More Thoughts on the Economics of Parity

By David Marasco

I was going through the archives of The Bullpen and I came across this train of thought from Charles Curtis - "Once again, competitive balance comes down to payroll, even though the A's and Twins have shown that money isn't completely necessary to win... Though I think Billy Beane is a genius and will be able to adjust his roster in some way (he did it when Giambi left), it's sad to see economics breaking up teams that will have potential for many years to come." Yes, before steroids, the baseball's biggest perceived problem was competitive balance. But the complaint here is interesting. Due to economic reasons, potential powerhouse teams are being broken up, and this is bad for baseball.

Some people think that a salary cap will solve all of baseball's troubles. But look at what Charles is worried about here, that good teams are being dismantled because of payroll constraints. But let's look at the league that has the strongest salary cap in sports, the NFL. It seems like half of the up-and-coming franchises in football end up stalling and then having to blow up teams that might have been championship caliber if they had been allowed another few years to develop. Instead, these teams run into salary cap woes and they shed their players the same way the A's have waved goodbye to Giambi and Tejada. The result? Yes, there is more parity in the league than there was in the past, but this has been achieved at the cost of not having any more great teams. There's little doubt that the Cowboys or 49ers of the early 1990s could destroy any current NFL squad. Sure, back then fans of other teams knew that they would have to climb a very tall mountain if they wanted to go deep into the playoffs, but on the other hand the fans knew that they would see a matchup of two great teams in the NFC title game. This year the Carolina Panthers went to the Superbowl. There are rotogeeks out there who know the Carolina roster up and down, but how many Panthers could an average NFL fan name? Is this really good for the NFL? Look at this in terms of baseball. Yes, going into the season many would quickly name the Yankees and Red Sox as the odds-on favorites for the ALCS. But if we went over to the NFL model, the Bombers and Sox wouldn't have been able to afford all of their stars. Last year's ALCS could have been at the talent level of last year's Blue Jays and White Sox. Halliday and The Big Hurt are great talents, but I think that most would rather see a model where you get teams with talent like Boston and New York.

Some will back off a bit on the salary cap, claiming that a "hard cap" like the NFL creates too many problems of its own. They then propose an NBA-style salary cap. However, this version doesn't keep the playing field balanced either, this salary cap allows the top team to outspend the bottom team by almost a factor of three:

Team	Payroll
New York Knicks	$89,444,816
Portland Trailblazers	$82,905,616
Dallas Mavericks	$78,286,720
Minnesota Timberwolves	$70,589,120
Sacramento Kings	$67,991,504
Phoenix Suns	$66,550,452
Atlanta Hawks	$64,372,340
Los Angeles Lakers	$63,360,448
New Jersey Nets	$63,273,120
Toronto Raptors	$63,033,248
Philadelphia 76ers	$60,411,084
Boston Celtics	$60,185,916
Indiana Pacers	$57,774,920
Memphis Grizzlies	$57,378,320
Houston Rockets	$55,401,432
Chicago Bulls	$54,983,480
Detroit Pistons	$53,317,832
Milwaukee Bucks	$53,167,328
Golden State Warriors	$52,934,408
Seattle Super Sonics	$52,347,480
Orlando Magic	$50,209,704
New Orleans Hornets	$49,037,564
Miami Heat	$46,764,008
Cleveland Cavaliers	$46,183,424
San Antonio Spurs	$46,082,752
Washington Wizards	$45,114,084
Denver Nuggets	$39,336,148
Los Angeles Clippers	$38,351,724
Utah Jazz	$34,747,676

Worse still, it doesn't seem to address the competitive balance problem. We've used this chart before.

Some will claim that the real solution isn't to cap the amount of money that each team can spend, but to spread around the cash in such a way that the bottom-feeders will be able to pay for good talent. The first problem here is the identification of "who is a bottom-feeder". There are two possible ways of doing this. The first is to identify which teams brought in the least revenue. This would seem to reward teams that are bad at marketing, and also to punish teams with "loyal" fans who are willing to shell out cash to see their teams. The second way of looking at "bottom-feeders" is to tie it to the size of the team's payroll. Baseball has done this in the past, with very bad results. This encourages teams to cut payroll in order to get a kickback from the league. In other words, while the NFL model eliminates strong teams, this structure rewards teams for having low-cost talent on their rosters. If the combination of kickback for low-payroll and the team salary difference is larger than the expected benefits of a higher payroll, then those teams will concede the season for the bottom-feeder cash. In 2001 the Montreal Expos brought in $6.4M at the gate, and $28M in revenue sharing. Who do you think Montreal head brass was trying to please?

If salary caps aren't the answer and revenue sharing has problems of its own, then what's the proper solution? I think that The Crank has the answer. Instead of trying to bust up large market teams, let's bust up the large markets. Move the Expos to New York City. Milwaukee once stole a team from Boston, move the Brewers to Beantown (heck, the Brewers started out in Seattle in any case). With fewer big markets and fewer small markets, the economic playing field will see much better balance.