Hot Stove Economics and Other Baseball Thoughts

Now that the NBA season is upon us, let’s talk a little baseball. 

Okay, maybe this isn’t what readers in this forum are look for.  Still, I have a few baseball thoughts I wish to share (my next post will offer a few basketball thoughts).

Hot Stove Economics

JC Bradbury – author of the Baseball Economist – has recently released his latest, Hot Stove Economics.  Here is what one person said about this book:

“During the summer and fall baseball fans live and die with the success and failures of their favorite teams. But the source of all this emotion – as J.C. Bradbury demonstrates in Hot Stove Economics – are the decisions made in the winter. Such decisions depend upon the information available to teams and how this is evaluated. Bradbury provides a guide to decision-making that will not only help the fan understand what their favorite team is doing, but also probably help more than a few teams do more to please their fans.”

Okay, that was my comment (which you can find on the book cover).  Here are two more comments:

“J.C. Bradbury is the preeminent analyst of baseball economics in the world.” Tyler Cowen, George Mason University and marginalrevolution.com

“There’s no more complaining that you can’t understand the economics of the game after this book. Bradbury’s clear and entertaining style makes the hardcore economics that drive the game accessible to someone like me, who can’t balance a checkbook!” Will Carroll, Senior Writer, Baseball Prospectus

Beyond these comments, let me just note that this book applies what we know about economics and sabermetrics to the decisions baseball teams make each offseason. So if you really pay attention to the moves baseball teams make in the winter, this book will help you evaluate the decisions you observe.

It is my hope to offer a few more comments on this book in the near future.

The Value of Derek Jeter

Last week I was a guest of Kathleen Hays on Bloomberg Radio. Kathleen and I were primarily discussing the economics of the World Series.  Towards the end of the conversation, though, we turned to the topic of Derek Jeter’s free agency.  And it was then I offered the observation that maybe Jeter wasn’t the best shortstop in the world anymore. One might suspect (if one was smarter than I) that making such a statement on a radio show based in New York was a bad idea.

Although my statement was probably ill-advised (even if I was probably right), it is not the only time I have recently commented on Derek Jeter.  Stephen Dubner – at the Freakonomics blog – recently hosted a Freakonomic Quorum that asked “What’s Derek Jeter Worth?”  More specifically, Maury Brown (founder and President the Business of Sports Network.), JC Bradbury, and I were asked to address the following question:

Given Jeter’s history with and value to the New York Yankees, his pending free agency (at age 36), and the public-relations cost of LeBron James’s very noisy departure from the Cleveland Cavaliers, what kind of deal would you suggest Jeter and the Yankees make?

For our answers, please click on over to Freakonomics.

Expanding Playoffs in the Baseball

Last night was the first game of the World Series.  As everyone expected, the last two teams standing are the Texas Rangers and San Francisco Giants. 

Okay, I find it hard to believe that any people thought before the season started that the Rangers and Giants would be in the World Series last April.  In fact, I doubt many people at the start of the postseason thought the Rangers (the team with the 8th best record in baseball) and Giants (the team with the 5th best record in baseball) would prevail in their respective league playoffs.

What this outcome demonstrates is that the playoffs in baseball have a large random element.  To see this point, let’s note that the team with the best regular season record in the NBA has won the title 15 times in the past 30 years (across all NBA history since 1946-47 the percentage is 48%).   So although the NBA invites 16 teams to the postseason party, the team with the best record still prevails half the time.

In baseball it is a very different story. Since 1995 – the first year eight teams made the playoffs – the following three teams took both the regular season title and the World Series:

  • The New York Yankees in 2009
  • The Boston Red Sox in 2007
  • The New York Yankees in 1998

So it has happened about 20% of the time.  When four teams made the playoffs (1969 to 1993), the best team won 25% of the time.  And I think I once looked and found that when two teams made the playoffs (before 1969), the team with best record won about 50% of the time.

Related to this point… As I have noted before, The Drunkard’s Walk: How Randomness Rules Our LivesThe Drunkard’s Walk: How Randomness Rules Our Lives by Leonard Mlodinow (a wonderful book), contains the following passage relevant to any discussion of predicting the winner in a best-of-seven playoff series.“…if one team is good enough to warrant beating another in 55% of its games, the weaker team will nevertheless win a 7-game series about 4 times out of 10.  And if the superior team could beat its opponent, on average, 2 out of 3 times they meet, the inferior team will still win a 7-game series about once every 5 match-ups.  There is really no way for a sports league to change this.  In the lopsided 2/3-probability case, for example, you’d have to play a series consisting of at minimum the best of 23 games to determine the winner with what is called statistical significance, meaning the weaker team would be crowned champion 5 percent or less of the time.  And in the case of one team’s having only a 55-45 edge, the shortest significant “world series” would be the best of 269 games, a tedious endeavor indeed! So sports playoff series can be fun and exciting, but being crowned “world champion” is not a reliable indication that a team is actually the best one.” (p. 70-71).

With these thoughts in our head, let’s turn to the news that baseball is thinking about expanding its playoffs.   We have already seen that when the playoffs expand the best team had a harder time winning the title.  And with just eight teams in the playoffs, the best team is winning less than 20% of the time.  What if we move to 12 or 16 teams? 

To the extent that competitive balance matters (and this issue is over-emphasized by owners in sports), this move will enhance balance.  Even if the Yankees spending can actually buy regular season wins (and remember, payroll only explains about 20% of the variation in regular season wins), more playoff teams reduces the ability of the Yankees to “buy” a title.  And if baseball expands it far enough… well, the Yankees winning a title might not happen much anymore.

The Playoffs – for the players – is not about the money.

One last thought (and I think I have noted something similar before, but I like this story)…People often complain the modern athletes only care about money.  But the amount of money paid out to the players in the playoffs is relatively small.  A full post-season share for the New York Yankees in 2009 was only $365,052.73.  To put that in perspective, Alex Rodriguez was paid $33 million this past season, or about $240,000 for each of the 137 games he played.  In the playoffs the previous season, though, he only received about $24,000 for each game (or about 10% of his regular-season pay). 

So when you see these players trying hard in the post-season, remember these players are not just motivated by the money.  Many baseball players really like winning baseball games (and hopefully, that isn’t a shocking insight).

- DJ

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