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Jeffrey Vargas Gango- 2 April 11, 2014

Investment in Americas Pastime over the Years: Evolution of Baseball Economics Baseball is officially known as Americas pastime and has brought everyone closer in times when Americans needed to unite and just get away from it all. The game has evolved in many ways since its creation in order to bring stability, especially in professional leagues. Not only has the game evolved into one of the Americas top played sports but into a business, a business that is constantly expanding. Like any other business, professional baseball leagues all around the world want to gain as much profit as they can and in order to do this these leagues have learned to predict the future performance of an individual using nothing more than old stats and mathematical equations called sabermetrics. Sabermetrics wasnt a big deal when it was created in the middle of the 20th century but since the incorporation of Free Agency in Major League Baseball (MLB), sabermetrics has become much more valuable and has resulted in a radical change in the economics of baseball. Sabermetrics is the use of players statistics in mathematical formulas in order to create new statistics that are supposed to be much more clear and efficient in telling scouts and general managers how players will perform in the near future. Bill James, a baseball writer that actually started writing while he was a security guard at a pork and beans cannery, first introduced Sabermetrics in many of his books. Sabermetrics was created in order to counter traditional baseball statistics such as batting average for hitters and wins for pitchers (A Guide) because many of the traditional statistics failed to provide an accurate report of a players ability and

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potential. James noticed this and decided to attempt to change this but many rejected his ideas because of James background; scouts primarily did not believe that a security guard with no baseball experience could have the ability to scout a player, although, Free Agency has affected this belief and has increased the acceptance sabermetrics. At first fans started rejecting the idea because they believed numbers shouldnt determine a players salary and definitely should be the cause why a franchise player entering free agency shouldnt leave to another team. (Martinez). The fact is that the fans were looking at the wrong numbers leading them to believe that all stats were the same. Reality is that the new and much more advanced stats showed the true production of a player. It wasnt until the success of the Boston Red Sox in 2004 that fans started accepting the process within their own local teams. (Martinez). Sabermetrics have a great influence over front offices of teams trying to rebuild or trying to win it all. The most famous examples of the usage of sabermetrics to develop a team are the 2002 Oakland Athletics and the 2004 Boston Red Sox. These two teams revolutionized baseball with their low spending, yet still managed to make the playoffs, which resulted in the Red Sox winning the 2004 World Series. Billy Beanes (General Manager of the Oakland Athletics) mentality was changed when the 2001 Oakland Athletics failed in the playoffs and in the 2001 offseason, lost many players, most noticeable Jason Giambi, Jason Isringhausen, and Johnny Damon. The Oakland As bounced back by scouting overlooked players and signing those with a high OBP, or on base percentage. Billy Beane signed players with the highest OBP, even if that meant that the players were on base because of walks rather than hits. He thought that men on base would eventually result in more runs and in more wins.

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The Oakland Athletics received a mixture of criticism, especially after they lost to the Detroit Tigers in the American League Divisional Series. Many criticized Billy Beane for following a format for 10 years that wasnt getting them to the World Series and that Oakland should reconsider their mentality because clutch players and clubhouse leaders cant be scouted in statistical form (Steelman). While others agreed with Beane and the idea of do you really need $27 and a half million to play baseball (Palmer). The reason for this criticism is that Billy Beane attempted to replace superstar caliber players with overlooked free agents that resemble the production that was being lost to free agency. Billy Beane was led his team to the postseason. Sabermetrics is used heavily by scouts and baseball fans in order to track the progression of a player for a fantasy team or simply just to know (A Guide). Major League Baseball has learned to track and keep record of many of the saber metric stats although many more have to be solved. Many of these formulas do provide an efficient and accurate prediction while others arent as valid as they seem. The MLB is the Worlds largest baseball league with the biggest amount of talent inside it, many of which are imports. The MLB has this lead because of one huge advantage: The US dollar. There are professional baseball leagues all around the world, such as the Nippon Professional Baseball, the professional baseball league belonging to Japan but these leagues suffer because of the MLBs competitiveness and much higher salaries. Japan has lost a great number of talents to the MLB especially in the last few years that was revolutionized with Hideo Nomo signing with the Los Angeles Dodgers in 1995. Although both leagues have agreed to a Posting System that prevents excessive amounts of Japanese players to leave the NPB as well as provide economical compensation to the team. Nevertheless, since the NPB is considered a AAAA league (because of its high competitiveness, yet not as competitive as the Majors), it

