Archive for Hot Stove Economics
Here are the most valuable position players in the leagues, according to my estimates. Position players here.
AL Rank Player Team $-Value (MRP) 1 Cliff Lee SEA/TEX $18.94 2 Felix Hernandez SEA $17.13 3 Justin Verlander DET $15.71 4 Francisco Liriano MIN $14.79 5 Jered Weaver LAA $13.73 6 CC Sabathia NYY $13.57 7 Zack Greinke KCR $13.17 8 Jon Lester BOS $13.06 9 John Lackey BOS $10.94 10 John Danks CHW $10.80 11 Colby Lewis TEX $10.56 12 Carl Pavano MIN $10.43 13 Ricky Romero TOR $10.29 14 Mark Buehrle CHW $10.26 15 Gavin Floyd CHW $10.23 16 Joba Chamberlain NYY $10.18 17 David Price TBR $10.14 18 Joakim Soria KCR $10.03 19 Matt Thornton CHW $10.00 20 C.J. Wilson TEX $9.88
NL Rank Player Team $-Value (MRP) 1 Roy Halladay PHI $20.77 2 Adam Wainwright STL $16.51 3 Ubaldo Jimenez COL $15.84 4 Josh Johnson FLA $15.67 5 Matt Belisle COL $15.40 6 Carlos Marmol CHC $13.87 7 Tim Lincecum SFG $13.05 8 Brian Wilson SFG $12.65 9 Jonny Venters ATL $12.62 10 Sean Marshall CHC $12.52 11 Chris Carpenter STL $11.91 12 Billy Wagner ATL $11.60 13 Tommy Hanson ATL $11.46 14 Heath Bell SDP $11.42 15 Chad Billingsley LAD $11.29 16 Clayton Kershaw LAD $11.26 17 Anibal Sanchez FLA $11.19 18 Brett Myers HOU $11.12 19 Matt Cain SFG $11.09 20 Hiroki Kuroda LAD $10.75
Here are the most valuable position players in the leagues, according to my estimates. Pitchers here.
AL Rank Player Team $-Value (MRP) 1 Jose Bautista TOR $21.11 2 Josh Hamilton TEX $19.43 3 Miguel Cabrera DET $18.65 4 Shin-Soo Choo CLE $18.00 5 Evan Longoria TBR $17.67 6 Robinson Cano NYY $17.03 7 Adrian Beltre BOS $16.01 8 Daric Barton OAK $15.28 9 Carl Crawford TBR $15.11 10 Ichiro Suzuki SEA $13.48 11 Austin Jackson DET $12.48 12 Joe Mauer MIN $12.38 13 Nick Swisher NYY $12.35 14 Nelson Cruz TEX $12.04 15 Vernon Wells TOR $11.98 16 Justin Morneau MIN $11.93 17 Nick Markakis BAL $11.93 18 Billy Butler KCR $11.93 19 Paul Konerko CHW $11.91 20 Torii Hunter LAA $11.83
NL Rank Player Team $-Value (MRP) 1 Albert Pujols STL $21.61 2 Joey Votto CIN $20.17 3 Matt Holliday STL $18.04 4 Ryan Zimmerman WSN $17.99 5 Adrian GonzalezSDP $16.64 6 Jayson Werth PHI $16.13 7 Aubrey Huff SFG $15.95 8 Troy TulowitzkiCOL $14.83 9 Carlos GonzalezCOL $14.02 10 Jason Heyward ATL $13.97 11 Ryan Braun MIL $13.81 12 Jay Bruce CIN $13.15 13 Kelly Johnson ARI $13.05 14 Chase Headley SDP $12.19 15 Rickie Weeks MIL $12.14 16 Prince Fielder MIL $11.94 17 Hunter Pence HOU $11.80 18 Chris Young ARI $11.76 19 Chase Utley PHI $11.71 20 Angel Pagan NYM $11.70
Here is a list of some top free agents, and what I project them to be worth in 2011.
— These values are projected based on recent past performance.
— The estimates account for aging and league revenue growth.
— These values are just for 2011. Over a longer term, value will diminish with age, but increase with revenue growth. Revenue growth is stronger than aging decline; therefore, even as players age their value tends to increase. If a player signs a five-year contract, he will typically get more than five-times the value projected in 2011.
— Values assume the player signs with an average team. Players who sign with winning teams are worth considerably more than their value to an average team. Example: Clill Lee is worth nearly $10 million/year more to a top team than an average team.
