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MLB NEEDS A SALARY CAP!

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Postby WittyC » Wed Dec 06, 2006 3:04 am

GTWMA's argument is sound regarding the price of labor in baseball. Sure, kids in Latin American aren't choosing baseball over American football, but they sure as hell have soccer and even basketball to choose from these days. MLB as an entity is smart to pay their players what they are worth, rather than some low-ball figure that is restricted by an arbitrary price ceiling. Go ahead and make the $10 million is the same as $20 million argument all you want, but if I gave you your choice between the two, I bet I know which one you would take.

And here's the best part:

Not only will attracting the best talent result in having the most exciting athletes on the diamond, but it will naturally increase the CB of the league. More talent to choose from in the same sized league results in a smaller talent gap from the best players to the worst. Even if all the best players are on just a few teams, the difference in talent will still shrink. See: the 2006 Florida Marlins.

The only real problem with baseball is that the 162-game schedule is too honest when compared to other sports. You can't just use smoke and mirrors to make a team seem competitive over 162 games the way you can in 16 games in the NFL.

Baseball shouldn't change a thing, IMO... although a promotion/relegation system in the MLB would be awesome. :-D

Also, in terms of real money, Soriano's contract really wasn't that different from the one Piazza signed eight years ago. Plus, you have to consider that at the end of Soriano's deal, $18 million won't be worth as much as it is now. I guarantee you that everyone involved in that deal realized this, even if most members of the media did not.
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Postby GotowarMissAgnes » Wed Dec 06, 2006 9:35 am

Half Massed wrote:
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.


I'd agree if MLB revenues were not growing rapidly. Player value is determined by their contribution to team performance (effectively their win productivity) and the revenue that those wins provide to the team (marginal revenue in economic terms--in essence, the amount of revenue generated by the improved performance). The rapidly growing revenue means that each win is worth more to a team. And that means each player is worth more So, each player's value over the next 5 years or so (now that the contract runs through 2011) is increasing rapidly.

Doesn't mean some individual owners are not making mistakes, but in general, the market does not seem to be way out of line with player value.
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Postby Althalius » Wed Dec 06, 2006 1:51 pm

GTMA, what do you think the most popular sport is in Latin America? What about Europe? What about the U.S.A? Just guess.
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Postby GotowarMissAgnes » Wed Dec 06, 2006 6:08 pm

Althalius wrote:GTMA, what do you think the most popular sport is in Latin America? What about Europe? What about the U.S.A? Just guess.


Depends on what you mean by most popular.
Most participants? At what age?
Most people attending games?
Largest TV audiences?
Identified as favorite sport in polls?

If I had to guess it's American football in the U.S. and European football almost everywhere else based on most of these measures.
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Postby noseeum » Wed Dec 06, 2006 7:05 pm

GotowarMissAgnes wrote: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.


I suggest you stay awake next time you take one. Again, assertions with no facts. Yes, we all know that the percentage of foreign born players has increased at the same time that salaries have. As I said earlier, correllation does not prove causation.

Instead of name dropping, try fact dropping. And read this:
Link

It is exactly in line with what I said: the increase in foreign born players is caused by continued increases in scouting and development budgets being moved to Latin America. They did more research than me and pinpoint the cause right back to the implementation of the draft in 1965. The draft made it very likely that dollars invested by a team in establishing relationships with and developing American kids would be wasted because the player would likely be drafted by another team.

With the implementation of the draft, it immediately made more sense to develop players in Latin America because you could bring them to your academy by age 12 and sign them at 16, and they could choose you if they wished.

The Blue Jays built the first academy in Latin America in 1977 specifically to build a successful team to evade the draft. It worked, and teams realized they needed to do the same to compete. By 1990, 13 teams had academies in the Dominican Republic. By 2000, 28 of 30 had academies in Venezuela.

Before the draft, teams had similar programs in the US, but they closed them because it was a waste of money discovering someone and giving him the skills to play for another team.

As I said, it's scouting and development dollars that are the leading cause of an increase in foreign players, not salaries. And, as the llinked article shows, the cause of the movement of those dollars out of the country is the draft. The salaries are plenty high to support a very high interest from anyone with the talent to succeed.

Now quit being so smug or provide some basis for your jibber jabber.
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Postby GotowarMissAgnes » Wed Dec 06, 2006 10:38 pm

There aren't mutually exclusive phenomena. The (unpublished) paper you cite addresses ONLY the demand side of the market and offers no test for how much of the changes over time have been driven by the demand or the supply side of the market. What we know from theory, though, is that both demand and supply contribute to the changes. As demand increases, player salaries rise. That player salary rise increases the supply of players, unless you argue there is no price response on the supply side. Further, the growing economic returns to players, over time, increase the number of younger athletes that seek out that field. I've never argued that demand is not part of the explanation. I've merely argued that supply effects contribute, too. Meanwhile, others seem to take the nonsensical position that player salaries have no effect on attracting players--domestic and foreign--to a sport.

