Priorities

I debated writing this article -- starting it and then deleting it about a week ago -- unable to marshal my thoughts and not wanting to do a hatchet job on an interesting and worthy topic. I will further disclaim that my level of education and study in this field is not at the level where I would feel confident about writing with great conviction.

Hiding behind the rhetoric of "it's just an opinion and is therefore above reproach" is a lazy and dishonest cop out from defending the rationality behind one's views, but suffice it to say that what follows is more observation than analysis. This is what I see and what I think about it and why I think it.

And I just can't get mad about the Marlins. I can't even feel like their ownership group has done anything wrong.

***

From an economic standpoint, people love to talk out of both sides of their mouths about the role of the authority figures that they report to. I don't want them taking money out of my paycheck every month, but there better be a pension program and health insurance. I am mortified by politicians suggesting cutting funding to the local high school's art and music programs, but they better start balancing the budget and reducing the deficit.

Which makes sense and should be expected. People care most about getting more for themselves and giving up as little as they can. That sounds like an unpleasant world to live in, but it is the chief driving force behind evolution and we have to live with it. Human nature becomes no better or worse by acknowledging the competitive and self-centered drive that is at the core of all life. It just is what it is.

That is not intended to read as a justification for any and all self-interest. Stepping on the backs of others to get ahead is objectionable and people are smart enough to realize that, even if they can sometimes rationalize it away. But if you create a path to prosperity that requires a little moral flexibility or a little fudging of the rules, it would be optimistic to the point of foolishness to expect no one to take it.

And when that inevitably happens, I tend not to look at the perpetrator, but the system itself. A system that always deteriorates as a result of bureaucrats mistaking activity for improvement.

It looks like the implementation of revenue sharing and a taxpayer-funded stadium have allowed the Marlins to pocket their income while letting everyone else pay the bills! What we need is more intervention from above and a salary floor or something. There's no way that the businessmen involved will find another way to exploit the loopholes in our new increasingly convoluted system!

I wish I understood why that happened. Regulation strangles free market prosperity, forcing the big players in the industry to adapt and usually squash those beneath them to survive. And the call is for more regulation to fix it. This isn't a solution, it's reinforcing the problem to create the illusion of cracking down.

If a salary cap or a salary floor is instituted in baseball, it is inevitable that teams begin to take advantage. The farce of the "expiring contract" in the NBA allows Pau Gasol to be traded for Kwame Brown. The Yankees are already openly scheming on how to have a $188.9* million payroll for 2014.

*What is the difference between a $189.2M payroll and a $188.8M payroll, really? About one Jayson Nix. Are we really going to say that the Yankees should be taxed differently as a result of one Jayson Nix? And if the Yankees are sitting around the border, isn't it obvious that they'll find a way to cut out a few spare parts to get under the limit?

When arbitrary and silly round numbers are decreed from above, it is a certainty that this sort of thing happens. So when the Yankees are looking to strengthen their bench with an acquisition, happy to spend the money and pay a player to improve their product and decide to pocket that money instead, who is it that is supposed to benefit from that?**

**This is a simplified model that translates well from a macro-economic standpoint but poorly from a baseball perspective. The idea is that by handcuffing the Yankees, a smaller market team has the opportunity to add a piece at the deadline or keep a homegrown player for another year or two without the Yankees pricing them out. It makes sense and it works to a degree. But don't expect a trickle down*** of cheaper tickets and beer now that the Yankees are spending less on the team. Don't expect Josh Hamilton or Zack Greinke to be thrilled that artificial constraints have neutered the biggest free agent bidder.

***An even further tangent, but one worth taking. Trickle down is a concept that is often used horribly in economic circles. It is not intended to mean that when the wealthy get a tax break, they turn around and give everyone beneath them a big raise because they have enough money and don't need any more now. That's not going to happen. But you're probably not going to get fired to inflate your company's fourth quarter numbers, either. Investors with freed up capital are now more inclined to take chances on small business and think about the future instead of just trying to stay afloat.

Workers at every level profit from being part of a successful enterprise while they get benefits slashed and opportunities taken away when the company struggles. Keeping taxation and regulation at arm's length is a great way to reduce cost and waste and everyone should benefit from that.

***

So, what the hell do we do?

