Archive for People

More On Gerald Scully

The New York Times has published an obituary for Gerald Scully.

I recently remembered that I wrote up a post on Scully’s contribution to baseball economics last year. It was published at The Baseball Project, so I repost it below.
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Gratitude (for Gerald Scully)

Curt Flood is an important player in baseball history for his contribution to the current economic climate of major league baseball. Flood is famous for demanding higher wages for himself, and standing up to owners for not meeting his demands. Though he lost his court case, his discontent helped pave the way for the players union to successfully win concessions from owners (such as salary arbitration and free agency) that would boost the baseball player salaries.

Why should we celebrate this man, as The Baseball Project does? These people play a child’s game and make millions of dollars. Flood himself was no pauper—he turned down a $90,000 contract because he didn’t want to play for Philadelphia. Why should we feel sorry for any of these money-grubbing athletes?

The answer lies in the work of economist Gerald Scully. Using economic theory as a guide, Scully viewed Major League Baseball as a monopsonist employer—the sole buyer of a particular type of labor. Being the only organization that purchased major league baseball talent, players had little bargaining room to negotiate their pay. And MLB understood this, enforcing its reserve clause that required players to play for the team that they previously played for, or to play for no team at all. Scully understood that the impact of this relationship between teams and players meant that owners collected a large percentage of revenues that players generated by playing baseball.

Using estimates of team revenues and performance metrics (SLG for hitters and K/BB for pitchers) Scully estimated how much performance affected winning and how much winning affected revenues. Thus, he was able to generate a dollar-value estimate of the revenue that players generate. When he compared what players made to what the players actually earned, the difference was striking. Players earned 90-percent less than the revenue they generated through their play. This means that a player like Flood, who earned around $100,000 year was generating nearly $1 million in revenue. What was at stake was how this was shared between owners and players. It is easy to see why players were upset, owners were profiting from the low salaries of players.

The Andy Messersmith and Dave McNally cases in 1975 finally led to the repeal of the traditional reserve clause, and player wages rose accordingly. Now that players were no longer bound to a single team during free agency, teams compete for players and offer to pay them salaries commensurate with the revenues they expect players to generate.

Gerald Scully published his paper in 1974 in American Economic Review, and it most certainly had an impact on the atmosphere; although, I can’t say how much. In almost any history you read of about free agency, Scully doesn’t receive a mention. There is no doubt that once Scully’s conclusions were published that the reserve clause would soon fall. Either a rogue league would enter the market to pay players higher wages or the courts or Congress would finally be convinced of the damage being done to players.

Players earn high salaries because they possess unique skills that fans will pay to watch. While it is had to sympathize with the plight of wealthy players in their labor struggles with owners, it is important to understand that what players don’t get goes to the owners, who tend to be much wealthier than players.

RIP Gerald Scully

A great pioneer of sports economics has passed on.

Jerry was one of the most prolific, innovative and imaginative economists of our age. One of the most fundamental building blocks of economics is the idea of “marginal product.” Jerry was the first economist to ever measure one. He did it in, of all places, baseball.

He pioneered sports economics and went on to make many contributions in other fields. One of his most important contributions was the “Scully Curve.” Jerry showed that the size of government can contribute to economic growth in a nation’s early stages, but at some point, the size of government becomes a burden – reducing the rate of growth and causing national income to be lower than it otherwise would be.

I never met him, but his work greatly influenced my own. RIP Dr. Scully.

Thanks to Marginal Revolution for the pointer.

Addendum: Further thoughts from Skip Sauer.

My colleague Bill Dougan once told me that he regarded “Pay and Performance” as one of the best pieces of economic scholarship in the last quarter-century, something that I repeat to my students in sports economics classes to this day. Note that we are speaking of economic scholarship, and not just scholarship in the economics of sports. Scully’s 1974 paper is evidence that the study of economics in the context of sport can be important, and make a significant contribution to the discipline as a whole.

Sports history had thus subjected Scully’s model to a stern test, which it passed with flying colors. It is not common for economic theory and evidence to produce an estimated effect that is so clear and so large as was Scully’s (for example, we are still arguing about the size of fiscal multipliers seventy-odd years after Keynes). It is even less common for such an estimate to be tested by events so promptly and directly, and in addition to have these events support the author’s work so convincingly.

A few years ago, I recall hearing Skip say something like this, and I was nearly knocked off my feet at how right he was. Skip also pointed out to me that Scully understood the problems of ERA long before sabermetricians began arguing over DIPS. In 1974, he used strikeout-to-walk ratio to proxy pitcher quality instead of ERA, which would have seemed to be the intuitive choice. Scully knew better.

An Econ Major to Root For

Burke Badenhop gives me a reason to cheer for him.

