When things come to an end, it’s usually time to reflect, and as Drew Fairservice brought to our attention yesterday, the Minnesota Twins with their $100 million payroll and potential to lose 100 games, could stand to do a lot of reflecting this off season.

While any team that loses so much while spending even more is a good argument against the need to implement a salary cap, Tom Tango puts into words an additional argument that, in typical Tango fashion, seems obvious upon reading it, but to the best of my knowledge, hadn’t been expressed before. The man behind The Book takes issue with an offhand remark from Pittsburgh Pirates owner Bob Nutting who says:

There’s no question that, a market like Pittsburgh, a salary cap would be advantageous.

Oh, really? Tango points out that with the inefficiency in cost / value comparisons between free agents (with MLB playing time) and draft picks (as well as  international free agents), a salary cap on payrolls might do more harm than good to small market teams.

Let’s say that the Yankees currently spend, on payroll and player development (minor leagues, drafts, recruiting, etc) a total of 250MM$.  Let’s say that, currently, they spend 210MM$ on payroll and 40MM$ elsewhere.  Now, MLB imposes a hard cap of say 150MM$.  What do you think the Yankees will do with the 60MM$ that they are used to spending on free agents?

Tango assumes that a large portion of those additional dollars would be spent on draft picks, foreign signings and player development.

 If you shut out the Yankees, you are simply going to force a redistribution of spending.

And that redistribution would actually force the Yankees to spend their money in a more efficient manner, leaving less opportunity for teams like the A’s and Pirates to do so. In other words, the real problem in baseball’s pursuit of an increased competitive balance isn’t the distribution of wealth, but rather the knowledge gap between the smart general managers and the not so smart ones.

Instead of looking for a cap on payroll expenses that would only force money to be better spent by big market clubs, small market teams would do better to take advantage of the inefficiencies in free agent spending.

The resulting discussion on Tango’s blog is almost as interesting as the post itself.

Comments (38)

  1. more than a salary cap, they might want to put in a stupid/cheap floor. for example, if you have the first overall draft pick and you take…say…Bryan Bullington for signability reasons…maybe you should pay the fine of having a terrible team indefinitely that has to complain about a system (revenue sharing) that has only benefitted them. or maybe that already exists.

    • no, but i think when teams like the leafs and pirates suck so bad their fans are called “the faithful”.

  2. I think that MLB is unfairly labeled as the most imbalanced of the major North American leagues. As the experiments that formed the plots for Moneyball/Extra 2% demonstrated, the MLB system has created a number of inefficiencies that have allowed certain intellectually-superior teams to win more games than their major league payroll would suggest they ‘deserved’.

    I supposed that the problem alluded to by Tom Tango could be mitigated if the salary cap extended to all facets of player acquisition, including money spent on signing draft picks and international free agents.

    • Doesn’t balance out the fact that the majority of GM’s are complete morons and wouldn’t know how to draft well or where to spend the money anyways.

    • I think it’s an unfair label as well. A proposed cap would have to restrict a whole lot more than merely payroll to actually stop imbalances. I wonder about the values placed in training staffs and player development as well.

      • Determining what falls within the purview of this aggregate salary cap would be a nightmare. At an extreme end, it may even be impossible.

        • Totally agree. This, combined with the strength of the MLBPA and the fact that owners are already making so much money, makes me think that a salary cap is a long way away in baseball.

  3. Wow. That is a very good point. And as you said Parkes it seems to have been completely overlooked. I for one am guilty of this as I had never really thought of what a salary cap would do beyond just equalizing the teams in terms of free agent spending. As you pointed out the inefficiencies between the GM’s is the biggest problem.

    I imagine that if MLB were to put in a hard salary cap you would actually see a switch by teams such as the Yankees or Sox from spending the majority of the money on free agents to it going towards player development and the draft. (i.e. what AA is doing now) On a limited payroll which a salary cap essentially is and what AA is actually working under that is the greatest way to gain an upper hand on the competition. Just my two cents though.

    • Nutting is another entitled-socialist owner. “i want hand outs!” “no fair, he has more money!” take some responsibility, man! if you don’t like that the value of your team has gone up and up over the last ten years, then sell to someone else.
      i’m surprised this idiot doesn’t think they should implement minor league playoff systems where the “winners” of the first half of the season get playoff berths. because, you know, the pirates were actually in first place at the half way mark of this past season.

