I like baseball. But like most baseball fans, I’m selective. I happen to like the game played on the field by two professional teams and managerial game strategy and the performance of humans under stress and the things that go with the 2½ to 3 hours of the game. Lots of other people are interested, sometimes intensely interested, in other aspects of baseball:
- Team Formation. Drafts, scouting, farm performance, 40-man roster construction, trades, free agency, evaluation, etc.
- Players: their lives, their backstories, their scandals, their wives, their lifestyles.
- The Business of Baseball: TV contracts, salary negotiations, agents, stadium deals, ownership transfers, attendance, competitive balance.
While these things aren’t central to my appreciation of baseball, as an economist I have an academic interest in something that underlies all three of these: player compensation. Compensation issues underlie team formation, player interest and baseball business issues, and drive immense amounts of commentary.
I’m an economist, and I guess I’m supposed to be interest in player compensation mechanisms. But I’m not. The players wear numbers on their back, not $$. (Or $$$$$.) Players should be paid, and some of them should be paid more than others, and some of them ought to be really, really wealthy for the enjoyment they bring to people, but when I’m watching a game, I don’t want to think about any of that. But it’s everywhere. Just imagine how many hours of Bryce Harper at-bats this year were devoted to discussions of what he was going to be paid next year. If issues of team formation, his life or baseball business are really important to you, that makes sense, but beyond the sense that Bryce Harper is a really talented player who ought to make a lot of money, I’d rather just watch him play. (And fail to lead the Nationals to the playoffs, but that’s another matter.)
So I started to think: is there some way to get player pay issues out of baseball discussions without compromising the fundamental fairness and incentive purposes of pay? And I think I have one. It’s not one that has any chance of adoption, but hell, it’s the offseason and it might be worth discussing here.
So here’s my idea. The aggregate pot of money going to players is determined in negotiations between the League office and the Player’s union. The player’s union is then responsible for distributing this money between the players in whatever manner they see fit. I would assume they would allocate the pay in a way roughly similar to what’s done now, but maybe not. I don’t care. They might make those salaries public. They might not. I don’t care. What I do know is that players won’t earn any less in aggregate than they do now, and might well earn more. And the relative status of the players within the Union would be determined by the players themselves in a democratic fashion. We like democracy, right?
So what does this solve? At the outset, the bulk of the competitive difference between small market and large market teams goes away. Second, player compensation no longer has any relevance to trades. Trades are made when teams see mutual on-the-field benefits to swapping players. No more salary dumps. Fewer trade deadline rentals, unless the seller gets something of genuine value. Competitive balance is restored: no more luxury taxes.
There are other advantages: the changes in the game which have caused pitching staffs to enlarge have shrunk non-pitcher benches in a way that makes game-time decisionmaking overly restricted. Rosters can’t be expanded (September aside) however, because of the extra compensation that would need to be paid. Baseball now needs 30 man teams, IMO. The negotiations for aggregate compensation would allow (with union permission) larger teams while not increasing revenue outflow over what is sustainable. At the same time, the larger rosters would make ditching the designated hitter easier to do. To the extent that pitchers get shorter stints (as is the trend) very few pitchers would ever come to bat anyway if the rosters were large enough.
The way I think about this is that it’s the best of college football (in terms of team adherence) without the scandal that the players are underpaid. We’ve gotten used to the notion over the last twenty years that the Chipper Joneses of this world, staying with one team his whole career, are, lamentably the exceptions. Players move around because they have to follow the money. Thus the rise of players whose Hall of Fame plaque’s cap is subject to adjudication by the Commissioner.
Player discipline may be difficult without the ability to dock pay. I’m sure it will be for some players. But even here there is an upside in that player discipline won’t really be protested by the union. If some player is suspended, the Union can decide whether to dock his pay or not (and consequently increase everyone else’s pay) as an internal Union matter. Or the player can just get a paid holiday from the team if that’s what the Union decides is best. The same would go for suspensions from violations of drug policies, for example. You can’t play baseball for 50 games, Melky, but whether you get paid or not is not our issue. Take it up with the union. If the non-drug-using players want to support you out of their own pockets, they can.
A major upside is that you make Scott Boras an unknown flunky who negotiates with the Union on behalf of his client. Indeed, under some formulaic compensation schemes you can dispense with him and his ilk altogether.
There are some downsides, of course, beyond the obvious fact that the plan would never be accepted. First, if you allow free agency in any form you’ll inevitably have to contend with teams making secret payments to players. I’m not particularly troubled by this, since the payments would be secret, but that might well undo some of the fairness criteria hypothetically used by the Union in allocating the honey pot of cash. Players will still earn money from local endorsements which might sway them as well. The ability to trade off pay for a shot at a World Series ring will be greatly attenuated.
But the most critical downside is that you constrain the ability of teams to compete for players with the oldest tool in the economics playbook of efficiency: money. If I really, really want Manny Machado, I can pay him enough money that he has to pick me or leave yachts on the table. That carrot will vanish (though note the under-the-table payments above.) To an economist, that’s a bad thing, but not in the context of preserving competitive balance. The capitalist idea is not for Boston to beat Baltimore, but to drive them out of business. By limiting the financial component of competition for talent, you accomplish some competitive balancing (not necessarily all you’d need) as a side effect. My plan leaves highly unspecified what ought to be the length of a contract. When Mike Trout is a free agent, how does he negotiate a long-term contract with the Union? Why should the Union give him a long term contract? What do they get out of anything longer than a one year contract? There are important risk-sharing provisions in long term contracting for free agents and it may be difficult to preserve all of them when you take annual salary off the table and don’t allow a long term commitment to drag down a team’s financial results. My preferred alternative would be to sign free agents to any term the club wanted, but without the ability for the club to take the player off the 40 man until the end of the contract. The penalty for giving Bryce Harper a 20 year contract wouldn’t be financial… it would be in having fewer useful players in the outyears of the contract. I’m sure there are other possibilities as well.
There are also important incentive effects with respect to injury risk. This post is already too long but these issues are resolvable more or less like they are now: players are paid on expectation of performance, not on actual performance. I would hope the Union would maintain that method, but it’s their call.
As crazy ideas go, I think it has a lot going for it. Other than the fact that the union would never go for it, and I suspect that the really rich teams would oppose it (but they oppose anything that helps competitive balance, so suck eggs) what do you folks think? Why not restrict baseball competition to the games on the field? Baseball already has an antitrust exemption which treats the 30 teams for many purposes as if they are one entity. The Union is a single entity representing the labor supply. Why isn’t negotiation between them for an aggregate wage all you need? Maybe you like speculating on player salaries and worrying about whether they’re playing well enough to earn their pay. I like watching baseball. I look forward to any comments you might have.
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