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MLB NEEDS A SALARY CAP!

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Postby Althalius » Tue Dec 05, 2006 1:16 am

First of all, the Japanese example is specious because they have had such a small impact on the MLB. Seriously, outside of a dozen or so players, they are largely excluded. Latin America is a much better example of a situation in which people would be attracted irrespective of a salary cap. With that said, I think many Japanese players sign within a salary cap; that is, few Japanese players would be affected by a salary cap because they simply would not command the highest salaries. This might not be true for Ichiro or maybe Matsuzaka, but I think it's generally true for others. I also think they view it just as a higher level of competition, the chance to play against the best. That alone might incentivize elite players to come to the states. However, none of that matters because my analysis still holds for Latin America.

I'm also not sure what people mean by competition. The best way to test it would be using empirics, setting theory aside. Look at some of the recent playoff teams, and you've got a lot of small-market competitors in the mix (Oakland, Minnesota, Arizona, Florida) and a lot of larger markets not doing as well (LA, Chicago, even the Yankees). I mean if the "theory" that money buys championships is true, then every year the Yankees or the Mets or the Sox should win. Clearly it isn't true.

I'm also not sure what is so good about "competition". What is so good about it? In the everyday sense, competition produces better product, but I'm not sure that's true in baseball where any fantasy player will tell to the best team that could possibly be created is made of the best players, not some interesting combination of players. Do you mean more fun to watch? It doesn't sound then that you need an equitable distribution of wealth, it sounds like you want an equitable distribution of talent. The salary cap and revenue sharing is just a means to that end.

I think the current system solves very well. First of all, good teams should not be punished for doing well or attracting fans. They should be allowed to reinvest as they want. The other thing is that every time you sign a free-agent (using that wealth) or trade for an expensive player, you need to give draft picks as compensation. That means that by ignoring any financial constraint is not in the long-term interest of your team. Take the Yankees. They obliterated their farm system by buying free agents, and they are using older players that can wear down easily.
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Postby Althalius » Tue Dec 05, 2006 1:19 am

GotowarMissAgnes wrote:Yeah, I'm sure the rising interest of Japanese players has nothing to do with salaries. And the issue isn't the absolute level, but how it compares to salaries in other sports. Thanks for playing.


What do you mean, not at the absolute level, but compared to other sports? Athletes are more likely to choose the sport that pays the most?
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Postby GotowarMissAgnes » Tue Dec 05, 2006 2:33 pm

Althalius wrote:First of all, the Japanese example is specious because they have had such a small impact on the MLB. Seriously, outside of a dozen or so players, they are largely excluded. Latin America is a much better example of a situation in which people would be attracted irrespective of a salary cap. With that said, I think many Japanese players sign within a salary cap; that is, few Japanese players would be affected by a salary cap because they simply would not command the highest salaries. This might not be true for Ichiro or maybe Matsuzaka, but I think it's generally true for others. I also think they view it just as a higher level of competition, the chance to play against the best. That alone might incentivize elite players to come to the states. However, none of that matters because my analysis still holds for Latin America.


Your analysis? You offered a quip, not an analysis.

A clear analysis based on economics would certainly show that rising salaries attract a greater supply of players. You might quibble that the elasticity of supply is small once you've already got a high salary (and the average salary isn't 10 or 20 million, it's barely over 2 million). But, I don't think there is ANY doubt that an economic analysis of player supply as a function of player salary would show that higher salaries lead to greater supply, including supply from abroad.

Althalius wrote:I'm also not sure what people mean by competition. The best way to test it would be using empirics, setting theory aside. Look at some of the recent playoff teams, and you've got a lot of small-market competitors in the mix (Oakland, Minnesota, Arizona, Florida) and a lot of larger markets not doing as well (LA, Chicago, even the Yankees). I mean if the "theory" that money buys championships is true, then every year the Yankees or the Mets or the Sox should win. Clearly it isn't true.