The same thing is happening in other sports, too. For example, in Europe a 1995 court decision gave basketball players greater free agent rights, and has driven up salaries. Not surprisingly, there's been an increasing number of American players headed to play there (and I don't seen any Italian basketball academies in the U.S.)

Scully, Rosen, Sanderson, and other papers are not available for free, because they are copyrighted published works. Take a walk to your local academic library or pay for them online and you can read them yourself.

And, I'd be the one teaching the class, not taking it.
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Postby noseeum » Thu Dec 07, 2006 12:27 am

GotowarMissAgnes wrote:There aren't mutually exclusive phenomena. The (unpublished) paper you cite addresses ONLY the demand side of the market and offers no test for how much of the changes over time have been driven by the demand or the supply side of the market. What we know from theory, though, is that both demand and supply contribute to the changes. As demand increases, player salaries rise. That player salary rise increases the supply of players, unless you argue there is no price response on the supply side. Further, the growing economic returns to players, over time, increase the number of younger athletes that seek out that field. I've never argued that demand is not part of the explanation. I've merely argued that supply effects contribute, too. Meanwhile, others seem to take the nonsensical position that player salaries have no effect on attracting players--domestic and foreign--to a sport.

The same thing is happening in other sports, too. For example, in Europe a 1995 court decision gave basketball players greater free agent rights, and has driven up salaries. Not surprisingly, there's been an increasing number of American players headed to play there (and I don't seen any Italian basketball academies in the U.S.)

Scully, Rosen, Sanderson, and other papers are not available for free, because they are copyrighted published works. Take a walk to your local academic library or pay for them online and you can read them yourself.

And, I'd be the one teaching the class, not taking it.


You're truly priceless.

No one has argued this: "Meanwhile, others seem to take the nonsensical position that player salaries have no effect on attracting players--domestic and foreign--to a sport."

You have argued that increasing baseball salaries will attract athletes to baseball instead of other sports. You cited the influx of international athletes as proof of this. I joined in to say that the influx of international athletes is not proof that increased salary attracts more people by showing you that those athletes are the primary result of increased scouting and development by the teams themselves.

You still have not proven that rising MLB salaries contribute to increased supply. Everyone agrees that exceedingly high MLB salaries help make being a baseball player attractive. But you argue that adding $100k increments to the already astronomical comparable salary to other professions has resulted in increased international talent with no proof at all.

Then you site rising salaries in Italian basketball and increased US players in Italian leagues as a related proof. That's proof on my side. These guys still have only one sport they can be professional athletes in. It's basketball. If they can't make it in the NBA or they can make more money in Italy, they might choose that. BUT THEY'RE STILL PLAYING BASKETBALL.

Yes, Latin American players may opt to play in Japan or some other arbitrary baseball league that pays well and doesn't yet exist. But they will STILL BE PLAYING BASEBALL.

Yes, high salaries make baseball attractive.

But you have yet to prove that increasing baseball salaries are the primary reason for making baseball more attractive than other sports, and you have yet to prove that increasing salaries were the main reason for international players coming to the US to play.

Sure, the continued rise of salaries may contribute in some tiny way to Latin American players coming here, but it does not compare to the impact of scouting and development increases in those countries because at its core, people are already plenty motivated to get a job as a major league baseball player.
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Postby The Cow » Thu Dec 07, 2006 1:04 am

Call me crazy, but when Ted Lilly get $40 mil over 4 years. I can't help, but think the MLB system is flawed. Now this is a crazy thought instead of spending $40 mil on Lilly how about giving fans a $40 mil break in the price of tickets. That would be about $2.50 off per ticket for 4 years based on an average attendance of 4 mil per year. Lost in the shuffle of all the big money signings is the fans who continue to pay more per ticket, more per hot dog, more per beer etc... Lets not forget that it is the fans that fund most of the new stadiums by again paying more per beer, per cigarrette etc... I think a salary cap is necessay not to protect the billionaire owners, but to protect the fans. MLB owes it to the fans who have supported their product for years to get a salary cap in place. I mean MLB can pay players 100 mil per year and sure maybe that may attract more talent, but in the end who is going to pay that $100 mil contract? The fans. The fans deserve better. And yes a $100 mil per year contract is not that far fetched at the rate MLB is going.

