Monday, February 28, 2022

Joe Sheehan Newsletter, February 27, 2022 -- "All just a little bit of history repeating..."

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I couldn’t sleep Saturday night, and ended up trying to teach strangers about baseball economics one at a time using the Socratic method. It went exactly as well as you think it did.

(I’m going to let you in on a secret. When I have these quarterly wrestling matches on Twitter, it’s never really about baseball or labor or payroll caps or whatever’s on the screen. It’s because I can’t sleep for some other reason and I’m using Twitter to keep from dealing with it or keep me from making it worse. Yes, doctor, I also think that’s really healthy, thanks.)

This afternoon I got to doing some digging, and it’s remarkable to me how long we’ve been having these fights. More than a decade ago, when i was with Sports Illustrated, I wrote a column about…well, just read this excerpt:

"The Pirates are the extreme, if inevitable, product of a system that has been put in place over the past 20 years, step by arduous step. The core problem is a revenue-sharing system that is designed not to level the playing field between teams in large and small markets, but to lower the returns on paying for players, and therefore the industry's labor costs as a whole. MLB has never once entered a negotiation with the union with any goal other than lowering labor costs, and all proposals, from a payroll cap to a luxury tax to revenue sharing, have been proffered with that objective foremost in mind."

That was August 25, 2010. The Pirates were gaming the system then, and they’re gaming the system now, because MLB has left the system wide open to be gamed. Nothing in the current negotiation will stop the Pirates from continuing to game the system.

That’s not the piece that stands out. No, the one that stands out is now 20 years old. 

"That’s an important distinction. Were the more accurate term 'payroll cap' used, the effects and intent of the tool would be more clear: to restrict the amount of money management can spend on labor. It’s an agreement among competitors to inhibit the labor market, lowering salaries.

"A salary cap transfers wealth from labor to management."

This is, on the surface, not relevant. MLB owners aren’t asking for a payroll cap, having achieved most of the goals of one through other means.

What’s happened, though, is that the success MLB teams have had in keeping more of the game’s growing revenues away from players has caused many fans to say that a payroll cap system might be better for labor. After all, the players in the other three leagues are taking home a higher percentage of league revenue than baseball players are, and as Travis Sawchik has written, doing so with higher minimum and median salaries.

To me, this is quitting. If someone’s cheating you at a card game, you don’t just hand over your chips and concede that they’ve bested you. You fight to make them play by the rules. MLB players have always wanted competition for talent. in a capped system, players fight each other for a limited pool of money — that’s why the free-agent periods in the NBA and NFL are so frenzied. It’s Million Dollar Musical Chairs. MLB players have rejected that model, preferring that the owners compete for their talents, rather than the players compete for cash. 

The owners have built a rule set that reduces competition from top to bottom. Restrictive payroll taxes and penalties. The lowering of playoff eligibility. Massive amounts of revenue sharing to subsidize losing and lessen the marginal value of player performance. Caps on what teams can spend on amateur talent.

The solution to that isn’t to give them their dream system. The solution to that is to force them to compete to make money. 

It’s a source of personal frustration that I haven’t been able to move the conversation of payroll caps. They’ve either been imposed or sustained in the three other leagues after labor wars that featured the use of scab labor and lockouts, and that it’s taken such measures to get them should be the only clue you need about who they benefit. Everything in this graf I wrote 20 years ago, however, remains true today.

"Recognize, though, that the only people who gain anything from a salary cap are those member owners. A salary cap doesn’t benefit fans, it doesn’t benefit the game as a whole, and it doesn’t do anything for competitive balance. It reduces the financial incentives to improve and innovate and succeed."

Baseball has structural problems, ones that aren’t going to get better via whatever agreement gets made at this point. The answer, though, isn’t less competition. It’s more.