  4. Couldn’t the same argument have been made about the Leafs prior to the implementation of the NHL salary cap… Have the Leafs become more efficient in the manner in which they spend their vast riches after the implementation of the salary cap? Have the leafs really spent much more attention to scouting, player development, etc? Has the salary cap translated into any additional success for the Leafs versus pre-salary cap days? I think the answer to all of these questions is clearly “No”.

    Perhaps the Leafs-Yankees analogy is not perfect, but I think that there are enough similarities to suggest that the Yankees wouldn’t benefit from the salary cap as much as the article would lead us to believe.

    • I don’t know the NHL well enough, but is there as large a value in young players as MLB? Are they cost controlled for as long? Is there as large of a disparity between drafted players and free agents.

      Personally, I doubt it, but like I said, don’t know enough about NHL.

      • The current young player/old player situation in the NHL is very similar to that of MLB. It’s rare for a talented young player to become a UFA as teams are increasingly signing their young talent to long term deals. In addition, there is no equivalent to MLB’s compensation pick system in the NHL. As such, you could say that there’s an even greater premium on draft picks.

      • I think a major difference between the two leagues is that there is never signability concerns with the NHL draft. So a team with tonnes of cash doesn’t have an advantage in the draft as all of the teams simply pick the player that they deem to be the best talent. In baseball, that is obviously not true.

        Also, and I could be wrong here, but isn’t the NHL draft a global talent draft? So the Leafs can’t just go out and out spend people on UFA’s from the equivalent of Latin countries.

    • That’s because the Leafs are the Cubs of the NHL and it really doesn’t matter if you put together a winner or a loser because people are still going to watch them. You think the owners of the Leafs really give two shits about winning when the house is packed every night? Still comes down to bad management.

      • I do think the Leafs owners would like to win. Why wouldn’t they want the house packed for additional playoff games?

        • True. But how much more in money would it be in developing a winning team as offset by the amount of money obtained during playoff games. I don’t know the answer.
          I don’t think there is a concerted effort to lose but I don’t think there is a huge desire to win either. Also, don’t forget 8 teams make it so its not a stretch for a team to fall into the playoffs still gain that revenue and not put a great club together.

          • The Leafs essentially spend to the cap every year. They also have one of the highest paid coaching and management staffs in the league. It’s not as if they’re “not winning” by choice – and if they are, it makes no sense as they’re not saving any money in the way they’re doing it.

  5. The number one question I have for proponents of salary caps: who benefits? Do the fans benefit?

    Not really. In nearly all salary cap leagues you must win the draft lottery to have a hope of turning your favors.

    The players? Not even a little bit.

    The owners? Like crazy. Their revenues stay the same while the costs go down. WIN!

    Count me out.

    • Well, I think in a situation where a salary cap actually improves competitive balance, you could make the argument that it benefits the fans. But in a practical sense, I totally agree with this.

    • i’d rather see more revenue sharing/luxury tax – however, that’s not a good idea if you think the jays are soon to join the big spenders’ club.

    • How many times have the Patriots won the draft lottery? The Packers? Saints?

      Fans benefit, different teams have a chance to win every year, you don’t see the same 2 teams win a division 15 years in a row.

      • Winning the draft “lottery” (as in drafting a superstar) I meant as a means to sustained success. And the Saints? The team with three playoff berths in 10 years? Try harder.

        • Really, because pretty much everyone else calls winning the right to the first pick the draft lottery. But sure, lets use your definition.

          First of all the Saints definitely count. They won the Super Bowl, they made the playoffs last year (but choked), and they are most certainly one of the best teams in football this year. Three playoff appearances in 10 years is average for a league where 12 of 32 teams make the playoffs. I would love if the Jays could be a playoff team 3 of 10 years.

          Did they win the draft “lottery”? Not even close. They smartly signed a free agent quarterback. They hired good coaches. They drafted well, nothing amazing just well, and shouldn’t you have to draft well to win?

  6. as for competitive balance: this year in the mlb there are two teams with sub .400 records. compare that to the nfl, nba, or even the nhl. baseball is always a game that is relatively balanced on the field. mlb is the only league where even the worst team is going to take 1 in 3. that’s why playoff expansion is silly: what do you want? every team to play 500 all year? because asides from the twins, astros on one end and the phillies and yanks on the other, things are pretty evenly distributed this year, at least.