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Postby Half Massed » Thu Dec 07, 2006 5:00 am

The Cow wrote:Call me crazy, but when Ted Lilly get $40 mil over 4 years. I can't help, but think the MLB system is flawed. Now this is a crazy thought instead of spending $40 mil on Lilly how about giving fans a $40 mil break in the price of tickets. That would be about $2.50 off per ticket for 4 years based on an average attendance of 4 mil per year. Lost in the shuffle of all the big money signings is the fans who continue to pay more per ticket, more per hot dog, more per beer etc... Lets not forget that it is the fans that fund most of the new stadiums by again paying more per beer, per cigarrette etc... I think a salary cap is necessay not to protect the billionaire owners, but to protect the fans. MLB owes it to the fans who have supported their product for years to get a salary cap in place. I mean MLB can pay players 100 mil per year and sure maybe that may attract more talent, but in the end who is going to pay that $100 mil contract? The fans. The fans deserve better. And yes a $100 mil per year contract is not that far fetched at the rate MLB is going.

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Payroll and ticket prices are unrelated. Ticket prices are set to maximize revenue not to balance the costs of payroll. Ticket prices are due to demand. For example even if the Yankees cut their payroll in half, the ticket prices wouldn't drop because the fans would still want to see the game. The demand wouldn't change.

A salary cap would not save fans any money.
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Postby GotowarMissAgnes » Thu Dec 07, 2006 1:11 pm

noseeum wrote:You're truly priceless.

No one has argued this: "Meanwhile, others seem to take the nonsensical position that player salaries have no effect on attracting players--domestic and foreign--to a sport."


Did you write:

noseeum wrote:So no, IMO the salary increase has nothing to do with the increase in Latin players and everything to do with a huge increase in scouting and development staff in those countries.


Both you and Althalius have argued that the effect of salaries on player supply is effectively nil. You've focused mostly on the Latino players, but said just one page above that salary increases had NOTHING TO DO with Latino player supply from


noseeum wrote:You have argued that increasing baseball salaries will attract athletes to baseball instead of other sports. You cited the influx of international athletes as proof of this. I joined in to say that the influx of international athletes is not proof that increased salary attracts more people by showing you that those athletes are the primary result of increased scouting and development by the teams themselves.

You still have not proven that rising MLB salaries contribute to increased supply. Everyone agrees that exceedingly high MLB salaries help make being a baseball player attractive. But you argue that adding $100k increments to the already astronomical comparable salary to other professions has resulted in increased international talent with no proof at all.


No, what I have argued is that the fact that average baseball salary have almost tripled in the last 15 years has attracted more and better talent to baseball. It's not $100,000 increments. It's going from barely one million to what will surely top $3 million this year. The minimum MLB salary in 1977 was $19,000. Now, it's $327,000. Are you really telling me you think that change has had NO effect on Latino ballplayers? You do know they have their own professional leagues, just like Japan?

The one study you cited--unpublished--does not even attempt to address the effect of player salaries as an explanatory factor. The variable that's included in the study to control for the draft and the academies is nothing more than a dummy variable indicating time. While the authors argue that it was changes in the draft and the academies that generate the correlation, they don't include many other factors that are also correlated. Omitted variable bias is a huge problem is this study. Basically, the effect of ANY variable correlated with time left out of this study is going to end up looking like the effect of the draft and the academies.

Like salaries, for example. Between 1970 and 2005, the correlation between percent foreign born players and the average salary is .94 The correlation with the minimum salary is .96. Not having other variables like that in the study makes it impossible to draw any conclusion about the results.



noseeum wrote:Then you site rising salaries in Italian basketball and increased US players in Italian leagues as a related proof. That's proof on my side. These guys still have only one sport they can be professional athletes in. It's basketball. If they can't make it in the NBA or they can make more money in Italy, they might choose that. BUT THEY'RE STILL PLAYING BASKETBALL.

Yes, Latin American players may opt to play in Japan or some other arbitrary baseball league that pays well and doesn't yet exist. But they will STILL BE PLAYING BASEBALL.

Yes, high salaries make baseball attractive.

But you have yet to prove that increasing baseball salaries are the primary reason for making baseball more attractive than other sports, and you have yet to prove that increasing salaries were the main reason for international players coming to the US to play.

Sure, the continued rise of salaries may contribute in some tiny way to Latin American players coming here, but it does not compare to the impact of scouting and development increases in those countries because at its core, people are already plenty motivated to get a job as a major league baseball player.


No, the point about Italy supports my point that athletic markets are global.

As far as I know there is no good study that looks specifically at this issue. But what we do know is that previous studies of baseball markets and economic theory support the notion that higher salaries attract players. There certainly are other factors, but no one can claim on the basis of any evidence that the salary increase had nothing to do with it.
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