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uses saber metrics to acquire major league players that arent needed in the United States and refuse to sign a minor league deal (Playing Baseball). Most of these players are successful AAA (and sometimes AA) players with little Major League experience. The formulas are also used in the Majors in order to scout international leagues to acquire the elite of the elite from all around the world. These formulas have changed the baseball world in revolutionary ways. Even though sabermetrics is being used internationally, its main use is still in the Majors with Major League free agents. For the first time a scout could predict a players production without having to actually be near him. (Steelman). It has also for teams to effectively pick up players without overpaying, that is if no other teams have also scouted the same player. For the same reason that anyone could scout a player with sabermetrics, baseball players salaries have grown greatly in the last years because if one team doesnt value a player like they should, another team will. (Steelman). For example, in 2009, the Cleveland Indians, the Atlanta Braves, and the Toronto Blue Jays were having a rough time appreciating their free-agents-to-be due to the Great Recession of 2008, but the reloading Yankees didnt let troubled times get in the way of their off season spending, in fact they [spent] more than $420 million on left-handed ace CC Sabathia, first baseman Mark Teixeira and hard-throwing starter A.J. Burnett. (McNeal). The Yankees would eventually win the World Series that year. Although the Yankees excessive spending earned them a championship, that doesnt always happen. In more recent history, the Los Angeles Angels of Anaheim spent an estimated amount of $500 million on 3 players alone and based the salaries of the players on traditional views that said that Albert Pujols and Josh Hamilton still had the skill they had a year ago not taking in

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consideration age and change of scenery, (Neyer) although the predictions have seen to be off by a large margin leaving the Angels out of the play offs since 2009. The Angels are not the only ones who have increased their payroll that dramatically. In fact, in the last 25 years the overall MLB payroll increased nearly 10 times (USA TODAY). The most infamous team to do this is the New York Yankees, which in 2010 their payroll was $206,333,389 (USA TODAY). Even though they were competing against the much richer hated New York Yankees (Steelman) in free agency, the Oakland Athletics, in 2012, once again proved they [were] able to build a club that could compete for a playoff spot (Steelman). Much of the salary rise was due to the lack of sabermetrics and many traditionally-oriented teams started to outbid each other for big time free agents. Sabermetrics wouldnt have been very important to baseball if free agency wasnt approved in the Majors in 1976. Team owners heavily disliked the idea of free agency because they were able to monopolize the lives and contracts of each player. In fact, even if a player didnt re-sign with their team, they would simply not play baseball in the Majors since they owned you, that was the system (McNeal). Another claim players made was the lack of ability to choose where they want to play. Although, the owners contradicted that claim by saying that good players [stay] with a ballclub just about their whole careers they got attached to the community. (McNeal). After a long player strike and dispute between team owners and the Major League Baseball Player Organization, the players eventually won and free agency in American baseball was born. Free agency brought players the freedom to decide where they want to play as well as the ability,

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when negotiating contracts, to start demanding the salary they believe they should earn. (Palmer). These new player freedoms angered team owners because now they would have to compete for players inside their own organization. Many team owners predicted an unbalance in competition because large market clubs would outbid others for talent and dominate (Eckard). Nevertheless, free agency continued and now it is widely accepted but that doesnt change the fact that it indeed harms small market teams since many players chase lucrative contracts and these teams cannot outbid other teams and the only compensation (if any) that is given to the losing team is a draft pick. Although Sabermetrics is being used to find appropriate replacements for superstar players that a team loses while they stay within their budget. Although it seems that Sabermetrics hasnt been working for every team and one can argue that it has served as a catalyst to a decline of a teams production and ability to win games. In 2005, the Houston Astros were the best team in the National League. They had a solid rotation of 3 superstars (Roy Oswalt, Andy Pettite, and Roger Clemens) as well as a powerhouse lineup that included Jeff Bagwell and Lance Berkman. The Astros would advance to their first ever World Series (which they would eventually lose in 4 games to the Chicago White Sox), but after an amazing 2005 season, the Astros saw a major decline from 2006 and on. They would eventually lose Pettite, Clemens, and many other players to free agency. Since then, the Astros havent been to the playoffs and have failed to have a record above .500. The Astros are looking for a comeback in the near future with prospects and overlooked free agents with the use of sabermetrics (Jaffe) and since then, the Astros have been on a steady rise, and even though they dont move out of last place, they win more games every season and eventually will see a huge