    • you’re not necessarily wrong, but this is a factor of schedule length; longer schedule will normalize results by eliminating the influence of streaks. if the MLB season was 16 games long, like the NFL, I think we’d see a lot more 16-0 and 0-16 teams in MLB than the NFL.

      • the nba has teams at or around .200 every year. no team in baseball is that bad at the halfway mark. there is a huge difference between a game in which someone can leave high school and be a star, and a game in which the same person would be the worst player in the league.
        the old example stands well: no one will hit .400 ever again let alone regularly because the mean talent level is too high. you’d have to be some kind of freak of nature measures beyond a-rod (or whomever) to do so at this point.
        there’s a huge difference between a game that has zone coverage and one that is, essentially, defined by the events happening in the battery.
        baseball already has a hard time attracting the best athlete who know they can immediately jump to the pros in other sports. if you eliminate the lure of giant contracts for a sport less likely to result in certain injuries (here i’m thinking of concussions), i think you reduce the talent poor further. many have long been concerned about the talent drain in baseball…
        anyway. that’s just my two cents.

  7. Drew, I’m not sure that the owners as a whole would benefit from a salary cap. The fact is that the owners – even the small market teams – are generally doing very well financially under the current model. I’m not convinced that they would do better as a group with a salary cap notwithstanding potentially lowered salary expenses.

    A rising tide floats all boats – and that is why generally speaking the MLB owners are not really pushing a salary cap. They realize that the league as a whole does best financially when big market teams like Boston, NYY, Philly, etc are perennial contenders. National TV ratings go up when those teams are involved and the money pours in. The big market teams redistribute some of that wealth to the smaller maret teams through revenue sharing, etc. which is a form of hush money paid to the small market teams so they can remain profitable even if not sucessful on the field.

    A salary cap could change that very successful business model. Parity might mean more playoff opportunities for smaller market teams and fewer opportunities for larger market teams. The larger market teams would have less revenue and thus less money to redistribute. They’d likely want to do away with revenue sharing entirely. The financial success of each of the individual owners would then be tied more closely to how well the team performs on the field since they don’t have any supplemental income. That would be as scary thought for the owners of smaller market teams without a recent history of on-field success.

  8. I wouldn’t mind a stiffer tax, but at a very high threshold (like $150m++) and maybe everybody under the tax shares equally in the proceeds.

    But that’s as far as I’d go. I kind of like the baseball model for cost control of young players.

  9. i’d like to see the luxury tax changed, have that money split up among the non-offending teams in the same division as the offender, rather than spread around the whole league.

    • obviously biased as a Jays fan, but i like this. maybe luxury tax received from a team divided by schedule (so we’d get 18/162th of the Yankees luxury tax, while the non-East AL teams would get 8-10/162th, and NL teams who they don’t play wouldn’t get any. if Boston also paid the tax, the Red Sox ‘share’ of Yankee tax would be divided in the same way, so we’d actually end up with somewhere around 21/162 of Yankee tax.)

  10. For those who foolishly believe that caps = parity:

    How many Cups did the Leafs win in the pre-cap era, when they were routinely among the highest spenders? This season, their cap number is higher than the Canucks, who last I looked, went a bit farther than the Leafs last season (and several before it). And that’s ignoring the other easy example of the NY Rangers, for one.

    How many NBA titles have heavy spenders in the New York Knicks won the last decade, when they’ve routinely been top at their loosely capped league? I’ve got the “under” on 0.5. The Portland Trailblazers spent like mad for years and saw nothing, yet the San Antonio Spurs, a middling spender, were dynastic only just now sliding.

    How many NFL playoff *appearances* have the Cincinnati Bengals and Buffalo Bills made in the capped NFL the last decade, the allegedly most balanced league to model after? 1 between them? 2?

    In the last 15 years, the Baltimore Orioles and LA Dodgers have been top spenders are one time or another, and the Mets until this year were always a top 2/3 spender. Any parades there of note? Yet Florida managed TWICE to get there. Others have spoken about how having high profile teams is great for business, and I couldn’t agree more. This fall, you’re either a Yankee, Philly or (if they’re lucky) Sox fan…or dead against them (save for the “win one Halladay” contingent). That’s a bad thing?

    There’s no escaping bad management, and it is a fool’s game to think a cap = parity.