First Last Last Team 2011 Value (in millions) Adrian Beltre BOS $12.6 Lance Berkman NYY $9.8 Pat Burrell SFG $7.0 David Bush MIL $4.5 Carl Crawford TBR $15.0 Johnny Damon DET $9.5 Jorge de la Rosa COL $6.5 Adam Dunn WAS $10.5 Jon Garland SDP $8.5 Vlad Guerrero TEX $7.5 Orlando Hudson MIN $10.0 Aubrey Huff SFG $11.0 Derek Jeter NYY $9.0 Paul Konerko CHW $9.5 Hiroko Kuroda LAD $8.0 Cliff Lee TEX $18.5 Victor Martinez BOS $10.0 Kevin Millwood BAL $6.5 Carl Pavano MIN $9.5 Carlos Pena TBR $10.0 Andy Pettitte NYY $6.0 Scott Podsednik LAD $4.0 J.J. Putz CHW $5.0 Chad Qualls TBR $5.0 Manny Ramirez CHW $7.0 Jon Rauch MIN $6.0 Edgar Renteria SFG $5.0 Mariano Rivera NYY $9.5 Rafael Soriano TBR $8.6 Jim Thome MIN $9.5 Juan Uribe SFG $7.0 Jayson Werth PHI $14.0 Jake Westbrook STL $7.0
That’s the question Ken Rosenthal tries to answer. The Florida Marlins supposedly offered Dan Uggla a four-year, $48 million extension that he turned down. Like the team, I am a bit surprised that Uggla didn’t accept. I estimate Uggla to be worth approximately $51 million over the next four years ($12.75 million per year). That’s in the same ballpark as the Marlins’ offer, plus Uggla still has another year of arbitration, when he will likely get a little less than his market value.
Rosenthal suggests the following answers.
Uggla, the only second baseman in history with four 30-homer seasons, has slightly lower rate stats than outfielder Jayson Werth over the past three years, but more home runs, extra-base hits and RBI. Werth, a free agent, almost certainly will command more than four years, $48 million.
I have Werth valued at $4–5 million more per year than Uggla. If this is what Uggla is waiting for, he probably shouldn’t hold his breath.
A four-year deal for Uggla would amount to a three-year extension on top of his final year of arbitration, making him a free agent at 34. Uggla likely would seek at least a five-year contract as a free agent after next season, delaying his next deal to 36.
That’s true, but the future market will account for his depreciated value as he ages. Also, he risks having an awful season in 2011 that could raise uncertainty about his future performance. That’s an awfully big gamble to take for a few more million dollars. This contract would be more than triple his current lifetime earning as a baseball player.
While the Yankees, Red Sox and Phillies are among the high-revenue teams that wouldn’t pursue a second baseman in the 2011-12 market, Uggla also could play third base and outfield, increasing his options.
While I don’t think a position switch is necessarily in his future, he would be worth more to a winning club. It may be that he’s willing to hold out for free agency in the hope of grabbing on with a perennial winner that will value him more than a merely-decent club like the Marlins. Or maybe, he wants assurances that if he signs, he won’t be traded to somewhere else in an attempt by the Marlins to capture some of his added value to winning clubs.
Who knows what really is going in in these negotiations, but I think the Marlins have a pretty good offer on the table.
Free agents have now hit the open market. Welcome to the hot stove league!
A year ago, I posted a list of “hot stove myths.” I have since expanded on why these commonly-stated beliefs are mistaken in my new book Hot Stove Economics. As the hot stove season kicks off—and because it seemed to really piss a few people off the last time—I thought I’d repost with a few updates and links to further explanations.
GMs can buy low and sell high — So, let me get this straight: you think you know when a player is playing above or below his true ability—usually due to a small sample or by using a SGT-approved metric instead of a mainstream statistic—but guys who make a living in baseball completely miss it. For this to work, the GM on the other team has to be a colossal moron. GMs have made mistakes in the past and will make mistakes again, but they’re not dumb enough to act on a meaningless hot/cold streak. You can’t sell high or buy low and profit financially because all GMs understand these things. You don’t have to wait for a guy to get hot to sell him, nor dump him before he gets cold. In addition, the key knowledge of when the peak or trough is doesn’t exist, except in the mind of message board posters. Fluctuations in performance create uncertainty, which affect the price that GMs are willing to pay. (See Chapter 6.)
The number of free agents at a position affects the price of free agents at a position — It seems logical that more free agents at a position will mean more options for teams—even union leader Marvin Miller believed this to be the case. Players act as substitutes and thus a team can pit the players against one another to keep salaries down. The problem with this idea is that the free agents have come from somewhere. A high number of players looking for new teams means that there is a corresponding number of openings that teams need to fill. For example, if there are four good shortstops on the market this means that there are also four openings on teams. The increased supply of players is counteracted by the increased demand by teams needing replacements. (In Chapter 5, I look at the free-agent markets leading up to the 2007, 2008, and 2009 seasons to examine how the size of the pool affected salaries of free agents. It turned out that the impact of the size of the talent pool was not statistically significant.)
