The Economics Of Baseball

Major League Baseball is in the middle of its free agency season. The off season is when teams add new players. Each year sees teams looking to fill holes by doling out money to players in an effort to be competitive.

The last couple of off seasons saw a lot of free agents have to settle for deals that were smaller than they thought would be received. Some were complaining of collusion while many felt that the market simply did not have the level of talent as previous years.

This year is completely different. We have seen 3 contracts for pitchers that went for 9 figures. Zack Wheeler got over $100M from the Phillies, Stephen Strasburg re-upped with the Nats for over $200M, and Gerritt Cole took home over $300M from the Yankees.

What is interesting about this off season is we are seeing the economics of baseball in full swing. It really is a game of the haves and have nots. We can also add the category of "not at this time".

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Small market teams always have a tough time competing in this areas since money is an issue. The likes of Miami, Tampa, Cincinnati, and Pittsburgh are excluded from the Winter festivities since they cannot handle 9 figure contracts. Contrast this with the Yankees, Dodgers, Red Sox, and Cubs and we see how life is usually different for those teams.

This year we are seeing the final category in full tilt. The Astros, Red Sox, and Cubs all added World Series trophies to their mantles in the last few years. While this is a great payoff for doing what is necessary, it does not come without a cost. Free agent signings such as Jason Heyward, David Price, and Justin Verlander means these team are on an austerity plan. For the Cubs, this is the second year in a row that the team is basically sitting out the free agent sweepstakes.

Unfortunately, what we are looking at is even the bigger market teams are having to behave like the Marlins of yore. Miami (Florida at the time) won two World Series titles by loading up on talent, only to trade all the expensive players away right after winning.

This is exactly what the teams mentioned are doing. They won their World Series yet have to put guys like Kris Bryant, Carlos Correa, and Mookie Betts on the trade block. The teams simply need to reduce paytoll.

It appears the only ones that can keep spending year in and year out are the Dodgers and Yankees. While they might pull back at times, when there is a player they want, money is no object.

This Winter sees the Atlanta Braves tossing some money around. I expect them to be in a bind over the next couple years. Liberty Media, the owner of the team, is notorious for under funding the team. Even the Washington Nationals, who laid out the money for Strasburg, did so at the expense of retaining their MVP candidate Anthony Rendon. The Nats owner basically said it was one or the other.

We will see how baseball unfolds over the next couple years but it does appear that teams have to make a run at the World Series before unloading some contracts to get back within budget.

It is now the Haves, the Haves-Sometimes, and the Have-Nots when it comes to the free agent markets.

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