“I’ve got no problems giving out tax money,” he continues, “as long as it’s earmarked to the right places. That’s what the economy is – allocating proper capital to people who need it, people who are going to make it double, triple …”

What in the name of Alan Greenspan does this 26-year-old pitcher know about capital asset ratio, microfinancing and product differentiation? “Not much,” he said with a laugh.

But he knows plenty more than most baseball players. Badenhop graduated from Ohio’s Bowling Green State University in 2005 with an economics degree and a 3.94 GPA.

“He took four classes from me and got all A’s, and some were tough upper-level courses,” said BGSU economics professor Timothy Fuerst, whom Badenhop credits with sparking his interest in the subject during his freshman year. “One class was on the Great Depression, which is pretty appropriate now.”

Badenhop wrote a term paper on sports economics. “One issue was whether it makes sense to use state money for new stadiums, and I remember Burke was skeptical about using public money,” Fuerst said with a laugh. “You better not tell that to his employers!”

Thanks to Skip for the pointer.

The Economic Impact of Sports Facilities

On Thursday February 26 at 7-8pm Kennesaw State University will be hosting the 10th Annual Grady Palmer Distinguished Lecture. The lecture is open to the public, and I believe that many people in the Atlanta area may be interested in hearing this year’s speaker.

Dr. Brad R. Humphreys of the University of Alberta will be presenting “What Do Economists Know About the Economic Impact of Sports Facilities?” Brad is one of the discipline’s leading authorities on the topic, and my opinions on the Gwinnett Braves stadium issue have been heavily influenced by his research. I encourage anyone interested in the topic to attend. Also, if you want to learn more about the Sport Management program at KSU, this would be a good opportunity to meet some of our faculty and majors.

You can find more information here. If you have any questions about the event, please feel free to contact me.

Speaker: Dr. Brad R. Humphreys
Topic: “What Do Economists Know About the Economic Impact of Sports Facilities?”
Location: Kennesaw State University, Convocation Center, Room 2016
Time: 7-8pm (with reception to follow)
Anticipated Economic Impact to the Community: $0

DePodesta Now Blogging

I believe that Paul DePodesta is the first MLB front-office executive to operate a blog: It Might Be Dangerous. I’m curious as to what he has to say. It looks to be mostly about the Padres, but he welcomes questions. I suggest asking him your advice about how to get a job in baseball. People often ask me for this advice, but I really do not have much to offer.

Freakonomics Posts Bill James’s Answers

Freakonomics has posted Bill James’s answers to reader questions. He even answered my question.

Q: Is sabermetrics the Freakonomic analysis of baseball?

A: There are parallels. What I do was heavily influenced by the University of Chicago economists of the 1960’s. I think Freakonomics comes from the same tradition.

Cool, so we can trace the origins of sabermetrics to the Chicago school of economics.

Bill James at Freakonomics

Bill James is taking questions at Freakonomics. Submit your question in the comments and he may answer it.

Baseball Musings Pledge Drive

David Pinto is hosting his annual pledge drive to support Baseball Musings. Baseball Musings is one of my favorite baseball blogs out there. I check in on it several times a day, and I appreciate all the hard work that David puts in.

David is offering copies of The Baseball Economist to anyone making a premium donation, while supplies last. I encourage you to stop by and make a contribution.

What Is A-Rod Doing?

The latest event in the A-Rod saga with the Yankees is almost too bizarre to believe. Alex Rodriguez opted out of his contract to become a free agent without giving the Yankees the opportunity to negotiate. Supposedly, the Yankees were willing to extend Rodriguez’s deal five years for $150 million in their initial offer. Adding this to the remaining three years and $81 million owed on his current contract, that would guarantee him $231 over the next eight seasons. That translates to $29 million per year, which is about five million less than than I predicted, so I was not surprised that he didn’t think this was enough to keep him. However, I thought it was a bad move to opt out so soon, because the Yankees could up their offer and had the advantage of having the Texas Rangers subsidizing any extension. I assumed that A-Rod was just ready to leave.

Last week, Jeff Gordon argued in the NY Times that A-Rod’s opt out was part of a strategy to make the Yankees respond to competing offers from other team, and that the Yankee’s refusal to negotiate further was not credible. When higher offers came in , the Yankees would cave and match the offer. I disagreed, because of the damage this would do to the Yankees bargaining power in the future. I also felt an actual free agent bidding war wasn’t necessary to determine Rodriguez’s value; the Yankees and Scott Boras could make close approximations and then move on if the numbers didn’t match. But, neither of us anticipated what seems to be transpiring.

Alex Rodriguez is now willing to return to the Yankees for a longer time but for less money per year (ten years and $270 million, according to published reports)—his penance for keeping the Yankees on the hook for $20-30 million dollars that the Texas Rangers would be contributing to his salary had he just extended his deal.

