Justin Bopp takes issue with my defense of the Jayson Werth contract, Rob Neyer went so far as to call it a fisking: however, I think fisking requires snark, I thought it was a polite response. I respond briefly below.
1. Aging – Bradbury contends that aging is “rather flat,” for which his estimate takes account, but doesn’t mention that Werth is a post-peak player getting paid like a player that projects to peak over the next several years.
My aging corrections are based an aging study that I did a while ago. I conducted this study because I found several flaws in current approaches to aging. If I was going to do age projections, I was going to have to do my own. The study is based on historical data and uses statistical techniques designed to handle some tough problems.
My estimate of future performance is not based on Werth being at his peak; if it was, he’d be worth more. Werth is a good player, and even as he declines, he will continue being a good player. This is consistent with findings in the academic literature on aging and athletic performance that humans tend to decline between 0.75 to 1 percent per year after reaching peak performance.
Revenue Projection – He projects MLB revenue growth will remain at 9% through the the life of the contract, in what I presume is to suggest that Werth’s percentage of the Nationals’ total expenditures will go down accordingly.
Werth’s percentage of expenditures to the Nationals will go down, but that isn’t what motivates my argument. In the future, wins will be worth more nominal dollars, therefore his value and expected salary will increase. Teams don’t just spend a set budget like fantasy players, they invest when returns are positive (with caveats). As I said in the post, this is based on historical revenue growth. If we assume revenue growth will be less, he will be worth less. If you want to assume it will be less, go right ahead. I’m basing my assumption on a historical trend.
. Adam Dunn – Probably the best argument in the article, JC takes issue with the idea that the Nats could get the same production for less cost. The idea is that Dunn’s “defense” makes him more valuable to an AL club, but he makes no mention of why paying another player 70 MILLION additional dollars (over an additional 3 years) is a way to leverage that AL/NL value disparity.
I don’t really understand this point. I argued that the salary that Dunn got for the time they would have him will be more than he would be worth to the Nationals over that time period. I estimate that Werth is getting close to his worth, and Dunn would have to be paid more than his worth.
Albatross Contracts vs. Risk of Loss – This last argument has me somewhat stumped, honestly, but the gist of it is that albatross contracts can be mitigated by cutting losses, dealing away good players, and recouping some amount of the contract.
I was arguing that the risk of an albatross contact is somewhat counterbalanced by the contract turning out well and Werth being even more valuable (for example, if the Nationals become a perennial winning team). There are also ways teams can insure against losses by diversifying risky contracts across several players or through direct insurance. And just because a player doesn’t live up to its expected worth doesn’t mean that the loss is equivalent to the entire value of the contract.
Finally, Bopp finishes with the following.
The problem is that the Nationals, for whatever reason, overpaid the current market value.
I see no evidence to support this assertion. Is it because some GMs a said it seems high? Of course, every GM who doesn’t sign a player is going to think the signing GM overpaid, that’s why the player ends up with the team that values him most. It’s what creates winner’s curse in auctions. I’ll call the reverse effect loser’s lurgy (for Harry Potter fans). If I’m a GM who loses out, you better believe I trash the high-dollar signings of other players. While the Nats may have had the high bid, I have no doubt that there were competitive bids on the table, and the Nats didn’t just blindly throw this number out there.
I’ve been reporting my numbers for many players that are signing this offseason. In my book, I compare my estimates to actual salaries paid and find a decent fit. And while I try to maintain skeptical of my own estimates, I think it is interesting to see my numbers fit with a contract like this one.
One final criticism was leveled in the comments by Sky (a frequent critic of mine), but the questions he raise about my model that are mostly addressed in my book. I estimated many alternate models with different estimation strategies to account for potential omitted variables, interactions, outliers, etc. (In particular, I think throwing out the Yankees—a high revenue team and a big player in the free-agent market—would do far more damage than including the team.) Appendix B looks at some alternate estimates, including some that are nested within individual markets. In these models where I control for unique market characteristics, the best estimate continues to be non-linear. When you use models that try and get at team-specific effects, winning and team effects become difficult to disentangle. That is why I use the common-pool estimation procedure.
I don’t care what players make. I’m trying to develop a model to understand why players make what they make. These are my results, and I have toyed with many different models trying to understand what is going on. And I am not claiming that my estimates are objectively correct. In fact, I go so far as to refer to them as “crude,” a term I borrowed from Gerald Scully who developed the first estimates of player worth in the 1970s.