A Modest Proposal

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.


Author: JonathanF

Alive since 1956. Braves fan since 1966. The first ten years were pretty much wasted. Exiled to Yankees/Mets territory in 1974 --- bearable only with TBS followed by MLB.TV.

56 thoughts on “A Modest Proposal”

  1. Players added to the 40-man to protect from Rule 5: Alex Jackson, Jacob Webb, Patrick Weigel, and Huscar Ynoa. Webb is 25, but he seems to be increasing his stock. He was Gwinnett’s closer last year. Ynoa isn’t quite Ricardo Sanchez in this regard, but it seems the scouts like him more than his performance would suggest.

    40-man is now at 40.

  2. I guess I’m assuming Adam Duvall was not non-tendered. There was really a valid thought that he might have been on the chomping block, but who were they going to protect at his expense, anyway? They can always non-tender him later if another player commands his spot.

  3. Kirk H. More or less like it is now. You draft players and develop them. You get to keep them until they are free agents or you trade them. Under this proposal, the arbitration period goes away. One possible downside is that player development is essentially your only way out of hole. if you don’t have any players anyone wants, no one will give you any. Rule 5 drafts would still be around as well.

  4. I would think there has to be some sort of points cap system for obtaining players. Instead of dollars or a salary cap, teams would be allotted points or credits to spend towards building out the roster. When players become free agents, their point cost could either be determined by a free market bidding system where teams bid for their services OR the point cost is tied directly to what the player is actually earning. In this way, teams are limited to how many highly sought after players they can obtain via free agency, and it also avoids any one team from favoritism (because we all know certain teams already have a huge international presence and everyone abroad dreams of playing for the DodgersYankeesSox). This would also avoid an actual salary cap, which the players union would never agree to.

    The only thing I would seek to change in baseball is the degree of disparity in spending. If that means more share-the-wealth then so be it. If it means holding every team owner to the fire and forcing them not to pocket baseball funds, then so be it. They should literally run the profit out of MLB.

  5. Jonathan F

    I wish I understood all of it but that was beautifully written, my thanks.

    Good lord, I have thanked an economist.

  6. Kurt Suzuki. Something must have happened to his priorities in the last 15 months.

    Towards the end of the 2017 season he was quite openly saying that was it for him, he was going to retire and join his family in the Pacific N.West whom he hardly got to see in the regular season. Enough already.

    We had written him off with some chagrin when someone must have worked the charm button and it was announced he would be back with us for one more year.

    Fair enough, we were happy, but what to make of what’s just happened? And for TWO years!

    What would an economist answer? Ten million dollars. While you still can. The legs on their last hurrah. He’ll take it.

  7. Saw a good explanation on the relationship between Liberty Media and the Braves. Someone was complaining on twitter that LM doesn’t inject money into the Braves, and according to this summary of the relationship they can’t.


    If this summary and its cited source are correct, them Liberty Media can neither accept any cash from the Braves nor inject funds into them. They, in fact, cannot control the Braves at all apart from continuing to own them or potentially sell them (which there is no reason for them to sell). They’re not in any position to approve or decline any deals the Braves would seek to make with free agent players. Yes, the Braves can offer Bryce Harper a 15 year contract if that’s what they want to do, but of course they wouldn’t. The Braves only have their own revenue to work with, which includes stadium, TV, merchandise, and the Battery.

    Anybody with more insight care to offer insights on this that the summary might be missing?

  8. Donny at 9,

    I don’t believe Securities law forbids a parent company from injecting funds into a subsidiary. It does have to be disclosed and published in publicly available filings. So, there is a “practical barrier” (“Liberty Media reports transfer of 35 million to Braves subsidiary to allow an offer to Bryce Harper.”)

    The report doesn’t say how much cash stayed inside the Braves. The cash from Time Warner to Liberty was deposited into accounts of “Atlanta Braves National League Baseball Club, Inc.” Under IRS rules for a “high cash exchange” the cash could not be moved to Liberty (parent doing the exchange) for 5 years (I think). I believe there is something in the agreement with MLB that probably sets that number (maximum permitted transfer, subject to reduction if remaining cash would be less than x).

    Basically, Time Warner overpaid by about 20% to get rid of a potentially annoying and potentially powerful minority shareholder (Liberty) and Liberty saved about 30% by getting paid with Braves Ownership. Effectively, Liberty was assured of a good deal once it closed just on the cash. That the Braves franchise may now be worth 3 to 4 times the value in 07 has been a further blessing to Liberty. Their management doing the Battery deal is a part of that increase, for sure.