    Wonder how many Jays fans cared when the Jays were top spenders and won a couple World Series? Was it that alone? Or maybe that Pat Gillick was in the top 2/3 in the game at finding talent had something to do with it?

    All this is not even mentioning that baseball has seen all but a handful of teams make the playoffs the last decade (look em up, only a few left out, Toronto included), and has had more winners of championships than ANY other sport in almost any time frame you look near or long term.

    Sure, the lack of a cap gives the Yankees/Sox/Phillies the chance to afford mistakes (and stash a Kei Igawa in the minors, for example), but it also allows teams a place to unload their own too. If you though Vernon Wells wasn’t tradeable last year, picture the odds if there’s a cap to consider?

    …not that the MLBPA would EVER allow for one.

    • Of course a cap doesn’t guarantee parity … but it allows it. Bad management keeps bad teams bad, and what’s wrong with that?

      Yes, many teams in baseball have made the playoffs over the past few years. But in many divisions you will find pretty similar payrolls, even without a cap. In the AL East you have the Red Sox and the Yankees more than double the next closest team, and when you have that you get what we’ve watched for the last 15 years where 2 teams almost exclusively make the playoffs.

      • The Jays (fans) don’t complain about the crowds the big boys bring in, just that the big boys are the big boys. Tough to have it both ways though as I said earlier, I don’t recall Jays fans taking issue when the Jays were the big boy on the block, only when they became the baseball version of a third world nation, and that had a lot more to do with things not related to the Yankees/Sox (strike, dwindling crowds, horrible stadium, poor teams, and terrible, terrible management until recently).

        In the end, the problem as far as I’m concerned isn’t a cap problem, it is an alignment problem that could be better remedied with a single league set up and balanced schedule than something the most powerful union in the sports game, and the games biggest franchises, aren’t likely to ever allow.

  11. I think we need to keep in mind the severity of salary caps and the amount of players you have on a team. Hockey you need probably 2-4 elite players, and a solid second and third line, give or take. Teams that won the draft lottery like Pittsburgh (Crosby/Malkin) or Chicago (Toewes/Kane) found immediate success. But in the case of Chicago, were also totally dismantled because they had to dish out bonuses, resign now more expensive players and they were out of options.

    I think bringing up the knowledge gap is a very interesting and solid argument against a salary cap, but I don’t think that makes one useless. I like the idea of before that there be a cap and a ceiling, almost like a socialist cap instead of a communist cap, if you want to think of it that way. There can still be the big teams and the smaller teams. No, that doesn’t automatically guarantee success. But the gap has been huge for a long time and in my eye, the Twins of this year (spending big and losing) and the A’s and Rays of (spending little and winning) are anomalies outside of teams that spend big and consistently win and suck the player market dry.

  12. As a baseball and hockey fan, I enjoy juxtaposing MLB and the NHL.

    MLB’s model promotes as much revenue in the sport as possible by allowing the big market teams to spend and, ideally, this competitive advantage allows these teams to carry the league’s overall revenues; from this large pot, the have-not franchises collect their welfare cheques which allows them to stay afloat. Cyclically you have franchises like Oakland and Tbay that challenge the consistent spenders (at least the ones that are spending well at any given time). This is the superior model, IMO.

    The NHL’s model is designed to be idiot-proof. The league’s GM’s/owners lacked a fundamental understanding of value, locked out & vilified their players for a year, lost a season of revenues (and future revenues with the damage it caused) and decided to placate their miserable franchises by capping team spending. However, teams that should be rebuilding at the bottom are forced to spend to a payroll floor and, quite frankly, spend more for essentially the same result. The big market teams lack a massive payroll advantage and, hence, these teams are not as successful as they could be which lowers the collective revenue of the sport.

    I doubt MLB changes their fundamental model any time soon and I am glad. It is better for the sport to allow the big boys to spend and the little boys to not have to spend, which is the antithesis of the NHL model.

  13. I realize most commentary here is over and done with, but I just checked the correlation between wins and salaries (as listed on USA Today, for whatever that’s worth), and it seems to be a close correlation – R^2 of 0.1675. So while there are outliers like the Rays and Diamondbacks on the positive, and the Astros and Twins on the negative, it tends to even out to the intuitive rule of thumb: if you spend more, you’re more likely to have success.

    That said, how many different teams have played for the super bowl in the last decade? What about for the NBA title? The Stanley Cup? And how many have played for the World Series?

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