Every trade has a winner and a loser — Swapping resources only takes place if both parties are made better off. Therefore, when we observe trades taking place, it’s likely that both parties are doing so because they expect to improve their teams (see the weak axiom of revealed preference, or as I call it: “the useful WARP“). Mistakes happen, but as a general rule, all parties to trades are winners. Who says economists aren’t touchy-feely? (See Chapter 1.).
Players peak at 27 and old players are worthless — My estimates indicate that players peak at 29–30. And just because a guy is past his peak doesn’t mean he’s not valuable. The aging process is gradual, more like the Minneapolis Metrodome than an Egyptian pyramid. If a guy was good last year, even if he’s in his mid-30s, he’ll probably be good next year. Now, the older he gets the more dangerous long-run contracts get, but one- and two-year deals are fine. (See Chapter 3 for a discussion of the flaws in the studies that produced this myth and an explanation my study.)
Other myths in Hot Stove Economics:
Some Players are Clutch — Sorry, folks. Clutch performance is not an identifiable skill that should be valued.
Replacement Players are Cheap and Abundant — Why do you think that a third of the league is composed of “below replacement” players?
Player Salaries Raise Prices at the Gate — The causation is backwards. Sports are normal goods. Prices have risen with consumer demand in a wealthy economy, which has made players more valuable.
College Players are Better Draft Bets than High School Players — The college talent pool may be more certain, but it’s also shallower than the high school ranks.
Congrats to the San Francisco Giants on winning the 2010 World Series. While the winner normally gets a few days to bask in the after-glow of its victory, fans of the loser quickly look to next year, when the runner-up can make tweaks to push the team over the top. The Texas Rangers have a few offseason issues, but right now I want to focus on their aging designated hitter/ outfielder.
There is no sugar-coating it. Vlad Guerrero had an awful World Series (.071 AVG, .125 OBP, .071 SLG), and the rest of his post-season wasn’t much better…well, actually it was, but a .615 OPS in the ALDS and ALCS wasn’t up to Guerrero’s expectations. It’s too bad, because Guerrero had a nice regular season, and was a big part of why the Rangers won their division. After a subpar season with the Angels, the Rangers took a chance that Vlad would bounce back and be a productive hitter in their lineup, offering him a one-year $5.5 million contract, with a second year option for $9 million or pay a $1 million buyout.
How did this deal shake out? I estimate his 2010 regular-season was worth approximately $8.75 million to an average team, and to a winning team like the Rangers he was certainly worth more. At most, the Rangers will end up paying him $6.5 million for his 2010 services; so, he was a bargain this season. But the real question comes as to what the Rangers should do with his option. $8.75 is only a little less than $9 million. From these numbers, picking up the option ranges from a neutral to a bad idea, but I need to make a few corrections.
First, Vlad is getting older, and he really can’t play the field much at all (as he demonstrated in the World Series). He’s been almost a full-time DH since 2008. But, as he showed this season, he can still hit. Even if we just looked at his 2010 second-half (and I wouldn’t recommend doing so), he had an OPS+ of 107. Yes, he’s getting older, but even into their late-30s, good players continue to be good players.
Also, what about his playoff performance? How much does that tell us about his future performance? Not much information can be drawn from 62 plate appearances. In 2009, he batted a spectacular .370/.393/.593 over 27 plate appearances in the postseason. Were people willing to believe that he would be playing near his peak in 2010 based on this small sample? I doubt it. Several hundred plate appearances over the course of the regular season provide far more information about a player’s ability than a small sample from the playoffs.
I estimate that based on his last three years of performance, adjusting for aging and league revenue growth, Guerrero projects to be worth $7.5 million in 2011. To pick up their option, the Rangers would have to spend $8 million more than they would have to pay him if they declined (triggering a $1 million buyout). On top of this, the Rangers are a winning team, so his play is likely worth more than the option to the team. However, Guerrero isn’t the Rangers’ only option. If they want to re-sign Cliff Lee, or go after free agents like Jayson Werth or Carl Crawford, they may prefer not to pick up the option.
Guerrero may be declining, but baseball talent is quite scarce and valuable. I won’t be surprised if the Rangers pick up his option; and, if they decline, I expect he will sign a comparable deal with another team.
Phillies fan Joe Munley sent me the following question:
With the Phils season now over I’m trying to evaluate where we stand for next year. Jayson Werth, the only power, right handed hitter in the lineup is a free agent and has hired Scott Boras as his agent. The word on the street up here is that the Phils won’t be brining him back since he’s 31 and they have Dominick Brown waiting in the wings. Based on your model for valuing players what do think Werth’s true value really is and would it actually make sense for the Phillies to re-sign him?