An already wealthy man who has a reputation for being greedy and childish goes through the ordeal of upsetting everyone by opting out to get more, but then returns to get less? Why didn’t he just extend the deal? It’s not like this was a rushed process; it seems like we’ve been discussing the opt-out for years. Going back on a well-planned strategy at this time seems…well, childish and something only A-Rod is capable of doing. It certainly isn’t a move that will endear him to Yankee fans, even if he does make the team better.

There is still the possibility that this is a marketing ploy to up the offers of other free agent suitors. I still think that there is a decent chance that he will sign somewhere else, but the media reports that are coming from all sides make the think that this deal is more likely to go down than not. The end result of this entire process is that a great baseball player who is hard to like is poorer and less-likable than he once was. Nice move, Alex.

ESPN’s Keith Law Interview

Sabernomics readers ought to be familiar with Keith Law, a former member of the Toronto Blue Jays front office who is now the lead baseball analyst for ESPN’s Scouts Inc. Last year, I had the good fortune to meet Keith while scouting Josh Smoker in my neck of the woods. I had a few questions for Keith that I thought might be of interest to others, so I asked him if he would be willing to do and interview, and he obliged.

Here are Keith’s thoughts on working in baseball, ESPN, scouting, sabermetrics, the Braves, and the great tiramisu debacle of 2003.

Every few weeks I get a request from a young baseball fan who wants to work in baseball. What is your best advice for landing a job in baseball?

I’m asked that at least once a week in some form or another. There’s no easy answer; if you haven’t played the game and developed contacts within the industry, it’s hard to break in. It helps to have something baseball-related on your resume to set yourself apart from the thousands of other candidates, something like an internship with a minor league team or work with your college’s baseball team/athletics department. Then just start plugging away, contacting front office people, going to the winter meetings, sending out resumes and cover letters.

What was it like to work in a MLB front office? What did you do? What were your hours?

Toronto’s front office was odd, as was my role, since I worked from home and went to Toronto for a lot of home games until the travel got to be too much. I was primarily the statistical analyst, but was fortunate enough to work with Tony Lacava, who took me under his wing and taught me a lot of what I know now about traditional player evaluation, so I started going out to see amateur players on Cape Cod to try to improve my skills there. I ended up able to at least contribute to scouting discussions on players in our draft room and to submit follow lists to area scouts to let them know which players in their areas looked good/not good on the Cape. I ended up doing a little work in some other areas like arbitration cases, negotiating contracts for zero-to-three players, etc.

How stat-savvy are MLB teams? Is there a stats-versus-scouts war in baseball? I get the impression that this is overblown.

Totally overblown. Doesn’t exist. And I’m seeing more people trying to acquire skills in both areas.

What is wrong with sabermetrics?

I think that the arrogance in the field has gotten worse with time, not better. I thought that as sabermetrics moved into the mainstream, its practitioners would soften – and trust me, I’m not painting all sabermetricians and sabermetric writers with one broad brush – but we haven’t seen that. Statistical analysis is critical to the successful operation of any ballclub. It is far from a complete solution. And we all know that you can argue with statistics by cherry-picking which stats to use, which is part of why I try to use stats only as secondary evidence when I’m writing, using first-hand observation before I rely on data.

What is the biggest misconception that outsiders have of what goes on in MLB front offices?

Without a doubt it’s the assumption that a baseball operations department’s primary function is to assemble the roster. Sign some free agents, make some trades, do the draft, boom, you’re done. There’s a hell of a lot more to those jobs, including a lot of less glamorous work that requires organization and skill and diligence. Nothing makes me lose respect for a writer or reader who says that he could do a better job than GM so-and-so – it’s not an easy job, and as I said in an interview on the Lion in Oil blog, most outsiders would be crying for their mommas after a day or two of doing it.

How do you scout a player when you look at his stats? How do you scout a player beyond the stats?

I can’t even explain how I look at stats now, because I’m just looking for patterns in the data – almost a certain shape to a stat line that reminds me of other stat lines from past players. I don’t have time to do any sort of database work like I used to do with Toronto, which is probably for the best because writing about stats isn’t my job.

Beyond the stats, I’m looking at tools and at projection. What can the player do right now? What will he be able to do as his body develops? What are his fixable flaws? What are his unfixable flaws? And I always try to emphasize the tools that matter (hit & power) over those that matter less (run & throw).

What is your job like for ESPN?

It’s great, but it’s demanding. My mandate is to cover, from a scouting perspective, the top amateur players for the upcoming draft, the top prospects in the minors, and just about all the players in the majors. I go to see games and players so that I can write about them at a later date – in draft previews, in prospect rankings, in trade reactions, in playoff advance reports. So given the broad mandate, I get to set my own schedule as long as I’m seeing who I need to see. I really value that flexibility.