  9. The summary is right, for the most part, but (unless there are some details in the agreement with MLB) the lockups and tax implications have long expired. The Braves are an asset of LM. Like any asset, the company can take any actions they like to maximize the value of that asset, including making incremental investments. LM would have to justify those actions to the stockholders in the way that they justify any investment activity, but if they can increase the value of the franchise (which they eventually intend to sell) by $1,000,000 with the investment of $500,000, they are free to do it. If Terry McGuirk could make a cogent business case that he needs some more money from LM for some particular investment, he can make that case. But the article is basically correct that few MLB teams (or any sports franchises for that matter) make very much money in operating profits. But if the value of the franchise goes up even in the absence of operating profits, that’s an investment worth making at the right price to the owner.

  10. So, if the Braves can support a payroll of $160 million based solely on their own revenue but only spend about $115 million, is it safe to assume that the difference isn’t going to Liberty Media? Can it go directly to them?

    As I understand it, the Braves may be being left on the hook for building payments left over from the stadium and Battery construction, but I just wonder what, if any, Liberty Media is directly profiting from in any of this. My sincere hope is that they’re not, they won’t, and they can’t. I prefer that gold bar analogy the TC author used. Is that even realistic, though?

  11. Thanks for the thought experiment, JonathanF. The advantages of your plan are great: getting rid of the big market/small market disparity would be terrific; and eliminating salary dump trades would cheer us all up.

    A third advantage is letting the players collectively determine each player’s salary—that strikes me as much more just than the current system. (Although it is hard to imagine the players through the union making this work, it really would be in the interest of most players).

    Of course this will never happen, but that’s no reason not to dream. Anything that gets the focus away from the off field salary issues and back on the play on the field is great in my book.

  12. 1. Each player as part of his ego wants the best contract. Making their money making a bureaucratic effort of appealing to their playing brethren would extraordinarily change the dynamics of the game.
    2. Unless entertainment is subsidized by government, its revenue model is capatilistic. It is hard for a payment model and a revenue model to diverge.
    3. Whenever unions are involved in setting pay scales, raw seniority is usually a major compensation factor. The current system of young get paid little, old get more chance for more pay was the system the union wanted. It hasn’t worked as well for the older players in the past few years, but the disparity was not created by management as much as by labor.
    4. Every other sport has a “what it costs to field a team” issue. It may be “cap space.” It may be “buying a contract.” So, these issues are everywhere.
    5. The real issues that most people want addressed are (a) more money to young and particularly minor league and DSL players, and / or (b) assuring competitive balance despite market size or structural advantages. This model may help b, but not a.

  13. tfloyd: Thanks
    cliff: 1. I agree, but for the better! The reason I’m quite sure the unions would never agree to this plan is the problem that it makes the natural antagonism between players for a slice of the pie their problem, not someone else’s.
    2. But in this system the pay model is a share of revenue, so the models aren’t really diverging at all.
    3. If somehow the union were *forced* to take this model, I think they’d try out all sorts of crappy allocation schemes, including pure seniority schemes. In my fantasy world, though, it would settle down to something sensible.
    4. Agreed.

  14. I suspect Chuck or Hedy will have better future performance. LaMar, Lamarr, Lamarre: it’s like some weird French verb conjugation.

  15. LaMarre, who turns 30 tomorrow, hit .279/.322/.382 in 180 plate appearances between Minnesota and Chicago, adding a pair of homers, 11 doubles and two stolen bases along the way. That offense, though, was buoyed by a .389 BABIP that looks ripe for regression. LaMarre also whiffed in nearly 30 percent of his plate appearances, further adding some reason for skepticism.

    And we have found our Braxton Davidson replacement.

  16. We can only hope Ryan will be as distinguished as Edwin the organist or Thomas the footballer, but little chance of that.

  17. My understanding is MLB forced a rider in the sales document to the effect that Liberty could never add nor subtract operating capital from the team. This was because Selig was afraid that a disinterested corporate owner would allow its baseball management to spend like drunken Curacaon centerfielders.

  18. I overreacted to the fake NL Comeback of the Year going to Kemp, so I will overreact about this one:

    Jonny had the greatest comeback season of all time!

  19. Derek Dietrich was DFA’ed. I thought he was genuinely worth something to acquire. What do I know…

  20. @28 Dietrich’s non-tender was predicted a while ago. I can’t believe the Braves would not try and pick him up for whatever the Marlins will take. He’s the perfect LH complement to Culby.

    Trade him for Adam Duvall……. LOL…..

  21. Thanks, coop. This sort of thing seems to appeal a lot more to old timers who remember a time when salaries were barely a topic.

  22. I remember when salaries were barely a topic for the 90’s Braves. Yeah, that all changed when Alex Rodriguez agreed to sign with the Braves but then took an earth-shattering offer from the stupid Rangers. It’s never been the same since.