Jayson Werth is a great example of how unique player careers can be. He was first-round draft pick who struggled upon entering the league and was plagued by a wrist injury. He’s been traded multiple times and was released by the Dodgers after the 2006 season. In Philadelphia, he played his way from an outfield sub, to a platoon player, to an everyday player and All-Star. He just had his best season at age 31, in a walk year.
I’m not sure whether the injury caused Werth to reevaluate his commitment to the game, he got better coaching, or he just finally figured things out; but, whatever he did, he has become a much better ballplayer in Philly. With the Blue Jays and Dodgers, he posted a .245/.333/.420 (AVG/OBP/SLG) line. With the Phillies, he’s batted .282/.380/.506. So, when projecting Werth going forward, I believe his Philadelphia performance is most relevant. Werth is also an above average defender and can steal bases.
If Werth was younger, a six- to eight-year deal might be feasible, but at age 32, I think five years is about as long as any team will be willing to go with him. And just because he’s baseball-old doesn’t mean he’s getting ready to head to the bench. Aging tends to be gradual. I’ve estimated that hitters tend to peak around 29-30. If Werth signed a five-year deal, by my estimates he’d be expected to decline by an average of 1.25% per year over the contract term. This lost value from aging will be counterbalanced some by the expected growth in league revenue. Even though his performance will still be diminishing, that diminished performance will be worth more in the future than it is today.
After combining all these factors, I estimate that Werth’s play would be worth approximately $80 — $85 million ($16 — $17 million per year) over a five-year contract to an average team, and worth even more to a contender. Is this something the Phillies are willing to shell out? I doubt it considering all the chatter seems to indicate that he is gone. But someone is going to give Werth a lot of money, possibly paying him more next year than he has received in his entire career up to now.
That’s the question Stephen Dubner asked me for a Freakonomics Quorum. Here’s a tease:
I see the problem here as one of gathering information about what each party desires in order to foster agreement where there are strong incentives to hold out. I’d prefer to adjust the bargaining framework rather than directly attempt to reconcile revenue expectations that are largely invisible to the other side and the public.
You can read the rest of my answer, as well as the answers from Dave Berri and Maury Brown, at Freakonomics. Thanks to Stephen for asking my opinion.
Brandon Inge and the Detroit Tigers have agreed to an extension that will guarantee the third baseman $11.5 million over the next two seasons. The contract includes a club option for a third year at $6 million, with a $500,000 buyout.
Over the term of his contract, I have him valued between $7-$8 million per season. Good deal for the Tigers, and it provides some security for a veteran nearing the end of his career.
That’s a question that I commented on in today’s Wall Street Journal.
[Cliff Lee] would be worth $21 million or $22 million a year from an average major-league team, according to J.C. Bradbury, author of the book “The Baseball Economist” and a professor at Kennesaw State University in Georgia.
But over his eight career postseason starts, Mr. Lee is 7-0 with a 1.26 ERA, placing him among the most dominant October pitchers in major-league history.
So a big-market team that enters each season presuming it will reach the playoffs would be willing to dig deeper into its pockets to pay Mr. Lee, said Dr. Bradbury and Dan Rascher, a sports economist at the University of San Francisco.
Major League Baseball’s revenue grow by a rough average of 9% each year. Assuming that players’ salaries rise at the same rate, Dr. Bradbury said, Mr. Lee could command as much as $32 million in annual salary over a five-year contract from an elite franchise.
This estimate is based on Lee’s past performance during the regular season. His post-season performance might make him a little more valuable to an acquiring team due to his added star potential, but the main reason he’s going to get a big paycheck is that for the past three years he’s been good no matter when he’s pitched. The first number is based on his addition to an average club, the latter includes his added value to a winning club like the Yankees. The estimates are derived from the same method that I use in Chapter 7 of Hot Stove Economics to project C.C. Sabathia‘s worth at the time he signed his free-agent deal with the Yankees.
Many people feel that New York is Lee’s most likely destination; however, the Yankees face the hurdle of the luxury tax, excuse me “Competitive Balance” Tax.
If they do, the tax’s rate will be 40%. For every $20 million the Yankees might pay Mr. Lee, then, they’d actually be spending $28 million.
“Let’s say another team wants him and isn’t going to have to pay the luxury tax,” Dr. Bradbury said. “If they offer him a $22 million-a-year deal, they’re really paying less money out of their pocket than the Yankees. The Yankees [might] say, ‘To give you $22 million, we’re going to have to spend $30 million off our budget, so it’s not worth it.’ “