A Season Later: Baseball Players and Opportunity Costs

Before the 2003 baseball season began, I wrote an article called “Baseball Players and Opportunity Costs” that used the concept of opportunity cost to examine the off-season roster moves made by the Toronto Blue Jays. Specifically the Blue Jays decided not to offer salary arbitration to their outfielder Jose Cruz, who later signed as a free agent with the San Fransisco Giants. By doing this they were able to sign 6 major league players to contracts instead of retaining Cruz and adding 5 minor league players to their roster.

I thought it would be interesting to go back and see if the Jays made the right decision. To be able to do that we need some objective measure of the contributions each player made to his team. One such statistic is Keith Woolner’s “Value Over Replacement Player”; you can learn more about VORP at StatHead.com. There are other metrics which attempt to measure the same thing; all of which give fairly similar results. VORP measures how many more runs a player contributed to his team than a replacement level player (a good minor league player) would have contributed if the minor leaguer would have been in his place. For pitchers, it measures the opposite, that is how many runs the pitcher prevented as compared to what a minor league pitcher would have in his place. In 2003 New York Yankees catcher Jorge Posada accumulated a VORP of 56.5 runs, meaning the Yankees scored 56.5 more runs than they would have if they had called up a catcher from AAA such as Michael Hernandez. VORP takes into account differences caused by playing in different parks, but it does not take defence into account, other than it measures shortstops against shortstops and centerfielders against centerfielders. By definition, a replacement level player should on average accumulate a VORP of 0. Often players will have a negative VORP, which indicates that the team would have gotten more production if they had called up a minor league player instead.

Baseball Prospectus has complete 2003 VORP data, for both position players and for pitchers. First we’ll look at the six players the Jays ended up using, which in “Baseball Players and Opportunity Costs” we called Option A:

VORP Values for Option A

Myers (C) : 28.0
Catalanotto (LF) :19.2
Bordick (SS) : 10.1
Creek (P) : 3.1
Tam (P) : -0.6
Sturtze (P) : -6.6
TOTAL : 53.2

Two of the six players the Jays acquired performed under replacement-level. The Jays had much better luck choosing hitters than they did pitchers, but the overall performance of the six players was quite high providing 53.2 runs above replacement level at a cost of $6.5 million for the 2003 season.

Next we’ll consider what the Jays could have done. Their Option B was to retain the services of Jose Cruz and use 5 minor league players to fill the roster:

VORP Values for Option B

Cruz (RF) : 17.7
Replacement1 : 0.00 (on average)
Replacement2 : 0.00 (on average)
Replacement3 : 0.00 (on average)
Replacement4 : 0.00 (on average)
Replacement5 : 0.00 (on average)
TOTAL : 17.7

Cruz's offensive performance for the Giants was good, but it was surprassed by both Greg Myers and Frank Catalanotto of the Blue Jays. Both sets of players takes up 6 roster spots and costs $6.5 million in player salary, so the two lists are directly comparable. If we assume that VORP is a good measure of player performance, and that the Jays couldn’t find better players who would play for the major league minimum, then clearly the Jays made the right decision. Due to the rules of salary arbitration Cruz would have commanded a salary of five million dollars in 2003, which he was clearly not worth. Interestingly enough Cruz ended up signing with the Giants for $2.5 million, just $300,000 more than the Jays signed Frank Catalanotto for. Given that the offensive performance of the two players was roughly similar (17.7 vs. 19.2) and that Cruz is a somewhat better player defensively, the two players ended up providing their new teams the same bang for the buck.

In the very entertaining book Game Theory at Work author James D. Miller remarked that “microeconomics is the most successful nonreligious philosophy the world has ever known”. By understanding the microeconomics concept of opportunity cost, we can understand why successful organizations make the decisions that they do and how we can make better decisions in our own lives.

If you have a question about opportunity costs, microeconomics or any other economics topic you'd like answered please use the feedback form.