Sunday, October 20, 2013

Money doesn’t buy happiness, it buys wins






According to Major League Baseball (MLB), the sport is competitive and balanced, just look at what Bud Selig (Commissioner) had to say, "There's more competitive balance than ever in the history of baseball." While this statement makes a good headline, the truth is, the more money you can spend in baseball, the better your team will be. 

Baseball is one of the few sports without a salary cap. This means each team can spend as much money as they want to build their roster. As you can imagine, larger markets like New York can outspend smaller market teams like Kansas City to get better players. According to Wikipedia, “Several sports leagues have implemented salary caps, [to] ensure parity between teams so wealthy teams cannot entrench dominance by signing many more top players than their rivals.” To investigate further, we must first decide if there is a large salary discrepancy between teams and if teams with higher salaries win more games.   


As you can see from the payroll data, there is an extremely large discrepancy in payroll between teams. This is evident from the very large range and the fact that the payroll average is ~$44,000,000 higher than the median. Pittsburg Pirates GM Bob Nutting had this to say about team payrolls, "Is it easier to build a great club with $200 million than with $75-$80 million? Absolutely.Over the last 4 seasons, the average number of wins by all of the teams who made the playoffs was 93.92. Teams with higher payrolls, in general, have won more games per year than teams with lower payrolls. 




Instead of addressing the salary cap problem, Baseball has chosen to expand the number of available playoff spots from 2 teams (when the sport originated) to the 10 team format we see today. Smaller market teams have a higher chance of making the playoffs because more playoff spots are available. 
 

So, how does a team with a low payroll make the playoffs? It’s a combination of brilliant management and luck. For example, Oakland has made the playoffs 2 out of the past 4 seasons while averaging ~87 wins per season despite having a payroll in 10th percentile.  How have they done this? Through exceptional management and smart business decisions coined “Moneyball”. “[Oakland] buoyed by massive amounts of carefully interpreted statistical data, believed that wins could be had by more affordable methods such as hitters with high on-base percentage and pitchers who get lots of ground outs.”
 

 


 
A sport cannot be considered balanced when the best players earn the most money. The highest spending team, the New York Yankees, spent more money on their team payroll in 2013, than Oakland, Pittsburg, and San Diego have spent on their respective teams in the past 4 years. By repeatedly expanding the number of available playoff spots, MLB has given the illusion of competitive balance but has only created a Band-Aid solution to the real problem which is not having a salary cap.






Link to Original Article:

Payroll & Statistical Data Retrieved From:

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