Talking Baseball

Your weekday baseball fix. Some days.

Posted by Dave on Thursday, February 19, 2004

And You Thought I Was Done?!

I strongly believe that this post will bring an end to two things you must be getting tired of hearing analysis about: Coming later, I'll bring my discussion regarding salary arbitration (the main topic in my last two posts, and the topic in a third (Check out our recently-added Archives By Author to your left if you'd like to see them)) to a close. But for the penultimate (find a cooler word, I dare you. It's impossible) topic: From all of us at Talking Baseball, I bid you adieu from our blog, ARod. Quickly, I think it's a good trade for both sides; Hicks gets to recoop some of his financial stupidity and the Yankees tip the scales in their favor in the AL East (There's always that infernal Luck, so I won't prognosticate about the playoffs). I wanted to comment more extensively on something on the periphery of the ARod deal, however. It could have slipped under your radar - it nearly slipped under mine - but Texas signed Hank Blalock to a 5-year, 15 million dollar contract. Immediately, I thought: "And so it begins." Hart did this in Cleveland, as well. He got a nucleus of some quality young players (Albert Belle, Kenny Lofton, Carlos Baerga, Jim Thome, Omar Vizquel, and later, Manny Ramirez) and signed them through their arbitration/free agency years. These signings were a bit dangerous - if the players didn't pan out (all of them did), then Cleveland was stuck paying handsome sums of money to ineffective players (not a good way to spend money in a small market). But, on the whole, these signings are good ideas: You suck it up, take the risk, and you pay these players 3, 4, or 5 years to help shield your team from paying potentially high arbitration or free agency salaries later on. Hart succeeded in doing this in Cleveland - the Indians were consistent winners for the better part of the 90s. The Hart Plan for getting a small-market team to consistently win has since been imitated, but is rarely duplicated. The A's employed a similar strategy with its aces and core hitters, but they are the only favorable comparison to Cleveland. The Twins signed their young players, but not with the same fervor that the A's or Indians did (that's just how good their farm system is). The Brewers, the Pirates, the Reds, and Tigers have all tried to mimic Hart, but as your convulsions (reading the names of so many bad teams in succession is certainly psychologically disturbing) can attest to, these teams have failed quite spectacularly in replicating the success of Cleveland. Who better, than, to repeat the success of Cleveland than Hart himself then? Well, the way I figure it, Hart's at least 1/4 of the way there after signing Blalock to that long-term contract. To complete the quad, Hart must sign Soriano long-term, followed by Michael Young, followed by Mark Teixeira (Please, that's ti - SHAYR - uh, and 26 HRs in his rookie season? Sign me up!). It remains to be seen whether Laynce (Where'd that Y come from?!) Nix or Ramon Nivar are solid enough to merit the long-term bucks. That core of 4 players looks like a solid middle-of-the-order, and I would not want to see the Rangers lineup in 3 years if those four guys are still around. To be honest, it's scary enough as is.

I was in the car tonight, driving home to Worcester, MA (an hour West of Boston) from a great night in Belmont, MA (just outside Boston) with some buddies and my girlfriend from school (yes, even baseball junkies can have wonderful girlfriends), and I was thinking. Just...thinking. I do it a lot. It appalls me when people tell me that they "don't like thinking" or that they "hate doing things that make them think." Why forego the activity that makes you most human? I digress. Anyways, I think of all sorts of stuff while thinking. Most stuff are things I'm intellectually curious about. Why do I go to school if I'm reasonably certain I'd be happy subsisting on a meager salary? How do police officers decide who to ticket (I think about this one a lot and I'm thinking about writing my thesis on it)? Why buy one present for someone if I have a particularly low discount rate (I value the future nearly equivalently to the present) - why shouldn't I just buy them multiple presents and give them the utility of owning the presents for a longer period of time (in addition, this would preclude me from buying presents later)? And, tonight, since it was Posting Night (the most burdensome night, but simultaneously the best night of the week), what am I going to write about? Of course, I started to think about salary arbitration again. Johan Santana recently received 1.6 million from the arbitors. You'd like to think that you could infer the result of the case, given the "objectivity" in arbitration, but you can't. He lost. Anything is possible in the backwards world of salary arbitration. This guy missed out on about 10 starts by my estimation, mostly because the Twins were too idiotic to place him in a starter's role to start the season. Even though he missed those 10 starts (he totalled only 18 starts), he still went 12-3 with 169 K's and a 3.07 ERA. That means that he bested the 2002 CY Young Award Winner, Barry Zito, in the last two statistics. The worst part is, Santana struck out more batters even though Zito started 17 more games than Santana - nearly double the number of starts (Hint: Don't draft him in fantasy this year, let the other dolts do it). Enough bitching, we know arbitration is a flawed system. Players don't always get what they deserve, and the system does not seem consistent or objective. I've understood this since I wrote that post way back in January. So why am I so bothered by it, even still? Thanks to the car, Hail To The Thief, and the Silence of the Road, I discovered why.

