Competitive Balance and the New CBA

Yesterday, ESPN’s Jayson Stark argued, correctly, that Major League Basbeall is more competitively balanced than the NFL or NBA. Although I’d argue that the NHL is the most balanced of any of these leagues, I do agree with Stark that MLB is in pretty good shape as far as competitive balance goes. With a new CBA coming any day now (seriously Selig, let’s get on with it!), I don’t think the question that we should be asking is, “Is there some parity in baseball?” but, echoing Fangraphs, “Is there enough parity in baseball?”

At Fangraphs, Woodrum writes:

The relationship, as we might expect, is loose. An uninspiring R-squared in the 0.17 range tells us payrolls have accounted for 17% of the variation in winning percentages over the last 12 seasons.

Now we reach the philosophical portion of the program, asking ourselves: How much do we really want payroll to effect winning?

The NFL has decided it wants payroll to have essentially no impact on winning, so teams basically trot out the same amount of money every Sunday and hope their money was better-spent. Is that what the MLB wants?

Its a good question. I think that Woodrum is right, as opposed to Stark, to quantify baseball’s competitive balance issues in terms of regular season wins. Stark told me that only the Red Sox and Cardinals have repeated as World Series winners since the Yankee dynasty ended, but I really don’t care all that much. We know the playoffs are random, and that the Cardinals were objectively not the best team in baseball this year. The Phillies lost, but that was due more to bad luck than anything. Over 162 games, we can know who the good teams are and who the bad teams are.

17% is not a high number for any regression. It means that the vast majority of differences in the win-loss record of teams is not explained by how much they pay their players. However, it is a high enough number to keep a team like the Yankees or Red Sox perennially in the playoffs or damn close to it.

As a Yankee fan, its tough to think about competitive balance. We benefit from the current system more than any team, by virtue of having the most money. Our team has missed the playoffs just once in any of our recent memories, and that trend looks to continue into at least the near future. There is no hard cap coming to baseball, and there are few impediments to a smart team spending a bunch of money and winning games because of it. Of course, teams like the Mets can throw money around and not win anything, but that’s the case with any sport.

All that caveated out, how should baseball think about competitive balance. Here are a few rules I think we should follow:

• What goes up must come down, What goes down will eventually come up – Winning teams shouldn’t win forever, and losing teams shouldn’t lose forever. The Yankees are obvious modern examples of this rule breaking down.
• Going up shouldn’t require Superheroes – There will always be one or two Friedman/Beane/Daniels story running around baseball – genius GMs who transform a poor team into something amazing. That’s fine, but I don’t think it should inform the overall state of competitive balance in baseball. I think that the median GM should be able to guide a small-market team to a run at the playoffs.
• Don’t mess with the business incentives – We shouldn’t achieve competitive balance by overly subsidizing the small-market teams using the revenue from big-market teams. This creates horrible incentives. Clubs need skin in the game. This is why a hard cap is a bad idea.

I think its OK for some teams to have a higher winning percentage over a long period of time due to a high payroll. However, I don’t want those teams, including the Yankees, to become sure-fire invincible. The Yankees have been pretty much the only invincible large market team in this decade, although you could make an argument for Boston, and there are scenarios that you could imagine where they are unseated soon enough.

More importantly, I think there needs to be space for teams to make runs at the playoffs after a few years of losing. That’s what the Brewers did this year – they loaded up on players before losing Fielder to free agency and made a run at it. See also the Diamondbacks, last year’s Reds, or even the Rangers. A well-functioning league will see these types of booms happen to small market teams every year. I’d place my bets on the Royals and Nationals to do it next.

These types of outbursts are good, and the common theme between all of them is the MLB draft. The draft is structured to give the worst talent to winning teams and the best to losing teams, thus pushing the bottom up and the top down. The fact that only 17% of variance suggests that this is effective. However, this system could break down, especially as more of the talent poor shifts to international free agents. That’s why I think it’s smart for MLB to try and bring some order to the IFA system, as they are rumored to be debating right now. Furthermore, that’s why I’m semi-open to an argument for a hard-slotting system, although I’m much more enthusiastic about the proposed draft luxury tax that’s also being rumored.

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