect teams to compete against one another and ultimately settle on offers that are roughly equivalent to their projected marginal revenue products. Thus, we would expect teams to be submitting similar offers to players. The evidence that supposedly damns the owners is also consistent with competitive pricing. Just as gasoline prices at different gas stations fluctuate together with petroleum prices, so too does the amount that different teams are willing to pay players according to each player’s financial worth.

Second, in the 1980s, there is no doubt that the owners were colluding, and they were found guilty of colluding in arbitration. At the time Gerald Scully used his marginal revenue product estimation framework to try to determine if there was any collusion. He found that free agents were earning about 70 percent less than their marginal revenue products, and he suspected that collusion was occurring.

I have my own updated Scully-estimates, so I thought I would take a look at the recent free-agent market to see if I can observe any obvious evidence of collusion in recent free-agent signings. I looked at the past two years of free agents who signed major-league contracts and compared them to their estimated marginal revenue products from production in the previous year to the median difference in salaries. For 2008 and 2009 I find that free-agent hitters received salaries that were about 70 percent of their marginal revenue products; there is no difference between years. For pitchers, in 2008 free-agent pitchers received salaries approximately 13 percent more than their marginal revenue products, and in 2009 they received approximately 70 percent more.

Now, these comparisons are rough. They assume that each player is added to an average team, and thus many free agents likely have higher marginal revenue products than I estimated, because the returns to winning are increasing (players added to winning teams are worth more). This may explain in part why on average free-agent pitchers have been earning more than the marginal revenue products. I also believe that the pitchers are a bit overvalued by the market.

Though the numbers are imperfect, I think they convey some interesting information when compared to Scully’s analysis. In the 1980s, when we know collusion was occurring, players were earning significantly less than their marginal revenue products. When compared to today’s players, the difference is striking. I don’t think the MLBPA has much of a data-driven case here.

The Beckett Extension

The Red Sox and Josh Beckett have agreed to a four-year, $68 million extension that locks up Beckett from 2011–2014.

Beckett is a good pitcher on a good team, but I think the Red Sox overpaid. On an average team, I have Beckett valued at $60 million over this stretch. Given that the Red Sox have been a good team recently, Beckett’s performance is worth more than that now, but I’m not sure it’s a good idea to project the Red Sox’s excellence that far into the future. Furthermore, given that Beckett still has another year on his deal, I think the team should have expected more of a discount before reaching an extension. Beckett’s not a free agent yet, and I think this is about the type of deal he would get on the free-agent market. What’s the rush to sign this deal? Don’t get me wrong, it’s not a horrible contract, but I think the Sox stretched and Beckett should be pleased with his agent.

Opening Day

I realized something about myself this spring: I don’t like Spring Training. I’ve been fooling myself that it interests me for years. It’s not that I’m opposed to Spring Training—players have to practice to get ready for the upcoming season—I just don’t like to watch it. The games don’t matter, the stats don’t matter, and the chatter about it is mostly a waste. What? His swing looks better, he’s got a new training regimen, he’s lost a bunch of weight; I don’t care. I’d rather watch a little-league game, because the outcome matters.

So this year, instead of following the exhibition games in the evening, I checked out Ken Burns’s Baseball from the library. I remember watching the series when it came on originally, and I haven’t seen it since. It is a fun documentary film that is well done. It’s not perfect, and I didn’t agree with the interpretation of some of the reported history, but it was nothing worth complaining about. Every night, I watched a little bit to satisfy my desire for baseball, but I wanted to pace myself through the spring. It was much more enjoyable than any Spring Training game that I could have followed, because the film does such a good job of focusing on the things in baseball that matter. Because the outcomes are known, the uncertainty isn’t there, but Burns is able to keep the drama alive for historic moments with interviews, images, music, and sound effects .

The only time I became annoyed with the documentary is when baseball becomes more than a game in the eyes of the participants. These metaphors for life in baseball just drive me nuts. You could only talk about baseball with your dad? See a psychiatrist. You learned about accepting failure from baseball? You weren’t looking hard enough elsewhere. Home plate is shaped like a house, and the goal of the game is to make it “home”…how beautiful? Alright, THAT’S IT!

I watch baseball because baseball is awesome. Do you need some pretentious excuse to justify devoting 3-4 hours a day watching games? I don’t. Baseball has strategy, baseball has emotion, baseball is entertainment. You don’t need any metaphors. Watch the games, watch the sub-games, and root for your team. Baseball is fun to watch, and some people like it. Let’s leave it at that and watch the games that matter. Enough talk, let’s play ball.