Baseball is inconsistent. There's nothing that infuriates me more than irrationality and inconsistency. It bugs me because anyone with enough self-awareness/intelligence would realize their inconsistent or irrational actions/beliefs and would purge them. It's okay to have these, I'm not going to kill you for them - but it annoys me. My girlfriend hates it when I chide her for her claustrophobia - she hates getting into elevators. Claustrophobia, like most phobias, are irrational. Generally, and especially in elevators, there's nothing that suggests that your presence in an enclosed space increases your risk of being harmed. This is the irrationality that bugs me. Inconsistency? A guy who stays in a hand to try to catch a straight but refuses to stay in hands to catch a flush (in Texas Hold 'Em). It's not only harder to catch a straight, but a straight is worse than a flush. In other words, if you're the kind of person that tries to catch straights (this kind of person is not a good poker player), then you should be the kind of person that tries to catch flushes. Those examples of irrationality and inconsistency are not paradigm examples, but they're adequate.

Why is baseball inconsistent? Its simultaneous adherence to a form of capitalism (especially relative to the other professional sports) and to practices that are completely antithetic to capitalism (salary arbitration and the evolution of the reserve clause). Capitalism is especially prevalent in baseball as compared with football and basketball. Football restricts the strongest markets by making them share their revenue with those that are less fortunate. In this fashion, all teams are working within roughly the same financial means. Some might even describe the NFL as socialist. The NBA employs a more powerful luxury tax than the MLB. If you exceed the 52.5 million dollar cap, then you must pay, dollar-for-dollar, whatever you exceed the cap by. For example, if the Mavericks had a combined payroll of 72.5 million. They would have to pay their players the 72.5 and would also have to pay the NBA 20 million. This 20 million would be dispersed and disbursed to the financially unfortunate teams equitably. That's a pretty steep penalty, especially when you consider that the luxury tax is aiding your competition. In the MLB, however, there is nothing resembling a cap - unless you consider the luxury tax that's in place a cap. The Yankees proved last year that the "luxury tax" is merely pennies to them. In addition, the threshold is so high that only two teams (Boston has joined the party) are expected to reach it this year. Some "Luxury Tax" - it sounds more like a Gluttonous Tax. In this fashion, however, baseball resembles capitalism most. In capitalism and in America we allow the most successful businesses and firms to rampage around, trampling their competition. In essence, this is what the Yankees do, stomp on their competition due to their geographical superiority (Manhattan is pretty dense, last I checked). The absence of capitalism in football is what will prevent a team from ever winning three Super Bowls in a row (I'm pretty serious, it seems impossible). In addition, like the other major sports, baseball has a system of free agency that allows the player to choose among competitors for his services. This open market system is the fundament of capitalism. Even the playoffs are more capitalistic than basketball and football - only the finest 8 teams venture to the postseason for baseball. In football, 12 get the pleasure, 16 in basketball.

Unfortunately, however, these shining examples of capitalism are juxtaposed with the anti-capitalistic policies like the Reserve Clause and Salary Arbitration. Many of you may not know what the reserve clause is (I wouldn't blame you), it's main form has been gone from baseball for quite awhile. Prior to Messersmith-McNally, players were forced to remain with their original teams indefinitely. There was no free agency and the only method for acquiring coveted players outside your organization was to trade for them. This, from a Primer article:

