Thursday, January 28, 2010

Something for Everybody: MLB's Mechanism Design 

Continuing my recent Yankees theme ... in a curiously long post on his blog, SI writer Joe Posnanski considers the effect of MLB's playoff structure on the Yankees' performance :
And in that way the expanded playoffs have been genius for baseball — not only because they are milking television for every dime but because the short series have been baseball’s one Yankee-proofing defense against the ludicrous unfairness of the New York Yankees. Hey, if the game is rigged, rig the game. The Yankees spend a lot more money than any other team. As a direct result, they had the best record in the American League in 2002, 2003, 2004, 2006 and 2009. They made the playoffs every single year but one this decade (and going back to 1995). They are the best team with the best players every year — that sort of big money virtually guarantees it.
Stefan Szymanksi made similar observations in his 2007 TSE post, A Measure of Success and Dave Berri in 2006 with Is Revenue Sharing Working? However, Posnanski isn't exactly mollified by the relatively small number of World Series titles. In fact, he sees that as part of the plot:

So, you create a system where the best team doesn’t always win. In fact, you create a system where the best team often doesn’t win. For years the Yankees didn’t win. They lost to Florida. They lost Anaheim. They blew a 3-0 series lead against Boston. They lost to Anaheim again and Detroit and Cleveland — and how could you say that baseball is unfair? Look, the Yankees can’t win the World Series! See? Sure they spend $50 million more than any other team and $100 million more than most. But they haven’t won the World Series! Doesn't that make you feel better?

And this has been the Wizard of Oz slight of hand game that Baseball has been playing for a long time … ignore the man behind the curtain who makes more money off of baseball than anyone else and can buy just about any player he wants. Ignore the absurdity of it all. Just remember: The Yankees haven’t won in a while! Just remember: Anything is possible.

Posnanski's on the mark about the system's effects, but I would turn his sarcastic rant about it on its head. Yes, MLB is having it's cake and eating it too, but rather than nefarious "slight of hand" or "absurdity," it's "surdity". As he later observes, the Yankees dwarf the rest of MLB by their payroll, but this is because they dwarf the rest of MLB in their fan base. If I'm running MLB, do I really want the Yankees (as much as I dislike them) at the same performance level as Kansas City and Pittsburgh over a decade?

The playoff structure isn't outside the system, tricking everyone as Posnanski seems to imply. It's an integral part of he system. If the Yankees lose in the playoffs, I enjoy that maybe as much or more than them losing in the regular season. Whether by design or serendipity, the expanded playoff format reduces their chances of winning it all while not taking them "out of the hunt" more frequently as a more constraining revenue-sharing system would. The large Yankee fan base gets something while non-Yankee fan bases get to see some team take them down with a degree of regularity. To use prevailing econ jargon, it's a very useful design mechanism.

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permalink posted by Brian Goff @ 8:58 AM

Tuesday, January 19, 2010

"Yankee Premium" Updates 

In 2005 I explored the "Yankee Premium, how much of the Yankee payroll reflected a revenue advantage relative to the rest of baseball and how much reflected the ability of NYY players to negotiate away the revenue advantage into their own pockets.

Here's an update for 2009 salary data where I match Yankee players with players from other teams whose productivity are "in the neighborhood" of the Yankee. The question is, what is the pay rate of a comparable players in terms of production and freedom of movement. I'm not using any sophisticated matching technique, so there's plenty of room to quibble, sometimes that that the match is not good enough and sometimes too good. There's not offensive match for A-Rod among third basemen, but someone like David Wright would be much cheaper than Mike Young. Joe Mauer's years of service are much less than Posada, but Mauer is mobile. The point is not any specific match, but the aggregate amounts. Where one player is considered a better fielder, I've tried to compensate with batting stats such as Mike Cameron and Johnny Damon in a position, CF, where fielding matters more.

Player (Salary, Career OPS or ERA, Years)

1B: Teixeira ($20.6, 0.923, 7) Howard ($15.5, 0.961, 6)
2B: Cano ($6.0, 0.818, 5) Kinsler ($3.2, 0.814, 4)
SS: Jeter ($21.6, 0.847, 15) Tejada ($14.8, 0.810, 13)
3B: Rodriguez ($33.0, 0.966, 16) Young ($13.0, 0.798, 10)
C: Posada ($13.1, 0.885, 15) Mauer ($10.5, 0.892, 6)
OF: Damon ($13.0, 0.854, 15) Cameron ($10.0, 0.788, 15)
OF: Matsui ($13.0, 0.852, 7) Werth ($2.5, 0.827, 7)
OF: Swisher ($5.4, 0.869, 6) Hawpe ($5.5, 0.875, 5)
SP: Sabbathia ($15.3, 3.62, 9) Buerhle ($14.0, 3.80, 9)
SP: Burnett ($16.5, 3.84, 11) Fuentes ($8.5, 3.47, 9)
SP: Pettitte ($5.5, 4.20, 15) Garcia ($10, 4.08, 10)
RP: Riveria ($15, 2.25, 15) K-Rod ($9.1, 2.53, 8)


Yankees: $178m Non-Yankees: $116

A close-to-comparable team has a labor market price tag of about 65 percent of the Yankee total for these key positions. In other words, the Yankee players extracted nearly 40% in "rent" above their market values from the Yankees because they are just as aware as anyone else of the Yankee revenue advantage.

My point is not that the players dissipate all of the revenue advantage of the Yankees. Rather, using gross payroll differences vastly overstates the Yankees advantage. The rent capture by players means that the Yankees must spend their money wisely to make it translate into wins, as the period of the 1980s-early 1990s showed.

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permalink posted by Brian Goff @ 11:11 AM