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rise in wins and will become a competitive team; Nobody [will be] laughing at them in 2015 or 2016. (Jaffe). Now, you would believe the Astros would get some sort of compensation for losing big stars to free agency, and they did, which is a draft pick in a Compensation Round between rounds 1 and 2 in the annual first player draft. This form of compensation wasnt accepted by many team owners for many years after free agency had been established which caused in 1981 yet another players strike and a division in the Major League offices. Eventually, through negotiation, an agreement was set: free agents were classed as type A and type B free agents. (Free Agency Primer). Type A free agents were superstars that had left a team to pursue a much more lucrative deal. If a team were to sign Type A free agents, they would immediately surrender their first round draft pick to the team that lost the free agent. Type B free agents were stars (not superstars) that basically sign with another team as well. The difference between type A and type B free agents is that when a team signed a type B free agent they still get to keep their draft pick but the losing team gets a pick in the Compensation Round. When teams lost players that are not classified as type A or type B free agents, they receive no compensation. (Free Agency Primer) It wasnt until 2011 that an approval for the removal of this system was set. Players would no longer be classified as Type A or Type B free agents, instead teams now have to give a soon-tobe free agent a qualifying offer ($13.3 million/year as of 2012) (Free Agency Primer) in order to receive a Compensation Round pick when (and if) the players signs with another team. These forms of compensations in the free agency has allowed for the advancement of sabermetrics in the baseball world as well as a radical change in baseball economics. Recently

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we have learned that anything can happen in baseball and a team doesnt necessarily need spend a lot of money in signing players and have the ability to scout equivalent or better replacements through saber metrics although saber metrics is not a crystal ball and is only a close estimate. A team must take into consideration injuries and age to a player. Saber metrics also lacks to define what a clutch player and clubhouse leader is. Even if free agency is a major advantage to large market teams and players, small market teams could still manage a winning season as well as give a chance to overlooked players to have a spot on a major league roster.

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Works Cited

"A Guide to Sabermetric Research." SABR. SABR, n.d. Web. 9 Apr. 2014. Eckard, E.W. Free Agency, Competitive Balance, and Diminishing Returns to Pennant Contention. Economic Inquiry. 2001. Print. "Free Agency Primer." Baseball. About.com, n.d. Web. 11 Apr. 2014. Jaffe, Jay. "Houston has problems but unorthodox approach is still the right one." The Strike Zone SIcom RSS. Sports Illustrated , n.d. Web. 11 Nov. 2013. Martinez, David . "Homerunweb: Baseball books, stats, and more - All About Sabermetrics." Homerunweb: Baseball books, stats, and more - All About Sabermetrics. N.p., n.d. Web. 11 Apr. 2014. Mcneal, Stan et al. Theres no $ in Team. Sporting News. 16 February 2009: 1-42. Print. Neyer, Rob. "Do Angels Pay Any Attention To Sabermetrics? - SBNation.com." SBNation.com. N.p., n.d. Web. 11 Apr. 2014. Playing Baseball in Japan. 2013. Web. 20 September, 2013. Palmer, Pete. The hidden game of baseball: a revolutionary approach to baseball and its statistics. Garden City, N.Y.: Doubleday, 1984. Print.

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Steelman, Aaron. Baseball Science. Region Focus. 01 July 2004: 32. Elibrary. Web. 09 September, 2013. USA TODAY. 2012 MLB Salaries by Team. 2012. Web. 09 September, 2013