Baseball Players and Opportunity Costs

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Economics

Baseball Players and Opportunity Costs

[Part 1: Baseball Players and Opportunity Costs - Money]
by Mike Moffatt

More of this Feature

• Part 1: Baseball Players and Opportunity Costs - Money
• Part 2: Baseball Players and Opportunity Costs - The Major League Roster
• Part 3: Baseball Players and Opportunity Costs - Vote and Have Your Say

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• Baseball Economics Links
• Baseball - Leaky Stadiums
• Baseball - The Winner's Curse

On December 21, 2002, the Toronto Blue Jays decided not to offer salary arbitration to outfielder Jose Cruz, one of their more popular players. By not offering arbitration, Cruz became a free agent and could sign a contract with any of the other 29 teams in major league baseball. Under the rules of arbitration, any team signing Cruz would not have to give the Blue Jays any players, money, or draft picks in return.

The reaction in Toronto by many in the media was rather predictable. Caller after caller on local sports talk shows asked, "How could we get rid of one of our best players and get nothing in return?" The hosts of these shows seem to do little to try and answer these questions. If radio talk show hosts were required to take an introductory course in economics, they would understand the concept of opportunity cost and would be better able to answer these questions posed by their callers.

Money

We need to examine two important resources which major league baseball teams have in order to understand the personnel decisions they make. The first resource at their disposal is the money that they use to sign players. Teams generally do not have enough money to sign every player they want to a contract, although the New York Yankees are trying to prove otherwise. Had the Blue Jays offered salary arbitration to Jose Cruz, his salary for 2003 would have been decided by an arbitrator. The best estimates available suggest that Cruz would have received $5 million for 2003 if his salary was determined by an arbitrator. If we believe this estimate and if the Jays had offered Cruz arbitration, the Jays would be required to retain Cruz and pay him $5 million for the season. This would be 5 million dollars that they Jays could not use for other purposes.

If we look at the moves the Blue Jays have made over the winter, it seems that they used this $5 million to sign other players. The Blue Jays have signed 6 players to contracts who played elsewhere in 2002. The players and the salaries they will be paid in 2003 are as follows:

Player	Position	Salary	Former Team
Bordick, Mike	Shortstop	$1,000,000	Baltimore
Catalanotto, Frank	Outfielder	$2,200,000	Texas
Creek, Doug	Pitcher	$ 700,000	Seattle
Myers, Greg	Catcher	$1,000,000	Oakland
Sturtze, Tanyon	Pitcher	$1,000,000	Tampa
Tam, Jeff	Pitcher	$ 600,000	Oakland
TOTAL	6 PLAYERS	$6,500,000

So the Jays have spent $6.5 million on players during this off-season. It is likely that, if the Jays were paying Jose Cruz $5 million for 2003, they would not have spent this $6.5 million on these six players.

Next page > Part 2: Baseball Players and Opportunity Costs - The Major League Roster > Page 1, 2, 3.

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