There is irreversible inequality in market size and financial opportunity between teams based in different cities. Too little manipulation of finance leads to the strong crushing the weak. Too much leads to stagnation and a reversal of incentives.

Winning games sells tickets, merchandise, and concessions. It is the purest incentive that aligns the interest of every party. The league wants team owners to be committed to winning games. Team owners want their team to make money. Players want to be rewarded with big contracts. Fans want to watch their hometown team succeed.

The drive to win should exist at every level. The obstacle now is how to empower the small markets to feel that they can compete without breaking apart these natural incentives.

By making taxpayer-funded stadiums the norm and by lining the pockets of owners with corporate welfare, it should come as no surprise to see a lesser importance placed on winning. And when the size of that revenue sharing check increases the lower your payroll and win total go, you've made the incentives precisely backwards.

It's easy to make the rich owners who cry poverty into the bad guys, but are they really? If a law passed that every American named Mark Duggan was entitled to ten million dollars, I would think that it was stupid and unfair and no way to spend taxpayer money. I would also show up and collect.

***

Mike Trout was the best player in baseball last year and it's easy to imagine the revenue that he generated for the Angels and the league. He was a major part of the team being in contention and I'm sure that they did a roaring trade on Trout-themed merchandise. He won't be seeing any of that money while Alex Rodriguez cleared a $29 million check.

We have devolved pretty far from a meritocracy.

What the players union and the owners have agreed upon is a system that allows team-controlled players to be grossly underpaid for the trade-off of giant deals for free agents that often last well beyond that player's productivity. If Mike Trout keeps on being awesome until he hits free agency, he'll make a killing. Until then, it will be the Angels making a killing.

If he, like many before him, struggles or gets injured before he can negotiate that big deal, his brilliance as a 20 year old will be completely unrewarded.

Chien-Ming Wang was the best pitcher on the wealthiest team in baseball for a good part of three years. Injuries made sure that he never got his fair share of what he had earned. It is a decidedly unfair and silly system. People don't show up and spend their hard-earned money because A-Rod was great in 2007, they show up and spend money because Mike Trout is great right now.

***

So here are our goals:

- Limit the ability of big market teams to crush the competition with their economic advantage.
- Help small market teams hold onto the players that they have developed.
- Figure out a way to get some money for the Mike Trouts and Chien-Ming Wangs of the game.

Why not just impose a flat payroll tax across the league? No arbitrary cut-off points to be negotiated around, just a singular percentage. The Yankees have the biggest payroll, so they'll contribute the most and it will taper down as payroll decreases. This is how percentages work.

So now the league has collected this big pot of money from all thirty teams. That's still mostly in keeping with the current revenue sharing system, I've just wiped out the brackets and made the tax flat. The current idea is to redistribute this money based on payroll and success, with the teams with the lowest payroll and the least success getting the biggest slice of revenue sharing dollars.

What I'd love to see happen instead is for that communal pot of money get divided out as league bonuses to young players. Owners still have to put butts in seats to make money, the Yankees are still being given the biggest burden by the league, and we've reintroduced some merit-based dollars.

To make up some figures, let's say the league collects $200 million from the combined pool of thirty teams. The players eligible to receive bonuses (players who are still under team control) have combined for 200 WAR. Hand out one million dollars per WAR. Mike Trout gets a healthy $10M bonus, Bryce Harper gets around $5M, and Eduardo Nunez gets a pack of playing cards. That sounds pretty fair and an agreeable alternative to the current arbitration system.

Rather than three cheap years of Giancarlo Stanton and then three years of his salary starting to balloon in arbitration, the Marlins get six years of Stanton at league minimum. Meanwhile, Stanton doesn't have to wait three years to start making money.

The model of small-market teams using team-controlled players is even more cost-effective than before, but their incoming revenue is still completely tied to their own success.

To take things one step further, the league could offer an extra year of being bonus-eligible to any player that resigns with his current team. So that after six years of receiving league pay while a member of the Marlins, Giancarlo Stanton can become eligible for a seventh year only if he resigns in Miami. This gives them the inside track in keeping him around and provides another obstacle for a big market team looking to take him away.

Like anything else, there will be ways for teams to take advantage of this system. But I have to think that we can do a much better job of putting money in the hands of the teams and players who have earned it.

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