I'm also not sure what is so good about "competition". What is so good about it? In the everyday sense, competition produces better product, but I'm not sure that's true in baseball where any fantasy player will tell to the best team that could possibly be created is made of the best players, not some interesting combination of players. Do you mean more fun to watch? It doesn't sound then that you need an equitable distribution of wealth, it sounds like you want an equitable distribution of talent. The salary cap and revenue sharing is just a means to that end.

I think the current system solves very well. First of all, good teams should not be punished for doing well or attracting fans. They should be allowed to reinvest as they want. The other thing is that every time you sign a free-agent (using that wealth) or trade for an expensive player, you need to give draft picks as compensation. That means that by ignoring any financial constraint is not in the long-term interest of your team. Take the Yankees. They obliterated their farm system by buying free agents, and they are using older players that can wear down easily.


I don't disagree with much, except the seeming claim that salary caps and revenue sharing are a means to an equitable distribution of talent. I don't think any good evidence supports that claim, if that is what you are saying.
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Postby GotowarMissAgnes » Tue Dec 05, 2006 2:35 pm

Althalius wrote:
GotowarMissAgnes wrote:Yeah, I'm sure the rising interest of Japanese players has nothing to do with salaries. And the issue isn't the absolute level, but how it compares to salaries in other sports. Thanks for playing.


What do you mean, not at the absolute level, but compared to other sports? Athletes are more likely to choose the sport that pays the most?


Every economic decision is made relatively compared to the opportunities. So, yes, what I am saying is that over time, sports that have greater salary growth will tend to attract more and better athletes, compared to the other opportunities.
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Postby Half Massed » Tue Dec 05, 2006 7:06 pm

The problem here is that the owners have no idea how to spend money in baseball. This is what happened in 1994. The owners asked the players to help them because they had no idea how to work the market and the players refused. With the new deals signed with ESPN and Fox, the owners have a lot of money to throw around and no clue how to use it.

A salary cap won't change the owners incompetent spending. Players will get the same crazy contracts. How many teams think they're just one piece away from competing? They'd still be willing to pay ridiculous amounts to get that player. The teams that need the most help will be penalized because they can't afford to go out and get it. A salary cap would barely affect the small market teams that couldn't get near the cap anyways.

A cap would also penalize success. A team that goes out and gets the pieces they need to win would have to dismantle because they wouldn't be able to afford to bring back their players.

The only way a hard cap would make a positive difference is if it was set low and contracts were restructured, which the player union wouldn't agree with.
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Postby noseeum » Tue Dec 05, 2006 7:40 pm

GotowarMissAgnes wrote:
Althalius wrote:First of all, the Japanese example is specious because they have had such a small impact on the MLB. Seriously, outside of a dozen or so players, they are largely excluded. Latin America is a much better example of a situation in which people would be attracted irrespective of a salary cap. With that said, I think many Japanese players sign within a salary cap; that is, few Japanese players would be affected by a salary cap because they simply would not command the highest salaries. This might not be true for Ichiro or maybe Matsuzaka, but I think it's generally true for others. I also think they view it just as a higher level of competition, the chance to play against the best. That alone might incentivize elite players to come to the states. However, none of that matters because my analysis still holds for Latin America.


Your analysis? You offered a quip, not an analysis.

A clear analysis based on economics would certainly show that rising salaries attract a greater supply of players. You might quibble that the elasticity of supply is small once you've already got a high salary (and the average salary isn't 10 or 20 million, it's barely over 2 million). But, I don't think there is ANY doubt that an economic analysis of player supply as a function of player salary would show that higher salaries lead to greater supply, including supply from abroad.


Why is there no doubt about this? You keep saying it as if it's written in stone but you offer no proof other than essentially, "If it's true for accountants, it must be true for baseball players." Baseball players are not accountants. Accountants can take their analytic and mathematical skills and apply them to dozens of jobs that offer different benefits. With baseball, you're talking about a profession that pays you an exhorbitant amount of money that only a rare few people on this earth possess the right combination of talent, training, and desire to excel at a level to be a professional athlete in one sport. Those skills are by and large not transferable. Very few athletes can play pro level at two or more sports. So few that they're not worth being part of the discussion. The salaries for baseball have been and will always be so high that it will attract plenty of people interested in giving it a go. Same for NFL, NHL and NBA. Plenty of people are willing, but very few have the talent.