I try to write twice a week, but I’m somewhat at the mercy of the news cycle and the baseball editorial calendar, which is set over a week in advance. So I like having the weekly chats to keep in touch with readers and continue to develop that relationship.

I also do at least one TV hit a week, sometimes as many as five or six, and a lot of appearances on our national radio network or local affiliates. The TV stuff can be done from a little studio about 15 minutes from my house, and the radio stuff I do from the house or hotel room or wherever I am. I try to go to Bristol once or twice a month, at which point they’ll put me through the “car wash”

Which organizations have the best and worst farm systems in baseball?

I haven’t looked hard enough at that to answer it, but I’m pretty sure I’ll rank them all again in January. I can say that Tampa Bay and Texas are the clear 1-2 to me right now.

Now let’s talk about the Braves.

What is your overall impression of the Braves farm system? What do they do right/wrong?

The one task they do best, better than any other club, is mine their local area. It helps that Georgia high school baseball is some of the best in the country – maybe second only to California, but certainly in the top five states with Texas, Florida, and Arizona – but it’s also about the Braves having and using the connections to find the players and convince them to sign rather than going to college.

The Braves could improve their player development in terms of how they get some of their tools players, especially hitters, to develop. Jeff Francoeur is a good example. I’d like to see stronger evidence that the Braves can take the tools players they’re so good at finding and drafting and convert them into star-caliber big leaguers. For the last few years, they seem to have fallen a little short in that regard.

Your opinion on Jordan Schafer seems to have changed. You once compared him to Grady Sizemore, but after seeing him in the Arizona Fall League you were a bit more pessimistic. Why did you change your mind and what do you think his development prospects are?

I saw him in the Arizona Fall League and was disappointed at how short he fell of the hype. The ball comes off his bat well, but the part of his swing leading from his set point to contact isn’t consistent, and it gets long because he loads so deep. I like that he uses the opposite field and I think there’s 25-homer power in the bat, but Sizemore is one of those guys who’s just an obvious star, who stands out immediately when you see him take BP or shag flies. Schafer isn’t like that. That doesn’t mean he’s not a good prospect – he is. But he’s not Sizemore and he’s not one of the ten or fifteen best prospects in baseball.

Who are the Braves prospects to watch?

They’re all in Texas! Okay, that’s an exaggeration. Jason Heyward is the best prospect in that system for my money, at least for the long term, and he could easily turn out to be the best or second-best player in the 2007 draft class. I liked Brandon Hicks as a little sleeper in this draft – good defensive shortstop with an outside chance to hit a little. Cole Rohrbaugh is interesting, fastball sits plus, has a wicked curveball but it’s a spike, which is very hard to command. Gorkys Hernandez may never have much plate discipline but he’s a plus defensive outfielder who should make a lot of contact. And I like Daniel Elorriaga-Matra as a good defensive catcher with plus makeup who should at least turn into a big league backup.

Do you expect the Braves to change any of their operations with Frank Wren taking over John Schuerholz’s GM duties?

Everything I’ve been told sounds like the answer is no. Status quo.

Jeff Francoeur, what is the deal with this guy? What is he going to become?

I know everyone’s all excited because he upped his walk rate, but seriously, 37 unintentional walks in almost 700 plate appearances is unacceptable for a corner bat. He does have legit 30-homer power, and like a lot of players of this type he’ll have a .300/.335/.550 year somewhere along the line, but the volatility in his average and the ceiling on his OBP will always keep him from becoming a star.

What do you think about when you are not thinking about baseball?

Food, cooking and eating, is my other great passion. I love to cook elaborate meals, and I’ve got an inner pastry chef who likes to come out when there’s company, although after the great tiramisu debacle of 2003 I might have to scale my ambitions down until I get a bigger kitchen. I love to read, especially literature and comic novels. I used to play the guitar pretty regularly, but don’t have as much time with the busier job and with parental responsibilities. I love learning and speaking foreign languages, and that’s probably the one thing I’d like to put time into but can’t right now; I’d say teaching myself Spanish, from Sesame Street level (¿Entrada? ¡Salida!) to the point where I passed a first-level fluency exam, is the achievement of which I’m most proud, because I had to come up with a method and then stick to the plan even when I felt like I wasn’t making progress. I was always the kind of person who gives up when he wasn’t good at something right away, and it was gratifying to know that I didn’t have to be like that after all.

Thanks to Keith for taking the time to share his thoughts. For more of Keith’s opinions, check out his ESPN blog, his website, and his non-ESPN blog: The Dish.