  23. Ryan LaMarre
    ’tis hard to understand what the byan’ criteria are
    is there no App to identify these aughts?
    Soon we’ll risk confusing the Solds and the Boughts.

  24. @30, I like the fact that this proposal attempts to balance removing player salaries from player evaluation, while simultaneously ensuring that players get paid.

    The reason no one talked about salaries in the old days was the reserve clause, which basically turned every player into Le’Veon Bell: you either took the pittance you were offered, or you held out for more money and got vilified.

  25. @33: You’re mostly right, Alex. First, even before free agency, a few superstars earned outlandish (for the day) salaries, as when people marveled that Babe Ruth made more than Herbert Hoover. https://quoteinvestigator.com/2014/12/28/better-year/ Second, while the initial free agent salaries were discussed a lot (including #17, Andy “Channel” Messersmith http://news.sportslogos.net/2013/09/24/nba-considering-player-nicknames-on-jerseys/j-bird-cannon-and-channel-1976-atlanta-braves/) the public discussion of salaries as a fundamental part of player evaluation came, if my fading memory is correct, much much later.

  26. But how does this proposal give individual players any bargaining power? Wouldn’t this just put them in a take-it-or-leave-it situation, like Bell?

    “I would assume they would allocate the pay in a way roughly similar to what’s done now”

    I don’t really see how this is possible. The status quo is a market where teams make guesses about future performance based on the info they have. They have strong incentives to get player valuation right because they’re in competition with each other. Deals are made when player and team agree on a price they both see value in.

    I can think of ways the Union might decide to allocate shared revenue to players, but none of them would be anything like the current market. With the union setting FA prices, there’s no reason they would set them at a point that both player and team see as a value. The union could set a FA’s price “wrong” and no team will pay the price. One reason the market is so useful is that it brings the knowledge of all the dispersed parties together – there’s a lot of information that the market makes sense of that a central planner, as the Union would be here, can’t know.

    I also don’t see how this would necessarily lead to greater competitive balance. On the contrary, my bet is that messing with the market, which is one of the league’s competitive forces, would actually lead to less competitive balance.

    I appreciate the thought experiment, JonathanF! Happy Thanksgiving, all!

  27. @37: Thanks, Jay, and Happy Thanksgiving to you as well. A possible answer is in the arbitration model. Every agent and every team has a model which is able to use the current stats to make comparables for future salaries. Since at the transition, lots of salaries would be fixed by contract, this forms a rich set of comparables and the models can be extended to include the free agent years, which is what Boras et. al. do now to propose pay. That helps determine relative salaries and then the whole scale slides up (probably, though maybe down) to make the total payroll equal the given aggregate payroll.

    “The union could set a FA’s price ‘wrong’ and no team will pay the price.” But no team pays the price! The union pays every player out of the aggregate player revenue pot. The competition for pay is between players, not between teams.

  28. If Jonathan’s scheme were set to pay in arrears, players could be paid for actual production rather than today’s method of betting on the come. Never happen, of course, but pay based on performance might provide a little more incentive than a guaranteed paycheck.

  29. By the way, I left unsaid which team gets a free agent. The clearest method would be an auction in which teams pay draft picks to the team losing the player. Each draft pick would get a numeric value. Variations in this method would allow the player some scope to pick a particular team or set of teams. If the set of teams was too small to make an auction feasible, default draft picks would be used and the player would go only if the loss in draft picks was acceptable to the acquiring team.

  30. coop: I’ve thought about that a lot and I think pay for actual performance is not a great idea, though it has some clear benefits over the present system. First, actual production is too dependent on managerial decisions. Second, I think you’d see a lot of lackadasiacal play to avoid injury. Third, you’ll get guys who swing when ordered to sacrifice and generally carry out personally beneficial strategies rather than team-beneficial strategies, unless of course everyone is paid some complicated function of Win Probability Added. Piecework puts too much risk on the players, IMO. Base salaries plus some incentive clauses, on the other hand, could still be fit in this framework, although a little awkwardly, since one couldn’t specify both the base and the incentives in advance and still meet the payroll bogey.

  31. @36, I think you’re mostly right, except that Babe Ruth was fairly obviously underpaid. (And he was clearly correct that he had a better year than Hoover.) After all, forty-some years into free agency, the best baseball players no longer merely outearn the president — they outearn him by multiple orders of magnitude.

    I can’t challenge your memory, but my impression was that George Steinbrenner’s willingness to pay what it took for free agents started right at the dawn of the free agent era, and he injected salary discussions into the public arena at every opportunity.

