Archive for JC’s Book
Today is the official release date of the paperback edition of The Baseball Economist. This edition has the new low list price of $15—most online stores sell it for around $10—and is updated to include 2007 player values for every player.
Here is a list of some of the topics discussed.
- Why are there more hit batters in the AL?
- What happened to the left-handed catcher?
- What are the best/worst managed organizations in baseball?
- Putting a dollar value on every player in MLB (updated to include the 2007 season)
- How good is Leo Mazzone?
- Big cities vs. small cities
- Scouts vs. stat-heads
- Is MLB a Monopoly?
The book is available at your local bookstore. Here is a list of links to online booksellers.
With spring training underway, the big story for the Atlanta Braves is whether or not the team can sign its star slugger Mark Teixeira to a long-term deal. Teixeira will be a free agent after the 2008 season, and he will play this season for $12.5 million. The word is that the Braves would like to sign Teixeira to an extension soon. Neither Teixeira nor is agent Scott Boras are stupid, and they will only agree to a contract that will approximate his price on the free agent market. Tex might be willing to take a little less now to insure against and injury or simply because he likes playing for the Braves, but his estimated open-market value is a good place to start.
So, what will it take to keep him? Texeira isn’t going to be cheap. According to David O’Brien:
Some believe agent Scott Boras could land Teixeira a six- or seven-year deal worth $25 million or more annually, considering the other contracts that have been handed out in recent years and Teixeira’s age and all-around skills.
Using his past three years of performance, aging, and the growth of MLB salaries (based on the method in my book—paperback out on Tuesday!), I estimate that he will garner a contract of approximately $26.82 million for a six-year deal following the 2008 season. This estimate appears to be in line with the rumors.
I think that the Braves may be able to get him in the low-twenties if they can reach a deal before the season starts. I’m not sure if the Braves are going to be willing to go that high.
Justin Inaz interviews me over at On Baseball and the Reds. Here is an excerpt.
Question: I’ve seen reports critiquing the use of public funds for MLB stadium projects. Hamilton county (through a half-cent sales tax increase) has invested an enormous amount of money into revitalizing the Riverfront area, which has included the construction of the Reds’ and the Bengals’ new stadiums. How do you view these sorts of stadium projects, from the perspective of economic return to the cities or counties that pay for them?
JCB: The economic return is zero. I have not seen a single study that shows a positive impact from such efforts. The state of the research is such that if an economist attempted to publish another economic impact study, that journal editor would reject the study for being redundant. Spending on sports replaces spending that would have happened anyway. The idea that these projects confer financial benefits is a myth. Any positive return to taxpayers is non-monetary.
And you don’t need studies to understand this. I go to about five Braves games a year. It’s been 10 years since the Braves started playing at Turner Field (which was the 1996 Olympic Stadium). The area surrounding the stadium is a dump. It’s the type of place where at night, you run red lights just to get out of the area faster. There are no restaurants, bars, or shops. Those things are inside the stadium. The same is true for many stadiums around the country.
I have no problem with a community reaching a political decision that it will chose to raise taxes because its citizens value having a sports team. But, it really bothers me when people argue that these projects are beneficial. It is time to be honest and say, “if you want to pay $5 more in taxes a year, we can host a team or have a nicer stadium.” As long as everyone agrees that this will cost money, not make it, I have no problem with government choosing to fund such projects.
Thanks to Justin for asking me the questions.
The New York Mets are in the process of acquiring Minnesota Twins ace Johan Santana. The Mets will send the Twins four prospects (Carlos Gomez, Phil Humber, Deolis Guerra, and Kevin Mulvey) if they can reach a long-term extension with Santana. Given what media reports are saying, I think there is little chance that the deal will fall through.
Using my player valuation method, explained in my book, Santana was the 24th most valuable pitcher in baseball in 2007—his worst season since he became a regular starter. In the previous two seasons he was the second most valuable pitcher in baseball (Chris Carpenter and Brandon Webb were first in 2005 and 2006, respectively). It’s no secret that Santana is a stud. What will this bring him with an extension?
Using Olney’s projection of a six-year contract, the model estimates his total worth to be $138 million ($23 million/year)—this accounts for aging and league revenue growth. Essentially, the Mets are signing Santana as a free agent, which is why the Mets gave up so little to acquire him. But the Twins didn’t come away empty-handed; four prospects who have close to zero service time are valuable for rebuilding the team on the cheap. He will earn $13.25 million in 2008, when he will produce approximately $17 million revenue to the team. Thus, the prospects going to the Twins represent the $3.75 million in excess revenue, the right to negotiate with Santana before he hits the free agent market, and the compensatory draft picks the Twins will lose. This is a good deal for both teams, and I can see why the Yankees and Red Sox were unwilling to part with their top prospects.
I look forward to seeing what Santana actually gets. There is no doubt that the Mets are now a much better team. As a Braves fan, this is not good news.
Addendum: You can record your prediction of Santana’s extension at MLB Trade Rumors.
The Baseball Economist has gotten a new cover for the paperback edition. It will be released on February 26. This edition has the new low list price of $15—most online stores sell it for around $10—and is updated to include 2007 player values for every player.
Here is a list of some of the topics discussed.
- Why are there more hit batters in the AL?
- What happened to the left-handed catcher?
- What are the best/worst managed organizations in baseball?
- Putting a dollar value on every player in MLB (updated to include the 2007 season)
- How good is Leo Mazzone?
- Big cities vs. small cities
- Scouts vs. stat-heads
- Is MLB a Monopoly?
It has been hard to think about anything but performance-enhancing drugs for the past week, but I’ll take a break to talk about Carlos Sliva’s new deal. Yesterday, the Seattle Mariners signed Silva to a four-year, $48 million deal ($12 million/year, see comments). The size of the contract surprised some, as The Seattle Times described him as “a league-average sinker-ball pitcher who wins about as many games as he loses.”
Silva had a bad year in 2006—the 38 bombs he allowed was a big part of the problem—but he rebounded in 2007. Taking a three-year average of his worth and projecting it out over the course of his contract—adjusting for aging and salary growth—my model projects that he will generate $45 million ($11.25 million/year) over the next four years. This is close to what he got. It’s not that Carlos Silva is a fantastic pitcher, but what he does on the field is still quite valuable. As baseball revenues rise, so do player salaries.
I’m not a big fan of the M’s use of the free agent market—I think they rely on it too much—but at least they are not overspending. Dave Cameron provides an in-depth look at Silva’s skill set, and I think he’s not all that happy with the signing.
If you are interested, there are a few responses posted to my proposal for removing performance-enhancing drugs from baseball published in Saturday’s New York Times. I further explain my proposal here.
The main complaint is that players will not be willing to rat out one another. I agree that there may be few instances of players selling out specific teammates—though, it seemed to be enough for Judas. My comment that players would have an incentive to police each other was more about players identifying new drugs and methods deception employed by users, which clean players could pass along to the union in order to strengthen enforcement, than squealing. I did not explicitly state this, and I accept the criticism
My proposal is merely a proposal. Though I am nearly certain that what I have suggested will not be a part of a new system, I hope that planners will pay careful attention to the incentives I discuss when they design a new program.
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.
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.
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.