The odds of becoming a major league baseball player are pretty much infinitesimal. Yet there are hundreds of players in the minors, on high school teams, and on college teams right now doing everything they can for little or no pay to have a chance at the dream. Most of them will quit having never made it and having never made much money at all. They risk anything and everything for a chance to make it and most fail, yet you contend they are doing all of this because of the increase in salaries. Sure, I agree that the money at the top helps, but I completely disagree that changing the top line from $15 million to $20 million has any impact on a person's decision to give pro baseball a shot. And I disagree even more that salaries in relation to other sports have helped draw athletes to baseball.

By the time someone makes it to the majors, he's committed himself over and over to the sport. Summer leagues and camps. Scholarship in college. Years in the minors. What choice does the player have at this point that would offer him anything near the chance he's got in the majors? He decided to stop playing football at 15 to focus on baseball because he was better at it and had a chance at a scholarship. You get the picture.

Until you can prove otherwise, all evidence tells me there is little to no economic competition between sports for athletes. There is plenty of economic competition within a sport, between teams, for athletes. But that athlete has chosen his job, and he's sticking with it. Show me proof otherwise, except for the handful of multi-sport talented athletes.

Now, for Japanese players, they may have an economic decision to make because they have two choices. Latin players don't. There's only one game in town, and it's MLB. Sure, they may try out Japan but not until their quest to make it to the majors doesn't pan out. Even for Japanese players, though, the pay is far less than MLB.

So far you've offered nothing to show that salary increases in baseball draw more players compared to other sports, yet you keep insisting on it. If you're a pro athlete at the top level, you make a lot of money. You're going to choose the sport which gives you the best chance at becoming making it to the top, which in turn will make you the most money.

If I think I can be a mediocre major league pitcher but a stud quarterback, I'm picking football. I'll make more because I'm one of the best. Maybe the best baseball player makes more than me, but if I chose baseball, I'd be an underpaid middle reliever.

Put what you're saying to the test and it fails. So stop insisting on it unless you can back it up with some facts.
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Postby Althalius » Tue Dec 05, 2006 7:52 pm

I agree. To be honest, I have never taken an econ class, but I think the 15-20 million dollar salary is what is called diminishing marginal returns, by which you see every additional dollar has a smaller effect than say, if you increased the salary from $1 to $2. My point is, yea, salaries are high. $10 million is a lot of money, no matter which way you cut it. Making it $20 million is not THAT much of a change in terms of influencing people to become a baseball player.

The previous poster also has a good point. Baseball players are not like commodities in which production can just be increased as demand increases. There is a finite supply of baseball players out there. If you are good at basketball, you will probably play basketball. If you are good at both basketball and baseball, which is pretty rare, I'd even say that you wouldn't pick the sport that pays more, but the one that you are better at, and the one which you enjoy playing more.

And economics is not necessarily the real world. First, your saying that "A clear analysis based on economics would certainly show that rising salaries attract a greater supply of players." is fallacious since I have shown empirically that it isn't true. If the facts and the theory do not agree, you don't throw out the facts, you throw out the theory. Secondly, baseball players do not behave in purely "rational" manners. Take Aramis Ramirez, for example. He signed for a contract in Chicago when he could have gotten more from another team. Clemens is influenced more by his family than how much he gets paid. Utility, clearly, cannot be measured in purely monetary terms.
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Postby GotowarMissAgnes » Tue Dec 05, 2006 9:42 pm

Half Massed wrote:The problem here is that the owners have no idea how to spend money in baseball. This is what happened in 1994. The owners asked the players to help them because they had no idea how to work the market and the players refused. With the new deals signed with ESPN and Fox, the owners have a lot of money to throw around and no clue how to use it.