  32. @42: I suspect you’re correct that Babe Ruth was underpaid, but the number of players earning multiples of Presidential pay today doesn’t prove it. TV revenues in 1932 were 0. Admission was a quarter or something. They played fewer games.
    Would an free agent auction of Babe Ruth commanded multiples of $80,000? Probably. But almost surely not 50 times. This is partly due to the fact that Presidential pay has risen so slowly. Inflationary increases alone would have moved Hoover’s salary to about $2.8 million per year, instead of the $500K or so they make now.

  33. “The competition for pay is between players, not between teams.”

    But in this scenario, the union, as the employer, faces no competition, and that’s a bad thing. In the current system there’s competition on both sides, among players and among teams. In your proposal, the union faces no competition as the employer. That monopoly power is a recipe for problems.

    And the union would have to make choices about who to hire — how does it choose on the margins? Sure, they’re going to give Bryce Harper a contract this year (but for how many years?) but what about the marginal middle reliever? Just because the union gives a guy a contract, that does not mean a team will want that player.

    “But no team pays the price!”

    This is the problem.

  34. Maybe I wasn’t clear. The teams choose whom to hire. The union has *no* choice. MLB turns over a pot of $billion (which they get from the 30 teams and the national TV contract and digital sales) to the union who then allocates the money amongst the members. The teams also choose the contract lengths. All the union does is decide how much to pay the 1200 players on the 40 man such that the sum of the 1200 salaries is their aggregate pay number.

  35. @28 I don’t think you are wrong. I also believe Dietrich is a great depth addition.

    This is another example why we can’t predict what the Marlins will do, especially what they will do with Realmuto. I still think the chance of us landing Realmuto is remote.

  36. JonathanF,

    Tell me if I’m wrong but it sounds like what you’re saying is basically making MLB a fantasy snake draft league. The players are salaryless — their only measurable value is their playing value, not how relatively underpaid they are.

    How would you allocate the players to the teams? All 30 teams will want Mike Trout. Who gets to have him?

  37. @16 Ryan is a good guy. He is from the same high school that my kids go to. He still comes back to school a lot and does a lot for the kids.He was all state in baseball, football and hockey before going to Michigan. I always thought he was better suited for the NL because he has good speed and is your typical late inning defensive replacement/pinch hitter type. He fits in well with the Dansby/Culberson type look

  38. Sig Mejdal
    rocket science to the Chesapeake et al
    not Fast though
    more time to think,soon they will talk, slow.

  39. @47: The Angels start with Trout since they drafted him, and he signed according to exactly the same minor league salary/bonus structure we have. When Mike can become a free agent, the teams that want him offer to compensate the Angels with a package of future draft picks. If the Angels want to keep him, they compensate the league with a package of future draft picks (spread among the worst teams somehow… I can’t nitpick over the details of a plan that will never happen.) That would work fine unless we give Mike some say over what team he will go to (and I think we have to do that.) My notion (above) is that Mike can present a set of teams he’s willing to play for. If it’s large enough, we proceed as above. If it’s too small to make the auction competitive, we specify some well-calibrated compensation price to serve as a reserve price.

    The key is that the only currency teams have is draft picks, though I would expect under-the-table payments to help shape Mike’s opinion of where he wants to go, Note that rentals aren’t completely eliminated. Mike could still be traded for actual players before free agency came, but when his contract is up, whomever is left holding him is compensated in draft picks.

  40. I’m not sure I 100% follow the plan but it seems like another way to saying that there’s one single employer rather than 30 individual ones? It’s not clear to me how the pot would be divided.

    If we could somehow just make all salary data private, then I think that would help a lot. I don’t need to know that a backup catcher that barely belongs in the league is making $6M a year. I would enjoy the game more if I *didn’t* know that, I think.

  41. It appears that “power” as a skill in and of itself is overvalued in salary and has relatively less value unless it is accompanied by other additive skills.


    I’m guessing that this is one reason why defense is being so highly valued by the Braves/AA. Defense is a skill undervalued by salary but has more additive benefit than just “defense” alone in that it can easily make the entire pitching staff seem better than it’s baselined skillset.

    In this sense, players with limited defensive skills get paid more, say in arbitration, and have a lower market value. That still leaves space for guys like Dickerson that may have been underestimated. I’m sure Cron is who he is but my gut tells me that Dietrich may be another Dickerson or Culberson that were originally underestimated in what they can do. Both Culby and Camargo were expected to regress because they didn’t have a pedigree and or a performance history. I am already starting to see stories mentioning regression for Culby. I don’t think he will.

    The ironic part of all of this is that most trade proposals the Braves are getting seem to be focused on position prospects as opposed to the trove of pitching that could be available. Everyone wants Riley, Pache, or Contreras. This, to me, seems to portend a long offseason where we don’t get the deal we want until Jan/Feb….

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