The first cases of salary arbitration were heard in 1974 under the terms of the agreement between the parties. At that time players were bound to their respective teams by the reserve clause, with none of the free agency rights they enjoy today. Once a player was drafted, he could only negotiate with the team that drafted him until he retired, unless he was traded to or his contract was sold to another club. Each year the player and team would negotiate terms for a new contract. If a player chose not to sign for the offer the team put in front of him, he had no power to receive more compensation for his skills. He could not shop his skills to another team that wanted to hire him. Now, players with six years of Major League service time are no longer bound to their teams by the reserve clause, they can sign a contract with any team that makes them an offer. Prior to six years players still are subject to the reserve clause. In 1974, prior to Messersmith-McNally, the seminal case that created the free agency right for players, the salary arbitration system was the only way for players to put additional pressure on clubs that did not offer contracts that were acceptable to players.
Before 1974 there was no capitalism, in fact, the reserve clause resembled thirty (well, there were a lot less MLB teams then) monopolies! Players were bound to their specific teams - for life, if the owners and GMs pleased it. The players finally garnered some freedom in 1974. Now, they only need to wait six years to get their freedom. In the NFL and NBA, you need only wait 3 years to get your freedom. Three years isn't too long - most NBAers are still 2 or 3 years from their prime when they get their freedom - but six years?! Baseball players are generally exiting their prime, heading into the twilight of their careers. They're missing out on some of their chances to be rewarded most because the diluted reserve clause is forcing them to be bound to their ballclubs. In nearly all walks of American life, labor is fungible. Unless you're under contract, no one has a claim to you. Imagine if you finished working a year at Salomon-Smith Barney in Boston and you wanted to leave for a better job at AG Edwards in New York. If you were subject to baseball's rules, you couldn't do it - you'd be stuck working with Smith-Barney not for 3 years (as in the NBA and NFL), but for six grueling years. That's not exactly in the spirit of capitalism. Granted, neither are the NBA or NFL, but at least they have socialist systems in place so they're not behaving inconsistently.

Salary Arbitration is even more counter-capitalist. As I stated previously, the fundament of capitalism is the open-market system. As I was articulating to Jon last night, capitalism is the best system for ensuring that prices are at what they should be. I gave him the example of 50 people entering a marketplace with 20 bucks and only 10 oranges to buy. The seller of the oranges would raise the price until there would only be 10 buyers - he's maximizing profit. This is just the type of situation that arises every day in a capitalistic society, except you'll have wholesalers bidding on cereals, construction firms bidding on steel, etc. The way the prices get driven up is by having competing buyers haggle over the suppliers' price. Eventually the supplier will relent to an acceptable price, and give up his goods. In baseball's free agency, the players are the suppliers of services (they play baseball well, after all) and the owners demand their services. With players like Greg Maddux, Los Angeles and the Cubbies (kudos to Scott Boras for leaking the story about the Yankees to the press - it's a brilliant ploy by a brilliant agent (I'm serious) to get the most out of the Cubs) bid against themselves to see how much they'd be willing to pay for Maddux. The Cubs really didn't get a bad deal, I may add; If Maddux does not top 400 IP over the next two years (quite possible), then it's merely a 2 year, 15 million dollar deal. Anyways, this is what happens once a player reaches free agency, they are in an open market. Prior to this, however, they're stuck in salary arbitration. Now, to be fair, arbitors aren't charged to give the players "market value" when they enter arbitration, they're supposed to account for performance and precedent (a lot of the latter, it would seem) when determining a player's salary for the upcoming year. But, jeez, why would salary arbitration exist if not to give fair market value? If you're going to bind a player to a team, why not try to at least estimate fair market value. Even if they estimated fair market value, however, they wouldn't actually be finding it. To find fair market value, the players would need to actually be in an open market. Only the teams competing for the services of the players really know how much they're willing to pay on a player - arbitors can never have enough information to understand teams' willingness to pay. That's part of why the open market system is great, the buyers have perfect information about their willingness to pay because they are the ones buying. With Salary Arbitration, however, not only is the player bound to the team (precluding him from the open market), but arbitors don't assign a salary that is fair market value(they use precedence, otherwise Santana would have received much more than 1.6 million this season). Incredibly uncapitalistic.

So, what to do? Well, at the very least, I'd like to see baseball become consistent. This means one of two things:

1. A destruction of salary arbitration and the diluted reserve clause. Or,
2. A more effective form of revenue sharing and/or a salary cap and/or luxury tax.

In the first situation, baseball would embrace capitalism entirely. Unfortunately, while this is generally good for consumers, it is not good for competition. Unfortunately, while capitalism is good for society, it is not great for sports. With full-fledged capitalism, the Lakers and Yankees would win every year and that's no fun for 90% of the fans in those two sports. That's why the NFL and NBA have adopted a more socialistic approach to their economic foundation - it breeds greater competition amongst the teams. Therefore, I fully endorse an improved form of revenue sharing. Maybe baseball should increase the penalties under the luxury tax to mimic the NBA, dollar-for-dollar. Maybe they should lower the threshold so more teams are forced to pay the tax. There are lots of possibilities, but I do know this: A sport is less interesting to follow when two teams have a better pitching staff and lineup than the rest of the MLB combined.

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