A salary cap won't change the owners incompetent spending. Players will get the same crazy contracts. How many teams think they're just one piece away from competing? They'd still be willing to pay ridiculous amounts to get that player. The teams that need the most help will be penalized because they can't afford to go out and get it. A salary cap would barely affect the small market teams that couldn't get near the cap anyways.

A cap would also penalize success. A team that goes out and gets the pieces they need to win would have to dismantle because they wouldn't be able to afford to bring back their players.

The only way a hard cap would make a positive difference is if it was set low and contracts were restructured, which the player union wouldn't agree with.


First of all, that's NOT what the owners asked players to do in 1994.

Second, I'd argue that more than any other time in baseball history we have owners and GMs with a decent idea of market value.
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Postby GotowarMissAgnes » Tue Dec 05, 2006 10:51 pm

I suggest you both take a course in sports economics. There's a long history of economics of sports studies that proves my claim. Some of the earliest work was in the 1950s by Simon Rottenberg. Rosen and Sanderson have a full study on professional sports labor markets on the National Bureau of Economic Research web site. Gerald Scully's work on baseball labor markets is some of the best.

The question you raise is a really basic one. It is whether or not the elasticity of labor supply is positive. In other words, do higher player salaries attract more players? I've seen dozens of studies like Rottenberg's, Rosen's and Scully's, and all indicate that it is. It's also theoretically consistent with almost all economic theory that shows supply curves slope up.

Given that both theory and evidence suggest I'm right, the burden of proof is on you to show that higher salaries do not attract more labor.

It would help the discussion if you steer away from silly arguments about basketball players switching to baseball and misrepresenting average salaries by a factor of 5 to 10.

It certainly takes time for kids in the domestic labor market to respond. The current 2 or 3 sport junior high athlete's decision to choose baseball over football will take close to a decade to impact the market. And, as most economic decisions do, it operates at the margin. The kid who is clearly better at football isn't going to change.

International markets can respond much quicker, as has already happened in Japan, Korea, and Latin America. When player salaries were essentially limited by the reserve clause, few foreign born players were attracted to American baseball. The percentage of foreign born players in baseball was essentially flat from 1960 to 1985, hovering between 7 and 9 percent. Suddenly, as baseball salaries rose rapidly, that percentage has almost tripled, with almost one-quarter of players now foreign born.

The domestic market can also respond quicker at the end of the age spectrum. Rising salaries make it more likely that vets will hang around that extra year or two. Career length has been growing in the 1990s, thanks to both medicine and salaries.

Nevertheless, markets in this area work just like they do elsewhere.
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Postby Half Massed » Tue Dec 05, 2006 11:04 pm

GotowarMissAgnes wrote:
Half Massed wrote:The problem here is that the owners have no idea how to spend money in baseball. This is what happened in 1994. The owners asked the players to help them because they had no idea how to work the market and the players refused. With the new deals signed with ESPN and Fox, the owners have a lot of money to throw around and no clue how to use it.

A salary cap won't change the owners incompetent spending. Players will get the same crazy contracts. How many teams think they're just one piece away from competing? They'd still be willing to pay ridiculous amounts to get that player. The teams that need the most help will be penalized because they can't afford to go out and get it. A salary cap would barely affect the small market teams that couldn't get near the cap anyways.

A cap would also penalize success. A team that goes out and gets the pieces they need to win would have to dismantle because they wouldn't be able to afford to bring back their players.

The only way a hard cap would make a positive difference is if it was set low and contracts were restructured, which the player union wouldn't agree with.


First of all, that's NOT what the owners asked players to do in 1994.

Second, I'd argue that more than any other time in baseball history we have owners and GMs with a decent idea of market value.


Well, that's an extreme simplification, but that was a big issue.

And how can you say this point in history is when the owners have the best grasp of market value? The situation is becoming similar to what happened in the early 90's that helped lead to the strike in the first place. This much salary inflation does not show that the owners know what they're doing.
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