Friday, October 31, 2003

Sports observation of the day
The economics of sports just keep getting weirder and weirder.

Basketball, with its odd soft salary cap, still leads the league in bizarre transactions for financial reasons. For example, this past offseason, the Atlanta Hawks participated in a trade in which they traded away someone who had scored more than 20 points per game for them that year (namely, Glenn Robinson), in order to obtain a player who was on the injured list with injuries that were likely to prevent him from ever playing again and had announced that he was retiring (Terrell Brandon), solely for the purpose of obtaining salary-cap space. (To be fair, the Hawks also did move up a bit in draft picks, but that part is unlikely to matter. All of the quotes from Atlanta officials indicated that they were interested primarily in obtaining the cap room.)

I believe at one point (though I don't remember enough details to find it via Google) that the Clippers, owned by notorious cheapskate Donald Sterling, once obtained some players in a trade which they then promptly waived, just in order to meet the salary floor. But I could be misremembering on that.

Now, baseball, despite not having any official salary caps and floors, has been seeing more and more economically-driven transactions of late. The Rockies, for example, practically gave away Mike Hampton just to be rid of his contract (hey, the faint voice in my mind is telling me that I already wrote something about this), but at least they got something in return. In general, teams trading away good players with overinflated contracts have gotten less back then if they had a reasonable contract, and bad players with big contracts are essentially of negative value in trade discussions, but it's not the case that a good player with an overinflated contract has actually been a negative.

Until now, that is. The Red Sox placed Manny Ramirez on irrevocable waivers on Wednesday, meaning that anyone willing to pick up the 5 years and $101.5 million left on his contract could have him without sending anything back to the Red Sox in return -- and no one was interested. Now, no one doubts that Ramirez is one of the top hitters in the league; he's been in the top 10 in MVP voting for five years running, and this year is extremely likely to be a sixth; it's just that no one wanted to pay that much money. Is that weird?

Well...maybe not as weird as it might seem at first glance. You see, at the end of 2000, Manny Ramirez was a free agent. Thus, when the Sox signed him, they were, pretty much by definition, the team that had the highest valuation of what his services were worth. So, given that Ramirez hasn't improved substantially over the past three seasons (not to say that he's been a disappointment, either; his production has pretty much been in line with reasonable expectations), it stands to reason that the Sox' valuation would still be higher than anyone else's; that is, that no one else would want to have him for the price that the Sox were paying him.

There's been a lot written about how free agency creates a "Winner's Curse", in that the team that signs a player in free agency is always the team that overestimates the player's value by the greatest amount, so I won't bother rehashing that, but I wonder if people realize that this is essentially the same thing, just three years later.

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