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Tuesday, September 27, 2011
Do the Pittsburgh Pirates really want a salary cap?
The owner says he does:
Some owners, especially those in low-revenue areas, say a cap would give smaller markets a fair shot at signing top talent.
“There’s no question that, a market like Pittsburgh, a salary cap would be advantageous,” Pirates owner Bob Nutting said.
I don’t see why it necessarily follows. 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?
Well, instead of inefficiently spending it on free agents, they will efficiently spend it on recruiting, player development, and/or research and development. This will be the impetus the Yankees need to not take the easy way out of overspending on free agents, but now take over other parts of the player acquisition or development market that they’ve left to other teams, small market or smart teams, to exploit.
Either that, or the owners will pocket the money.
My guess is that the Yankees provide a better ROI on the extra 60MM$ than just pocketing it (and spending it elsewhere that has no impact on wins their team will create).
This is what gets me with small market teams like the A’s, Twins, Pirates, etc. They have access to a hugely inefficient market: the non free agents. The players get paid cents on the dollar. Even the investment costs into the player development and signing bonuses doesn’t offset the huge advantage the teams have over the players for non-free agents.
The players keep quiet because free agents are overpaid, and they get a sizeable portion of this imbalance.
But, if you shut out the Yankees, you are simply going to force a redistribution of spending. One that won’t necessarily benefit the small market teams.
I’d like to hear from economists or others that can actually provide wisdom to this, and either confirm what I said, or refute it for missing a hole in my argument.
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